Full Transcript: Boston Pizza Royalties Q1 2026 Earnings Call

On Wednesday, Boston Pizza Royalties (TSX:BPF) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

BPF.UN reported franchise sales of $238.4 million in Q1 2026, a 3.1% increase from the previous year, driven by promotional initiatives and increased takeout and delivery traffic.

The Fund posted royalty income of $9.5 million and distribution income of $3.1 million, both showing marginal increases from Q1 2025.

Net and comprehensive income rose to $2 million for Q1 2026, primarily due to a $7.4 million increase in fair value gain.

BPF.UN launched several promotional initiatives, including Pasta Tuesday and heart-shaped pizzas for Valentine's Day, raising $650,000 for local charities.

The company closed two restaurants in Q1 but has construction underway for new locations in Revelstoke, B.C., and Dryden, Ontario, among others.

The Fund's distributable cash increased to $7.5 million, with a payout ratio of 101.6%, and the monthly distribution rate was raised to 12.4 cents per unit.

Looking ahead, BPF.UN plans to focus on guest engagement through sports-themed promotions and partnerships, while monitoring geopolitical developments for potential cost impacts.

Full Transcript

Michael Harpenson (Chief Financial Officer)

Very good and thank you. Welcome to the call. Today we'll be discussing the 2026 first quarter results for both Boston Pizza Royalties Income Fund or the Fund as well as Boston Pizza International or bpi. For complete details on our financial results, Please see our first quarter materials filed earlier today on SEDAR plus or visit the Fund's website at bpincomefund.com should you require additional information. After the call, you can reach out to our Investor Relations email at the address of investor [email protected] the fund is a limited purpose open ended trust established under the laws of British Columbia. Its purpose is to acquire indirectly certain trademarks and trade names used by BPI in its Boston Pizza restaurants in Canada. BPI pays royalty income and distribution income to the Fund based on franchise revenue of royalty pool restaurants. For a complete description of the Fund and its business, please see the Annual information form dated February 12, 2026 which was filed on Sedarplus CA. Before I turn the call over to Jordan Holm, President of bpi, I would like to note that certain information in the following discussion may constitute forward looking information. For a more complete definition of forward looking information and the associated risks, please refer to the Fund's management discussion and analysis issued earlier today. Forward looking information is provided as of the date of this call and except as required by law, we assume no obligation to update or revise forward looking information to reflect new events or circumstances and with that I will now turn

Jordan Holm (President)

the call over to Jordan Jordan thank you Michael and welcome everyone to Boston Pizza's first quarter investor conference call. Today I'll be discussing our first quarter results for 2026 and also share a brief outlook. Michael will summarize our key financial highlights and as usual we'll leave time for your questions at the end of today's call. Boston Pizza delivered strong franchise sales and same restaurant sales results for the first quarter. Our promotional initiatives continue to captivate guests in 2026, driving guest enthusiasm and positive feedback across our restaurants nationwide. Our continued performance in spite of continued trade tensions and increasingly uncertain global backdrop demonstrates the resilience and strength of our business and the Boston Pizza brand. The fund posted franchise sales from restaurants in the royalty pool of $238.4 million for the first quarter, representing an increase of 3.1% versus the same period one year ago. Same restaurant sales was 3.1% for the first quarter and was principally due to increased guest traffic from sustained momentum in the takeout delivery business and promotional initiatives. From a marketing perspective, we kicked off the first quarter with Boston Pizza's popular Pasta Tuesday all month long promotion throughout the month of January where guests enjoyed pastas every day of the week starting at just $11.99 with gourmet pastas available for $15. To boost guest engagement even further, we partnered with Pepsi to give guests the chance to win exciting NFL prizes, which included a trip to a regular season football game. On Valentine's Day 2026, we celebrated one of Boston Pizza's most long standing and beloved traditions through our heart shaped pizzas. For every pizza sold on February 14, a dollar was donated to support local charities across our communities and with the support of our guests. This meaningful campaign raised approximately $650,000 for the Boston Pizza foundation and local charities. In terms of restaurant development, no new restaurants opened during the first quarter and two restaurants closed and 11 have undergone restaurant renovations during the first quarter. We have a collection of upcoming initiatives lined up for the second quarter of 2026 designed to boost sales and drive guest engagement. I'll share the details with you shortly after we first hear from Michael about the Fund's financial performance. Michael thank you Jordan.

Michael Harpenson (Chief Financial Officer)

The fund posted royalty income of $9.5 million for the first quarter compared to $9.2 million for the same period one year ago. The fund posted distribution income of $3.1 million for the first quarter compared to three million dollars for the same period one year ago. Royalty income and distribution income for the first quarter were based on three hundred and seventy two Boston Pizza restaurants in the royalty pool that reported franchise sales of $238.4 million for the same period in 2025. Royalty income and distribution income were based on the royalty pool of again 372 Boston Pizza restaurants reporting franchise sales at $231.1 million. The fund's net and comprehensive income was $2 million for the first quarter compared to $6.3 million for the first quarter of 2025. The increase in the Fund's net and comprehensive income for the first quarter compared to the first quarter of 2025 was primarily due to a $7.4 million increase in fair value gain and a $0.4 million increase in royalty income and distribution income, partially offset by a 1.7 million in deferred income tax expense, a $2 million increase in net interest expense, and a $0.1 million increase in current income tax expense. The Fund's cash flows generated from operating activities for the first quarter was $9.6 million compared to $9.3 million in the first quarter of 2025. The increase of $0.3 million was primarily primarily due to an increase in royalty income and distribution income of $0.4 million, partially off income taxes paid of $0.1 million. While net and comprehensive income or loss and cash flows from operating activities are both measurements under IFRS accounting standards or ifrs, the Fund is of the view that net income or loss and cash flows from operating activities do not provide the most meaningful measurement of the Fund's ability to pay cash distributions. Net income contains non cash items that do not affect the Fund's cash flow, whereas cash flows from operating activities is not inclusive of all of the funds required cash outflows and therefore is not indicative of the cash available for distributions to unitholders. Non cash items include fair value adjustments on the investment in Boston Pizza Canada Limited Partnership, Class B unit liability, interest rate swaps, and changes in deferred income taxes. Consequently, the Fund reports non IFRS metrics of distributable cash and payout ratio to provide investors with, in the fund's opinion, more meaningful information regarding the fund's ability to pay distributions to unitholders. The Fund generated distributable cash of $7.5 million for the first quarter compared to $7.3 million for the same period in the previous year. The increase in distributable cash of $0.2 million, or 2.9%, was primarily due to an increase in cash flows generated from operating activities of $0.3 million, partially offset by higher interest paid on debt of $0.1 million. The fund generated distributable cash per unit of 35.4 cents for the first quarter compared to 34.4 cents for the same period in 2025. The increase in distributable cash per unit of $0.01, or 2.9%, was primarily due to the increase in distributable cash discussed earlier, the funds payout ratio for the first quarter was 101.6% compared to 100.2% in the first quarter of 2025. The increase in the funds payout ratio was due to distributions paid increasing by $0.3 million or 4.3%, partially offset by a distributable cash increasing by $0.2 million or 2.9%. The funds payout ratio fluctuates quarter to quarter depending on the amount of distributions paid during a quarter and the amount of distributable cash generated during that quarter. On a trailing twelve month basis, the Fund's payout ratio was 102.2% as at March 31, 2026. On April 2, 2026, the Trustees of the fund increased the monthly distribution rate to 12.4 cents per unit starting with the distribution for the period of March 1, 2026 to March 31, 2026. The new monthly distribution rate represents an increase of 0.4 cents per unit or 3.3% from the previous monthly distribution rate of 12 cents per unit. On an annualized basis, the new distribution rate is equal to $1.488 per unit compared to $1.44 per unit for the previous rate. The March 2026 distribution was paid on April 30, 2026 to unitholders of record on April 21, 2026. On May 12, 2026, the Trustees of the Fund approved a cash distribution for the period of April 1, 2026 to April 30, 2026 of 12.4 cents per unit, which will be paid on May 29, 2026 to unitholders of record at the close of business on May 21, 2026. The trustee's objective in setting a monthly distribution amount is that it be sustainable. The trustees will continue to closely monitor the Fund's available cash balances given the uncertain economic outlook, and with that, I will turn the call back over to Jordan for more on the outlook.

Jordan Holm (President)

Jordan thank you Michael Boston Pizza started the second quarter of 2026 with the launch of a playoff promotion to align with the start of the hockey and basketball playoffs. This campaign features several exciting new menu items including the Philly Cheesesteak Pizza, the Most Valuable Platter, and the Smoke Show Whiskey Caesar. Supported by extensive national advertising as part of our Feast Like a Hockey God campaign, this promotion is designed to elevate Boston Pizza and the sports bar experience in particular and allow guests to enjoy greater participation by calling upon the Hockey gods, further maximizing guests enjoyment by summoning some playoff magic during the post season. In June, we'll launch a series of promotional campaigns aligned with the upcoming World cup of Soccer, supporting franchisees and engaging their local communities and cheering on home athletes and those coming from international teams. We'll also be kicking off a summer promotion with a refreshing feature menu alongside another partnership with Live Nation Canada to offer guests a chance to win exciting concert prizes and having more live music at Boston pizza restaurants across the country this summer. While our strong franchise sales in the first quarter highlight the underlying strength and resilience of our business, we will closely monitor the evolving trade landscape and broader geopolitical developments, including those that may impact our operations, such as the ongoing conflict in the Middle East. While the conflict has not yet resulted in material increases to input costs for our restaurants, any prolonged disruptions to global supply chains may result in increased costs in the future and dampen consumer discretionary spending. We'll remain focused on adapting our businesses as needed. Our priorities continue to be delivering exceptional guest experiences, supporting our franchisees and are driving sustainable long term growth through innovation and operational discipline. With that, I'd like to turn it back to the operator to begin the question and answer session. Operator

OPERATOR

thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star Then one on their Touchstone phone or send a question via email to [email protected] Please note those questions that we don't get to during the call will be answered via email immediately following the end of the investor conference call. The first question comes from Nick Cochran with Acumen Capital. Please go ahead.

Nick Cochran (Equity Analyst)

Good morning and thanks for taking my questions. Thanks Nick. Just first question, the two stores that closed in the quarter, any details on where those were?

Jordan Holm (President)

They were both in Western Canada. We had one in the B.C. lower mainland and one in the Edmonton area.

Nick Cochran (Equity Analyst)

And was that related to leases ending or any color on why those stores closed?

Jordan Holm (President)

Yeah, the one in Edmonton was anticipated for quite some time. It is a redevelopment site and so we were waiting to hear from the landlord about their development plans and so that led to the timing of the closure in Q1. The one in B.C. had a mix of issues in terms of the location and it's not uncommon, as you know, for a restaurant group of our size to have locations that need to close permanently, either to relocate or to develop other territories. So we're confident that we can capture a good portion of the sales from those two closures in other areas. Other Boston pizzas that are nearby and we never like to see Boston Pizzas close, but it is part of the life cycle at times to to let long standing restaurants close the doors and look for new growth elsewhere.

Nick Cochran (Equity Analyst)

Great. And then maybe can you talk about the pipeline for new stores and any stores that might be under construction now?

Jordan Holm (President)

Yeah, absolutely. We're excited to see a number of projects moving forward as the frost comes off in certain regions across the country. We've been talking about Revelstoke for a little while. It's a, a really growing four season recreational community in British Columbia. Has, you know, obviously great ski history up there, but increasingly four seasons, golf, mountain