PIZZA PIZZA ROYALTY CORP. ANNOUNCES FOURTH QUARTER 2024 RESULTS
TORONTO, March 31, 2025 /CNW/ - Pizza Pizza Royalty Corp. (the "Company") (TSX:PZA), which indirectly owns the Pizza Pizza and Pizza 73 Rights and Marks, released financial results today for the three months ("Quarter") and twelve months ("Year") ended December 31, 2024.
Fourth Quarter highlights:
Same store sales(2) decreased 3.8%
Royalty Pool sales decreased 2.1%
Adjusted earnings per share(5) decreased 3.9%
Restaurant network increased by seven net locations
2024 Full Year highlights:
Same store sales(2) decreased 3.0%
Royalty Pool sales decreased 1.2%
Adjusted earnings per share(5) decreased 2.7%
Restaurant network increased by 23 net locations
Royalty Pool of restaurants for 2024 increased by 31 net restaurants on January 1, 2024
"With 48 new Pizza Pizza and P73 restaurants opened in 2024, we are pleased with our continued paced of expansion across Canada," said Paul Goddard, President and CEO of Pizza Pizza Limited. "During the fourth quarter, in response to the continued challenging economic environment, we further leveraged our strong everyday value position with strategic offerings. These innovative and creative bundles were supported by effective marketing spend across multiple channels, designed to drive incremental traffic and customer frequency."
SALESRoyalty Pool System Sales for the Quarter decreased 2.1% to $160.5 million from $163.9 million in the same quarter last year. By brand, sales from the 672 Pizza Pizza restaurants in the Royalty Pool decreased 2.4% to $137.7 million for the Quarter compared to $141.1 million in the same quarter last year. Sales from the 102 Pizza 73 restaurants decreased 0.2% to $22.8 million for the Quarter compared to $22.9 million in the same quarter last year.
Royalty Pool System Sales for the Year decreased 1.2% to $620.6 million from $628.3 million in 2023. By brand, for the Year, sales from the 672 Pizza Pizza restaurants in the Royalty Pool decreased 1.8% to $534.8 million compared to $544.4 million in the prior year. Sales from the 102 Pizza 73 restaurants increased 2.3% to $85.8 million for the Year compared to $83.9 million in 2023.
For the Quarter and Year, the change in Royalty Pool System Sales is primarily driven by the effects of new restaurants added to the Royalty Pool on January 1, 2024 and the same store sales. The Royalty Pool System Sales for the Year also benefitted from the extra day of sales in February 2024 due to the leap year. Additionally, while the number of restaurants in the Pizza 73 Royalty Pool remains less than in 2019 when there were 104 restaurants, the negative impact on Royalty Pool System Sales due to prior year restaurant closures has been mitigated by the Make-Whole Carryover Amount.
SAME STORE SALES GROWTH ("SSSG")SSSG, the key driver of yield growth for shareholders of the Company, decreased 3.8% (2023, increased 4.0%) for the Quarter, and decreased 3.0% for the Year (2023, increased 8.2%). SSSG is not affected by the additional day during the leap year, as SSSG is calculated using a 13- and 52-week comparative basis.
SSSG
Fourth Quarter
(%)
Year
(%)
2024
2023
2024
2023
Pizza Pizza
-4.3
3.5
-3.8
8.4
Pizza 73
-0.7
7.3
2.3
7.2
Combined
-3.8
4.0
-3.0
8.2
SSSG is driven by the change in the customer check and customer traffic, both of which are affected by changes in pricing and sales mix. During the Quarter and Year, consistent with the general market trends, at both brands restaurant traffic decreased due to the current economic situation and its impact on consumer discretionary spending, and was also impacted by the heightened competitive landscape. The average customer check for the Pizza Pizza brand decreased in the Quarter, and was relatively flat for the Year, as the brand introduced new value-oriented offerings. At Pizza 73, during the Quarter and Year, the average check increased.
MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVEThe Company declared shareholder dividends of $5.7 million for the Quarter, or $0.2325 per share, compared to $5.7 million, or $0.230 per share, for the prior year comparable quarter. The payout ratio is 104% for the Quarter and was 96% in the prior year, comparable quarter.
The Company declared shareholder dividends of $22.9 million for the Year, or $0.93 per share, compared to $21.8 million, or $0.8875 per share, in 2023. The payout ratio is 110% for the Year and was 97% in 2023. The Company's policy is to distribute all available cash in order to maximize returns to shareholders over time, after allowing for reasonable reserves. Despite seasonal variations inherent to the restaurant industry, the Company's policy is to make equal dividend payments to shareholders on a monthly basis in order to smooth out income to shareholders.
The Company's working capital reserve, excluding the credit facility, is $6.1 million at December 31, 2024, which is a decrease of $2.2 million in the Year due to the decrease in royalty income and the 104% payout ratio. The reserve is available to stabilize dividends and fund other expenditures in the event of short- to medium-term variability in System Sales and, thus, the Company's royalty income. The Company has historically targeted a payout ratio at or near 100% on an annualized basis.
EARNINGS PER SHARE ("EPS")Fully-diluted basic EPS decreased 3.6% to $0.240 for the Quarter compared to the prior year comparable quarter.
As compared to basic EPS, the Company considers adjusted EPS(5) to be a more meaningful indicator of the Company's operating performance and, therefore, presents fully diluted, adjusted EPS. Adjusted EPS for the Quarter decreased 3.9% to $0.245 when compared to the prior year comparable quarter.
RESTAURANT DEVELOPMENT As previously announced, the number of restaurants in the Company's Royalty Pool increased by 31 locations to 774 on the January 1, 2024 Adjustment Date, and consists of 672 Pizza Pizza restaurants and 102 Pizza 73 restaurants. The number of restaurants in the Royalty Pool was unchanged through 2024.
During the Quarter, Pizza Pizza Limited ("PPL") opened eight traditional and three non-traditional Pizza Pizza restaurants, and closed three non-traditional Pizza Pizza restaurants. PPL also opened one traditional and one non-traditional Pizza 73 restaurant, and closed three non-traditional Pizza 73 restaurants.
During the Year, PPL opened 21 traditional and 23 non-traditional Pizza Pizza restaurants, and closed three traditional and 19 non-traditional Pizza Pizza restaurants. PPL also opened two traditional and two non-traditional Pizza 73 restaurants, and closed three non-traditional Pizza 73 restaurants.
PPL management expects to grow its traditional restaurant network by 3-4% and continue its renovation program through 2024.
Readers should note that the number of restaurants added to the Royalty Pool each year may differ from the number of restaurant openings and closings reported by PPL on an annual basis as the Years for which they are reported differ slightly.
CREDIT FACILITYOn June 19, 2024, in response to the cessation of the Canadian Dollar Offered Rate ("CDOR"), the benchmark interest rate on bankers' acceptances, the credit facility was amended. The amendment transitioned the $47.0 million term loan from bankers' acceptances to Canadian Overnight Repo Rate Average ("CORRA") loans. The remaining terms and conditions are consistent with those of the previous credit facility. The fixed interest rate on the swaps remained unchanged with this amendment, and the effective interest rate remained at 2.685% for the Quarter and Year.
Subsequent to December 31, 2024, the Company's existing credit facility was extended for three-years with new maturity date of April 24, 2028. Mandatory repayment remains interest-only until the loan matures. The facility will bear interest at CORRA rate plus a credit spread of 1.00% to 1.50%, depending on the level of certain financial ratios.
SELECTED FINANCIAL HIGHLIGHTSThe following tables set out selected financial information and other data of the Company and should be read in conjunction with the December 31, 2024 audited consolidated financial statements of the Company ("Financial Statements"). Readers should note that the 2024 results are not directly comparable to the 2023 results due to there being 774 restaurants in the 2024 Royalty Pool compared to 743 restaurants in the 2023 Royalty Pool.
(in thousands of dollars, except number of
restaurants, days in the year, per share amounts,
and noted otherwise)
Three months
ended
December 31,2024
Three months
ended
December 31,2023
Twelve months
endedDecember 31,2024
Twelve months
endedDecember 31,2023
Restaurants in Royalty Pool(1)
774
743
774
743
Same store sales growth(2)
-3.8 %
7.0 %
-3.0 %
8.2 %
Days in the Year
92
92
366
365
System Sales reported by Pizza Pizza restaurants in the Royalty Pool(6)
$ 137,721
$ 141,051
$ 534,768
$ 544,388
System Sales reported by Pizza 73 restaurants in the Royalty Pool(6)
22,820
22,861
85,783
83,949
Total System Sales
$ 160,541
$ 163,912
$ 620,551
$ 628,337
Royalty, 6% on Pizza Pizza System Sales
8,264
8,463
$ 32,086
$ 32,663
Royalty, 9% on Pizza 73 System Sales
2,053
2,058
7,721
7,556
Royalty income
$ ...
