Pizza Pizza Royalty Corp.

Ladies and gentlemen, thank you for standing by. Welcome to the Pizza Pizza Royalty Corps earnings call for the first quarter of 2024. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, there will be a question and answer session. 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 May 10, 2024. I will now turn the call over to Christine DeSalva, CFL. Please go ahead. Thank you.

Good morning, everyone, and welcome to the Pizza Pizza Royalty Corp's earnings call for the first quarter of 2024. 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 with 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 a reconciliation and other disclosures relating to non-IFRS financials mentioned on the 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'll now turn the call over to Paul Goddard to provide a business update.

Thanks, Christine, and good morning, everyone. Thanks for joining our first quarter about your conference call. Today, I will discuss our first quarter results, and we'll share a brief outlook for what's ahead in 2024. Christine will then summarize our key financial highlights before the q&a at the end. Following over two years of continuous funds, big sense for sales growth, we are pleased to report our 12th consecutive quarter of positive sense for sales growth, which now makes it three years of continuous positive sense for sales growth. We're very proud of that. In the first quarter of 2024, we reported a combined 1.7% same-store sales growth, as pizza-pizza restaurants reported 0.6% growth, and pizza-73 restaurants reported 8.5% growth. And growth at both brands was driven by increases in both guest traffic and the average customer check. The first quarter is typically our slowest quarter of sales, and while our sales growth was softer than previous quarters, we continue to report positive sales in a challenging economic environment. And also, I would comment that our Results last year obviously for this quarter were very strong as well and tougher to lap those obviously, but we managed to do that, so that's great. And moreover, in terms of this year, the unseasonably warm weather or winter in Canada did adversely affect sales. And in case you didn't know, snow days are great sales days for pizza. As we have discussed on past calls, our sales are driven by key areas of our strategy, including our well-positioned and diverse value offerings throughout our menu, our convenience and presence, where customers can experience and interact with our brand through a variety of platforms, and the strength and resiliency of our brand, supported by effective marketing initiatives. And to give it more color on the importance of value, the QSR industry is naturally competitive, not just within the pizza category, but with all other QSR players, at-home meal delivery companies, and third-party food delivery platforms, of course. So we know our customers are looking for value as well as quality, especially in a challenged economic landscape. So we have to find the right balance of perceived value for money. In achieving this, we promote key specials and introduce new products at price points that attract customers. Many of our marketing messages are centered around our always-on value offerings that resonate with consumers, including our fixed-rate pizza, our snack boxes, and our walk-in and pick-up specials. And in addition to value, I'd also like to talk a little bit about presence and convenience. Having the ability to interact with our customers through our expansive restaurant footprint across Canada, whether it's through our wide delivery network or in store, ensures that we are able to reach customers in all metropolitan areas across Canada. In fact, our restaurant locations are within a 10-minute drive of 60% of Canadian households. Over the last three years, we have seen a shift in consumer behavior. with customers moving increasingly to pickup orders. And with over 750 locations across Canada, we are ideally positioned to capture all audiences, especially those looking to save on delivery, tips, and surcharges that many companies charge. Our in-store pickup channel has grown steadily over the last three years, and it is the highest sales level it has ever been. Beyond our physical locations, we continue to invest in critical technology infrastructure to ensure we are successfully receiving even more orders through our websites, apps, and call center. Over 60% of our orders are being placed on our digital platforms, that's online via web and apps, and over the phone. Even though we have the best-in-class technology for customers to order on, we also utilize third-party food delivery platforms to reach customers who choose to use those providers. While these channels are not as financially attractive for our stores or for us, relative to our own organic channels, we know that there is a subset of customers that only use these platforms or at least prefer them to order their food, and we need to have a presence there. Ensuring we are accessible to all potential customers has always been a key priority of our business and has proven to be a key differentiator for us as well with this omni-channel approach. In terms of strength of our brands, Pizza to Pizza's innovative marketing activities and partnerships continue to be recognized as industry's best-in-class and are well-received by Canadians. Leveraging our popular Everyone Deserves Pizza campaign and theme, we continue to focus on inclusivity and bringing people together to enjoy our products. When we look at days and occasions that bring people together, we look to see where there is already demand and we use that demand to create opportunity. So building on the success of our 2023 Valentine's Day promotion, Slices for Singles, we decided to celebrate the third wheel in our lives this year. The third wheel of this promotion was as successful as the previous year, in fact, even more, with over 9 million impressions and higher sales on Valentine's Day than the prior year, which was also a very successful state for us. So we really are, you know, have really developed a lot of experience in terms of building occasions and sales around particular events. So this was an example of a very fruitful brand building initiative, and it's just one example of how we continually succeed at keeping our brands top of mind with customers, which is key in our competitive QSR landscape. Another way to keep our brand's top of mind is through our many high profile sponsorships and marketing activations. This year, we were one of the first sponsors of the inaugural season of the Professional Women's Hockey League, the PWHL. We're very proud to be a sponsor of this league and support all athletes because like we said, everyone deserves pizza. The overall strength of our foundation, brand strength, marketing messages, enhanced menu, innovations in technology, and continuous presence for our customers will continue to be key to our growth as we go forward. Turning now to restaurant growth, network growth, we had a slower start to the year in the development pipeline with our traditional network, but we need to expand our non-traditional network rapidly across the country in Q1. And I do want to mention that we still do feel confident about meeting our delivery targets for 2024 for both traditional and non-traditional restaurants as well in that range of 3% to 4% or so. During the quarter, we opened two traditional and nine non-traditional Pizza Pizza locations and closed two traditional and five non-traditional locations. Meanwhile, we opened one non-traditional Pizza 72 restaurant during the quarter as well. So, over the year, we will accelerate our restaurant openings across Canada as part of our national expansion as we have plans to open more in Quebec, Ontario, British Columbia, and in Atlantic Canada. Construction times, permitting, and supply chains seem to be now working at more of a normal phase as well, which is excellent to see. And beyond Canada, we continue working with our Mexican partners on the next set of restaurant openings, which is very exciting. We are happy with the progress the first score is achieving and excited about the long term potential of this high growth, high piece of consuming market. But we are going to be focused and judicious as to how we further expand our footprint in Mexico to make sure it makes sense. But we're very happy with our partner and our progress so far there. Now onto outlook and closing remarks. As we look further into 2024, we are 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 for our customers. We know the economic landscape is challenged, and we will ensure that our customers continue to see us offering the best food at a value offering. 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 such key members in our success. Thank you for listening, and I'll now ask Christine to provide a brief financial update.