TORONTO, Aug. 7, 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 six months (“Period”) ended June 30, 2025.
Second Quarter highlights:
- Same store sales(2) increased 2.1%
- Royalty Pool sales increased 3.9%
- Adjusted earnings per share(5) increased 1.3%
Year to Date highlights:
- Same store sales(2) increased 1.6%
- Royalty Pool sales increased 2.8%
- Adjusted earnings per share(5) increased 0.2%
- Restaurant network increased by 3 net locations
“Our strong second quarter performance highlights our ongoing commitment to growth, supported by menu innovation and strategic sports partnerships,” said Paul Goddard, President and CEO of Pizza Pizza Limited. “Despite headwinds in the broader quick service landscape, our momentum continued this quarter and our marketing initiatives drove growth in both transactions and check.”
SALES
Royalty Pool System Sales for the Quarter increased 3.9% to $161.4 million from $155.4 million in the same quarter last year. By brand, sales from the 694 Pizza Pizza restaurants in the Royalty Pool increased 4.1% to $139.3 million for the Quarter compared to $133.8 million in the same quarter last year. Sales from the 100 Pizza 73 restaurants increased 2.4% to $22.0 million for the Quarter compared to $21.5 million in the same quarter last year.
Royalty Pool System Sales for the Period increased 2.8% to $312.7 million from $304.3 million in the same period last year. By brand, sales from the 694 Pizza Pizza restaurants in the Royalty Pool increased 2.7% to $269.2 million for the Period compared to $262.1 million in the same period last year. Sales from the 100 Pizza 73 restaurants increased 3.3% to $43.5 million for the Period compared to $42.1 million in the same period last year.
For the Quarter and Period, the increase in Royalty Pool System Sales is driven by the same store sales and new restaurants added to the Royalty Pool on January 1, 2025. Additionally, while the number of restaurants in the Pizza 73 Royalty Pool remains less than 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. See “Same Store Sales Growth”, and “Restaurants Added to the Royalty Pool”.
The Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System Sales for the quarter ended March 31 have generally been the lowest. System Sales for the quarter ended December 31 have generally been the highest relative to other quarters.
SAME STORE SALES GROWTH (“SSSG”)
SSSG, the key driver of yield growth for shareholders of the Company, increased 2.1% (2024 – decreased 3.9%) for the Quarter, and increased 1.6% for the Period (2024 – decreased 1.3%).
|
SSSG |
Second Quarter (%) |
Period (%) |
||
|
2025 |
2024 |
2025 |
2024 |
|
|
Pizza Pizza |
2.1 |
-5.1 |
1.3 |
-2.4 |
|
Pizza 73 |
2.0 |
3.7 |
3.5 |
6.0 |
|
Combined |
2.1 |
-3.9 |
1.6 |
-1.3 |
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 Period, at both brands, restaurant traffic and average customer check increased.
MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVE
The Company’s dividends remained unchanged in the Quarter and Period. The Company declared shareholder dividends of $5.7 million, or $0.2325 per share, for the Quarter and the prior year comparable quarter, and $11.4 million, or $0.4650 per share, for the Period and the prior year comparable period. The payout ratio is 108% for the Quarter and was 112% for the Period.
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. After the reduction in the monthly dividend in April 2020, and the eight subsequent increases, including the most recent increase in November 2023, any further change will be implemented with a view to maintaining the continuity of consistent monthly distributions. It is expected that future dividends will continue to be funded entirely by cash flow from operations and the cash reserve.
The Company’s working capital reserve is $4.8 million at June 30, 2025, which is a decrease of $1.3 million in the Period due to the 112% payout ratio. System sales for the quarter ended March 31 have generally been the softest and historically results in a payout ratio over 100%. 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 increased 1.3% to $0.236 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. The adjusted EPS for the Quarter increased 1.3% to $0.241 when compared to the same period of 2024, and was comparable at $0.47 for the Period
RESTAURANT DEVELOPMENT
As previously announced, the number of restaurants in the Company’s Royalty Pool increased by 20 net locations to 794 on the January 1, 2025 Adjustment Date, and consists of 694 Pizza Pizza restaurants and 100 Pizza 73 restaurants. The number of restaurants in the Royalty Pool will remain unchanged through 2025.
During the Quarter, Pizza Pizza Limited (“PPL”) opened three traditional and five non-traditional Pizza Pizza restaurants, and closed one traditional and four non-traditional Pizza Pizza restaurants. Additionally, at the Pizza 73 brand, PPL opened one traditional restaurant and closed one traditional restaurant.
During the Period, PPL opened five traditional and seven non-traditional Pizza Pizza restaurants, and closed two traditional and eight non-traditional Pizza Pizza restaurants. PPL also opened two traditional Pizza 73 restaurants, and closed one Pizza 73 traditional restaurant.
PPL management expects to grow its traditional restaurant network by 2% to 3% and continue its renovation program through 2025.
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 FACILITY
On March 20, 2025, the Company’s existing credit facility was extended for three years with a new maturity date of April 24, 2028. Mandatory repayment remains interest-only until the loan matures. The new facility bears interest at Canadian Overnight Repo Rate Average (“CORRA”) rate plus a credit spread of 1.00% to 1.50%, depending on the level of certain financial ratios. Additionally, on April 3, 2025, the Partnership entered into a three-year forward swap arrangement commencing April 24, 2025. With the new swap and credit spread, the interest rate increased to 3.51%, comprised of a fixed rate of 2.51% plus a credit spread currently set at 1.0%.
The credit facility includes affirmative and negative covenants customary for agreements of this nature, and as at June 30, 2025 all covenants have been met. The Partnership is required to maintain a funded debt-to-EBITDA ratio not to exceed 2.5:1.0 on a four quarter rolling average and an interest coverage ratio of minimum 3:1. The debt-to-EBITDA ratio for the last four-quarter rolling average is 1.19:1 and the interest coverage ratio is 29.47:1 (December 31, 2024 – 1.20:1). The Partnership is presently making interest-only payments on the non-revolving credit facility. As the debt-to-EBITDA level changes, the credit spread will change as follows.
|
Debt:EBITDA |
Credit Spread |
|
< 1.5:1 |
1.00 % |
|
1.5 – 2.0:1 |
1.25 % |
|
> 2.0:1 |
1.50 % |
SELECTED FINANCIAL HIGHLIGHTS
The following tables set out selected financial information and other data of the Company and should be read in conjunction with the June 30, 2025 unaudited interim condensed consolidated financial statements of the Company (“Financial Statements”). Readers should note that the 2025 results are not directly comparable to the 2024 results due to there being 794 restaurants in the 2025 Royalty Pool compared to 774 restaurants in the 2024 Royalty Pool.
|
(in thousands of dollars, except number of restaurants, days in the year, per share amounts, and noted otherwise) |
Three months |
Three months |
Six months |
Six months |
||
|
Restaurants in Royalty Pool(1) |
794 |
774 |
794 |
774 |
||
|
Same store sales growth(2) |
2.1 % |
-3.9 % |
1.6 % |
-1.3 % |
||
|
Days in the Period |
91 |
91 |
181 |
182 |
||
|
System Sales reported by Pizza Pizza restaurants in the Royalty Pool(6) |
$ 139,347 |
$ 133,839 |
$ 269,167 |
$ 262,123 |
||
|
System Sales reported by Pizza 73 restaurants in the Royalty Pool(6) |
22,035 |
21,517 |
43,538 |
42,129 |
||
|
Total System Sales |
$ 161,382 |
$ 155,356 |
$ 312,705 |
$ 304,252 |
||
|
Royalty – 6% on Pizza Pizza System Sales |
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