A & W Food Services of Canada (AW) Q4 2024 earnings summary

Executive summary

• Achieved a milestone year with the strategic combination of Food Services and A&W Revenue Royalties Income Fund, simplifying the corporate structure and positioning for future growth.

• Opened 28 new A&W restaurants and the first stand-alone Pret restaurant in Fiscal 2024, with a net annual unit growth of 1.8% and strong guest response to menu innovations.

• Introduced successful menu innovations, including the Spicy Piri Piri Buddy Burger, Veggie Masala Burger, and expanded Pret A Manger in Canada.

• Focused on improving franchisee profitability and operational efficiency, with ongoing structural changes to benefit bottom lines.

• Declared a quarterly dividend of $0.480 per share, payable March 28, 2025.

Financial highlights

• System sales reached a record $1.87 billion in Fiscal 2024, up 0.8% year-over-year, with Q4 system sales at $576.8 million, flat year-over-year.

• Adjusted EBITDA grew by $1.2 million to $93.5 million in 2024, with Q4 Adjusted EBITDA up 1% to $27.9 million.

• Annual revenue declined 2% to $292.3 million, mainly due to a strategic reduction in capital outflow for franchisees, impacting equipment sales.

• Fiscal 2024 net income was $21.7 million, down from $38.0 million in 2023, mainly due to a $16.9 million non-cash, non-recurring deferred tax expense.

• Q4 2024 saw -1.9% same-store sales growth and a net loss of $1.1 million due to the tax expense.

Outlook and guidance

• Continued focus on menu innovation, value offerings, and the launch of a new loyalty program in late Q2 2025.

• Plans to roll out a redesigned restaurant operating system in 2025 to enhance efficiency and guest experience.

• Anticipates top and bottom-line growth through franchise model and strategic initiatives.

• Cautious on near-term same-store sales trends due to economic uncertainty and weather impacts, but expects improvement as conditions stabilize.

• Forward-looking statements subject to risks including economic conditions, competition, and regulatory changes.