Pizza Pizza Royalty Corp.

Ladies and gentlemen, thank you for standing by and welcome to the Pizza Pizza Royalty Corps earnings call for the fourth 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. If you would like to ask a question during this time, simply press star one on your telephone keypad. As a reminder, this conference is being recorded on March 31st, 2025. I will now turn the call over to Christine De Silva, CFO. Please go ahead.

Thank you, everyone, and welcome to Pizza Pizza Royalty Corp's earnings call for the fourth quarter, ended December 31st, 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 related 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 a reconciliation of non-IFRS 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. With that, I'd like to turn the call over to Paul Goddard to provide a business update.

Thank you, Christine, and good afternoon, everyone. Thanks for joining us. Today, I will discuss our key four results and provide a brief outlook on 2025. Christine will then summarize our key financial highlights before the Q&A at the end of our remarks. Proud of what our brands accomplished this past year. Despite industry-wide challenges, we achieved remarkable milestones in our network growth with the opening of 48 new restaurants across Canada. In fact, we now have a restaurant in every Canadian province. Moreover, when we include our Mexican restaurants, we have surpassed 800 locations, so we're very proud of that. However, 2024 was not without its challenges. We continued to experience headwinds as we navigated ongoing reduced consumer spending and its impact on food service, particularly on our delivery channels. Additionally, in Q4, our marketing plans were impacted by the Canada post-strike as our holiday flyers did not reach our customers as initially planned. As we closed out 2024, our brands reported a combined 3.9% same-store sales decline in the fourth quarter, with Pizza Pizza restaurants reporting a 4.3% decline after two prior years of strong growth, and Pizza 73 restaurants reporting a sales decline, small decline of 0.7%. So for the year, Pizza Pizza restaurants reported same-store sales decline of 3.8%, while Pizza 73 reported positive sales growth of 2.3%. Both brands saw a decline in traffic, mainly on the delivery side of the business, as a result of heightened competition and pressures on consumer spending. In terms of average check, Pizza Pizza's check was flat, while Pizza 73 had an increase in the average check. While we recognize we still have work to do, we see many opportunities ahead. Our sales recovery strategy for 2025 will leverage our brand strength and strong everyday value leadership position backed by our core product propositions and ongoing menu innovation, convenient restaurants, and superb customer experience, including the digital experience. So speaking to a few specific areas, first, is our focus on value. As we discussed in our last call, the QSR food service category is highly competitive, and the heightened level of discounting continued in the quarter. We need to ensure we can attract customers, but we have to find the fine balance between value pricing and also ensuring the profitability of our restaurant owner operators. In the fourth quarter, we continued our focus of promoting value to our customers as we look to gain share of consumers' QSR spend. Beyond our always-on value messages, in the fourth quarter, Pizza Pizza launched a new promotion to ensure we are delivering to our customers craving for value. Our Slice the Price campaign offered customers a large pizza with four toppings at an industry-leading $13.99 price point. We also continued to aggressively promote our Pizza and Wings combo, offering incredible value at a $19.99 price point. And at Pizza 73, as we've mentioned on previous calls, we've introduced new offers and bundles each at attractive price points. From snack boxes at the sub-$10 level to the successful launch of an XXL 18-inch pizza at a $19.99 price point, we've been speaking directly to the value that customers are looking for, and these new offerings have been very well received. Meanwhile, at Pizza Pizza, over the last three years, we have seen a shift in customer behavior, with customers increasingly moving to pickup orders to save on delivery tip and third-party channel surcharges, where that's relevant. We continued our focus on this channel and refreshed our creative across the Pizza Pizza storefront network, promoting aggressive value options, and just an example of that is our two-for-six-dollar slice special and other attractive pickup specials. Ensuring we are convenient and accessible to all potential customers has always been a key priority for our business and has proven to be a key differentiator for us, especially with our expansive restaurant network across Canada and our award-winning digital channels for customers to order on. Our customers continue to recognize our strong value proposition and convenience, and our innovative marketing activities and partnerships continue to be recognized as industry best in class. They're always well received by Canadians, driving visibility and incremental sales. So I wanted to quickly highlight a few points about our brand strength and innovation as seen this quarter. In the past, we've talked about owning key days and occasions, but we also like to be at the forefront of current trending topics. This fall, we tapped into political zeitgeist to help boost visibility for our chicken category. we launched the Bipartisan Wings program as tensions rose amidst the U.S. election. Complete with left-wing and right-wing parody ads, the campaign thrust Pete's Pizza into the headlines while giving a significant sales lift to our chicken category. The fourth quarter is always an exciting time for our brands as our high-profile sports sponsorships kick off their seasons. This quarter, to celebrate our long-standing partnership with the Toronto Raptors during their 30th anniversary season, Pizza Pizza launched the Raptors Mega Slice, a gigantic pizza slice equal in size to a large pizza. This unique item, packaging, and product experience drove significant engagement within the Raptors fan base, and actually the packaging became a collector's item for people on social media as well. So it was amazing to see the secondary effects of that, and we had support from the Raptors mascot as well. And we also continued our pioneering score slice and score pie promotions at our NHL partner arenas across the country. These activations drive customers to our app and allows our marketing team to keep engaging with them, and importantly, for return visits. This leads me to the third, and I would say the most critical aspect of our sales driving initiatives, and that is the customer experience. Because customers have a plethora of restaurants to choose from, we have to ensure that from end to end, the customer's experience with us is second to none. To that end, we continue to invest in our digital ordering platform, loyalty program, business intelligence tools, as well as our in-store design and technology. And also importantly, I just mentioned on the human side, we also focus on ensuring that we have the friendliest possible experience for our guests, whether it's at the front counter when they walk in, whether it's at the front door if it's a delivery order, or over the phone if they call 967-1111 or 7373 in Alberta, or online. We want to make sure we give that personal human touch. And on the tech side, we have an in-house team of app and website developers and QA experts who are constantly enhancing our platform based on customer feedback, while also removing any friction points or bugs. We were a pioneer in loyalty, having had our Club 1111 program running now for over 10 years, and we have approximately 1.5 million enrolled users, which we're very proud of. We're currently updating Club 1111 with new functionality, including real-time push notifications, reminding members when the rewards are available, and again, when they're about to expire. Last year, we saw record use of the program as well, due to the enhancements, with really millions of dollars in loyalty dough redemption, so that's very exciting to see. We continue to improve our tech stack supporting this existing program while we investigate opportunities to enhance it. We're constantly working on our restaurant refresh and renovation program, adding the most current and inviting look for our customers with new contemporary designs and exterior signage. Customer satisfaction is paramount. It's a mission we focus on each and every day, and we continually work to elevate that customer experience with our talented operators who are trained and retrained and motivated to become A-level, the best of the best. not only at Pizza Pizza, but in the QSR industry. As we look ahead to 2025, we know that there is significant competition for consumer spending, especially with the impact tariffs are poised to have on our customers' wallets, but the overall strength of our foundation remain the same. Our brand strength and resonant marketing messages, a continually enhanced menu and industry-leading packaging, relentless innovations across our technology platform, reliable consistency and quality, and unrivaled convenience for our customers. These leading attributes will be key to our growth as we go forward. And before I turn the call over to Christine, I just wanted to briefly discuss our restaurant network growth as well. We remain focused on growing our business across Canada, and we're known and respected as a major homegrown national brand and the leading pizza chain in the country. During the quarter, we opened eight traditional and three non-traditional Pizza Pizza locations. Meanwhile, at Pizza 73, we opened one traditional location in one non-traditional Pizza 73 location. And we closed three non-traditional Pizza Pizza sites and three non-traditional Pizza 73 sites. And as I mentioned earlier, for the full year, we opened a record 48 new restaurants across Canada, which we're very proud of. And we also did close 22 smaller non-traditional locations and three traditional locations. For the traditional closures, adjacent restaurants benefited by absorbing the closed stores territory. While we continue to focus on our national expansion plans, we are pleased to say that half of our traditional store openings have been in our biggest, longest standing, most penetrated, lucrative market, the province of Ontario. And beyond Canada, we now have four restaurants operating in Guadalajara, Mexico, and the royalties to the Royalty Corp commenced in October of 2024. Although it is still early days for Mexico, we're pleased with our restaurant's performance today, and we're continuing to work closely with our Mexican partners on the next set of restaurant openings and expect more openings this year. So stay tuned. And as we look to 2025, Pizza Pizza Management expects to continue its restaurant network expansion with roughly 2% to 3% traditional restaurant growth. Additionally, we look to complete our renovation program, as we currently have over 93% of our restaurants featuring our new modern image. And we will also continue with significant upgrades in regards to restaurant equipment, such as more efficient ovens, digital menu boards, and other in-store technology. We continue to have a large pipeline of franchise leads that are eager to join the team, We also have many of our current franchisees looking to expand too. And I would just mention in passing as well that we did receive a very prestigious award this quarter from the Elite Franchise Group out of the UK. They evaluated 100 applicants across Canada, many, many leading brands that you would know very, very well. So we had some very stiff competition, but Pizza Pizza came out on top as the number one recognized elite franchise. So we're very proud of that as well. And certainly that reflects the quality of our operators, our business, and certainly helps sell more franchises as well. So we're very proud of that. Now some closing remarks. As mentioned, we will continue to drive business by leading into our value offerings, innovation, marketing, and brand initiatives, while providing high quality, delicious, hot and fresh food to our customers wherever and whenever they want us. We know the economic landscape is challenged and customers are much more deliberate in managing their overall spend, but we will ensure that our customers continue to see us offering the best food at the best price. And finally, I'd like to close by thanking our entire team, our corporate employees and operators alike for everything you do for our customers, our communities, and for each other, especially in this difficult macro operating environment. It is truly an honor to work alongside all of you as we built an innovative, ambitious, and collaborative culture right across the country at both brands. And I think the best is yet to come. Thank you for listening, and I'll now ask Christine to provide a brief financial update.