PIZZA PIZZA ROYALTY CORP. ANNOUNCES FIRST QUARTER 2026 RESULTS

• Pizza Pizza Royalty Corp. reported Q1 2026 results on May 1, 2026, revealing a significant deterioration in core operating metrics compared to Q1 2025 and previous quarters.
• Total Royalty Pool System Sales fell to $145.8 million, down from $151.3 million in the prior year period.
• Same Store Sales Growth (SSSG) turned deeply negative at -4.1% for the combined brands, a sharp reversal from +1.2% growth in Q1 2025 and positive growth throughout late 2025.
• Adjusted EPS declined 6.1% to $0.216, missing previous stability seen in Q4 2025 ($0.245).
• Royalty income decreased to $9.393 million from $9.729 million year-over-year.
• The dividend payout ratio surged to 134%, up from 117% in the prior year quarter, indicating earnings are insufficient to cover distributions.
• Working capital reserves were drawn down by $1.4 million during the quarter, leaving only $2.3 million remaining as of Q1 end.
• The restaurant network grew by seven net locations to 814 total (712 Pizza Pizza, 102 Pizza 73).

• Sales Deterioration: The shift from positive SSSG (+1.2% in Q1 2025) to negative (-4.1% in Q1 2026) is a material negative signal for a royalty business model where revenue is directly tied to franchisee sales volume. This contradicts the resilience narrative presented in Q4 2025 results.
• Dividend Sustainability Risk: A payout ratio of 134% is unsustainable without continuous capital raises or reserve depletion. With working capital reserves down to $2.3 million, the buffer for smoothing dividends is nearly exhausted. This materially increases the risk of a dividend cut in future quarters if sales do not recover immediately.
• Earnings Miss: The decline in Adjusted EPS (-6.1%) and Royalty Income confirms that cost pressures or volume declines are impacting bottom-line profitability more than anticipated following Q4 2025 guidance.
• Market Reaction Context: While the stock data ends April 30, 2026 (pre-earnings), the price had already retreated from February highs ($16.73) to $15.60, suggesting some market anticipation of weakness. However, the magnitude of the SSSG miss (-4.1% vs flat/positive expectations implied by Q4 guidance) warrants a negative reassessment of valuation.

• Company: Pizza Pizza Royalty Corp. operates as a royalty corporation that collects royalties from the Pizza Pizza and Pizza 73 restaurant networks across Canada.
• Flagship Project: The "Royalty Pool" consisting of 814 restaurants (as of Q1 2026). Revenue is derived from a percentage of system sales generated by these locations.
• Development: The network expanded by seven net locations in Q1 2026, but this growth was insufficient to offset the decline in same-store sales volume.
• Royalty Structure: The company holds royalty rights on the brands; properties are not owned by the Corp but pay royalties based on sales performance (royalty-free for the Corp regarding property ownership costs, but dependent on franchisee sales).