Mr. Eric Lefebvre reports

MTY REPORTS THIRD QUARTER RESULTS FOR FISCAL 2026, ANNOUNCES END OF STRATEGIC REVIEW AND INCREASES DIVIDEND BY 35%

MTY Food Group Inc. has released its financial results for its 13-week period of 2026 ended Aug. 30, 2026, has ended a strategic review and has declared a quarterly dividend of 50.0 cents per share, payable on Nov. 13, 2026, to shareholders registered in the company's records at the end of the business day on Nov. 3, 2026.

"During the third quarter, our franchising segment showed impressive resilience despite facing continued pressure on consumer spending and a challenging operating environment," said Eric Lefebvre, chief executive officer of MTY. "Despite these headwinds, our asset-light and diversified model continued to generate strong free cash flows, and we remained focused on executing our strategic plan.

"Following the announcement last quarter that we would be closing corporate locations representing roughly 1 per cent of our network, we closed 50 locations during the third quarter, with the remainder of the planned closures anticipated to happen during Q4. This is a decisive step to address underperforming assets and improve the overall quality of our corporate store portfolio. While this action will reduce our store count in the near term, we believe it will strengthen the business over the long term by reducing losses and allowing us to focus resources on our strongest opportunities. We remain committed to disciplined execution, strong cash generation and creating long-term value for shareholders."

Strategic review

On Nov. 17, 2025, MTY Group announced that the board of directors of the company had initiated a strategic review process, and engaged a financial adviser to identify, review and evaluate potential strategic alternatives, including a sale of all or part of the company, as well as continuing to execute its current business plan.

Given the changing macroeconomic environment and evolving customer expectations, the board of directors undertook a thorough and comprehensive review of strategic options to determine the best path forward to maximize shareholder and stakeholder value. Throughout the process, the company engaged with a range of interested parties and considered a broad set of alternatives. Following this comprehensive review, the special committee of independent directors and the board of directors have unanimously concluded that the most compelling path forward to drive shareholder value is to accelerate the evolution of MTY's current strategic plan, with a sharpened focus on efficiency, simplification and disciplined capital allocation.

The company's proposed actions will include, but will not be limited to, the following:

• The company will seek to return capital to shareholders by restoring the normal course issuer bid and will evaluate the potential for a substantial issuer bid.
• The company will increase its quarterly dividend to 50 cents per share from 37 cents per share, payable on Nov. 13, 2026, to shareholders of record on Nov. 3, 2026.
• The company will work to optimize its portfolio of brands.
• The company will focus on reverting to asset light franchising operations.
• The company will restructure some functions and offices to streamline operational efficiencies.

These proposed actions reflect the board and management's confidence in MTY's underlying business and its disciplined approach to capital allocation.

While mergers and acquisitions are part of MTY's DNA, the board of directors believes the best opportunity available today is MTY itself. Few acquisition targets offer the value and quality that MTY does, so for the moment, the company will focus on returning capital directly to shareholders by buying back MTY's own shares for cancellation and paying an increased dividend.

"MTY is at an inflection point, well positioned to harvest the benefits of the investments made over the last two years in our new ERP, which was delivered on time and on budget, as well as in our data infrastructure and systems architecture," said Mr. Lefebvre. "We've also taken decisive action to strengthen our corporate restaurant portfolio and have begun franchising strong-performing restaurants, continuing our evolution toward the pure-play, asset-light franchisor that has long been the foundation of our success. Our balance sheet is healthy, our cash generation remains strong, and we are entering this next phase with the discipline and focus needed to create lasting value."

Third quarter results

Network:

• At the end of the 13-week period, MTY's network had 6,966 locations in operation, of which 6,782 were franchised or under operator agreements and 184 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 international.
• During the 13-week period, MTY's network opened 72 locations (2025 period -- 96 locations) and closed 146 others (2025 period -- 81 locations), resulting in net decrease of 74 locations (2025 period -- net increase of 15 locations). Of the 146 locations closed, 50 were related to the corporate store closure announced in the second quarter.
• System sales (1) were $1.5-billion in the 13-week period, remaining steady compared with the same period in 2025. Excluding the impact of foreign exchange, organic system sales decreased 1.5 per cent, with Canada increasing by 0.7 per cent and the U.S. decreasing by 2.5 per cent. System sales were negatively impacted by the timing of the quarter-end, which fell on Aug. 30 compared with Aug. 31 in the prior year, the later timing of the labour day weekend, and the closure of certain corporately owned restaurants.
• Same-store sales (1) decreased 1.9 per cent year over year in the 13-week period. By region, Canada was relatively similar to prior year with a decrease of 0.2 per cent while the U.S. and international decreased by 2.7 per cent and 9.1 per cent, respectively.
• Digital sales (1) remained resilient in the 13-week period of 2026 at $279.2-million, representing an increase of 2 per cent despite decreasing system sales. As a per cent of total system sales, digital sales increased slightly representing 19.8 per cent of system sales compared with 19.3 per cent in prior year.

(1) This is a supplementary financial measure. Please refer to the supplementary financial measures section at the end of this news release.

Financial:

• Company revenue was $277.7-million in the third quarter, a decrease of 7.1 per cent compared with the same period in 2025, primarily attributable to lower revenue from corporate stores, which was tightly correlated to a decrease in the number of corporate-owned locations, as well as lower revenue from the retail segment due to delayed promotional activity.
• Net income attributable to owners totalled $24.8-million, or $1.08 per share, in the third quarter, compared with $27.9-million, or $1.22 per share, for the same period in 2025. The change was primarily due to lower adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and a stronger Canadian dollar relative to the U.S. dollar, which resulted in a loss of $4.5-million in the 13-week period, compared with a gain of $700,000 in the 2025 period.
• Normalized adjusted EBITDA, which excludes acquisition-related and strategic review expenses, and SAP project implementation costs, was $60.8-million, a decrease of $13.2-million compared with 2025. The change was due to reduced profitability from corporate operations mostly in the U.S. and international segment. These factors reflected continued pressure from commodity and other operating costs, as well as softer consumer spending in certain markets.

Segment performance:

• Franchise segment revenues increased by 1.6 per cent in the 13-week period, compared with the same period in 2025 while normalized EBITDA margins stayed stable at 54 per cent. The increase in revenues was the result of an increase in recurring revenues streams in the U.S. and international segment, as well as favourable foreign exchange variations, partially offset by a decrease in recurring revenue streams in Canada. Franchising operating expenses increased from $46.7-million to $47.9-million in the 13-week period. The increase was primarily attributable to an increase in non-recurring costs incurred in connection with the strategic review, higher expected credit losses, and an increase in sales of materials and services to franchisees. This was partially offset by lower SAP implementation costs and reduction in recurring controllable expenses, driven by improved cost-efficiencies, such as lower wage costs resulting from optimized staffing levels. Normalized adjusted EBITDA increased by 1 per cent to reach $55.4-million in the 13-week period of 2026, compared with $54.9-million for the same period in 2025.
• Corporate segment revenues were $100.7-million, a decrease of 15 per cent compared with prior year, which is tightly correlated to the decrease in the number of corporate-owned stores, reflecting the company's continued efforts to optimize its restaurant portfolio and increase the relative contribution of its asset-light franchise operation. Operating expenses showed a decrease of 4 per cent compared with the same period last year. Normalized adjusted EBITDA came in at $900,000, a $13.3-million decrease year over year with margin of 1 per cent, compared with 12 per cent last year. Margins were negatively impacted by softness in system sales, as well as by the employee retention credit recognized in the quarter, which accounted for a $4.6-million increase in expenses year over year and corporate store exit costs incurred in 2026 of $400,000.
• Food processing, distribution and retail revenues decreased by 13 per cent to $41.6-million. The decrease is due to a decrease in retail sales of 22 per cent, partially offset by an increase in food processing and distribution of 12 per cent. Retail revenues decreased due to delays in promotional activities for some of the top products sold. Normalized adjusted EBITDA came in at $4.5-million, compared with $4.9-million last year.

Liquidity and capital resources:

• During the third quarter, cash flows generated by operating activities amounted to $37.6-million, compared with $39.0 for the same period in 2025. The decrease is mainly attributable to the lower EBITDA generated, partially offset by lower taxes and interest paid and a stronger working capital fluctuation. The positive working capital fluctuation is primarily attributable to changes in accounts receivable, driven by improved collections. This was partially offset by timing of payable payments. Excluding the variations in non-cash working capital items, income taxes, interest paid and other, operations generated $60.1-million, compared with $73.6-million last year.
• MTY reimbursed $14.0-million of its long-term debt and paid $8.5-million in dividends to shareholders.
• As at Aug. 30, 2026, MTY had $70.6-million of cash on hand and long-term debt of $585.7-million, mainly in the form of bank facilities. The company also had a revolving credit facility with an authorized amount of $900.0-million, of which $246.0-million (Canadian) and $243.5-million (U.S.) had been drawn at the end of the 13-week period.

Dividend payment

On Oct. 9, 2026, MTY declared a quarterly dividend payment of 50 cents per common share. The dividend will be paid on Nov. 13, 2026, to shareholders registered in the company's records at the end of the business day on Nov. 3, 2026.

Conference call

The MTY Group will hold a conference call to discuss its results on Oct. 9, 2026, at 8:30 a.m. Eastern Time. All interested parties can instantly join the call by phone, by registering on-line to be connected into the conference call automatically, or the conventional method by dialling 1-416-945-7677 or 1-888-699-1199, with the conference identification of 28098 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 28098 followed by the pound key.

About MTY Food Group Inc.

MTY Group franchises and operates quick-service, fast-casual and casual dining restaurants over 80 different banners in Canada, the U.S. and internationally. Based in Montreal, MTY is a family whose heart 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 the MTY Group now touch the lives of millions of people every year. With 6,966 locations, the many flavors of the MTY Group hold the key to responding to the different tastes and needs of today's consumers, as well as those of tomorrow.

Non-GAAP (generally accepted accounting principles) measures

Adjusted EBITDA (revenue less operating expenses), normalized adjusted EBITDA (revenue less operating expenses excluding transaction costs related to acquisitions and strategic review, and SAP project implementation costs), adjusted earnings per share (net income attributable to owners less tax effected unrealized and realized foreign exchange gain (loss) divided by weighted daily average number of common shares -- diluted) and free cash flows net of lease payments (net cash flows provided by operating activities, used in additions to property, plant and equipment, and intangible assets, and provided by proceeds on disposal of property, plant and equipment; and net of lease payments) are non-GAAP measures, do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable with similar measures presented by other issuers.

The company believes that adjusted EBITDA is a useful metric because it is consistent with the indicators management uses internally to measure the company's performance, to prepare operating budgets and to determine components of executive compensation. The company believes that normalized adjusted EBITDA is a useful metric for the same reasons as adjusted EBITDA, without including the impact of transaction costs related to acquisitions and strategic review or SAP project implementation costs, which vary in occurrence and in amount. The company believes that free cash flows net of lease payments is a useful metric because they provide the company with a measure related to decision-making about cash-intensive matters such as capital expenditures, compensation and potential acquisitions. The company also believes that these measures are used by securities analysts, investors and other interested parties and that these measures allow them to compare the company's operations and financial performance from period to period.

These measures provide them with a supplemental measure of the operating performance and financial position and thus highlight trends in the core business that may not otherwise be apparent when relying solely on GAAP measures.

Refer to the compliance with international financial reporting standards section of the company's management's discussion and analysis of the financial position and financial performance (MD&A).

Non-GAAP ratios

Free cash flows net of lease payments per diluted share (free cash flows net of lease payments divided by diluted shares) and normalized adjusted EBITDA as a per cent of revenue (normalized adjusted EBITDA divided by revenue) are non-GAAP ratios, do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable with similar measures presented by other issuers. The company believes that free cash flows net of lease payments per diluted share is a useful metric because it is used by securities analysts, investors and other interested parties as a measure of the company's cash flows that are available to be distributed to debt and equity shareholders, including to pay debt, to pay dividends and to repurchase shares. The company believes that normalized adjusted EBITDA as a per cent of revenue is a useful metric because it is consistent with the indicators management uses internally to measure the company's profitability from operations, including to gauge the effectiveness of cost management measures, as well as provides a measure of the company's performance that does not include the impact of transaction costs related to acquisitions and strategic review, which may vary in occurrence and in amount. Refer to the compliance with international financial reporting standards section of the company's MD&A.

Supplementary financial measures

Management discloses supplementary financial measures as they have been identified as relevant metrics to evaluate the performance of the company. These include system sales (sales of all existing restaurants including those that have closed or have opened during the period, as well as the sales of new concepts acquired from the closing date of the transaction and forward), digital sales (sales made by customers through online ordering platforms) and same-store sales (comparative sales generated by stores that have been open for at least 13 months or that have been acquired more than 13 months ago).

We seek Safe Harbor.