Boston Pizza Royalties Income Fund (BPFUN) Earnings Call Transcript
August 13, 2026
Earnings Call Speaker Segments
Hello, this is Chorus Call conference operator. Thank you for standing by. Welcome to Boston Pizza's Second Quarter Conference Call. [Operator Instructions] The conference is being recorded on August 13, 2026. [Operator Instructions] At this time, I would like to turn the conference over to Michael Harbinson, Chief Financial Officer. Please go ahead.
Good morning, and welcome to the call. Today we'll be discussing the 2026 second quarter results for both Boston Pizza Royalties Income Fund, or The Fund, and for Boston Pizza International, or BPI. For complete details on our financial results, please see our second quarter materials filed earlier today on SEDAR+ 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 [indiscernible] at investorrelations@bostonpizza.com. 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 and its Boston Pizza Restaurants in Canada. BPI pays royalty income and distribution income to The Fund based on franchise revenues 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'd 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 the call over to Jordan.
Thank you, Michael, and welcome everyone to Boston Pizza's second quarter investor conference call. Today I'll discuss our second quarter results and provide 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 maintained strong same restaurant sales in the second quarter, driven in part by heightened guest engagement during the FIFA World Cup tournament, and these results reflect the continued success of our promotions and ongoing momentum across takeout and delivery. During the quarter, The Fund posted record franchise sales from restaurants in the Royalty Pool of $256.5 million and $494.9 million year-to-date, representing an increase of 1.9% and 2.5% respectively versus the same periods 1 year ago. SRS was 2.3% for the second quarter and 2.7% year-to-date. SRS for the second quarter and year-to-date was principally driven by continued momentum in the takeout delivery business, promotional initiatives, and increased restaurant traffic associated with the FIFA World Cup. We began the second quarter of 2026 with the launch of a playoff promotion to accompany the hockey and basketball playoff season. This initiative introduced a variety of new menu innovations supported by extensive national advertising centered on our Feast Like a Hockey God campaign, during which guests were encouraged to call upon the hockey gods and gather at Boston Pizza restaurants throughout the playoff season. In June, we also launched several promotional campaigns in alignment with the beginning of the FIFA World Cup, aimed at boosting guest engagement and celebrating Team Canada. To continue the momentum and excitement built with the FIFA World Cup, we introduced a new summer feature menu alongside a giveaway offering a chance to win concert prizes through our ongoing partnership with Live Nation Canada. Turning to restaurant development, no new restaurants opened, 2 restaurants permanently closed, and 10 restaurants completed restaurant renovations during the second quarter. Year-to-date, no new restaurants have opened, 4 restaurants in total have closed, and 21 restaurants have been renovated. We have an array of exciting initiatives lined up to maintain our strong sales momentum and guest engagement in the third quarter of 2026, which I'll discuss shortly. But first, I'll hand the call back to Michael for a review of The Fund's financial performance. Michael?
Thank you, Jordan. The Fund posted royalty income of $10.3 million for the quarter and $19.8 million year-to-date, compared to $10.1 million and $19.3 million respectively for the same periods 1 year ago. The Fund posted distribution income of $3.4 million for the quarter and $6.5 million year-to-date, compared to $3.3 million and $6.3 million, respectively, for the same periods 1 year ago. Royalty income and distribution income for the quarter and year-to-date were based on 372 Boston Pizza restaurants in the Royalty Pool that reported franchise sales of $256.5 million for the quarter and $494.9 million year-to-date. For the same periods in 2025, royalty income and distribution income were based on the Royalty Pool of 372 Boston Pizza restaurants, reporting franchise sales of $251.8 million and $483 million, respectively. The Fund's net and comprehensive income was $5.9 million for the quarter, compared to $14.3 million for the second quarter of 2025. The $8.4 million decrease in The Fund's net and comprehensive income for the quarter, compared to the second quarter of 2025, was primarily due to an $11 million increase in fair value loss and $0.3 million increase in net interest expense, partially offset by a $2.6 million decrease in income tax expense and a $0.3 million increase in royalty income and distribution income. The Fund's net and comprehensive income was $18.1 million year-to-date compared to $20.7 million year-to-date in 2025. The $2.6 million decrease in The Fund's net and comprehensive income year-to-date compared to the same period in 2025 was primarily due to a $3.7 million decrease in fair value gain and a $0.4 million increase in net interest expense, partially offset by a $0.9 million decrease in income tax expense and a $0.6 million increase in royalty income and distribution income. The Fund's cash flows generated from operating activities for the quarter was $10.4 million compared to $9.9 million in the second quarter of 2025. The increase of $0.5 million was primarily due to an increase in royalty income and distribution income of $0.3 million and an increase in changes in working capital of $0.3 million, partially offset by nominally higher income taxes paid. Cash flows generated from operating activities year-to-date was $20 million compared to $19.2 million in the same period in 2025. The increase of $0.8 million was primarily due to an increase in royalty income and distribution income of $0.6 million and an increase in changes in working capital of $0.3 million, partially offset by higher 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 distributions. Net income contains non-cash items that do not affect The Fund's cash flow, whereas cash flow from operating activities is not inclusive of all of The Fund's required cash outflows and therefore is not indicative of cash available for distribution to unitholders. Non-cash items include the fair value adjustments, 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 $8.2 million for the quarter compared to $8 million for the same period in 2025. The increase in distributable cash of $0.2 million, or 3.4%, was primarily due to an increase in cash flows generated from operating activities of $0.5 million, partially offset by higher interest paid on debt of $0.2 million and higher Class B Unit entitlement of $0.1 million. The Fund generated distributable cash of $15.8 million year-to-date, compared to $15.3 million for the same period in the prior year. The increase in distributable cash of $0.5 million, or 3.2%, was primarily due to an increase in cash flows generated from operating activities of $0.8 million, partially offset by higher interest paid on debt of $0.2 million and higher Class B unit entitlement of $0.1 million. The Fund generated distributable cash per unit of $0.386 for the quarter and $0.741 year-to-date compared to $0.374 and $0.718 respectively for the same periods in 2025. The increase in distributable cash per unit of $0.012 or 3.4% for the quarter and $0.023 or 3.2% year-to-date was primarily due to the increase in distributable cash outlined just now. The Fund's payout ratio for the quarter was 96.3% compared to 92.3% in the second quarter of 2025. The increase in The Fund's payout ratio for the quarter was due to distributions paid increasing by $0.6 million or 7.8%, partially offset by distributable cash increasing by $0.2 million or 3.4%. Year-to-date, The Fund's payout ratio was 98.8% compared to 96.1% year-to-date in 2025. The increase in The Fund's payout ratio year-to-date was due to distributions paid increasing by $0.9 million, or 6.1%, partially offset by distributable cash increasing by $0.5 million or 3.2%. On a trailing 12-month basis, The Fund's payout ratio was 103.1% as at June 30, 2026. On August 12, 2026, the trustees of The Fund approved a cash distribution for the period of July 1, 2026, to July 31, 2026, of $0.124 per unit, which will be paid on August 31, 2026, to unitholders of record at the close of business on August 21, 2026. The trustees' 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 fluctuating economic outlook. And with that, I will now turn the call back over to Jordan for more on the outlook. Jordan?
Thank you, Michael. This season, nationwide, Boston Pizza locations are celebrating summer with Live & Local, a new initiative designed to strengthen guest engagement and support local artists and talent by hosting live performances -- music performances at our restaurants. As we head into the fall, we'll be launching an exciting promotion planned in tandem with the start of this year's football season with a feature menu containing new guest favorites and crowd pleasers. Additionally, our popular BP Kids Cards promotion will run in the third quarter. For a $5 donation to the Boston Pizza Foundation, families will receive a card for 5 free kids meals, making it a perennial favorite. Though we attained record franchise sales during the second quarter of 2026, reflecting the sustained strength and resilience of our business model, we continue to closely monitor the evolving trade landscape and underlying geopolitical developments that could impact operations, including the ongoing conflict in the Middle East. Although the conflict has not yet led to material increases in input costs for our restaurants, prolonged global supply chain disruptions could potentially elevate future costs and weigh on consumer discretionary spending. We remain prepared to adapt as conditions evolve. Looking ahead, our core priorities remain focused on delivering excellent guest experiences, empowering our franchisees, and driving sustainable long-term growth. With that, I'd like to turn it back to the operator to begin the question-and-answer session. Operator?
[Operator Instructions] Our first question comes from Nick Corcoran with Acumen Capital.
Just the first question, you had relatively strong same-store sales growth in the quarter. Any indication how much was from guest traffic versus higher ticket?
Yes, great question. So this is the seventh consecutive quarter of positive same restaurant sales, which is a great trend for us, shows a lot of momentum. And we've been talking over that 7-quarter period about the contributions from guest visitation, that we're seeing more people coming in and more of the overall growth coming from more guests versus menu price adjustments. This quarter was a little bit of the reverse. Just a little bit more came from, still positive on both fronts, I should add, but a little bit more came from menu pricing. That's just seasonal. We tend to take main menu pricing in June and November. And so that was a factor in the results. But fair to say that we continue to be focused on both aspects. We're always going to need to take a little bit of menu pricing here and there, and we do that very carefully, as judiciously as we possibly can, but our focus, and you heard it through the promotional calendar and some of the, whether it's menu or events, certainly sports was a big part of the Q2 results, that drawing more people in has really been the focus. But to answer your question succinctly, the second quarter had a little bit more contribution from menu pricing, but still positive on a year-over-year traffic trend.
And any indication what stores might be in the pipeline for opening?
Yes, absolutely. So we have 3 under construction today. Revelstoke, British Columbia; and Dryden, Ontario; and The Pas, Manitoba. I can share that with you because they are approaching their opening dates and they're all public. We have some other irons in the fire. We're just not sure whether we're going to get them in this construction season or whether they'll get pushed into early 2027. That happens sometimes just with permitting and trades delays and supply chain and other things that affect our construction. I'll point out here, in addition to the new restaurant openings, we're really excited about the investment that our franchisees are continuing to make in restaurant renovations. Our target for the year was around 40. It looks like we might even be ahead of the 40 number. Last year we had 40 completed renovations. I think the number before that for 2024 was 26 renovations. So really ramping up to make those investments and the before and after experience for our guests and for our staff, quite frankly, is really powerful. So we're really encouraged by those investments and by the impact that it makes. And we're at about, approaching 30 of the renovations completed. And like I said, could even be above 40 for the full year 2026. So we're excited about that, in addition to the new restaurants that I mentioned.
Great. And maybe 1 last question for me. You closed 2 stores in the quarter. I think it's 4 for the year. Any color on what might have driven those closures and how the health of the remaining restaurants is?
Yes, fair. So last year, just for comparison, last year, 2025, full year, we had 0 closures. That's a little unusual and I would say a little unusual for us to have 4 year-to-date so far this year, meaning that last year was a little under the average overall for a system of our size with close to 370 restaurants, to have 0 closures. And then this year we have 4 year-to-date and each 1 is an individual story. Some of them are lease expiration. Some of them are expropriation for development. We are -- In a lot of cases we are leasing the land or the land and building or our franchisees are in this case, and the developer, the owner of the land, wants to do something different with it. And so that necessitates the closure and hopefully a reopening somewhere else if it's a strong market for us. I guess the tight answer for unitholders and investors on the call is that does the rate of closures signal brand weakness? Are these a sign of things to come? We do not feel that way at all. It's not unusual for a group of our size and our age as well. Over 60 years, some of our restaurants have been in locations for a really, really long time. And there just comes a time when we have to make a call about the long-term sustainability of that location. And we have some of those examples in the 4 closures this year. So it's not something that we're troubled about. We obviously don't like to see BP restaurants close. We like to see the new ones that I mentioned open. We want to continue to grow the system for the benefit of our guests and the brand overall. But we did have those 2 closures in the quarter for 4 year-to-date. And we don't see that as a concerning trend. Okay, well, I can assume that there aren't other folks in the queue for questions today, which I understand. It's a busy time. But since there are no further questions, I'd like to thank everyone for joining us on the call today. The proud Canadian restaurant, Boston Pizza, continues to appreciate your interest and support. And we look forward to reconnecting with you during our third quarter conference call, which will be held in November of this year. So thank you and enjoy the rest of your day.
This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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