MTY Food Group (MTY) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw stable system sales at CAD 1.459 billion, with U.S. growth offsetting a 3% decline in Canada and same-store sales down 2% year-over-year due to reduced consumer spending and inflation.

• Franchising segment normalized adjusted EBITDA rose 1% to CAD 52.6 million, with margin at 52% of revenue, while overall normalized adjusted EBITDA decreased 1% to CAD 73.7 million, mainly due to higher rents and lower system sales.

• Net income attributable to owners fell 10% to CAD 27.3 million (CAD 1.13 per diluted share), mainly due to impairment charges.

• Digital sales rose 8% year-over-year to CAD 287.7 million, now representing 20% of total sales.

• The network ended Q2 2024 with 7,107 locations, a slight decrease from Q4 2023, with U.S. locations representing 58% of the total.

Financial highlights

• Total revenues decreased slightly to CAD 303.7 million from CAD 305.2 million in Q2 2023, mainly due to lower recurring revenue streams.

• Free cash flow per share for the quarter was CAD 1.01, with CAD 5.21 per share over the last twelve months.

• Cash flows from operating activities were CAD 40.6 million, down from CAD 51.9 million in Q2 2023, mainly due to unfavorable working capital timing.

• Free cash flows net of lease payments dropped to CAD 24.3 million from CAD 29.5 million in Q2 2023.

• Digital sales increased to CAD 287.7 million from CAD 266.8 million year-over-year.

Outlook and guidance

• Management remains focused on M&A as the top capital allocation priority, with smaller acquisitions more likely in the near term.

• Supply chain inflationary pressures are stabilizing.

• ERP implementation is progressing on budget, with increased intensity expected over the next 12 months.

• Management prioritizes maximizing shareholder value by improving normalized adjusted EBITDA through enhanced in-restaurant and digital experiences and cost-cutting.

• Focus remains on organic growth of system sales and store count.