Earnings call transcript: MTY Food Group Q1 2025 beats EPS expectations

MTY Food Group reported its Q1 2025 earnings with an adjusted EPS of $0.87, surpassing the forecast of $0.8187. Revenue reached $284.79 million, slightly below the expected $288.4 million. Following the announcement, MTY's stock fell 2.03% to $39.13, reflecting investor concerns over revenue shortfall despite the earnings beat. According to InvestingPro data, the company maintains impressive gross profit margins of 60.67% and is expected to see net income growth this year, suggesting operational efficiency despite revenue challenges.

Key Takeaways

• MTY Food Group's adjusted EPS exceeded expectations, reaching $0.87.
• Revenue fell short of forecasts, totaling $284.79 million.
• The company's stock dropped 2.03% in pre-market trading.
• Digital sales saw a 7% increase, now 22% of total sales.
• The company is focusing on cost discipline and restructuring initiatives.

Company Performance

MTY Food Group showed resilience in Q1 2025, with a slight increase in system sales and company revenue. Despite a challenging macro environment, including extreme weather conditions affecting sales, the company managed to grow its normalized adjusted EBITDA by 1% year-over-year. The focus on digital channels and marketing strategies contributed to a 7% increase in digital sales. With a beta of 1.44, the stock shows higher volatility than the market, while maintaining a strong dividend history. InvestingPro analysis reveals 8 additional key insights about MTY's financial health and growth potential.

Financial Highlights

• Revenue: $284.79 million (up 2.2% YoY)
• Adjusted EPS: $0.87 (up from $0.69 in Q1 2024)
• Net income: $1.7 million, or $0.07 per diluted share (down from $17.3 million, or $0.71 in Q1 2024)
• Free cash flows net of lease payments: $43.5 million (up 18% YoY)

Earnings vs. Forecast

MTY Food Group's adjusted EPS of $0.87 exceeded the forecast of $0.8187 by 6.3%. However, the revenue of $284.79 million fell short of the projected $288.4 million by 1.25%. This mixed performance highlights the company's robust earnings amidst revenue challenges.

Market Reaction

Despite the earnings beat, MTY's stock fell 2.03% to $39.13 in pre-market trading. This decline is attributed to the revenue miss and potential concerns about the company's ability to sustain growth amid macroeconomic challenges. InvestingPro's Fair Value analysis suggests the stock is currently undervalued, though trading at a relatively high P/E ratio of 38.76. The stock is trading near its 52-week low, potentially presenting an opportunity for value investors. For deeper insights into MTY's valuation and growth prospects, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

MTY Food Group aims to reduce capital expenditures in 2025 while continuing its share buyback program. The company is preparing for potential supply chain challenges and monitoring tariff developments. Future EPS forecasts suggest steady growth, with expectations of $2.97 in FY2025 and $3.17 in FY2026.

Executive Commentary

CEO Eric LaFayette stated, "We've navigated the challenging last few years... We will continue to drive the business forward with disciplined foresight and a proactive approach to sustainable growth." LaFayette emphasized the company's focus on acquiring quality companies and concepts to enhance its portfolio.

Risks and Challenges

• Supply chain disruptions: Potential impacts from tariffs and trade issues.
• Weather-related sales impacts: Extreme conditions could continue to affect sales.
• Consumer spending variability: Changes in spending habits may impact sales.
• Market saturation: Increasing competition in the food service industry.
• Franchisee sentiment: Maintaining positive relationships is crucial for growth.

Q&A

Analysts inquired about MTY's share repurchase strategy, consumer spending trends, and potential M&A opportunities. Discussions also covered the impact of tariffs and the company's capital expenditure plans, highlighting the focus on maintaining financial flexibility and strategic growth.

Full transcript - MTY Food Group Inc (MTY) Q1 2025:

Conference Operator: Good morning, and welcome to the MTY Food Group twenty twenty five First Quarter Results Earnings Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided for you at that time for questions. And if anyone has any difficulty hearing the conference, you may press 0 for operator assistance at any time.

Listeners are reminded that portions of today's discussion may contain forward looking statements that reflect current views with respect to future events. Any such statements are subject to risk and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements. For more information on MTY Food Group's risk and uncertainties related to these forward looking statements, please refer to the company's annual information form dated 02/13/2025, which is posted on SEDAR plus The company's press release, MD and A, and financial statements were issued earlier this morning and are available on its website and on SEDAR plus All figures presented on today's call are in Canadian dollars, unless otherwise stated. This morning's call is being recorded on Friday, 04/11/2025 at 08:30 a. M.

Eastern Time. I would now like to turn the call over to mister Eric LaFayette, chief executive officer of MTY Food Group. Please go ahead, sir.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Thank you. Good morning, everyone, and thank you for joining us for MTY's twenty twenty five First Quarter Conference Call. Rene Sainton, our Chief Financial Officer, is also with us today. The word I would use to summarize our first quarter performance from my perspective is resilience. In the face of an uncertain macro backdrop, NTY and its franchisees continue to execute well.

We're taking a measured and thoughtful approach in response to emerging market headwinds. After adjusting for the impact of an extra day resulting from the leap year last year, same store sales remained largely stable. This performance comes despite significant weather disruptions throughout the quarter, during which we witnessed a higher frequency of extreme cold floods and snowstorms keeping customers home and increasing temporary store closures. These conditions placed downward pressure on system wide sales during the quarter, particularly on the QSR frozen treats segment. Our other snack brands such as Wetzel's Pretzels continued to perform well on all key metrics.

Casual dining restaurant segments in both Canada and The US remained resilient as consumers continue to strive for positive restaurant experiences that are priced right. We continue to make positive progress within our digital channels. Digital sales increased by 7% in the first quarter and now represent 22% of total sales. This growth reflects our ongoing investments and brand level initiatives aimed at enhancing the off premise customer experience. We are today in a better position to implement more targeted and data driven marketing strategies with our larger brands, and we continue to improve our ability to use all the best in class tools with a number of smaller brands.

As a reminder, the average digital sale carries a significantly higher average check than non digital sales. During the first quarter of twenty twenty five, we opened 70 locations and closed 102, resulting in a net decrease of 32. The first quarter has historically been a challenging period for openings and typically brings higher closures. Encouragingly, our current pipeline is strong with over 100 locations currently under construction. As such, we anticipate an improvement in the pace of restaurant openings in Q2 and Q3.

While there will always be ups and downs, we remain committed in achieving net locations growth in the future and are confident in our ability to deliver growth. At the end of Q1, NTY's network comprised 7,047 locations, of which 96.4% were franchised or under operator agreement and 3.6% were corporately owned. Turning to our financial results. Normalized adjusted EBITDA increased modestly despite the negative impact resulting from the leap year last year and The U. S.

Headwinds mentioned earlier. All segments were relatively flat year over year with small increases in the Franchise and Retail segments and a small decrease in Corporate Restaurants. Margins across all segments held steady, displaying the resilience of our business. MTY continues to generate very strong free cash flows as one would expect from our asset light model. Cash flows generated from operating activities were $58,500,000 up 9% year over year and free cash flows net of lease payments came in at $43,500,000 up 18% year over year.

Free cash flows net of lease payments represented 72% of normalized adjusted EBITDA, demonstrating the company's impressive free cash flow generation capabilities. We remain focused on building financial capacity for strategic opportunities, while also returning value to shareholders through share buybacks and dividends. In the quarter, we once again repurchased just under 300,000 shares under our normal course issuer bid, bringing the total shares repurchased in the last twelve months to 1,100,000.0 shares or 4.6% of our float at the beginning of that period. With that, I'll now turn it over to Renee, who will discuss MTY's financial results in greater details.

Rene Sainton, Chief Financial Officer, MTY Food Group: Thank you, Eric, and good morning, everyone. Like Eric mentioned, normalized adjusted EBITDA came in at $60,200,000 for the first quarter of twenty twenty four twenty twenty five, excuse me, up 1% year over year compared to the same period last year. MTY system sales grew by 2.5% year over year and company revenues saw a 2.2% boost. Looking at each operating segment separately, franchising operations Canadian revenues dipped by 2% to CAD34.5 million. This was mainly due to a $400,000 decrease in recurring revenues and a $500,000 decline in turnkey project sales.

Meanwhile, in The U. S. And International segment, franchise operations saw a 2% increase in revenues, reaching $58,500,000 A favorable foreign exchange swing of $3,600,000 led to the increase partially offset by a decrease in recurring revenue streams, which was the result of our organic system sales decrease of 3.1%. On the expense side, operating costs in Canada went up by 2% year over year to $19,700,000 mostly due to higher wages. The U.

S. And international operating expenses rose by 3% to $30,900,000 affected by $2,000,000 foreign exchange impact as well as $1,700,000 in SEP project implementation and acquisition related transaction costs. We are happy to say, however, that these increases were partially offset by a $2,100,000 reduction in controllable expenses, thanks to the company's continued focus on cost discipline, resulting partly due to the restructuring initiatives put into place in 2024. As for profitability, normalized adjusted EBITDA for the franchise operations came in at 44,000,000 a 1% increase from last year's $43,400,000 with the margins remaining steady at 47%. Moving over to the corporate operations, Canadian revenues rose 17% to $9,800,000 due to a net increase in corporate owned locations as well as a shift in mix resulting in an increase in casual dining restaurants year over year.

U. S. And international revenues rose by 2% to $116,100,000 also due to an increase in corporate locations. The increase in corporate store restaurants in The U. S.

Was the result of taking back select locations in certain underperforming territories in the later half of 2024, with the objective of turning the operations around and refranchising the restaurants. Operating expenses for the Canadian segment rose by 1,300,000 to $10,200,000 while The U. S. And International segment rose by 3% to $103,500,000 due to a higher number of corporate stores as well as higher wages and supply chain costs. Normalized adjusted EBITDA of the corporate store segment came in at 12,200,000.0 relatively stable from last year's $12,400,000 with margins in line at 10%.

Globally, revenue from food processing, distribution and retail grew by 7%, thanks to stronger sales in the Canadian Retail segment. A big driver for the increase was the strong Super Bowl performance. Normalized adjusted EBITDA for the segment reached $4,000,000 up 8% from $3,700,000 last year, with margins holding steady at 10%. Turning our attention to our income attributable to owners, it amounted to $1,700,000 or $07 per diluted share compared to $17,300,000 or $0.71 per diluted share in Q1 twenty twenty four. The decline was mainly due to accounting for the foreign exchange variations on intercompany loans.

This accounting loss has no bearing on our healthy operational and financial highlights in the quarter, which saw significant growth in operating and free cash flows. Excluding this foreign exchange impact, adjusted EPS was $0.87 per diluted share versus $0.69 per diluted share in the first quarter of twenty twenty four, highlighting the impressive overall performance during the quarter. On that note, moving over to cash flows, as Eric briefly mentioned, the first quarter had cash flows from operating activities of $58,800,000 compared to $54,200,000 in Q1 of twenty twenty four, an increase of 4,600,000.0 mainly attributable to the decrease in interest paid on long term debt. Free cash flows net of lease payments increased to $43,500,000 in the quarter compared to $36,900,000 last year, mainly due to lower capital expenditures. For 2025, we are targeting capital expenditure levels lower than 2024.

Moving over to liquidity and capital resources. As of the end of the quarter, the amount held in cash totaled $68,800,000 an increase of $18,400,000 since the end of the 2024 fiscal period. As Eric mentioned, during the three months ended 02/28/2025, we repurchased and canceled 287,400 shares for $13,800,000 through our NCIB and paid $7,700,000 in dividends to our shareholders. We ended the quarter with a net debt of 6 and $43,900,000 Considering our strong cash flow generating ability, our debt to EBITDA of approximately 2.5 times is a level of debt that gives us flexibility to make acquisitions should the opportunity arise, while we continue to return capital to shareholders in the form of dividends and share buybacks. And with that, I'd like to thank you for your time, and I'll turn it back to Eric for closing remarks.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Thanks, Renee. We've navigated the challenging last few years, the inflationary cycle of 'twenty two and 'twenty three, turning to macroeconomic headwinds of 'twenty four and early 'twenty five. Tools at our disposal to address these headwinds are plentiful. We will continue to drive the business forward with disciplined foresight and a proactive approach to sustainable growth. Tariffs have dominated the headlines and are front of mind for everyone.

It's a rapidly evolving and volatile situation, and we're actively monitoring developments. Our US stores are somewhat insulated because most of our supply chain is US centric for those stores. We don't source 100% within The US, but our exposure is more limited. In Canada, we also purchase most of what we need domestically, but there are some products that inevitably need to be imported. If counter tariffs were imposed by the Canadian government, we would need to manage their impact.

In both countries, our supply chain teams are working hard to identify alternative sources for the goods that are imported and organize the supply chain in case we need to move from one supplier to another. We are confident in our ability to manage any situation by leaning into our robust supply chain and procurement capabilities, strategic menu adjustments, and if necessary, pricing actions. I'd like to end off by saying that this quarter has demonstrated resilience in our system sales, and we feel good about our pipeline of new store openings. Cash flow generation remains strong, and our balance sheet is healthy. We remain committed to achieving long term growth and delivering strong results, strong returns for our shareholders.

I thank you for your time, and we will now open the lines for questions. Operator?

Conference Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star key followed by one on your touch tone phone. You will hear a one tone prompt acknowledging your request. Your questions will be pulled in the order they are received.

And if you would like to decline from the polling process, please press the pound key. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment for your first question. Our first question comes from the line of Vishal Sreedhar from National Bank. Your line is open.

Vishal Sreedhar, Analyst, National Bank: Hi, thanks for taking my question. I just wanted to get your thoughts on a comment that was indicated in the disclosure material, where you say we see significant value in share repurchases at current levels as the highly accretive use of capital. And we're going to remain disciplined in evaluating strategic acquisition opportunities. Wondering if something has changed more so from the last quarter and how we should contemplate acquisitions and even the pace of repurchases going forward?

Eric LaFayette, Chief Executive Officer, MTY Food Group: No, I don't think anything's changed. It's a continuity of what we're seeing out there. I mean, our priority remains to acquire good companies and good concepts that we can add to our portfolio, but that being said, acquiring MTY at the moment makes sense given our share price. We're buying back shares at around the same pace we've been acquiring for the last few months. We're in a position now at the pace we're going, we're gonna reach the maximum amount allowed by the TSX.

So we're we're still on pace for that. We're still buying back our shares, and we're still building our treasure chest for acquisitions. So it's just that it's it's not if we want to acquire companies, it's more when we'll be able to cross the finish line with with some of the projects we're working on.

Vishal Sreedhar, Analyst, National Bank: Okay. And how do you evaluate backdrop right now for acquisitions? Obviously, it's a very volatile situation as you commented and I presume the earnings outlook as we go through the year may change or the consumer backdrop may change. So I want to get your thoughts. Do you think there's better prices available and it's something to be prudent or do you think it's more of a long term view and you'll buy as available?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Well, it's always a long term view whenever we acquire something, it's not about next quarter or the quarter after, as you know these acquisitions are based on long term forecasts that we have for the cash flow generation and the growth potential of each of these concepts, but just to comment on what you're seeing in the consumer, there's a lot of noise about what the consumer is doing or might be doing, but right now as we stand today, I'm not seeing any material change in consumer behavior. There are ups and downs based on all the various factors we're seeing and all the noise that we're hearing in the media, but the consumer is still there and people still look for positive experiences in our restaurants. I don't think it has a material impact on valuations yet, I'm not sure if it will have an impact because the consumer is still there, but time will tell. But as far as we're concerned, it's not smooth sailing because of everything that's going on, but the consumers are still there and it's business as usual.

Vishal Sreedhar, Analyst, National Bank: Okay. And with respect to that comment where you said the consumers are still there, is that the comment in Canada and The US and it applies in in equal proportion for both?

Eric LaFayette, Chief Executive Officer, MTY Food Group: On the Canadian side, it's certainly stronger than The US at the moment. There are periods where one territory is going to be stronger than the other. Right now we're seeing Canada as their strongest territory, it's the same also since the beginning of Q2. But, yeah, The US consumer is still there. It's a little bit more choppy in The US, but there's still still good potential, and we have a lot of concepts that are still doing well.

Vishal Sreedhar, Analyst, National Bank: Thank you.

Conference Operator: Our next question comes from the line of Derek Lessard from TD Cowen. Your line is open.

Derek Lessard, Analyst, TD Cowen: Yeah. Good morning, everybody. So, Eric, I just maybe wanted to touch a little bit on the Canadian same store sales, for q one. So maybe talk about, I guess, the order of magnitude of the the weather impact, and the extra day. And maybe just maybe a comment around the GST holiday.

It doesn't seem like you guys benefited much, if any.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yeah. Well, the the extra day is important, obviously. Say it was a Thursday last year, February 29, so we had five Thursdays in that month. It's just over 1% on same store sales, the impact, so it brings our same store sales total to about flat, just under flat, and it brings our Canadian same store sales positive. As far as the weather is concerned, hasn't been much weather in Canada.

We did have a snowstorm, Valentine's Day weekend, historical snowstorms in Quebec and Ontario that cost us a Thursday, Friday, Saturday and Sunday. So that hurt us a little bit, but it's hard to measure exactly what the impact of that would have been versus a normal Valentine's Day weekend.

Derek Lessard, Analyst, TD Cowen: Okay. And on the GST holiday, anything to talk about there?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yeah. Well, again, it's another one that's hard to measure. Certainly in Quebec, it had no impact. 5% doesn't really necessarily make a big difference for the consumer. The impact is probably a little bit bigger in the Atlantic provinces because the entire sales tax was wiped away, but we were performing well before and we're still performing well after, so it's hard to measure whether it had an impact or not, but what's important is that the sales are still there before and after, so I can't really comment whether that created some lift or not.

Derek Lessard, Analyst, TD Cowen: Okay, and that's fair. And just maybe one last one for me. Could you maybe talk about, you said you're actively monitoring the tariff developments. I understand that it's extremely fluid environment, but you did say that you're implementing some mitigation strategies. Just curious if you could maybe talk about some of those strategies that you've got on the go.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yeah, well, we're not necessarily implementing the strategies because right now the impact is relatively minimal, so we don't have to change much, we're just preparing, they always say plan for the worst and hope for the best, so we're planning in case there would be counter tariffs between Canada and US for example, or if there's massive tariffs impacting some of our supply chain coming from Mexico for produce for example, so we're preparing a bunch of scenarios to prepare and if these counter tariffs or heavy tariffs do come to fruition, or not necessarily fruition in this case, but they are enacted, the entire supply chain will reorganize itself and what the impacts are going to be is still a big question mark, so we're preparing for a number of different scenarios. We have a tariff task force that's implemented now in our groups, and we're just preparing to make sure that we don't run out of food and to make sure that our franchisees are not too penalized and also to make sure we don't take pricing where we would need to take pricing.

Derek Lessard, Analyst, TD Cowen: Okay. Thanks, Eric. I appreciate the commentary.

Conference Operator: Our next question comes from the line of John Zamparo from Scotiabank. Your line is open.

John Zamparo, Analyst, Scotiabank: Thank you very much. Good morning. I wanted to come back to the same store sales performance subsequent to the quarter. I appreciate the comments so far. It's such a dynamic environment.

I wonder if you've seen any noticeable shift in spending within segments, in other words, quick service versus fast casual versus casual.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Our top performing concepts at the moment are the casual dining, and we haven't really seen major shifts. I would say that right now we're seeing more variation than normal, so the ups are higher and the downs are lower than normal, so we see the small changes that we typically see, we see heavier changes in both ways, but we haven't seen any major shift in consumer spending right now, so hopefully that stays that way.

John Zamparo, Analyst, Scotiabank: Okay. And then shifting to franchisees, I wonder how you would describe the sentiment among that group at the moment, thinking about their profitability levels, but also their willingness to open new stores in this environment.

Eric LaFayette, Chief Executive Officer, MTY Food Group: Well, as I mentioned earlier, our new store pipeline is really, really strong, probably the strongest it's ever been. So we're pretty happy with that, we're swinging hammers on over 100 stores as we speak. We're very confident with our pace of openings for Q2 and Q3. So I think the desire to open new stores and proven concepts hasn't necessarily gone down. And as far as profitability is concerned, our franchisees are entrepreneurs, they're small business owners, so I think it's normal that they're worried about profitability because of all the noise that we hear in the media, and because of all the back and forth that creates a lot of uncertainty, but their profitability hasn't been affected by everything that's going on yet, so hopefully it won't be.

If it does get impacted, then I can give an example, when eggs price soared in The US, it was a challenging time for our village and franchisees who sell a lot of eggs, so we need to address that and take some pricing in these cases to make sure that our margins remain viable. So there are a number of tools that we can use, but where there's no substitute for a certain product and price increases, we will need to protect our franchisees. And I think consumers understand that if they're buying eggs, they understand that it's a little bit more expensive. Now the eggs are back to a more normal price, but there are ups and downs that are a little bit more abrupt.

John Zamparo, Analyst, Scotiabank: Okay. On M and A, coming back to that topic, I think correct me, but I think typically you've been fairly agnostic on restaurant type or geography for what you'd target. Is is that still the case, would you say? Or are there specific segments or or regions or brands? Maybe maybe you don't have to to share what they are.

But are you getting more targeted in what you're interested in on the M and A side?

Eric LaFayette, Chief Executive Officer, MTY Food Group: We're still largely agnostic on geography and type of restaurant. Obviously, we're primarily going to focus on a very heavy franchise model. We're not necessarily that interested in corporate store models, which tend to be a little bit more challenged these days. We're seeing a lot of activity on the corporate store chains. We're monitoring, but this is not necessarily our primary focus.

But other than that, I mean, any type of restaurant, any any geography can do well if it's if it's operated well and if if people do a good job and if there's there's an appeal to to potential consumers. So we're we're agnostic, and we look at each opportunity on its own, not necessarily based on the type of food or or geography.

John Zamparo, Analyst, Scotiabank: Got it. Okay. And then one last one for me. Specific to this quarter, closure skewed more towards Canada. Can you add some color there?

Was there anything that was sort of one time that you think will not impact other quarters? I know this is always tough to predict, but is there anything you can add on that topic?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yeah, there was a little bit of a mixed bag in terms of closures during Q1. Obviously there is one, the Goozo theatres that went bankrupt affected our TCB wide chain, we had to close all those stores at once, so that obviously won't happen again in the future. But other than that, it's a little bit of a mixed bag, Q1 typically is a little bit more sensitive, January and February are typically lower months and this is when some of our franchisees choose to stop operations after the Christmas period. Historically it's been like that, it's probably going to be like that in the future as well, but there's no necessarily discernible trend that we'd say, yeah, this is something that's going to last in the future.

John Zamparo, Analyst, Scotiabank: Okay. Great. Understood. I'll leave it there. Thank you very much.

Conference Operator: Ladies and gentlemen, if there are any additional questions at this time, please press star followed Our next question comes from the line of Michael Glenn from Raymond James. Your line is open.

Michael Glenn, Analyst, Raymond James: Hey, good morning. Eric, the change in CapEx cadence that you're seeing in this year versus last year, can you just help give some insight into what's changed on the CapEx front, where you're spending less money this year versus last year?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yeah, for sure. Last year we had some construction that we had to do on a few stores, for example, the two Baton Rouge and Desjardins and La Salle, we had some other stores that we needed to build because they were pre committed. That doesn't happen this year and there's no intention to build corporate stores other than the famous Dave's new prototype that we just built and that we just opened a few weeks ago. Announced all of last year, we announced that the CapEx cadence would slow down and that we had visibility on on the lower CapEx and that we're just realizing what we said we would.

Michael Glenn, Analyst, Raymond James: Okay. And did you guys give a number for CapEx for the year, a guidance on it?

Eric LaFayette, Chief Executive Officer, MTY Food Group: No. We we didn't give a number. All we were saying is that it should be materially lower than last year.

Michael Glenn, Analyst, Raymond James: Okay. And then in the opening remarks, Renee sort of highlighted that there has been a creeping higher uptick in corporate stores taking place, and you spoke to some of that. But is there any specific intention on MTY's part to divest its corporate casual dining stores in The US?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yes and no. So we we we don't want to give them away because they're they produce, you know, valid EBITDA, and they bring dollars back home. There's there's no desire to increase that portfolio. Right now, what we're stores you see being added are mostly Papa Murphy's, where territories are being abandoned by some large franchisees, where we think the operations were not optimal and we can turn them around and refranchise them down the road. But, yes, there will be some sales of targeted sales of corporate stores.

I don't want to announce numbers. It won't necessarily be all of our stores for sure, but there will be some targeted sales of corporate stores in the casual dining portfolio coming.

Michael Glenn, Analyst, Raymond James: Okay. Perfect. And then just on the the the consumer, you you have seen headlines, and I know you reference, you read about this in the media, but a very active push to value menu offerings in The US. Are you responding across any of your brands right now to the in competitive intensity on the value side?

Eric LaFayette, Chief Executive Officer, MTY Food Group: Yes. I think every brand, whether it's US or Canada, needs to have a value offer to attract consumers and and get people into the store. They consumers won't necessarily buy that value offer, but at least it gives them a reason to come into the store. So, yes, I would say pretty much every brand has to play in that value offer. We we have no choice.

Michael Glenn, Analyst, Raymond James: Okay. And then from your franchisees on The US side, are you hearing anything or any dialogue regarding labor challenges or labor availability coming up?

Eric LaFayette, Chief Executive Officer, MTY Food Group: No. I think labor is is pretty stable. There are pockets here and there where it's more complicated. There there always is. But I wouldn't say the labor situation is is is better or worse than it's been before.

It's we're in a we're in a business where we have a high churn in our employees, and we need to constantly renew our workforce. And that's the nature of our business. And this year or or this month is no different than it was before.

Michael Glenn, Analyst, Raymond James: Okay. Thank you for taking the questions.

Conference Operator: There are no further questions at this time. This concludes the conference call for today. Thank you for participating. You may now disconnect.

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