Release Date: October 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The transaction to form a new publicly traded company was overwhelmingly approved by 99.2% of unit holders, indicating strong confidence in A&W Revenue Royalties Income Fund (AWRRF, Financial)'s strategic vision.
- Royalty income for Q3 2024 increased slightly to $13.74 million compared to $13.71 million in Q3 2023, driven by the addition of 10 new restaurants to the royalty pool.
- Despite economic challenges, A&W Revenue Royalties Income Fund (AWRRF) is focusing on value and affordability to address consumer needs, which could enhance competitiveness.
- Successful product innovations, such as the Masala veggie burger and peri peri lineup, demonstrate A&W Revenue Royalties Income Fund (AWRRF)'s ability to appeal to diverse demographics.
- The new transaction will allow A&W Revenue Royalties Income Fund (AWRRF) to explore multi-banner strategies, potentially expanding market reach and customer base.
Negative Points
- Same-store sales growth was negative at -1.0% in Q3 2024, attributed to decreased guest counts due to economic pressures like increased interest rates and inflation.
- Distributable cash generated in Q3 2024 decreased to $9 million from $11.1 million in Q3 2023, impacted by non-recurring costs related to the transaction.
- The payout ratio for Q3 2024 was 101.4%, higher than the 81.3% in Q3 2023, indicating a strain on cash flow due to transaction-related costs.
- A&W Revenue Royalties Income Fund (AWRRF) is not growing its market share as desired, facing stiff competition from larger players focusing on value propositions.
- There is a need for a more deliberate strategy to enhance product innovation and marketing efforts, as current initiatives may not be sufficiently visible to consumers.
Q & A Highlights
Q: Are the recent financial results indicative of a broader industry trend, and how is A&W addressing market share concerns?
A: Susan Senecal, President and CEO, explained that the economic situation, including increased interest rates and inflation, is impacting results. A&W is focusing on value and affordability to better compete and maintain market share, although they are not currently growing it as desired.
Q: How is A&W addressing product innovation, and has the recent transaction distracted from these efforts?
A: Susan Senecal stated that innovation remains a priority, citing successful product launches like the Masala veggie burger in Ontario. The company continues to focus on differentiating ingredients and plans to maintain innovation alongside addressing value propositions.
Q: Will there be a nationwide advertising push for new initiatives?
A: Susan Senecal confirmed that there will be a broad-based nationwide advertising campaign to support new initiatives.
Q: What is the strategic plan for the new Pret A Manger initiative in Canada?
A: Susan Senecal mentioned that while details are not ready to be shared, there is significant franchisee interest. The focus is on testing the standalone concept in Toronto to understand its economics before a broader rollout.
Q: How will the transaction affect unit holders who elected for cash or share consideration?
A: Kelly Blankstein, CFO, clarified that those who elected cash or combination consideration will not face proration. However, those who elected or were deemed to elect share consideration will receive cash for approximately 2.7% of their units due to oversubscription.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
