Mr. Jordan Holm of Boston Pizza International reports

BOSTON PIZZA ROYALTIES INCOME FUND ANNOUNCES 2023 SECOND QUARTER RESULTS AND JULY 2023 CASH DISTRIBUTION OF $0.107 PER UNIT

Boston Pizza Royalties Income Fund and Boston Pizza International Inc. (BPI) have released their financial results for the second quarter period from April 1, 2023, to June 30, 2023, and Jan. 1, 2023, to June 30, 2023 (YTD (year to date)). A copy of this press release, the condensed consolidated interim financial statements, and related management's discussion and analysis (MD&A) of the fund and BPI are available at SEDAR+ and at the fund's website. The fund will host a conference call to discuss the results on Aug. 4, 2023, at 8:30 a.m. PT (11:30 a.m. ET). The call can be accessed by dialling 1-800-319-4610 or 604-638-5340. A replay will be available until Sept. 4, 2023, by dialling 1-800-319-6413 or 604-638-9010 and entering the access code: 0275 followed by the pound sign. The replay will also be available at the fund's website.

COVID-19 impacted the business of the fund, BPI and Boston Pizza Canada LP (BP Canada LP), and the operation of Boston Pizza restaurants significantly during 2020, 2021 and the first half of 2022. Since then, COVID-19 case counts improved, government restrictions related to COVID-19 were largely eliminated, and sales levels of Boston Pizza restaurants have returned to more normal levels when compared with times prior to COVID-19.

"We are pleased that positive sales momentum continued through the second quarter of 2023 despite the current macroeconomic conditions and industry challenges. The success can be attributed to Boston Pizza's dedication to delivering exceptional guest experiences and introducing innovative menu options," said Jordan Holm, president of BPI. "As economic uncertainty and inflationary pressures persist in 2023, we will continue to work diligently to support our franchisees."

Period and YTD results

SRS (same-restaurant sales), a key driver of distribution growth for unitholders, was 6.6 per cent for the period, compared with 64.9 per cent reported in the second quarter of 2022. SRS for the period was principally due to an increase in average guest cheque. SRS YTD was 15.2 per cent, compared with 52.3 per cent reported in 2022. SRS YTD was principally due to an increase in restaurant guest traffic and an increase in average guest cheque compared with year-to-date in 2022. COVID-19 restrictions existed in most of the country during the first quarter of 2022 and part of the second quarter of 2022, which negatively impacted in-restaurant guest traffic. Those restrictions were largely eliminated during the second quarter of 2022.

Franchise sales of Boston Pizza restaurants in the royalty pool were $233.7-million for the period and $457.9-million YTD, compared with $219.4-million and $398-million, respectively, for the same periods one year ago. The $14.3-million increase in franchise sales for the period and $59.9-million increase in franchise sales YTD were primarily due to positive SRS.

The fund's net and comprehensive income was $12.8-million for the period, compared with $1.8-million for the second quarter of 2022. The $11-million increase in the fund's net and comprehensive income for the period compared with the second quarter of 2022 was primarily due to a $12.9-million increase in fair value gain, and a $700,000 increase in royalty and distribution income, partially offset by an increase in income tax expense of $2.5-million. The fund's net and comprehensive income was $19.5-million YTD, compared with $14.7-million YTD in 2022. The $4.8-million increase in the fund's net and comprehensive income YTD compared with the same period in 2022 was primarily due to a $3.6-million increase in 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, compared with $9.1-million in the second quarter of 2022. The increase of $700,000 was primarily due to an increase of royalty and distribution income of $700,000, and an increase in changes in working capital of $100,000, partially offset by an increase in income taxes paid of $300,000. Cash flows generated from operating activities YTD was $19-million, compared with $15.8-million in the same period in 2022. The increase of $3.2-million was primarily due to an increase of royalty and distribution income of $3.1-million, and an increase in changes in working capital of $700,000, partially offset by an increase in income taxes paid of $700,000.

The fund generated distributable cash of $7.9-million for the period, compared with $6.2-million for the second quarter of 2022. The increase in distributable cash of $1.7-million, or 27.1 per cent, was primarily due to an increase of cash flows generated from operating activities of $700,000, lower repayments of long-term debt of $1-million and lower interest paid on long-term debt of $100,000, partially offset by increased BPI Class B unit entitlement of $100,000. The fund generated distributable cash of $15-million YTD, compared with $10.9-million YTD in 2022. The increase in distributable cash of $4.1-million, or 38.3 per cent, 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 $100,000, partially offset by increased BPI Class B unit entitlement of $500,000 and SIFT (specified investment flow-through trust) tax on units adjustment of $100,000.

The fund generated distributable cash per unit of 36.5 cents for the period and 69.9 cents YTD, compared with 28.7 cents and 50.5 cents, respectively, for the same periods in 2022. The increase in distributable cash per unit of 7.8 cents, or 27.2 per cent, for the period and 19.4 cents, or 38.4 per cent, YTD were primarily attributable to the increase in distributable cash outlined herein.

The fund's payout ratio for the period was 88 per cent, compared with 88.9 per cent in the second quarter of 2022. The decrease in the fund's payout ratio for the period was due to distributable cash increasing by $1.7-million, or 27.1 per cent, partially offset by distributions paid increasing by $1.4-million, or 25.9 per cent. YTD, the fund's payout ratio was 89.7 per cent, compared with 100.9 per cent YTD in 2022. The decrease in the fund's payout ratio YTD was due to distributable cash increasing by $4.1-million, or 38.3 per cent, partially offset by distributions paid increasing by $2.5-million, or 22.9 per cent. Payout ratio is calculated by dividing the amount of distributions paid during the applicable period by the distributable cash for that period. The fund's payout ratio is typically higher in the first and fourth quarters compared with 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 per cent as at June 30, 2023.

Normal course issuer bid

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, other 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 per cent of the fund's issued and outstanding units (as at June 6, 2023). 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 Aug. 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 Aug. 3, 2023, the fund had acquired a total of 191,800 units at an average price of $16.50 per unit. The fund financed units purchased under the NCIB from cash on hand.

Distributions

During the period, the fund declared distributions on the units in the aggregate amount of $6.9-million, or 32.1 cents per unit. During the second quarter of 2022, the fund declared distributions on the units in the aggregate amount of $5.5-million, or 25.5 cents per unit. During the period, the fund paid distributions on the units in the aggregate amount of $6.9-million, or 32.1 cents per unit. During the second quarter of 2022, the fund paid distributions on the units in the aggregate amount of $5.5-million, or 25.5 cents per unit. The amount of distributions declared during the period increased by $1.4-million, or 6.6 cents per unit, due to the monthly distribution rate increasing from 8.5 cents per unit to 10 cents per unit commencing with the July, 2022, distribution, increasing again from 10 cents per unit to 10.2 cents per unit commencing with the November, 2022, distribution, and increasing again from 10.2 cents per unit to 10.7 cents per unit commencing with the March, 2023, distribution (collectively, the 2022 to 2023 distribution increases). Distributions paid during the period increased by $1.4-million, or 6.6 cents per unit due to the 2022 to 2023 distribution increases. YTD, the fund declared distributions on the units in the aggregate amount of $11.3-million, or 52.5 cents per unit. During the same period in 2022, the fund declared distributions on the units in the aggregate amount of $9.1-million, or 42.5 cents per unit. YTD, the fund paid distributions on the units in the aggregate amount of $13.5-million, or 62.7 cents per unit. During the same period in 2022, the fund paid distributions on the units in the aggregate amount of $11-million, or 51 cents per unit. The amount of distributions declared YTD increased by $2.2-million, or 10 cents per unit, due to the 2022 to 2023 distribution increases. Distributions paid YTD increased by $2.5-million, or 11.7 cents per unit, due to the 2022 to 2023 distribution increases.

On Aug. 3, 2023, the trustees of the fund declared a distribution for the period of July 1, 2023, to July 31, 2023, of 10.7 cents per unit, which will be payable on Aug. 31, 2023, to unitholders of record on Aug. 21, 2023. Including the July, 2023, distribution, which will be paid on Aug. 31, 2023, the fund will have paid out total distributions of $411.4-million, or $25.48 per unit, which includes 247 monthly distributions and two special distributions.

Financial summary

The associated tables set out selected information from the fund's condensed consolidated interim financial statements together with other data, and should be read in conjunction with the condensed consolidated interim financial statements and MD&A of the fund for the three-month and six-month periods ended June 30, 2023, and June 30, 2022.

Short-term outlook

The two principal factors that affect SRS are changes in guest traffic and changes in average guest cheque. BPI's and BP Canada LP's strategies to drive higher guest traffic include attracting a wide variety of guests into the restaurant, sports bar, and take-out and delivery parts of each location, offering a compelling value proposition to guests, and leveraging a larger marketing budget versus the previous year, along with a revised calendar of national and local store promotions. Increased average cheque levels are expected to be achieved through a combination of culinary innovation and menu repricing.

The success of BPI, BP Canada LP and Boston Pizza restaurants, and the amount of franchise sales, royalty, distribution income and distributable cash available for distribution to unitholders are dependent upon many economic factors, including impacts of inflation, increases in interest rates, unemployment rates, consumer confidence, recession, supply chain disruption, labour availability and other globally disruptive events. Despite the current state of economic uncertainty, Boston Pizza restaurants have been able to generate solid franchise sales and offer affordable dining options, both on- and off-premise, for guests in economically uncertain times. As demonstrated during COVID-19, BPI, BP Canada LP and Boston Pizza restaurants have the ability to adapt to changes in operating environments and economic conditions. However, with supply chain challenges, rising interest rates, increasing input costs and labour shortages impacting most of the restaurant industry, together with widespread focus on sustainability and climate-related issues, BPI's management remains cautious. The focus of BPI's management is to adapt the business to mitigate these challenges, and maintain the positive sales momentum achieved in 2022 and the first half of 2023.

The trustees of the fund will continue to closely monitor the fund's available cash balances given the uncertain economic outlook and industry challenges.

We seek Safe Harbor.