A & W Food Services of Canada (AW) Q3 2024 earnings summary

Executive summary

• System Sales for Q3 2024 were $465.1M, up 0.4% year-over-year; year-to-date System Sales reached $1.29B, up 1.3% from 2023.

• Same Store Sales Growth for franchised restaurants was -1.0% in Q3 and flat year-to-date, reflecting lower guest counts offset by higher average check size due to inflation.

• Net income for Q3 2024 was $6.5M, down from $9.5M in Q3 2023; year-to-date net income was $22.8M, down from $28.1M in 2023.

• Nineteen new A&W restaurants opened year-to-date, with ten in Q3; four permanent closures year-to-date.

• Strategic combination with A&W Revenue Royalties Income Fund approved, with completion expected October 17, 2024.

Financial highlights

• Total Q3 revenue was $76.0M, up $11.3M year-over-year; year-to-date revenue was $199.1M, up $2.7M.

• Operating Earnings for Q3 were $20.7M, down $3.6M year-over-year; year-to-date Operating Earnings were $61.6M, down $4.4M.

• Royalty expense for Q3 was $13.7M, flat year-over-year; year-to-date royalty expense was $38.3M, up slightly.

• Cash and cash equivalents at September 8, 2024 were $19.6M, up from $3.8M at year-end 2023.

• No amounts drawn on the $40M credit facility at quarter-end (vs. $15.7M at 2023 year-end).

Outlook and guidance

• Challenging economic conditions continue to impact consumer discretionary spending, with inflation and higher interest rates reducing guest traffic.

• Strategic initiatives focus on guest experience, convenience, new restaurant growth, and digital innovation to drive market share.

• Expansion of Pret A Manger brand in Canada underway, with one standalone Pret location and Pret coffee now available at all A&W locations.

• Long-term commitment to franchise network health and market share growth.