PIZZA PIZZA ROYALTY CORP. ANNOUNCES THIRD QUARTER 2026 RESULTS
TORONTO, Nov. 2, 2026 /CNW/ -- Pizza Pizza Royalty Corp. (the "Company") (TSX:PZA), which indirectly owns the Pizza Pizza and Pizza 73 Rights and Marks, released financial results today for the three months ("Quarter") and nine months ("Period") ended September 30, 2026.
Third Quarter highlights:
- Same store sales(2) decreased 2.3%
- Royalty Pool sales decreased 0.9%
- Adjusted earnings per share(5) decreased 1.7%
Year to Date highlights:
- Same store sales(2) decreased 3.8%
- Royalty Pool sales decreased 2.7%
- Adjusted earnings per share(5) decreased 4.4%
- Restaurant network decreased by 5 net locations
- Royalty Pool of restaurants for 2026 increased by 20 net restaurants on January 1, 2026
"Consumer discretionary spending remained tight through the third quarter, driving heightened competitive activity across the QSR sector," said Paul Goddard, President and CEO of Pizza Pizza Limited. "While we are disappointed with this performance, we remain focused on the fundamentals that will drive our business forward: strengthening our brand, delivering compelling value to our customers, and driving operational excellence. By staying close to our customers, sharpening our execution, and building on our core strengths, we are confident in our ability to navigate the current environment and position the business for sustainable, long-term growth."
SALES
Royalty Pool System Sales for the Quarter decreased 0.9% to $157.4 million from $158.8 million in the same quarter last year. By brand, sales from the 712 Pizza Pizza restaurants in the Royalty Pool decreased 1.4% to $136.1 million for the Quarter, while sales from the 102 Pizza 73 restaurants increased 2.3% to $21.3 million.
Royalty Pool System Sales for the Period decreased 2.7% to $458.8 million from $471.5 million in the same period last year. By brand, sales from the 712 Pizza Pizza restaurants in the Royalty Pool decreased 3.0% to $394.9 million for the Period, while sales from the 102 Pizza 73 restaurants decreased 0.7% to $63.9 million.
For the Quarter and Period, the decrease in Royalty Pool System Sales is largely driven by the decrease in same store sales, offset by new restaurants added to the Royalty Pool on January 1, 2026. See "Same Store Sales Growth".
The Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System Sales for the quarter ended March 31 have generally been the lowest. System Sales for the quarter ended December 31 have generally been the highest relative to other quarters.
SAME STORE SALES GROWTH ("SSSG")
SSSG, the key driver of yield growth for shareholders of the Company, decreased 2.3% (2025 – increased 0.1%) for the Quarter, and decreased 3.8% for the Period (2025 – increased 1.1%).
SSSG | Third Quarter (%) | Period (%) | ||
2026 | 2025 | 2026 | 2025 | |
Pizza Pizza | -2.7 | 0.3 | -4.0 | 1.0 |
Pizza 73 | 0.0 | -1.1 | -2.7 | 1.9 |
Combined | -2.3 | 0.1 | -3.8 | 1.1 |
SSSG is driven by the change in the customer check and customer traffic, both of which are affected by changes in pricing and sales mix. During the Quarter and Period, at both brands, restaurant traffic decreased due macroeconomic pressures on consumer discretionary spending, as well as heightened competition for those consumer spending dollars. The average customer check increased slightly, as the brands adjusted retail prices on select offers.
MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVE
The Company declared shareholder dividends of $5.0 million ($0.2025/share) for the Quarter and $5.7 million ($0.2325/share) for the prior year comparable quarter, and $15.9 million ($0.6475/share) for the Period and $17.2 million ($0.6975/share) for the prior year comparable period. The dividend reduction in May 2026 lowered the payout ratio to 93% for the Quarter compared to 111% in the prior year comparable quarter.
The Company's policy is to distribute all available cash in order to maximize returns to shareholders over time, after allowing for reasonable reserves. Despite seasonal variations inherent to the restaurant industry, the Company's policy is to make equal dividend payments to shareholders on a monthly basis in order to smooth out income to shareholders. After the reduction to the monthly dividend in May 2026, any further change will be implemented with a view to maintaining the continuity of consistent monthly distributions. It is expected that future dividends will continue to be funded entirely by cash flow from operations and the cash reserve.
As of September 30, 2026, the Company held a working capital reserve of $2.6 million, which is an increase of $0.4 million in the Quarter. This reserve serves to stabilize dividends and cover other expenses during short- to medium-term fluctuations in System Sales and resulting royalty income. Historically, the Company has targeted an annualized payout ratio at or near 100%.
EARNINGS PER SHARE ("EPS")
Fully-diluted basic EPS for the Quarter decreased to $0.227 when compared to the prior year comparable quarter at $0.231.
As compared to basic EPS, the Company considers adjusted EPS(5) to be a more meaningful indicator of the Company's operating performance and, therefore, presents fully diluted, adjusted EPS. The adjusted EPS for the Quarter decreased 1.7% to $0.232 when compared to the same period of 2025.
RESTAURANT DEVELOPMENT
As previously announced, the number of restaurants in the Company's Royalty Pool increased by 20 net locations to 814 on the January 1, 2026 Adjustment Date, and consists of 712 Pizza Pizza restaurants and 102 Pizza 73 restaurants. The number of restaurants in the Royalty Pool will remain unchanged through 2026.
During the Quarter, PPL's brand expansion was limited to two non-traditional Pizza Pizza openings, offset by the closure of two traditional and ten non-traditional restaurants. Pizza 73's restaurant network remained unchanged, ending the Quarter with 100 locations.
Development pace slowed during the quarter, primarily driven by construction delays and challenges in sourcing qualified franchisees. As a result, PPL management adjusted its full year restaurant development outlook to 1% to 2% growth, down from its previous forecast of 2% to 3%.
Readers should note that the number of restaurants added to the Royalty Pool each year may differ from the number of restaurant openings and closings reported by PPL on an annual basis as the years for which they are reported differ slightly.
SELECTED FINANCIAL HIGHLIGHTS
The following tables set out selected financial information and other data of the Company and should be read in conjunction with the September 30, 2026 unaudited interim condensed consolidated financial statements of the Company ("Financial Statements"). Readers should note that the 2026 results are not directly comparable to the 2025 results due to there being 814 restaurants in the 2026 Royalty Pool compared to 794 restaurants in the 2025 Royalty Pool.
(in thousands of dollars, except number of restaurants, days | Three months September 30, | Three months September 30, | Nine months ended | Nine months ended | ||
Restaurants in Royalty Pool(1) | 814 | 794 | 814 | 794 | ||
Same store sales growth(2) | -2.3 % | 0.1 % | -3.8 % | 1.1 % | ||
Days in the Quarter | 92 | 92 | 273 | 273 | ||
System Sales reported by Pizza Pizza restaurants in the Royalty Pool(6) | $ 136,111 | $ 137,997 | $ 394,890 | $ 407,164 | ||
System Sales reported by Pizza 73 restaurants in the Royalty Pool(6) | 21,287 | 20,812 | 63,940 | 64,350 | ||
Total System Sales | $ 157,398 | $ 158,809 | $ 458,830 | $ 471,514 | ||
Royalty – 6% on Pizza Pizza System Sales | $ 8,166 | $ 8,280 | $ 23,693 | $ 24,430 | ||
Royalty – 9% on Pizza 73 System Sales | 1,916 | 1,873 | 5,755 | 5,792 | ||
Royalty – International operations | 4 | 6 | 12 | 14 | ||
Royalty income | $ 10,086 | $ 10,159 | $ 29,460 | $ 30,236 | ||
Interest expense on borrowings(3) | (444) | (444) | (1,318) | (1,152) | ||
Administrative expenses | (141) | (181) | (455) | (616) | ||
Interest income | 20 | 37 | 65 | 166 | ||
Adjusted earnings available for distribution to the Company and Pizza Pizza Limited(5) | $ 9,521 | $ 9,571 | $ 27,752 | $ 28,634 | ||
Distribution on Class B and Class D Exchangeable Shares(4) | (2,497) | (2,726) | (8,123) | (8,212) | ||
Current income tax expense | (1,685) | (1,706) | (4,896) | (5,069) | ||
Adjusted earnings available for shareholder dividends(5) | $ 5,339 | $ 5,139 | $ 14,733 | $ 15,353 | ||
Add back: | ||||||
Distribution on Class B and Class D Exchangeable Shares(4) | 2,497 | 2,726 | 8,123 | 8,212 | ||
Adjusted earnings from operations(5) | $ 7,836 | $ 7,865 | $ 22,856 | $ 23,565 | ||
Basic earnings per share | $ 0.227 | $ 0.231 | $ 0.671 | $ 0.700 | ||
Adjusted earnings per share(5) | $ 0.232 | $ 0.236 | $ 0.676 | $ 0.707 | ||
Dividends declared by the Company | $ 4,985 | $ 5,724 | $ 15,940 | $ 17,171 | ||
Dividend per share | $ 0.2025 | $ 0.2325 | $ 0.6475 | $ 0.6975 | ||
Payout ratio(5) | 93 % | 111 % | 108 % | 112 % | ||
September 30, 2026 | December 31, | |||||
Working capital(5) | 2,604 | 3,727 | ||||
Total assets | 382,780 | 377,103 | ||||
Total liabilities | 75,838 | 75,614 | ||||
(1) | The number of restaurants for which the Pizza Pizza Royalty Limited Partnership (the "Partnership") earns a royalty ("Royalty Pool"), as defined in the amended and restated Pizza Pizza license and royalty agreement (the "Pizza Pizza License and Royalty Agreement") and the amended and restated Pizza 73 license and royalty agreement (the "Pizza 73 License and Royalty Agreement") (together, the "License and Royalty Agreements"). For the 2026 fiscal year, the Royalty Pool includes 712 Pizza Pizza restaurants and 102 Pizza 73 restaurants. The number of restaurants added to the Royalty Pool each year may differ from the number of restaurant openings and closings reported by Pizza Pizza Limited ("PPL") on an annual basis as the periods for which they are reported differ slightly (see "Royalty Pool Adjustments"). |
(2) | Same store sales growth ("SSSG") is a supplementary financial measure under NI 52-112 and therefore may not be comparable to similar measures presented by other issuers. SSSG means the change in Period's gross sales of a particular Pizza Pizza or Pizza 73 restaurant as compared to sales in the previous comparative Period, where the restaurant has been open at least 13 months. Additionally, for a Pizza 73 restaurant whose restaurant territory was adjusted due to an additional restaurant, the sales used to derive the Step-Out Payment (calculated as the difference between the average monthly Pizza 73 Royalty payment attributable to that Adjusted Restaurant in the 12 months immediately preceding the month in which the territory reduction occurs, less the Pizza 73 Royalty payment attributable to the restaurant in the current month) may be added to sales to arrive at SSSG. SSSG does not have any standardized meaning under IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). See "Reconciliation of Non-IFRS Measures". |
(3) | The Company, indirectly through the Partnership, incurs interest expense on the $47 million outstanding bank loan. Interest expense also includes amortization of loan fees. See "Interest Expense". |
(4) | Represents the distribution to PPL from the Partnership on Class B and Class D Units of the Partnership held by PPL. The Class B and D Units are exchangeable into common shares of the Company ("Shares") based on the value of the Class B Exchange Multiplier and the Class D Exchange Multiplier at the time of exchange as defined in the License and Royalty Agreements, respectively, and represent 27.2% of the fully diluted Shares at March 31, 2026 (December 31, 2025 – 26.2%). During the quarter ended March 31, 2026, as a result of the final calculation of the Exchangeable Class B and Class D Share entitlements related to the January 1, 2025 Adjustment to the Royalty Pool, PPL was paid a distribution on additional Exchangeable Shares as if such Shares were outstanding as of January 1, 2025. Included in the three months ended March 31, 2026, is the payment of $153 in distributions to PPL pursuant to the true-up calculation (March 31, 2025 - PPL received $34). |
(5) | "Adjusted earnings available for distribution to the Company and Pizza Pizza Limited", "Adjusted earnings from operations", "Adjusted earnings available for shareholder dividends", "Adjusted earnings per Share", "Interest paid on borrowings", "Payout Ratio", and "Working Capital" are non-GAAP financial measures under NI 52-112. They do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. See "Reconciliation of Non-IFRS Measures" and "Interest Expense". |
(6) | System Sales (as defined in the License and Royalty Agreements) reported by Pizza Pizza and Pizza 73 restaurants include the gross sales of Pizza Pizza company-owned, jointly-controlled and franchised restaurants, and the monthly Make-Whole Payment, Step-out and Recombination Payments, excluding sales and goods and service tax or similar amounts levied by any governmental or administrative authority. System Sales do not represent the consolidated operating results of the Company but are used to calculate the royalties payable to the Partnership as presented above. |
A copy of the Company's interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") will be available at www.sedarplus.ca and www.pizzapizza.ca after the market closes on November 2, 2026.
As previously announced, the Company will host a conference call to discuss the results. The details of the conference call are as follows:
Date: | November 2, 2026 |
Time: | 5:30 p.m. ET |
Call-in number: | 416-945-7677 / 888-699-1199 |
Recording call in number: | 289-819-1450 / 888-660-6345 |
Available until midnight, November 16, 2026 | |
Conference ID: | 68435# |
A recording of the call will also be available on the Company's website at www.pizzapizza.ca. | |
FORWARD-LOOKING STATEMENTS
Certain statements in this report, including information regarding the Company's dividend policy, its ability to meet covenants and other financial obligations, and their ability to achieve their business objectives, constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this report, such statements include such words as "may", "will", "expect", "believe", "plan", and other similar terminology in conjunction with a discussion of future events or operating or financial performance. These statements reflect management's current expectations regarding future events and operating and financial performance and speak only as of the date of this MD&A. The Company does not assume any obligation to update any such forward looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: changes in national and local business and economic conditions, impacts of legislation and governmental regulation, accounting policies and practices, competition, changes in demographic trends and changing consumer preferences, and the results of operations and financial condition of PPL. The foregoing list of factors is not exhaustive and should be read in conjunction with the other information included in the foregoing MD&A, the PPL financial statements for the period ended September 27, 2026 and the related MD&A and the Company's Annual Information Form.
Exhibit One: Reconciliation of Non-IFRS Measures
The Company's earnings, as presented under IFRS includes non-cash items, such as deferred tax, that do not affect the Company's business operations or its ability to pay dividends to shareholders. The Company believes its earnings are not the only, or most meaningful, measurement of the Company's ability to pay dividends or measure the rate at which the Company is paying out its earnings. Therefore, the Company reports the following non-IFRS measures:
- Adjusted earnings available for distribution to the Company and PPL;
- Adjusted earnings from operations;
- Adjusted earnings available for shareholder dividends;
- Adjusted earnings per share ("EPS");
- Payout Ratio;
- Working Capital; and
- Same Store Sales Growth ("SSSG").
The Company believes that the above noted measures provide investors with more meaningful information regarding the amount of cash that the Company has generated to pay dividends, and, together with Interest Paid on Borrowings and SSSG, help illustrate the Company's operating performance and highlight trends in the Company's business. These measures are also frequently used by analysts, investors, and other interested parties in the evaluation of issuers in the Company's sector, particularly those with a royalty-based model. The adjustments to net earnings as recorded under IFRS relate to non-cash items included in earnings and cash payments accounted for on the statement of financial position. Investors are cautioned, however, that this should not be construed as an alternative to net earnings as a measure of profitability. The method of calculating the Company's NI 52-112 non-IFRS financial measures: Adjusted earnings available for distribution to the Company and Pizza Pizza Limited, Adjusted earnings from operations, Adjusted earnings available for shareholder dividends, Adjusted EPS, Payout Ratio, Working Capital and SSSG for the purposes of this MD&A may differ from that used by other issuers and, accordingly, these measures may not be comparable to similar measures used by other issuers.
The table below reconciles the following to "Earnings for the period before income taxes" which is the most directly comparable measure calculated in accordance with IFRS:
- Adjusted earnings available for distribution to the Company and Pizza Pizza Limited;
- Adjusted earnings from operations; and
- Adjusted earnings available for shareholder dividends.
(in thousands of dollars, except number of shares) | Q3 2026 | Q2 2026 | Q1 2026 | Q4 2025 |
Earnings for the period before income taxes | 9,521 | 9,380 | 8,851 | 9,930 |
Adjusted earnings available for distribution to the Company and Pizza Pizza Limited | 9,521 | 9,380 | 8,851 | 9,930 |
Current income tax expense | (1,685) | (1,657) | (1,554) | (1,775) |
Adjusted earnings from operations | 7,836 | 7,723 | 7,297 | 8,155 |
Less: Distribution on Class B and Class D Exchangeable Shares | (2,497) | (2,616) | (3,010) | (2,725) |
Adjusted earnings available for shareholder dividends | 5,339 | 5,107 | 4,287 | 5,430 |
Weighted average Shares – diluted | 33,804,543 | 33,804,543 | 33,804,543 | 33,353,588 |
(in thousands of dollars, except number of shares) | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 |
Earnings for the period before income taxes | 9,571 | 9,734 | 9,328 | 9,840 |
Adjusted earnings available for distribution to the Company and Pizza Pizza Limited | 9,571 | 9,734 | 9,328 | 9,840 |
Current income tax expense | (1,706) | (1,707) | (1,656) | (1,767) |
Adjusted earnings from operations | 7,865 | 8,027 | 7,672 | 8,073 |
Less: Distribution on Class B and Class D Exchangeable Shares | (2,726) | (2,726) | (2,760) | (2,584) |
Adjusted earnings available for shareholder dividends | 5,139 | 5,301 | 4,912 | 5,489 |
Weighted average Shares – diluted | 33,353,588 | 33,353,588 | 33,353,588 | 32,908,631 |
The Basic EPS and the Adjusted EPS calculations are based on fully diluted weighted average shares, and both include PPL's Class B and Class D Exchangeable Shares since they are exchangeable into and economically equivalent to the Shares. See "Adjusted EPS".
Adjusted EPS is calculated by dividing Adjusted earnings from operations, as explained above, by the fully diluted weighted average shares. Adjusted EPS for the Quarter decreased to $0.232 and for the Period decreased to $0.676 when compared to the same periods of 2025, and reflect the decrease in royalty income and SSSG.
Basic EPS is adjusted as follows: | Three months ended | Nine months ended | ||
September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |
Basic EPS | $ 0.227 | $ 0.231 | $ 0.671 | $ 0.700 |
Adjustments: | ||||
Deferred tax expense | 0.005 | 0.005 | 0.005 | 0.007 |
Adjusted EPS | $ 0.232 | $ 0.236 | $ 0.676 | $ 0.707 |
Payout Ratio is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company presents the Payout Ratio to illustrate the earnings being returned to shareholders. The Company's Payout Ratio is calculated by dividing the dividends declared to shareholders by the adjusted earnings from operations, after paying the distribution on Class B and Class D Exchangeable Shares, in that same period. The dividend reduction in May 2026 brought the payout ratio down relative to the previous quarter and the same period last year.
Three months ended | Nine months ended | |||
(in thousands of dollars, except as noted otherwise) | September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 |
Dividends declared to shareholders | 4,985 | 5,724 | 15,940 | 17,171 |
Adjusted earnings available for shareholder dividends | 5,339 | 5,139 | 14,733 | 15,353 |
Payout Ratio | 93 % | 111 % | 108 % | 112 % |
Working Capital is defined as total current assets less total current liabilities. The Company views working capital as a measure for assessing overall liquidity and its ability to stabilize dividends and fund unusual expenditures in the event of short- to medium-term variability in Royalty Pool System Sales. The use of the working capital during the Period was to help fund the dividends, with the payout ratio of 117%.
(in thousands of dollars) | September 30, 2026 | December 31, 2025 | |
Total current assets | 6,010 | 7,258 | |
Less: Total current liabilities | 3,406 | 3,531 | |
Working Capital | 2,604 | 3,727 |
SSSG is a key indicator used by the Company to measure performance against internal targets and prior period results. SSSG is commonly used by financial analysts and investors to compare PPL to other QSR brands. SSSG is defined as the change in period gross sales of Pizza Pizza and Pizza 73 restaurants as compared to sales in the previous comparative period, where the restaurant has been open at least 13 months. Additionally, for a Pizza 73 restaurant whose restaurant territory was adjusted due to an additional restaurant, the sales used to derive the Step-Out Payment may be added to sales to arrive at SSSG (as defined in footnote 2). It is a key performance indicator for the Company as this measure excludes sales fluctuations due to store closings, permanent relocations and chain expansion.
The following table calculates SSSG by reconciling Royalty Pool System Sales, based on calendar periods, to PPL's 13-week sales reporting period used in calculating same store sales.
Three months ended | Nine months ended | |||
(in thousands of dollars) | September 30, | September 30, | September 30, | September 30, |
Total Royalty Pool System Sales | 157,398 | 158,809 | 458,830 | 471,514 |
Adjustments for stores not in both periods, Make-Whole Carryover Amount, | (3,377) | (1,094) | (4,941) | (293) |
Same Store Sales | 154,021 | 157,715 | 453,889 | 471,807 |
SSSG | -2.3 % | 0.1 % | -3.8 % | 1.1 % |
SOURCE Pizza Pizza Royalty Corp.
For further information: Christine D'Sylva, Chief Financial Officer, Pizza Pizza Royalty Corp., (416) 967-1010 x393 [email protected], www.pizzapizza.ca and www.pizza73.com or www.sedarplus.ca.
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