Mr. Eric Lefebvre reports

MTY REPORTS SECOND QUARTER RESULTS FOR FISCAL 2025

MTY Food Group Inc. has released its financial results for the second quarter (Q2) of fiscal 2025, which ended May 31, 2025, and declared a quarterly dividend of 33.0 cents per share, payable on Aug. 15, 2025, to shareholders registered in the company's records at the end of the business day on Aug. 5, 2025.

"From a same-store sales standpoint, the second quarter reflected a tale of two geographies. In the U.S., what began as volatility in Q1 evolved into broader macroeconomic pressure in Q2, which impacted both traffic and average check across much of our network. That said, Village Inn stood out as a bright spot and we're actively rolling out initiatives aimed at reinvigorating the guest experience across our key banners," said Eric Lefebvre, chief executive officer of MTY. "We believe these are near-term challenges and we're confident that the steps we're taking will position us well as the environment improves. In contrast, Canada continued to shine, with strong momentum driving solid results, particularly in the casual dining segment. This strength underscores the value of our diversified platform and the resilience of our brands in varied market conditions.

"While we're not satisfied with the year-over-year EBITDA performance this quarter, it's important to note that the impact was primarily concentrated within our corporate segment, with our franchise and retail segments performing better," Mr. Lefebvre continued. "The softness in the corporate segment was largely driven by some specific banners. We're actively evaluating strategic options -- ranging from accelerating our franchising efforts with one of the banners to implementing broader, transformative changes with the other. We're confident that these initiatives will strengthen the segment and enhance long-term profitability."

Second quarter results

Network:

• At the end of the second quarter of 2025, MTY's network had 7,046 locations in operation, of which 6,791 were franchised or under operator agreements and 255 were corporate owned. The geographical split among MTY's locations remained stable year over year at 57 per cent in the United States, 35 per cent in Canada and 8 per cent internationally.
• During the second quarter of 2025, MTY's network opened 76 locations (Q2 2024 -- 85 locations) and closed 77 others (Q2 2024 -- 90 locations).
• System sales reached $1.46-billion in the second quarter of 2025, representing a modest year-over-year increase of 0.3 per cent. The U.S. segment experienced an overall sales decrease of 1 per cent, due to a decline in same-store sales, slightly offset by the positive impact of foreign exchange rates, while Canada achieved organic growth of 3 per cent compared with prior year.
• Same-store sales (1) decreased 1.9 per cent year over year in the second quarter. By region, Canada grew by 1.4 per cent, the U.S. dropped 3.8 per cent and international declined by 2.9 per cent.
• Digital sales increased by 3 per cent for the quarter to reach $296.7-million, compared with $287.7-million in Q2 2024.

(1) This is a supplementary financial measure.

Financial:

• Company revenue remained stable to reach $304.8-million in the second quarter, driven by growth in the franchise and in the processing, distribution and retail segment, offset by a decline in the corporate segment.
• Net income attributable to owners totalled $57.3-million, or $2.49 per share ($2.49 per diluted share), in the second quarter, compared with $27.3 million, or $1.13 per share ($1.13 per diluted share), for the same period in 2024. The year-over-year increase can mainly be attributed to foreign exchange gain of $35.0-million, taken primarily on intercompany loans, which was offset by a loss on translation on the unaudited condensed interim consolidated statement of comprehensive income.
• Normalized adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which excludes acquisition-related expenses and SAP project implementation costs, decreased by $3.7-million year over year to reach $70.0-million in the second quarter of 2025, primarily due to lower margins generated by the U.S. corporate stores.

Segment performance:

• The franchise segment saw modestly higher revenues year-over-year driven by higher organic system sales in Canada and favourable foreign exchange, offset by lower organic system sales in the U.S. Operating expenses were up 2 per cent, driven by higher wages and a $1.0-million foreign exchange headwind. The U.S. segment saw a $1.2-million decrease in controllable expenses in the quarter. Normalized adjusted EBITDA improved by 3 per cent to reach $54.0-million, compared with $52.6-million in prior year.
• Corporate segment revenues decreased by 1 per cent to $131.5-million, due mainly to lower system sales. Normalized adjusted EBITDA came in at $11.3-million, a $5.5-million decline year over year. The decline was largely the result of pressure in two of the company's largest U.S.-based banners. Normalized adjusted EBITDA margin was 9 per cent, compared with 13 per cent last year.
• Food processing, distribution and retail revenues grew by 4 per cent to $40.2-million, due to an increase of 3 per cent in retail sales and an increase of 6 per cent in food processing and distribution. Normalized adjusted EBITDA came in at $4.7-million, up from $4.3-million last year. Normalized adjusted EBITDA margin expanded to 12 per cent, from 11 per cent last year.

Liquidity and capital resources:

• In the second quarter of 2025, cash flows generated by operating activities amounted to $40.2-million, compared with $40.6-million in the second quarter of 2024. The decrease is mainly due to lower segment EBITDA and an unfavourable working capital variance.
• MTY reimbursed $17.0-million of its long-term debt, paid $7.6-million in dividends to shareholders and repurchased 297,000 shares for a total consideration of $12.6-million in the second quarter of 2025.
• As at May 31, 2025, MTY had $47.2-million of cash on hand and long-term debt of $670.7-million, mainly in the form of bank facilities and promissory notes on acquisitions. The company also had a revolving credit facility with an authorized amount of $900.0-million, of which $264.0-million (Canadian) and $295.0-million (U.S.) had been drawn at the quarter-end.

Outlook:

• MTY continues to navigate a dynamic operating environment. Second quarter same-store sales performance highlighted a clear contrast between its two core markets. While macroeconomic conditions created short-term headwinds in the U.S., the company is actively implementing a range of strategic initiatives to position the business for growth once the environment improves. These include, and are not limited to, driving menu innovation, maintaining product quality and consistency, enhancing both on-line and in-store customer experiences, and reinforcing a strong value proposition across its banners.
• The pipeline of future locations remains strong. This quarter's net openings came in slightly below plan, however, MTY anticipates an improvement in the pace of openings in the coming quarters and continues to see strong demand for its brands, especially the larger ones.
• To date, MTY has only seen modest direct impacts from tariffs, however, the landscape remains fluid and management is actively monitoring developments while implementing mitigation strategies. In both Canada and the U.S., the company primarily sources products domestically, which helps limit the potential exposure. Management remains confident in its ability to navigate potential impacts through its strong supply chain and procurement capabilities, strategic menu adjustments, and, when necessary, pricing actions.
• For 2025, management expects stability in normalized adjusted EBITDA margins across all three of its segments, though the company may experience some fluctuations in corporate store margins, such as this quarter. Over all, management remains confident about its ability to drive margin improvement through positive unit growth, enhanced efficiencies and a continuing reduction in the number of less profitable corporate stores.
• Management expects to continue to drive strong free cash flows in 2025. This will be supported by lower capex than prior year.

Dividend payment

On July 11, 2025, MTY declared a quarterly dividend payment of 33 cents per common share. The dividend will be paid on Aug. 15, 2025, to shareholders registered in the company's records at the end of the business day on Aug. 5, 2025.

Conference call

MTY will hold a conference call to discuss its results on July 11, 2025, at 8:30 a.m. Eastern Time. All interested parties can instantly join the call by phone. Easily register on-line and be connected into the conference call automatically, or use the conventional method by dialling 1-416-945-7677 or 1-888-699-1199, with the conference identification of 76269 followed by the pound key. Parties unable to call in at this time may access a recording by calling 1-888-660-6345 (North American toll-free) or 1-289-819-1450 (international participants), and entering the passcode 76269 followed by the pound key.

About MTY Food Group Inc.

MTY franchises and operates quick-service, fast casual and casual dining restaurants over 85 different banners in Canada, the United States and internationally. Based in Montreal, MTY is a family with a heart that beats to the rhythm of its brands, the very soul of its multibranded strategy. For over 45 years, it has been increasing its presence by delivering new concepts of restaurants, making acquisitions and forging partnerships, which have allowed it to reach new heights year after year. By combining new trends with operational know-how, the brands forming MTY now touch the lives of millions of people every year. With 7,046 locations, the many flavours of MTY hold the key to responding to the different tastes and needs of today's consumers, as well as those of tomorrow.

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