MTY reports 2018 third quarter results

• Network sales increased 24%, owing to the acquired concepts and a slightly positive same store sales growth.
• Revenues increased 26% to $91.2 million compared to $72.4 million last year.
• EBITDA⁽¹⁾ increased 55% to $39.6 million, a historical high for the Company, versus $25.6 million last year.
• Net income attributable to shareholders increased 85%, to $22.3 million or $0.89 per share ($0.88 per diluted share), versus $12.0 million and $0.56 per share (basic and diluted) last year.
• Cash flows generated by operating activities were $28.4 million, compared to $24.9 million. Operating cash flow before variation in non-cash working capital items, income taxes and interest paid⁽¹⁾ increased to $38.1 million, compared to $27.3 million last year.
• Acquired substantially all of the assets of the sweetFrog Premium Frozen Yogurt franchise system on September 26, 2018.

MONTREAL, Oct. 10, 2018 /CNW Telbec/ - MTY Food Group Inc. ("MTY" or the "Company") (TSX: MTY), franchisor and operator of multiple concepts of restaurants, reported today its results for the third quarter ended August 31, 2018.

"We are extremely pleased with our third quarter results with EBITDA marking a historical high for the Company in a seasonally strong period. Our results benefited from a strong performance from some of our recent acquisitions, more particularly Imvescor Restaurant Group and The Counter Custom Burgers, as well as cost control initiatives and operational leverage which together drove EBITDA margins to new levels," said Eric Lefebvre, Chief Financial Officer of MTY. Looking forward, we will focus on maximizing shareholder value by integrating recent acquisitions, adding new locations of our existing brands and seeking potential acquisitions to increase market share."

THIRD QUARTER RESULTS

Network:

• At the end of the period, MTY's network had 5,690 locations in operation, of which 75 were corporate and 5,615 were franchised. The geographical split of MTY's locations remained steady with 44% in the United States, 47% in Canada and 9% abroad.
• System sales were up 24% compared to 2017, reaching $787.9 million. The growth is primarily attributable to recent acquisitions.
• Same store sales were slightly positive compared to the same period last year. Canadian sales grew by 1.2%, with most territories showing positive results, with the exception of Saskatchewan which remains under significant pressure following the introduction of the meal tax in the second quarter of 2017. Sales in the United States declined slightly by 0.3%, affected by California, Arizona and Oregon.
• Same store sales for Imvescor restaurants, which are not included in the consolidated same store sales, have grown by 0.7% in the third quarter.

MTY Results:

• The Company's revenue increased 26%, from $72.4 million to $91.2 million mainly driven by the acquisition of Imvescor Restaurant Group in Canada and The Counter Custom Burger.
• Cost of sales and other operating expenses increased 10%, from $46.8 million to $51.7 million, mainly driven by acquisitions. As a percentage of sales, cost of sales and other operating expenses decreased from 64.7% to 56.6%, reflecting operational leverage.
• EBITDA increased 55% to $39.6 million, or 43% of sales, a historical high for the Company, as compared to $25.6 million, or 35% of sales for the same period last year.
• Net income attributable to shareholders increased by 85%, to $22.3 million or $0.89 per share ($0.88 diluted) when compared to $12.0 million or $0.56 per share for the same period last year.

NINE-MONTH RESULTS

System sales were $2,075.1 million, up 18% compared to the same period the year before. Same store sales increased 0.1%, with Canada growing 1.3% and the United States declining 0.6%.

EBITDA increased 43% to $95.0 million, or 39% of sales, as compared to $66.5 million, or 32% of sales for the same period last year. Net income attributable to shareholders increased to $85.6 million or $3.58 per share (basic and diluted) when compared to $30.1 million or $1.40 per share for the same period last year, mainly because of the adjustment to deferred income taxes arising from the change in prospective tax rates in the United States.

LIQUIDITY AND CAPITAL RESOURCES

• During the third quarter, cash flows generated by operating activities were $28.4 million, compared to $24.9 million for the same period in 2017. Excluding the variation in non-cash working capital items, income taxes and interest paid, operations generated $38.1 million in cash flows during the third quarter of 2018, compared to $27.3 million in 2017.
• As at August 31, 2018, the Company had $49.1 million of cash on hand, and a long-term debt of $273.5 million in the form of holdbacks on acquisition and bank facilities. Factoring in the $11.7 million of holdbacks payable had been presented as income taxes payable, total net debt is currently $236.1 million.

SUBSEQUENT EVENT

On September 26, 2018, the Company announced that one of its wholly-owned subsidiaries had acquired substantially all of the assets of the sweetFrog Premium Frozen Yogurt franchise system ("sweetFrog') for a consideration of approximately US$35 million. A total of approximately US$28.9 million was paid on closing, financed from MTY's cash on hand and existing credit facilities, while US$2.6 million in liabilities was assumed and US$3.5 million was held back.

DIVIDEND

On October 10, 2018, the MTY Group Inc. Board of Directors declared a quarterly dividend of $0.15 per share payable on November 15, 2018 to shareholders registered in the Company's records at the end of business on November 5, 2018. This dividend is an eligible dividend for income tax purposes.

CONFERENCE CALL

MTY Group will hold a conference call to discuss these results on October 10, 2018, at 8:30 AM Eastern Time. Interested parties can join the call by dialing 1-647-788-4922 (Toronto or overseas) or 1-877-223-4471 (elsewhere in North America). Parties unable to call in at this time may access a recording by calling 1?800-585-8367 and entering the passcode 8895705. This recording will be available on Wednesday, October 10, 2018 as of 11:00 AM Eastern Time until 11:59 PM Eastern Time on Wednesday, October 17, 2018.

ABOUT MTY FOOD GROUP INC.

MTY Group franchises and operates quick-service and casual dining restaurants under approximately 75 different banners in Canada, the United States and internationally. Based in Montreal, MTY is a family whose heart beats to the rhythm of its brands, the very soul of its multi-branded strategy. For over 35 years, it has been increasing its presence by delivering new concepts in quick-service restaurants and making acquisitions and strategic alliances that 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 approximately 5,700 locations, the many flavours of the MTY Group have the key to responding to the different tastes and needs of consumers today and tomorrow.

NON-IFRS FINANCIAL MEASURES

EBITDA (earnings before interest, taxes, depreciation and amortization), same-store sales growth, system sales, operating cash flow before variation in non-cash working capital items, income taxes and interest paid are widely accepted financial indicators but are not a measurement determined in accordance with International Financial Reporting Standards ("IFRS") and may not be comparable to those presented by other companies. The Company uses these measures to evaluate the performance of the business as they reflect its ongoing operations. Refer to the section "Compliance with International Financial Reporting Standards" in the Company's MD&A.

FORWARD-LOOKING STATEMENTS

Certain information in this News Release may constitute "forward-looking" information that involves known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Company or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. When used in this News Release, this information may include words such as "anticipate", "estimate", "may", "will", "expect", "believe", "plan" and other terminology. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this News Release. Except as required by law, we assume no obligation to update or revise forward-looking information to reflect new events or circumstances. Additional information is available in the Company's Management Discussion and Analysis, which can be found on SEDAR at www.sedar.com.

Note to readers:  Management's Discussion and Analysis, the condensed interim consolidated financial statements and notes thereto for the third quarter ended August 31, 2018 are available on the SEDAR website at www.sedar.com and on the Company's website at www.mtygroup.com.

SOURCE MTY Food Group Inc.