A&W FOOD SERVICES OF CANADA INC. ANNOUNCES FOURTH QUARTER AND FISCAL 2024 RESULTS AND DECLARES QUARTERLY CASH DIVIDEND

Canada NewsWire

VANCOUVER, BC, March 5, 2025

VANCOUVER, BC, March 5, 2025 /CNW/ - A&W Food Services of Canada Inc. (TSX: AW) ("A&W", "Food Services", "we" or "our") today announced its financial results for the 16-week and 52-week periods ended December 29, 2024.

All references to "Q4 2024" are to Food Services' 16-week period ended December 29, 2024; and to "Q4 2023" are to Food Services' 16-week period ended December 31, 2023. All references to "Fiscal 2024" are to Food Services' 52-week period ended December 29, 2024; and to "Fiscal 2023" are to Food Services' 52-week period ended December 31, 2023.

"Reflecting on 2024, A&W has a lot to celebrate and be proud of. We opened 28 new A&W restaurants and opened our first stand-alone Pret restaurant," said Susan Senecal, Chief Executive Officer. "We delighted our guests with menu innovations that included our South Asian inspired Veggie Masala Burger and the Spicy Peri Peri Buddy Burger line up and elevated our beverage line up in 2024 by rolling out Pret coffee to A&W restaurants nationwide. We are pleased with the guest response to our latest menu innovations. Responding to a more challenging environment for Same Store Sales Growth in 2024, we have renewed our marketing strategy to reflect the growing importance of value and affordability to Canadians. With the decline in disposable income pressuring consumers and the intense price competition in the quick service restaurant ("QSR") industry, we recognize the need for more price activity and offers as well as doubling down on our successful innovation. We have made solid advancements on many of our strategic areas in 2024, including a redesigned restaurant operating system which will be rolled out in 2025, and are excited to bring more efficiency and guest experience enhancements to life at our restaurants and for our franchisees. Our brand and financial position are strong, and we feel confident in our ability to respond to the changing consumer environment in the year ahead," concluded Ms. Senecal.

Strategic Combination with the Fund

In Q4 2024, there were important changes to A&W's corporate legal entity structure. On October 17, 2024, A&W completed a transaction (the "Transaction") in which Food Services indirectly acquired the trademarks used in the A&W business in Canada (the "A&W Trademarks") through the acquisition of all of the units of A&W Revenue Royalties Income Fund (the "Fund") which it did not already own.

Prior to the completion of the Transaction, Food Services owned (i) 9.4% of the outstanding units of the Fund on a fully-diluted basis through its ownership of limited voting units, with the remaining units of the Fund being owned by the public and (ii) 21.9% of the issued and outstanding common shares of A&W Trade Marks Inc. ("Trade Marks), which were exchangeable for units of the Fund, with the remaining common shares being owned by the Fund. Prior to completion of the Transaction the A&W Trademarks were owned by A&W Trade Marks Limited Partnership (the "Partnership"), a subsidiary of Trade Marks and Food Services paid the Partnership a royalty for use of the A&W Trademarks.

The Transaction also involved the amalgamation of a predecessor of Food Services with the following holding companies that directly or indirectly owned shares of such predecessor entity prior to the Transaction, some of which were created solely to facilitate the amalgamation and in preparation for the acquisition of the Fund's units: Buddy Holdings Inc., A&W of Canada Inc. ("A&W Canada"), AWFS Holdings Inc., A&W Holdings I Inc. and A&W Holdings II Inc.

Following the completion of the Transaction, the units of the Fund were de-listed from the Toronto Stock Exchange ("TSX") and the common shares of Food Services were listed on the TSX under the symbol AW.TO, and such common shares began trading on the TSX on October 18, 2024.

For further information regarding the Transaction and its impact on our financial results, as compared to 2023, please refer to Food Services' most recently filed management discussion and analysis ("MD&A") which is available on Food Services' SEDAR+ profile at www.sedarplus.ca and the Fund's management information circular dated August 29, 2024, which is available on the Fund's SEDAR+ profile at www.sedarplus.ca.

Q4 2024 Financial Highlights

   -- System Sales(i) of $576.8 million were consistent with Q4 2023 
 
   -- Revenue decreased by $9.7 million (9%) as compared to Q4 2023 
 
   -- Income before income taxes increased by $8.7 million (72%) as compared to 
      Q4 2023 
 
   -- Adjusted EBITDA(i) increased by $0.2 million (1%) as compared to Q4 2023, 
      to $27.9 million 
 
   -- Operating costs decreased by $11.7 million (19%) as compared to Q4 2023 
 
   -- General and administrative expenses decreased by $1.7 million (10%) as 
      compared to Q4 2023 
 
   -- Opened 9 new A&W restaurants 

Fiscal 2024 Financial Highlights

   -- System Sales(i) of $1.87 billion -- an all time high for A&W -- up from 
      $1.85 billion for Fiscal 2023 
 
   -- Revenue decreased by $7.0 million (2%) as compared to Fiscal 2023 
 
   -- Income before income taxes increased by $2.9 million (6%) as compared to 
      Fiscal 2023 
 
   -- Adjusted EBITDA(i) increased by $1.2 million (1%) as compared to Fiscal 
      2023, to $93.5 million 
 
   -- Operating costs decreased by $6.9 million (4%) as compared to Fiscal 2023 
 
   -- General administrative expenses increased by $1.5 million (3%) as 
      compared to Fiscal 2023 
 
   -- Opened 28 new A&W restaurants and first stand-alone Pret restaurant 
 
(i) System Sales and Adjusted EBITDA are non-IFRS 
 financial measures. Please see the "Non-IFRS Measures" 
 section of this news release for further details. 
 

FOURTH QUARTER 2024 RESULTS

 
(in thousands of Canadian $)                          Q42024    Q42023 
Financial Summary 
Revenue from franchising                                85,633    95,321 
Revenue from corporate restaurants                       7,563     7,560 
Total revenue                                           93,196   102,881 
Operating costs                                       (49,015)  (60,677) 
General and administrative expenses                   (15,054)  (16,744) 
Royalty expense                                        (5,776)  (17,045) 
Impairment of leases receivable                          (192)      (43) 
Net finance expense                                    (3,837)     (437) 
Amortization of deferred gain                              398     1,143 
Share of income from associates                          1,242     3,143 
Income before income taxes                              20,962    12,221 
Income tax expense                                    (22,075)   (2,337) 
Net income (loss)                                      (1,113)     9,884 
Net cash generated from (used in) operating 
 activities                                              8,479     (196) 
Other Metrics 
System Sales(i)                                        576,796   577,616 
System Sales Growth(i)                                  -0.1 %     3.4 % 
Same Store Sales Growth(i)                              -1.9 %     2.1 % 
Net annual restaurant unit growth                        1.8 %     0.8 % 
Adjusted EBITDA(i)                                      27,927    27,705 
 

Income before income taxes increased by $8.7 million in Q4 2024, as compared to Q4 2023, largely as a result of the cessation of the royalty expense following the completion of the Transaction and secondarily by reductions in operating costs and general and administrative expenses, partially offset by a reduction in revenue.

The decrease in total revenue is primarily attributable to franchising revenue which decreased by $9,688,000 quarter over quarter due to lower equipment sales which reflects our strategic focus on reducing the cost of modernizations for our franchisees and the adoption of an overall capital light strategy for our franchisees that began in the fall of 2023. All other revenue streams, including revenue from corporate restaurants, service fees, sales of food and supplies, contributions to the National Adverting Fund, initial franchise and renewal fees, were relatively flat quarter over quarter.

System Sales(i) for Q4 2024 of $576.8 million were consistent with System Sales(i) for Q4 2023 of $577.6 million.

Same Store Sales Growth is a function of changes in guest counts and check size, which are impacted by party size, menu prices and menu mix and changes in consumers discretionary spending. The Same Store Sales Growth(i) of -1.9% for Q4 2024 is a product of a decrease in guest counts partially offset by an increase in average check size due in part to industry-wide inflation on goods, services, and labour. The decrease in guest counts reflects A&W's proportionate share of an overall decline in traffic at burger quick service restaurants across Canada. Food Services believes the decline in traffic at A&W restaurants and burger QSRs more generally is attributable to increased interest rates and inflation, along with market uncertainty, which have impacted consumer discretionary spending. In response to these economic conditions and the intense price competition in the QSR industry, Food Services continues to seek new and innovative ways to offer A&W's guests a delicious and affordable experience and in turn increase guest traffic.

Food Services reported a net loss of $1.1 million in Q4 2024 compared to net income of $9.9 million in Q4 2023. The net loss in Q4 2024 is not comparable to the net income in Q4 2023 due to the impact of the Transaction on the Q4 2024 results, particularly a non-cash, non-recurring deferred tax expense of $16.9 million that was recorded upon completion of the Transaction.

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