Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MTY Food Group Inc.'s Q2 2021 earnings conference 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 at that time for you to queue up the questions. If anyone has any difficulty hearing the conference, please press star zero for operator assistance at any time. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I'd like to remind everyone that this conference call is being recorded on Friday, July 9, 2021. I would now like to turn the call over to Eric Lefebvre, Chief Executive Officer. Please go ahead. Good morning, everyone. Thank you for joining us for MTY's 2021 Q2 results conference call. The press release and the MD&A with complete financial statements and related notes were issued earlier this morning and are also available on our website as well as on SEDAR. During the call, we will be referring to forward-looking statements and to certain indicators that are non-IFRS measures. You can refer to our MD&A for more details. I also remind you that all figures presented on today's call are in Canadian dollars unless otherwise stated. Before I begin, I would like to take a moment to thank our customers for their continued support, patience, and understanding. The last 15 months have been an intense roller coaster of COVID-related restrictions, being at times heavier and at times looser. Despite all the changes, our customers have always been there to consume our food with an open mind regarding the type of experience they will get. Restaurant owners still have a tough road ahead in their quest to return to profitability while facing a major labor shortage problem and a dislocated supply chain that is also struggling to find its balance. MTY has built its foundation on small entrepreneurs who have trusted us to invest in their business. Throughout the pandemic, our franchisees have shown a lot of courage and determination when it would have been easy to throw in the towel. They are seeing the benefit today as restrictions are gradually being lifted and customers return to our dining rooms, food courts, and office towers. I would also like to highlight the work of our franchise partners and their staff who have continued to serve customers under difficult conditions. The resilience and dedication of people who work in the MTY family have been nothing short of exceptional. I wish to sincerely thank all of them for their commitment to our common goal and success. To our results. We are pleased with our second quarter results, during which we operated facing heavy COVID-related restrictions in some of our key markets throughout the quarter. During the second quarter, MTY's network lost more than 38,000 business days because of those restrictions, and many restaurants that were still operating were doing so in a much reduced capacity. While the 38,000 lost business days marked a sequential improvement over the first quarter, the number is higher than in the fourth quarter of last year, reflecting the new wave of restrictions in Quebec and Ontario that started in December 2020. Together, these markets account for approximately a quarter of our total system sales in normal times. We are extremely pleased to report that adjusted EBITDA for the quarter more than doubled over last year, despite the lingering impact of the pandemic and the adverse variation in foreign exchange rates. While the business is far from fully recovered, our recurring streams of revenues are improving, especially in the U.S., where Cold Stone, Papa Murphy's, and a few other brands continued to perform extremely well during the quarter. Once again, we used our strong cash flow to reduce our debt level. The CAD 15 million applied to debt this quarter brings total repayments since the start of the pandemic to close to CAD 145 million, bringing the business well within our target leverage ratios and providing the necessary flexibility to explore various capital allocation possibilities. We finished the second quarter with 6,907 locations. We opened 61 locations and permanently closed 103 for a net store loss of 42. Although that number remains a net erosion of our network, we are happy to see the number of closures is relatively stable at a level that is lower than in the second quarter of 2020 and 2019. We still have 369 temporarily closed locations at the end of the quarter. Although we are hopeful those will reopen, we will get a better picture once all restaurants are in a position to reopen. Since the end of the quarter, 101 of those have reopened already. As for new store openings, we reached the highest level since the fourth quarter of 2019, and are confident we will continue to improve in the coming quarters. As indicated in the past few quarters, the pipeline of new franchisees remains healthy, and we expect a more normal rate of store openings to resume in upcoming quarters as visibility over the after effects of the pandemic becomes better. System sales for the quarter reached CAD 891.5 million, up 33% compared to the second quarter of 2020, a quarter that was materially impacted by the pandemic. This performance was realized despite the adverse impact of foreign exchange variation, which shaved CAD 53.8 million from our sales during the quarter. System sales were up 56% in Canada, 24% in the U.S., and 38% internationally. During the quarter, 23.5% of system sales came from digital channels, compared to 22.6% in the same period last year. As mentioned in the past, we are aggressively investing in technology to improve the customer experience, and our teams are continuously rolling out new solutions that we hope will have a positive impact on our sales. Although the sales mix will shift as other sales channels are reopening, we expect digital channels to grow in the foreseeable future and are hoping to position MTY as a leader in the industry for the quality of its solutions in the next 12 to 18 months. I will now turn it over to Renée, who will discuss MTY's financial results. Thank you, Eric. Good morning, everyone. Notwithstanding some challenges that remain ahead of us, we're encouraged by our second quarter financial results, especially since our Canadian network and parts of our U.S. network were still impacted by ongoing government-imposed restrictions related to the COVID-19 pandemic. As mentioned by Eric, Quebec, Ontario, as well as California, being three of our most prominent territories, still had the most restrictions imposed during the second quarter. In total, 977 locations were closed at least one day during the quarter, which resulted in over 38,000 lost days of business. These closures and other government-imposed restrictions impacted our recurring revenue streams and adjusted EBITDA. Currently, we still have 258 restaurants temporarily closed, an improvement over the 369 locations we had closed as of May 31st, and we expect this figure to continue to come down as more Canadian provinces move into the reopening phases. In the second quarter, total revenues improved by 39% to reach CAD 136 million, as the impact of the pandemic was more severe in Q2 of last year. Our franchise operations revenue increased 49% as recurring revenue streams from franchise locations rose CAD 8.8 million in Canada and CAD 15.5 million in the U.S. and international. These are closely related to our system sales, which, as mentioned by Eric, were up 33%. Revenue for our food processing, distribution, and retail operations increased 33% as it continues to benefit from higher consumer spending in grocery stores, expansion into new provinces, and additional SKUs. The number of branded products for sale in Canadian markets continued to progress in the second quarter, reaching 158 compared to 147 in the first quarter and 114 a year ago. Corporate store revenues also saw an increase of 21%, mainly due to the reopening of locations that were temporarily closed in Q2 of the prior year. As mentioned by Eric, digital sales for the second quarter increased to reach 23.5% of total system sales, compared to 22.6% for the prior year. While Canada was up 26.7% this quarter versus 19.7% last year, the percentage in the U.S. slightly declined from 23.6% last year to 22.1% this year, reflecting the gradual impact of the reopening. However, the year-over-year increase in digital sales remains very solid in Canada, with more than doubling its digital sales footprint, and the U.S.A. increasing by 16.2%. Our second quarter adjusted EBITDA increased to CAD 43.5 million compared to CAD 18.2 million for the same period last year. The U.S. and international segment's adjusted EBITDA posted a CAD 14.1 million increase year-over-year. Excluding the impact of foreign exchange, the segment posted organic growth of CAD 15.3 million. In Canada, adjusted EBITDA improved CAD 11.2 million. The severe adverse impacts of the onset of the COVID-19 pandemic in the Q2 of last year are the primary reason for the increases, reflecting an improvement in recurring franchising revenues of CAD 24.3 million. MTY also continued to benefit from the Canadian emergency wage and rent subsidies. In total, we benefited from these subsidies with a total of CAD 1.4 million in wage subsidies and CAD 0.5 million in rent subsidies during the quarter. We also saw a decrease in expected credit losses on accounts receivable of CAD 2.8 million, which stems mainly from better-than-expected collection from franchisees. These gains were reduced by an increase in wages as MTY had temporarily furloughed about half of its workforce at the onset of the pandemic in 2020, most of which were brought back by the third quarter. Net income attributable to shareholders was CAD 23 million, or CAD 0.93 per share for the second quarter of 2021, compared to a net loss of CAD 99 million or CAD 4.01 per share for the same period last year. Last year's loss was mostly due to a non-cash impairment charge of CAD 120.3 million. As for our liquidity and capital resources, despite the ongoing impact of the pandemic and its negative impact on revenues and EBITDA, MTY has generated solid cash flow from operating activities of CAD 29.5 million in the second quarter of 2021, compared to CAD 19.2 million for the same quarter last year. As we continue to tightly manage our liquidity, free cash flow has remained solid in Q2 2021 with a marginal decrease of CAD 1.4 million- CAD 27.5 million or CAD 1.11 per share on a fully diluted share basis, compared to CAD 1.17 for the same period last year. The decrease is mostly due to the franchising of multiple corporate stores in 2020, which generated cash of CAD 7.7 million. On the balance sheet front, at the end of the quarter, long-term debt stood at CAD 426.1 million, mainly in the form of our credit facility and holdbacks on acquisitions. Furthermore, to lower our standby fees and increase our financial flexibility, we renegotiated our existing credit facility during Q2. Our revolving credit facility now has an authorized amount of CAD 600 million instead of CAD 700 million, and an accordion feature was increased by CAD 100 million- CAD 300 million. The maturity was also extended to April 22nd, 2024, and many financial covenants were reinstated to pre-pandemic levels, thereby lowering overall interest costs. Now, I'll turn it back to Eric for the conclusion. Thank you, Renée. With restrictions having been lifted recently in some of our major markets, we are cautiously optimistic about the future, even though our industry is still facing many challenges. Customers are showing the need for food, and our team is excited to deploy a wide array of innovations that will wow our customers even more. Overall, we are confident about our prospects, and our goal is to return to the business momentum we experienced just prior to the pandemic. Our optimism is also supported by the tough but necessary actions we had to take, which are giving MTY a lot of flexibility today. These decisions now place us in an excellent financial position with CAD 41.5 million of cash on hand, over CAD 205 million in available credit, and with leverage ratios well within our comfort zone. In light of our financial situation, and with a more favorable outlook, we are very proud to announce that we are restoring our quarterly dividend. The quarterly dividend resumes at the same level as before, which is to say CAD 0.185 per share. The next quarterly dividend will be paid on August 13, 2021, to shareholders registered at the end of the business day on August 3, 2021. Restoring the dividend is a major step for MTY following the crisis we faced in the last 15 months. It shows the confidence we have in our network and in our ability to continue to produce strong free cash flows. We want to thank our shareholders for their patience with MTY. We have also renewed our normal course issuer bid and will continue to have the ability to buy back our own shares based on internal considerations and market conditions. Finally, with regards to potential acquisitions, we remain active and are in a strong position to take advantage of opportunities. In closing, I would like to sincerely thank our employees, customers, and suppliers for their ongoing support. With that, thank you for your time. We will now open the lines for questions. Operator? Thank you. Your first question will come from Jonathan Carter from CIBC. Please go ahead, your line is open. Thank you. Good morning. Hi, Jon. I wanted to ask about Papa Murphy's and Cold Stone. You mentioned they performed well in the quarter. Is there any call you can add there either on a year-over-year basis or maybe versus pre-pandemic? Are you seeing any divergence within those brands in markets that are more reopened versus ones where restrictions still exist? Yeah, I'll start with Cold Stone. Cold Stone is performing extremely well, above double-digit performance compared to 2020 or 2019. During Q2 and even after Q2 ended, Cold Stone is still performing extremely well, so we're really happy with that. For Papa Murphy's, Q2 was very strong. Still comping strong over 2020, and very strong over 2019. We did lose a little bit of steam since the end of Q2 as we're lapping stronger periods, and also with the massive heat wave in the Pacific Northwest that we had, we suffered a little bit in terms of our pizza offering. We're confident we're going to go back to a better momentum. We're still over 2019, but we lost a little bit of momentum compared to 2020 since the end of the quarter. Got it. That's helpful. Thanks. I wanted to move to Sushi Shop, which is now in your top five, and it's a category that's done really well in the pandemic. Can you just remind us what% of your system sales come from this category overall, and how have they been performing versus pre-pandemic levels? You mean the Sushi category or just Sushi Shop itself? The category in general. Yeah, the category is probably just under 10%. It's performed really well during the pandemic. It was already performing extremely well before the pandemic. There was a lot of good tailwinds for our Sushi brands. Our Sushi brands are also some of those that are the most advanced in terms of technology, online ordering, and everything. The marketing is just really up there. Those are brands that performed well before the pandemic, they performed well during the pandemic, and they continue to perform well as we're getting out of that crisis. Got it. Thanks. Last one from me. I'll pass it on. We've seen a flurry of M&A deals of late, mostly smaller. Maybe some in the areas you'd be interested in. I'm curious what comments you can make on deal flow for MTY, what you're seeing on valuations, and maybe what your preference on M&As versus use of the NCIB through the rest of this year. Yeah, well, the deal flow seems to be coming back slowly. There are opportunities that are presented to MTY more than we had maybe in the previous 15 months. That being said, it's still not at the normal pace of deal flow, and it's probably not also in the sweet spot of what we might be looking for in terms of valuation or in terms of quality of chains that are being offered to us. We're still going to be very disciplined. We're eager to do M&A. We haven't done an acquisition in a certain amount of time, and it's in our DNA to acquire and grow via acquisitions. We will eventually go back to do more acquisitions, but we'll stay disciplined, and if we can't find the right target, we'll stay on the sidelines while things settle down and valuations go back to a more normal level. Yeah, ultimately, we can buy back our own shares. We can continue to pay down our debt and build a treasure chest, and when the time comes, we'll be ready to pounce. I would say the deal flow is starting to be better, so I'm cautiously optimistic about the future. Great. That's helpful. Thank you very much. Your next question comes from Derek Lessard from TD Securities. Yeah, thanks. Good morning, Eric, and congratulations to you and your team on navigating through all this craziness. Just anecdotal observation. We were in Toronto the past couple of days. The drive-through at McDonald's alone was at least a half an hour. Even our hotel restaurant was closed on Monday and Tuesday, and everything was because of the shortage of labor, which you did point to, and some inflation pressures. Just wondering, again, how you're seeing the impact play out currently, and what's your view for your guys' ability to pass on prices? Yeah. Well, shortage of labor is certainly a big problem everywhere in North America. There are pockets where we're better, and there are pockets where it's more of a problem. All in all, there is just not enough workforce to work in hospitality and even for our suppliers and their manufacturers. It's also not enough quality people and even for the unqualified labor that we might be looking for certain duties, it's hard to find good, reliable staff. There's going to be an impact on the cost of labor, for sure. We're already paying more than we were paying before the pandemic, even though labor was already a problem before the pandemic in a lot of regions. We're going to end up paying more. Suppliers are also paying more for their staff. Our distributors are also struggling to find drivers and struggling to find people to work in their distribution centers. The problem is everywhere. In terms of our ability to pass prices, it's not like we have many options here because the ability of our franchisees to absorb these costs is nonexistent. We work with very tiny margins. We're a penny business. We'll need to figure it out, but it's either going to be through gaining efficiencies, working with our suppliers to reduce the number of hours we need to work in our restaurants, or it's going to have to go through prices. Our franchisees can absorb more, so ultimately, we're going to need to do pricing and pass it on to our customers. Hopefully, we'll be able to revamp some of our menus, to focus more on the better food cost items. We're going to be able also to do promotions to direct our customers to items that are a little bit more profitable for our franchisees. Ultimately, pricing will need to happen. I don't think we're any different from anyone else in the industry. Everyone's going to have to take prices, not only for the shortage of labor, but also for the inflation that's happening in food cost at the moment. Has some of those pricing actions already taken place or been implemented? Yeah. We have to do some pricing already, there's going to be more pricing in the next few months also. It depends. Some brands did it early, some brands did it late. In some cases, we've staged it over two or three different increments of price increases. It's going to have to happen over time, the situation is evolving so quickly that it's hard to say I'm going to do one batch of price increases and that's going to be it. We need to be more nimble than that. If we just look at the price of a container, for example. It's probably the best example where you ship something from Asia, the cost of the container is probably about 10 times what it was a year ago. It's not even the food, it's just shipping it that's costing a lot more. That changed over a four to six week span. If we're not nimble with our pricing, we're going to end up in a place where we can't support the cost structure anymore. Okay, thanks for that. You also had a strong rebound in your margins this quarter. I assume a lot of that is just operating leverage. Are you able to point to any other positive margin contributors this quarter? Yeah. Well, there's one large item there that's contributing to the margin that might be a little bit more pollution than anything else. It's the reversal of expected credit losses. Last year when we looked at our numbers, we had a certain number of risks and a lot of uncertainty. Collection was slower, it forced us to take a little bit more provisions for these expected credit losses. Now we're collecting more than anticipated at this time, we had to reverse a certain amount of it. That does contribute to the margins for sure. That's not going to last forever. Once we reverse the provision, it's reversed, and it's not coming back. That contributes. For the rest, you're right. It's operating. We're more efficient, and as we grow sales, we bring in royalties. Our cost structure is pretty much fixed. As the business continues to recover, you might see a little bit more weight on the top line and not necessarily more weight on the bottom line, on the middle line with the expenses. Margins should continue to be strong if everything stays constant and business keeps improving. Well, thanks for that, Eric. One last one from me, actually. Have your traditional revenues or your revenues from your traditional business fully recovered to pre-pandemic levels and then maybe if you could just talk to us about the outlook for the non-traditional and sort of the mall office sites and where those sales are in relation to pre-pandemic? We're not even close to where we were pre-pandemic, and we're not even close to being fully recovered. If you look at the major urban centers, those have not come back yet. Anything that's in a mall hasn't come back. You just look at Ontario and still under lockdown. Still not allowed to have dining rooms or food courts operating properly. Malls are not even close, and even if you look at the other major areas like Quebec, for Q2, we were still under lockdown for pretty much the entire quarter, where we're a little bit more relaxed in terms of restrictions now. For the quarter, we were still under lockdown. Our mall operations are not close to being back, and in terms of non-traditional, airports are certainly not back to where they were. Although in the U.S., it's starting to get better. University campuses, for example, are not back yet. We do have a long road ahead to fully recover in terms of our sales. Okay. Thanks, Eric. Your next question comes from Vishal Shreedhar from National Bank. Please go ahead. Your line is open. Hi. Thanks for taking my question. I just wanted to follow up on some of the questions asked earlier, particularly on inflation. I was noticing that inflation at restaurants in general seems to be meaningfully higher than inflation at grocery stores. I'm wondering if, in general, you agree with that perspective for your banners. Number two, if as a result of this higher inflation at restaurants, if you see the restaurant sector eventually grabbing back all the share that it lost to grocery stores, is that viable or is it still in the open? Yeah, I'm not sure how we can compare grocery stores and restaurants, because obviously there are items in the grocery stores that are not necessarily comparable to what we sell in restaurants. I would say in our case, the inflation in our restaurants hasn't been that much higher than what you would witness in the grocery store if you wanted to buy the ingredients to prepare that same type of food. We try to be pretty cautious with price increases, and we don't do more than we need to do. Yeah, it's hard to compare in terms of what happens in the future to grocery stores, to restaurants in terms of inflation. I wouldn't risk trying to speculate about where all that's going. Yeah, I do think that restaurants will fully recover at some point. When that's going to happen, I'm not sure. I do think restaurant sales will recover to fully and resume growth at maybe in the next few years. I don't know exactly when that's going to happen because I wish I had a crystal ball that would be very reliable, but unfortunately, I don't. Okay, continuing along the same theme, I noticed that the grocery stores are seeing a little bit more pressure year-over-year in their recent months. The food processing business at MTY seems to still be doing quite well. Wondering what you attribute that to? Is it market share gains? Is it new products? How should we think about that business going forward? Well, that segment is made up of three different sub-segments. We have our distribution centers that are serving our brands. In Q2, those were really struggling because our brands were more or less idle, the brands that are supported by these distribution centers. Our food processing was doing well, though. Our food processing does products for retail and does products for some of our brands that are performing well. The food processing is doing well and it seems to be in a really good place now where we can see some good growth in the future. In terms of our retail operations, I think we are capturing market shares. We are launching new SKUs that have been successful. We have a few champions there in terms of our products that we're really proud of and that seem to be performing really well. We're developing new sales channels as well and trying to expand in terms of geography, where we sell those products. It's really promising in terms of the retail, in terms of selling to grocery stores, selling to other retailers like Costco, Walmart or Giant Tiger or other retailers like that. I'm pretty optimistic about that segment and the growth that we can see in coming years, even though grocery stores might be feeling the weight of lapping a very strong year. I think in our case, we can capture share with our existing products and with new products as well. Okay. I'm hoping to expand upon your thoughts on acquisitions. Has this pandemic changed the way MTY thinks about acquisitions? When you talked about your sweet spot earlier, wondering what is your sweet spot in terms of region of acquisition, in terms of types of acquisitions? Is it a turnaround? Is it a larger chain, smaller chain? Is there any more color you can give us on what constitutes a good deal for MTY? Well, in terms of geography, we're pretty agnostic. As long as it's in North America, we're happy to look at any opportunity. We're present everywhere, and I think we can integrate well throughout North America. The type of offering is the same thing. There are a few things that we'd rather stay away from. In general, the type of food doesn't really matter for us. It's more in terms of where the business is in its life cycle and the valuation that's related to it. The sweet spot is a moving target depending on which brand we're considering and where it is in its life cycle. I'm not necessarily going to give you numbers. We do have a certain number of metrics that we use internally that we want any position to fit in. If we don't find something that does go into that sweet spot, we will not necessarily go after it. We want to be disciplined about it. If the pandemic showed us one thing, is that we need to be very careful in terms of how we deploy capital, and we need to be very protective of MTY because there's no guarantee that the business is going to keep growing forever and that there's not going to be another pandemic at one point, maybe in five years, in 10 years, in 20 years, I don't know. We need to be careful what we buy, how we buy it, how we integrate it, and how comfortable we are with everything that becomes part of MTY's portfolio. Okay, and maybe lastly, you commented that Papa Murphy's performance has grown a little bit subsequent quarter, and if I got that right, I was just wondering if you could comment on some of the initiatives, the improvement initiatives you implemented at the brand and whether you're pleased with those initiatives, if they're working or not in your estimation, and what next brands should we anticipate MTY to roll out its improvement initiatives to? Yeah. Well, yeah, we're really proud of the progress we've made with Papa Murphy's. Some of the initiatives related to technology are really paying off. The online ordering and the constant improvement of those platforms is really interesting. The investments we're making with the marketing also are really paying off. The research and development, which we're doing is interesting. We have a product now that's gotten a lot of attention in the U.S. and even in regions where we're not operating with our Fritos Outlaw Pizza in partnership with Pepsi. That was huge for us. There's a number of things that we're doing now that are really paying off and gives me a lot of hope that we're going to continue to build that brand in the future. Really happy with it. We're pushing hard now on development because we feel the brand is ready to start growing again. All in all, a lot of positives. In terms of the other brands, I would say all the other brands are pushing hard now on major initiatives when it comes to technology, online ordering, better usage of data, more efficient marketing. There's a lot going on for all our brands in Canada and in the U.S. I wouldn't necessarily be able to pinpoint one brand in particular and tell you this one is doing more than the other because we're pushing on all fronts now. Okay. Thank you. Your next question comes from George Doumet from Scotiabank. Please go ahead. Good morning, guys, congratulations on a strong quarter. I just wanted to ask about the store openings, the 61 in the quarter. Eric, can you maybe give us a little bit of flavor in terms of what's being opened, maybe by banners or by geographies? Maybe some flavor there. Well, we're opening a lot of the brands that performed well during the pandemic. The brands that we're opening are the ones you would expect to open. It's not necessarily the answer you might be looking for, but unfortunately, this is reality. We're opening a lot of Yuzu, a lot of Cold Stone. We're still opening Planet Smoothies. Those are brands that performed well during the pandemic and that keep opening. You should be expecting, I guess, those brands to continue to open for a certain amount of time because there's good momentum there. Okay. Maybe focusing on the closures, they're obviously lower than what we've seen in the past, but I'm just wondering to what extent you think that will pick up again when the government aids subside or continue to subside into the fall? Yeah. I'm hoping that by that time, the sales will be high enough that we won't see a flurry of closures. What we're seeing now is that in general sales, for the majority of our restaurants, are picking up nicely. I don't necessarily expect a flurry of closures. I'm not seeing a huge amount of risk. I'm not saying there's going to be none, but I'm not seeing a huge amount of risk in Canada or in the U.S. for massive closures in the future. I would say international might be a little bit more challenging as there's still massive lockdowns going on and in certain countries. For Canada and the U.S., I'm not expecting a flurry of closures. Okay, great. Just getting back to your commentary about Papa Murphy's kind of smooth and exiting quarter. Obviously, there's a COVID hangover, I'm just wondering how much of that is maybe due to aggressive promotions we're seeing by some of our more delivery-focused competitors in the pizza category, and do you guys at all plan on responding to that? Yeah, there's certainly an impact. We're seeing some of the major competitors really go aggressive on the pricing and on promotions. Papa Murphy's has always been a little bit more expensive than these guys, are thought of as higher quality. We don't necessarily want to discount a product the same way they do. We do have some value offers that are going on. Would we go to the same levels these guys are going? The brand has done it in the past. It's shown that it increases the top line. For a franchisor, maybe it's good, but it doesn't necessarily increase the franchisee bottom line, which is ultimately the goal for all of us. We're not necessarily going to that deep discounting strategy because we don't believe that's the long-term solution for our franchisees and for the industry in general. Okay. This last one from me, Eric, on the credit reversals that you guys called out. Do you have that number for this quarter, how much the total number was? Maybe I guess more importantly, maybe for like Q3 and Q4, should we expect similar level reversals, like half the reversals this quarter? Anything you can give us there would be appreciated. Yeah. The number is presented in the table in the MD&A, it's CAD 2.8 million. We really put it on a single line because we didn't want to hide it. We wanted to make it obvious. Are we going to have the same level of reversals in the future? No, I don't think so. This is all based on actuarial models that we have, that the team is running every quarter. Once the expected credit loss is reversed, it can't be reversed again. I don't think there's going to be the same level going forward. Okay. Thank you. Your next question comes from Dmitry Khmelnitsky from Veritas. Please go ahead, your line is open. Hi, thanks a lot for taking my questions. A lot of them were already asked, I still have a few. Just to confirm, the reversal of provisions in the quarter was CAD 2.8 million, right? That's the contribution to EBITDA. That's correct. Got it. Okay. If you can comment on how food court stores in malls have performed after the very limited reopening that we've seen recently. I know a lot of the food courts, you can't sit in there, but you can take out, and some people went back to malls to shop. Any comments on what you're seeing in terms of performance from food court locations in malls? Yeah. It's recovering slowly. We need to recreate habits and customers. It's going to take a certain amount of time. I'm not sure how long it's going to take, but what we're seeing is that it's recovering slowly. At least we're trending in the right direction. Some malls are performing a lot better than others. Some malls are more lifestyle type of malls where people will go hang out, and I guess those are performing better. Some malls are more in and out type of operation, and those tend to take a little bit longer. We'll see what the future holds for us, but at least we're trending in the right direction. Mm-hmm. Can you comment on the health of the franchisees, particularly in the food courts? Yeah. Well, obviously our franchisees have been under pressure, massive lockdowns and then the reopening with no seating. It's been challenging for franchisees. Most of our landlords have been really good to us and working with us to alleviate some of that pain. At least we have good collaboration from our important business partners. It's going to take a while for franchisees to make up the losses of the past 15 months. We're working hard with them to make the offering as good and as relevant as possible, and to try and help their operations at least go back to profitability now and then recover. You don't expect a wave of closures due to franchisee health in the food courts over the next year? Not a big wave, no. There might be a few here and there. I guess it can have some surprises. There are always some surprises, but I'm not expecting a massive wave of closures, no. Understood, Eric. Thank you. In terms of food courts in the office towers, those have been hit particularly hard. What's the strategy there? Also, in terms of franchisee health there, I presume this has been hit very hard, and it's still uncertain how long the reopening period will really take, how many people will eventually get back to the office. Any comments on that? Yeah. Office towers, they've been beaten up. The good news is that most of the landlords are working with us, and the abatement on rent is pretty aggressive for most of them. At least the fixed cost portion of our franchisees' operations is taken care of. Where landlords refuse to help, there have been some store closures just because it's not possible to make a living if you're not selling, if you don't have any customers in the office tower. This is more challenging. Where landlords work with us, I think we have a path forward to reopen and be profitable as people come back to the offices. We need good collaboration. Now, the good news is that we are gradually seeing people come back to offices. New York seems to be a little bit more busy now. We're seeing people coming back in offices in Montreal now. Toronto is still on lockdown, so it's fewer people, but we're seeing some major cities come back to life, and hopefully office towers will be back in full force in the fall. Our franchisees can resume operations and hope for profits. Right. Okay. Understood. Thanks for that. You already addressed a question about acquisitions. I just want to dig deeper, if possible. Is there a particular price tag above which you wouldn't go up? You mentioned you have some certain sweet spot metrics. If you can just talk to us about what metrics in particular are you looking at, financial metrics and operating metrics when you make an acquisition? Yeah. We don't want to close the door on any specific price tag. If the price tag is heavy, but if the business is a golden opportunity, we'll go for it. We don't want to limit ourselves or close the door on something, just for one reason. Every business needs to be evaluated for its own merits without us placing hurdles where there shouldn't be. In terms of giving you more accurate numbers or more precise numbers, I won't for competitive reasons. It would not be a smart move for me to say how much we're willing to pay for something, because then that pretty much sets the price tag for the next time someone calls us. No, that's fine. Any comments on maybe the EBITDA margins or even the growth profile that you're looking at? Well, again, there's a price for everything. There's a price for a mature business that might not be growing, and there's a price for a strong growth business. We adjust our buying strategy based on the business we have. Obviously, especially with COVID now, there have been some concepts that have shown more COVID proof than others, so maybe those tend to be a little bit more attractive. Franchisee profitability and franchisee health is a major criteria. Buying a network of franchisees that are under is not necessarily something that's that interesting for us at the moment. Understood. Okay, if you can comment on some of your older brands, how they are doing, in particular Country Style and Mr. Sub and there's a couple of more. Well, Country Style, it largely depends on business traffic, on frequency of purchases and everything. Like most of our coffee brands, Country Style has been affected by the pandemic. As traffic resumes and as people can meet a little bit more, I think we're going to see the business recover. In terms of Mr. Sub, it's a really well-performing brand. It's a mature brand, but that's performing extremely well, and I'm really proud of what the team came up with in terms of marketing, in terms of product offering. The brand image is spot on. I'm really proud of that brand, and it's performing really well, and it has been for many years. Is it growing organically or declining? How much? If you can give any details on its growth profile. Yeah. I'm not necessarily going to give you specific numbers on the brand. I'll stop my comment there. Okay, any comments on Extreme Pita and Mucho Burrito? Yeah. Extreme Pita has been struggling for quite some time since we acquired it. The pandemic affected it even more. We're working hard on Extreme Pita. We have a new product line that's being tested at the moment, that hopefully will reverse the trend for Extreme Pita. Cautiously optimistic about it. We have a lot in the pipeline to try to bring it back to where it should be, because we've always believed in the food, but for some reason, we weren't able to either market it or communicate it well to our customers, or the response wasn't the one we expected. We have a lot of new things going on for Extreme Pita, so cautiously optimistic. Mucho Burrito is still one of our top growth brands. It's a very strong brand, really good product offering. Still working on the brand, on product, on the marketing, on even the store image, the design and everything. Constantly evolving that. In general, really proud of Mucho Burrito, and it's one of our top growing brands, and we want to keep it that way. Mm-hmm. When you made that acquisition back some time ago, in terms of the store numbers, did the majority relate to Extreme Pita, or what was the split between Extreme Pita and Mucho Burrito? That was back in 2013, I think. Yeah. You're going pretty deep into my memory, so I won't be able to quote you the exact numbers, but I can tell you Extreme Pita was a lot larger than Mucho Burrito at the time. Now that's reversed. Extreme Pita has reduced the number of restaurants since we acquired it, and Mucho Burrito has grown really nicely. Where Extreme Pita was the larger brand back then, now Mucho Burrito is much larger than Extreme Pita. Understood. Okay, thank you so much. Your next question comes from Michael Glen from Raymond James. Please go ahead, your line is open. Hey, good morning. Eric, you called out the CAD 2.8 million credit loss provision. What's the item on there? It says variance due to impact of IFRS 16 on impairment of lease receivables. It was a CAD 1.3 million in the quarter. Is that a one-time item or is that something else? It's something that we reassess every quarter and it's a little bit more complicated, but it's basically an estimation of our collection ability on the leases that will be receivable in the future, not necessarily for what was receivable in the past. It's an assessment that's a looking forward assessment of our ability to collect. Okay. It would kind of bounce back and forth between this type of level in any given period? It could go up and down, yeah, depending on various different factors. Any comments you can give on the outlook for working capital over coming quarters? Any notable items that we should think about? Not necessarily. As the business is growing and recovering, I think we're going to have higher sales and that's going to generate higher accounts receivable and that's a good thing, I guess, because it means the business is doing better. I think you should expect our prepaids to be amortized over the next two quarters. We had some pretty heavy payments in the first two quarters. Other than that, in terms of working cap, I don't see anything major coming in the next few quarters. Okay. I think, and you can correct me if I'm wrong, I think you made a comment during the opening remarks just about strong royalty collections during the period. Is that something you said or did I mishear something? No, you did hear that. We're collecting more of our old royalties than we had anticipated, and that's why you had the reversal and expected credit loss. Okay. Thanks for taking the questions. We have no further questions in queue. This will conclude today's conference call. Thank you for your participation. 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