Thank you and welcome to today's call. Today, we will be discussing the 2023 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 us via the Investor Relations phone number that is listed in our press release.

The Fund is a limited purpose open-ended trust established under the laws of British Columbia to acquire indirectly certain trademarks and trade names used by BPI and its Boston Pizza Restaurants in Canada. BPI pays Royalty 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 the 8th, 2023, which was filed on sedar.com. Before I turn the call over to Jordan Holm, President of BPI, I would 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. Jordan?

Thank you, Michael, and welcome, everyone, to Boston Pizza's second quarter investor conference call. Today, I'll be discussing our second quarter results and share 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. We're pleased that positive sales momentum continued through the second quarter of 2023.

Turning to our financial results, the Fund posted franchise sales from restaurants in the Royalty Pool of $233.7 million for the quarter and $457.9 million year-to-date, representing increases of 6.5% and 15%, respectively, versus the same periods one year ago. Same restaurant sales was 6.6% for the quarter and 15.2% year-to-date.

SRS for the quarter was principally due to an increase in average guest check. SRS year-to-date was principally due to increases in restaurant guest traffic and an increase in average guest check.

COVID-19 restrictions existed in most of the country during the first quarter of 2022, and part of the second quarter of 2022 that negatively impacted in-restaurant guest traffic. Those restrictions were largely eliminated during the second quarter of 2022.

We are pleased that our strong sales results have supported the increase to the Fund's distribution rate that was announced earlier this year. From a marketing standpoint, we began the second quarter of 2023 with our NHL playoff promotion which introduced several new shareable menu items, plus cocktail innovations and included new TV and digital media advertising focused on Boston Pizza's new Fanalytics campaign optimizing every aspect of the Boston Pizza Sports Bar experience to maximize enjoyment for our guests.

Boston Pizza also launched a new main menu in May, introducing several new enhanced menu offerings, which will be available seven days a week as core menu offerings. In a continued effort to maximize off-premise sales by leveraging digital platforms, Boston Pizza announced an exclusive partnership with SkiptheDishes in selected markets effective May 15.

Turning to restaurant development. No new restaurants were opened during the quarter and one restaurant was closed and eight restaurants completed restaurant renovations during the quarter.

Year-to-date, no restaurant were opened, two restaurants have been closed and eight restaurants have been renovated. We have some exciting initiatives planned to drive sales in the second half of 2023, which I'll speak to in a moment.

However, first, I'll turn the call back to Michael for a review of The Fund's financial performance. Michael?

Thank you, Jordan. The Fund posted royalty income of $9.3 million for the quarter and $18.3 million year-to-date, compared to $8.8 million and $15.9 million, respectively, for the same periods one year ago.

The Fund posted distribution income of $3.1 million for the quarter and $6 million year-to-date compared to $2.9 million and $5.3 million for the same periods a year ago. Royalty and distribution Income for the quarter and year-to-date was based on 377 Boston Pizza Restaurants in the Royalty Pool that reported franchise sales of $233.7 million for the quarter and $457.9 million year-to-date.

For the same periods in 2022, Royalty and Distribution Income were based on the Royalty Pool of 383 Boston Pizza restaurants, reporting franchise sales of $219.4 million for the second quarter and $398 million year-to-date. The Fund's net and comprehensive income was $12.8 million for the quarter and $19.5 million year-to-date compared to $1.8 million and $14.7 million for the same periods in 2022.

The $11 million increase in The Fund's net and comprehensive income for the quarter compared to the second quarter of 2022 was primarily due to a $12.9 million increase in fair value gain and a $0.7 million increase in Royalty and Distribution Income, all partially offset by an increase in income tax expense of $2.5 million. The $4.8 million increase in The Fund's net and comprehensive income year-to-date compared to the same period in 2022, was primarily due to a $3.6 million increase in the fair value gain and a $3.1 million increase in Royalty and Distribution Income, partially offset by an increase in income tax expense of $1.9 million.

The Fund's cash flows generated from operating activities was $9.8 million for the quarter and $19 million year-to-date compared to $9.1 million and $15.8 million for the same periods in 2022. The increase of $0.7 million in the quarter was due to an increase of Royalty and Distribution Income of $0.7 million and an increase in changes in working capital of $0.1 million, partially offset by an increase in income taxes paid of $0.3 million.

The increase of $3.2 million year-to-date was due to an increase of Royalty and Distribution Income of $3.1 million and increase in changes in working capital of $0.7 million, partially offset by an increase in income taxes paid of $0.7 million. While net and comprehensive income or loss and cash flows from operating activities, are both measures under International Financial Reporting 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 noncash items that do not affect the Fund’s cash flows, whereas cash flows from operating activities is not inclusive of all of the funds required cash outflows and therefore, is not indicative of cash available for distribution to unitholders.

Noncash items include the fair value adjustments on the investment in Boston Pizza Canada Limited Partnership, the Class B unit liability, interest rate swaps and changes in deferred income taxes. Consequently, the Fund reports the 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 $7.9 million for the quarter and $15 million year-to-date compared to $6.2 million and $10.9 million, respectively, for the same periods in 2022. The increase in distributable cash of $1.7 million or 27.1% in the quarter, was primarily due to an increase of cash flows generated from operating activities of $0.7 million, lower repayments of long-term debt of $1 million and lower interest paid on long-term debt of $0.1 million, partially offset by increased BPI Class B unit entitlement of $0.1 million.

The increase in distributable cash of $4.1 million or 38.3% year-to-date was primarily due to an increase of cash flows generated from operating activities of $3.2 million, lower repayments of long-term debt of $1.5 million and lower interest paid on long-term debt of $0.1 million, partially offset by increased BPI Class B unit entitlement of $0.5 million and SIFT tax on units adjustment of $0.1 million. The Fund generated distributable cash per unit of $0.365 for the quarter and $0.699 year-to-date compared to $0.287 per unit and $0.505 per unit, respectively, for the same periods in 2022.

The increase in distributable cash per unit of $0.78 or 27.2% for the quarter, was primarily due to the increase in distributable cash, as previously described. The increase in distributable cash per unit of $0.194 or 38.4% year-to-date, was primarily due to the increase in distributable cash, as just described.

The Fund’s payout ratio for the quarter was 88% and 89.7% year-to-date and that compares to 88.9% and 100.9%, respectively, for the same periods in 2022. The decrease in the Fund’s payout ratio for the quarter was due to distributable cash increasing by $1.7 million or 27.1%, partially offset by distributions paid increasing by $1.4 million or 25.9%.

The decrease in the Fund’s payout ratio year-to-date was due to distributable cash increasing by $4.1 million or 38.3%, partially offset by distributions paid increasing by $2.5 million or 22.9%. The Fund’s payout ratio is typically higher in the first and fourth quarters compared to the second and third quarters since Boston Pizza Restaurants generally experience higher franchise sales levels during the summer months when restaurants open their patios and benefit from increased tourist traffic.

On a trailing 12-month basis, the Fund’s payout ratio was 94% as of June 30, 2023. On June 15, 2023, the Fund announced that it had received TSX approval of a notice of intention to make a normal course issuer bid through the facilities of the TSX of their designated exchanges and/or alternative Canadian Trading Systems from June 20, 2023, to no later than June 19, 2024.

The NCIB permits the Fund to repurchase for cancellation up to 400,000 units, being approximately 1.86% of the Fund’s issued and outstanding units. As at June 30, 2023, the Fund acquired 54,200 units under the NCIB at an average price of $16.28 per unit between July 1, 2023 and August 3, 2023 inclusive, the Fund acquired an additional 137,600 units under the NCIB at an average price of $16.59 per unit.

Accordingly, as at August 3, 2023, the Fund had acquired a total of 191,800 units at an average price of $16.50 per unit. The Fund finance units purchased under the NCIB from cash on hand.

On August 3, 2023, the trustee of Fund approved a cash distribution for the period of July 1, 2023, to July 31, 2023, of $0.107 per unit, which will be paid on August 31, 2023, to unitholders of record at the close of business on August 21, 2023. Trustee’s objective in setting a monthly distribution amount is that it be sustainable.

The trustees will continue to closely monitor the funds available cash balances, given the fluctuating economic outlook. And with that, I will turn the call back to Jordan for more on the outlook.

Jordan?

Thank you, Michael. Boston Pizza began the third quarter of 2023 on July 1 with a new summer patio campaign, which highlights new food and drink innovations.

Boston Pizza will be inviting Canadians from coast to coast to visit their local restaurants through billboard and digital media advertising, showcasing the delicious food, drinks and atmosphere of the Boston Pizza patio. Later in Q3, we’ll also launch our fall themed feature menu, which will feature a selection of new indulgent items just in time for the fall season.

Our BP Kids card promotion will also return at the end of the third quarter, and this promotion is always a favorite for families where for a $5 donation to the Boston Pizza Foundation, they receive a card for five free kids meals. We continue to be extremely pleased with the efforts of our team and our franchisees.

However, with supply chain challenges, rising interest rates and increased input costs impacting the restaurants and most of the restaurant industry, BPI’s management remains cautious. Our management team continues to adapt the business to mitigate these challenges and work diligently to support our franchisees and maintain the positive sales momentum that was achieved in 2022 and in the first half of 2023.

With that, I would like to turn it back to the operator to begin the question-and-answer session. Operator?

Good morning guys. I have a couple of questions.

The first is, how are guest shock levels compared to pre-pandemic?

Nick, maybe I’ll start and if Michael wants to add color, I’ll pause for that. But we, overall, are reporting strong same-restaurant sales.

It is driven mainly by increases in average guest check. We're still building back the total traffic levels that we had in 2019 before the pandemic hit.

So to answer your question, traffic is still below 2019 levels. But with the combination of average guest check being higher and that comes some from pricing and some from people, I think, being a little bit more indulgent, ordering a little bit more and treating themselves post pandemic, the average guest check has offset the – more than offset the lower traffic levels, resulting in higher SRS in 2023.

And maybe just digging into the guest traffic a little bit more, are there signs that the guest shock levels are improving to pre-pandemic levels. Maybe you can give an indication how guest shock levels have trended through the year?

Yes, they are directionally improving, for sure and it is – I would say that right after the pandemic sort of the restrictions were lifted in the second quarter of 2022. We saw a good kind of, I'll say, a cabin fever response of guests who hadn't been kind of on-premise at all in some provinces and jurisdictions or had been restricted in group size or last call, operating hours, those kinds of things.

So we definitely saw that boom coming back. I will say that the day-parts were not as evenly distributed or balanced and some day-parts like lunch and late night were slower to come back and have been a concentrated build back as opposed to the traditional kind of 5 p.m.

to 8 p.m. dinner time, which is obviously a core sales segment for us in our day, and seem to come back quite strong out of the gate.

So afternoon and dinner time tend to be stronger day-parts, late night and lunch are still areas that we're building. I see one area that we've highlighted in terms of guest visitation and is takeout and delivery.

And that they don't always come to the restaurant unless they're doing pickup, but that part of our business was about 18% of total national sales going into the pandemic in 2019. Now it would be closer to 25% of sales because we're holding on to the higher take-out delivery sales levels that were built up during the COVID period.

And that's a part of our business that goes back over 50 years of Boston Pizza we're quite committed to the off-premise opportunity and that helps us to balance that with the on-premise, which is kind of the core part of the business. So I hope that gives you some color.

Yes, that's helpful. And then maybe thinking about just consumer patterns in general, like take-out delivery continues to over index pre-pandemic.

Are there day-parts where you're seeing takeout and delivery stronger than they have been historically? Or is it kind of across the board?

I think it's across the board. And again, maybe Michael has more detail on how that breaks down.

During the COVID period we doubled our volume of takeout and delivery sales, and that was really just a necessity. We had restrictions in some places, full temporary closures of our on-premise dining room, sports bar, patio.

So we leaned in very heavily to the takeout delivery part of the business. And we continue to see, as you said over-indexing on that part of the business.

I would say, throughout the day, but part of the opportunity to grow back the day-parts and balance them out will be to see if people, for example, at lunchtime are looking more now for take-out delivery where they would have come into the restaurant pre-pandemic, just making sure that they know that we're offering takeout and delivery, not just through bostonpizza.com but the MyBP app or the telephone for that matter, but also through our third-party delivery partners, including the exclusive partnership with SkiptheDishes in some markets.

That's helpful. And then you completed any renovation in the quarter.

Can you give an indication of the pipeline through the remainder of the year?

Yes. So just as background, Nick, I know you know this, but for others on the call, our franchise agreement calls for an extensive renovation of the restaurant every seven years to the then current design standards.

Obviously, during the COVID period with restrictions on people's movements and activities and getting trades people into restaurants would have been quite challenging. We had a low number of renovations completed.

So we are in catch-up mode there. Last year, we completed about 20 renovations.

Our number this year will be about 30, and it is kind of seasonal. So we wait to get into the construction swing.

But we do know that those investments make a significant difference in the guest experience that they come into a very refreshed atmosphere inside the restaurant, the outside has a new painting signage in the interior look and feel is different. We take those opportunities as well to upgrade equipment, audiovisual whatever it takes to refresh the guest experience within the four walls, and that then helps us to stay fresh and keep the sales momentum going as people are attracted into the newly renovated restaurants.

That's helpful. And then last question from me.

I typically ask every quarter, but how is the pipeline for new restaurants?

Yes. So it has been a while since we've opened a new restaurant.

In fact, I think it's almost three years to the day. And normally, we have much more activity on the new restaurant development.

It just hasn't been prudent during the COVID period to push in that direction. But we do have a good pipeline; in fact, we have a new restaurant opening in British Columbia next month.

So that will be back to opening a brand-new ground-up build in hope British Columbia. And that's something that we're excited to see, and it's a signal that the brand managed to navigate the COVID period with very limited closures, permanent closures relative to what we saw in the full-service restaurant industry in Canada, definitely an indication of the resiliency and the commitment of our franchisees and the model itself.

And so do you – to build back the pipeline to serve markets across Canada that are in need of full-service restaurants like Boston Pizza and hope British Columbia is one of those that was on our radar. And we're very happy to see that new location opening next month.

And then we'll provide kind of more of an update as we fill the pipeline, but we do feel good about the prospect for more openings of Boston Pizza restaurants going forward.

Those are good color. Thanks for taking my questions.

Thank you, Nick.

Yes. Thank you, Nick.

All right. Thank you, operator, and thank you, everyone, for taking the time to join our second quarter investor conference call today.

I look forward to speaking to you again on the third quarter conference call in November. Thanks, everyone, and have a great long weekend.