Pizza Pizza Royalty (PZA) Q2 2024 earnings summary

Executive summary

• Same-store sales declined 3.9% in Q2 2024 after 12 quarters of growth, with Pizza Pizza down 5.1% and Pizza 73 up 3.7%.

• Consumer headwinds from higher interest rates and reduced discretionary spending impacted traffic, though average check increased.

• Pickup orders grew as customers sought to avoid delivery fees, while delivery channel faced challenges.

• Digital orders now exceed 60% of total, supported by technology investments and omni-channel convenience.

• Restaurant network expanded by five net locations in Q2 and ten year-to-date, with 31 new restaurants added to the Royalty Pool on January 1, 2024.

Financial highlights

• Royalty pool system sales decreased 2% to CAD 155.4 million in Q2; Pizza Pizza sales down 2.8%, Pizza 73 up 3.3%.

• Six-month Royalty Pool System Sales: CAD 304.3 million (up 1.0% YoY); Pizza Pizza up 0.3%, Pizza 73 up 5.7%.

• Q2 adjusted EPS fell 3.3% to $0.238; year-to-date adjusted EPS was flat at $0.469.

• Q2 dividends declared: CAD 5.7 million (CAD 0.2325/share), payout ratio 109%; six-month dividends: CAD 11.4 million (CAD 0.465/share), payout ratio 115%.

• Working capital reserve at CAD 6.8 million as of June 30, 2024, down $1.4 million since year-end due to higher payout ratio.

Outlook and guidance

• Plans to continue focusing on value offerings, innovation, and digital investments to regain traffic.

• Management expects to grow the traditional restaurant network by 3-4% and continue renovations through 2024.

• Expectation of further restaurant openings in Canada and Mexico in the second half of 2024.

• Anticipates renegotiating credit facility at higher interest rates before April 2025 maturity.