PIZZA PIZZA ROYALTY CORP. ANNOUNCES SECOND QUARTER 2025 RESULTS

Executive Summary

• Pizza Pizza Royalty Corp. reported its financial results for the second quarter and first half of 2025, showing growth in system sales and adjusted earnings per share compared to the prior year.
• Same store sales growth (SSSG) improved significantly, rising 2.1% in Q2 2025 versus a decline of 3.9% in Q2 2024, driven by increases in both customer traffic and average check size.
• The company declared a dividend of $0.2325 per share for the quarter, maintaining the payout ratio near historical targets despite a payout ratio of 108% for the quarter and 112% for the period.

Key Details

• Financial Performance (Q2 2025 vs Q2 2024):
  • Royalty Pool System Sales increased 3.9% to $161.4 million (from $155.4 million).
  • Adjusted Earnings Per Share (EPS) increased 1.3% to $0.241 (from $0.238).
  • Basic EPS increased 1.3% to $0.236 (from $0.233).
  • Adjusted earnings available for shareholder dividends were $5.3 million (vs $5.3 million in prior year).
• Financial Performance (YTD 2025 vs YTD 2024):
  • Royalty Pool System Sales increased 2.8% to $312.7 million (from $304.3 million).
  • Adjusted EPS remained comparable at $0.470 (vs $0.469).
  • Adjusted earnings available for shareholder dividends were $10.2 million (vs $10.0 million in prior year).
• Sales Breakdown:
  • Pizza Pizza: System sales increased 4.1% to $139.3 million in Q2; SSSG was 2.1%.
  • Pizza 73: System sales increased 2.4% to $22.0 million in Q2; SSSG was 2.0%.
• Dividends and Capital:
  • Dividends declared: $5.7 million ($0.2325 per share) for Q2; $11.4 million ($0.4650 per share) for YTD.
  • Payout Ratio: 108% for Q2; 112% for YTD.
  • Working Capital Reserve: $4.8 million at June 30, 2025 (down $1.3 million from December 31, 2024).
• Operational Metrics:
  • Restaurant Network: Increased by 3 net locations to 794 total restaurants (694 Pizza Pizza, 100 Pizza 73) as of Jan 1, 2025.
  • Q2 Openings/Closings: Pizza Pizza opened 3 traditional and 5 non-traditional, closed 1 traditional and 4 non-traditional. Pizza 73 opened 1 traditional, closed 1 traditional.
  • Management expects traditional restaurant network growth of 2% to 3% through 2025.
• Credit Facility:
  • Existing facility extended for three years with a new maturity date of April 24, 2028.
  • Interest rate structure: CORRA + 1.00% to 1.50% spread.
  • Current effective interest rate: 3.51% (fixed 2.51% + 1.0% spread).
  • Debt-to-EBITDA ratio: 1.19:1 (covenant limit 2.5:1).
  • Interest coverage ratio: 29.47:1 (covenant minimum 3:1).

Notable Quotes

• "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."