Mr. Nick Dean reports

THE KEG ROYALTIES INCOME FUND ANNOUNCES THIRD QUARTER 2023 RESULTS

The Keg Royalties Income Fund has released its financial results for the three months ended Sept. 30, 2023, and the nine months ended Sept. 30, 2023 (YTD).

Highlights

• Royalty pool sales down 1.5 per cent to $176.1-million for the quarter and up 8.5 per cent to $539.2-million year to date;
• KRL average sales per operating week down 1.1 per cent to $130,000 per operating week for the quarter and up by 4.6 per cent to $132,000 per operating week YTD;
• Same store sales up 0.2 per cent for the quarter and up 9.7 per cent YTD;
• Distributable cash down 2.8 per cent to 28.6 cents/fund unit for the quarter and up 13.2 per cent to 92.1 cents/fund YTD;
• Payout ratio was 99.3 per cent for the quarter and 92.5 per cent YTD.

Royalty pool sales reported by the 107 Keg restaurants in the royalty pool were $176,091,000 for the quarter, a decrease of $2,772,000 or 1.5 per cent from the comparable quarter of the prior year. Year to date, royalty pool sales increased by $42,249,000 or 8.5 per cent to $539,181,000. The decrease in royalty pool sales during the third quarter of 2023 was mostly due to the loss of sales at restaurants temporarily closed for renovation during that quarter. Management of KRL opted to temporarily close several restaurants for renovation during the third quarter of 2023, to capitalize on anticipated guest volumes during the fourth quarter of 2023. The YTD increase in royalty pool sales was primarily due to 130 more operating weeks in the first nine months of the current year, than in the first nine months of the prior year. During the first quarter of the prior year, restaurants were closed for 218 operating weeks because of temporary government-mandated restaurant closures related to the COVID-19 pandemic, whereas in the current year there were no such closures.

Royalty income decreased by $111,000 or 1.6 per cent from $7,155,000 in the three months ended Sept. 30, 2022, to $7,044,000 in the three months ended Sept. 30, 2023. For the first nine months of 2023 royalty income increased by $1,690,000 or 8.5 per cent from $19,877,000 for the nine months ended Sept. 30, 2022, to $21,567,000 for the nine months ended Sept. 30, 2023.

Distributable cash available to pay distributions to public unitholders decreased by $95,000 from $3,339,000 (29.4 cents/fund unit) to $3,244,000 (28.6 cents/fund unit) for the quarter, and increased by $1,215,000 from $9,236,000 (81.3 cents/fund unit) to $10,451,000 (92.1 cents/fund unit) year to date. During the third quarter of 2023 and 2022, distributions of $3,222,000 (28.4 cents/fund unit) were paid to fund unitholders. During the first nine months of both 2023 and 2022, distributions of $9,666,000 (85.1 cents/fund unit) were paid to fund unitholders. The payout ratio was 99.3 per cent for the third quarter of 2023 and 92.5 per cent year to date.

The fund remains financially well positioned with cash on hand of $2,428,000 and a positive working capital balance of $3,722,000 as at Sept. 30, 2023.

"We are satisfied with KRL's sales performance during the third quarter of 2023," said Nick Dean, president of KRL. "Same store sales grew by 0.6 per cent in Canada, and declined by 4.5 per cent in the United States, resulting in consolidated same store sales of 0.2 per cent. During the quarter, our locations in Texas and Arizona, where six or our eight U.S. locations reside, were negatively impacted by a prolonged heat wave, with extreme temperatures effectively eliminating outdoor dining, and causing many guests to remain in the comfort of their homes."

"We are very pleased with the financial results of the fund during the third quarter of 2023," said Kip Woodward, chairman of the fund. "We are particularly pleased with the number of restaurant renovations that are taking place, as historically a restaurant's sales increase meaningfully following a renovation."

About The Keg Royalties Income Fund

The fund is a limited-purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, a subsidiary of the fund, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. (KRL). In exchange for use of those trademarks, KRL pays the fund a royalty of 4 per cent of gross sales of Keg restaurants included in the royalty pool.

With approximately 10,000 employees, over 100 restaurants and annual system sales approaching $700-million, Vancouver-based KRL is the leading operator and franchisor of steak house restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steak houses. KRL has been named the No. 1 restaurant company to work for in Canada in the latest edition of Forbes Canada's best employers 2023 survey, securing third place in the overall ranking across all industries in the country.

We seek Safe Harbor.