Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MTY Food Group Inc. fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. 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 would like to remind everyone that this conference call is being recorded today, Thursday, February 15th, 2024. I would now like to turn the conference call over to Eric Lefebvre, Chief Executive Officer. Please go ahead. Thank you. Good morning, everyone. Thank you for joining us for MTY's fourth quarter conference call for fiscal 2023. The press release and MD&A with complete financial statements and related notes were issued earlier this morning and are available on our website as well as on SEDAR. During the call, we will be referring to forward-looking statements and to certain numbers 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. MTY delivered a remarkable financial performance in fiscal 2023 with record results across the board, including system sales of CAD 5.6 billion and normalized adjusted EBITDA of CAD 271.9 million, which led to free cash flows of CAD 154.1 million or CAD 6.30 per diluted shares. We're especially proud of those free cash flows as they were realized despite the drastic increase in interest costs, which more than quadrupled during the year, and higher than normal capital expenditures during the year. Our dual growth strategy, leveraging strategic acquisitions and organic growth, largely enabled us to overcome uncertain market conditions and inflationary pressure during the past year. MTY generated system sales growth of 33% year-over-year, largely due to the acquisitions of BBQ Holdings late in our 2022 fiscal year and Wetzel's Pretzels and Sauce Pizza and Wine early during the 2023 fiscal period. Excluding acquisitions and foreign exchange impact, system sales were up 4%, with our Canadian divisions accounting for most of the organic growth. In the fourth quarter, system sales improved 11% to CAD 1.3 billion, while same-store sales dropped 0.9% year-over-year as consumers reined in discretionary spending, which affected certain segments of our portfolio. The comparable sales decline came mainly from brands commanding a higher price point, while our quick-service restaurant business remained solid in Canada and in the U.S. I'm also encouraged by the positive outcome of the company's increased efforts in usage of data, digital marketing, online ordering, and websites during the past year. Our digital sales grew 25% year-over-year to CAD 1 billion in fiscal 2023. Excluding acquisitions and foreign exchange impact, digital sales rose 5%. There's still a lot of work to do to achieve our objectives, but we continue to take steps to make the customer experiences seamless and engaging as possible so that the growth momentum continues in the future. The fourth quarter was also highlighted by 94 new store openings, the highest number in any given quarter in our history. That brought us within a few stores of breaking even versus store closures for the third consecutive reporting period. Our pipeline of future store openings remained strong at year-end, and we're confident that we will continue to open new locations at a solid base in the future. At the end of the fourth quarter, our network had 7,116 locations in operation, of which 6,897 were franchised or under operator agreements, and 219 were corporately owned. 58% of our locations are in the U.S., 35% in Canada, and 7% international. Turning to our fourth quarter results, we generated strong normalized adjusted EBITDA and cash flows from operations of $60.4 million and $47.8 million, respectively. The 79% conversion rate of EBITDA into free cash flows is sequentially better than in recent quarters and is reflective of our efforts to maximize cash flows and optimize our asset-light model. As previously communicated, additions to property, plant, and equipment decreased significantly in the fourth quarter to CAD 3.2 million. We expect CapEx will return to a normal run rate in 2024, with some ups and downs as the business adjusts to its environment. Of note, we are now going full throttle on our new ERP implementation. This is an investment that will impact 2024 and 2025, and that will benefit the company for an extended period thereafter. To conclude, it should be noted that we recently announced a 12% increase in our quarterly dividend to CAD 0.28 per common share, reflecting our confidence in our ability to generate strong free cash flows in the future. I will now turn the call over to Renée, who will discuss MTY's fourth quarter results in greater details. Thank you, Eric, and good morning, everyone. As mentioned earlier, normalized adjusted EBITDA totaled CAD 60.4 million in the fourth quarter of 2023, up 13% from CAD 53.5 million in the fourth quarter of 2022. The year-over-year increase in normalized adjusted EBITDA is largely due to the acquisitions of BBQ Holdings, Wetzel's Pretzels, and Sauce Pizza and Wine for the U.S. and international segments, which accounted for CAD 9.8 million of the increase in the segments, partially offset by a CAD 4.1 million decrease in our Canadian operations. The decrease in Canada stems mainly from higher provisions for lease buyouts and disputes, as well as lower profitability generated by our retail segments, which saw sales and margins shrink as a result of the current economic environment affecting grocers and retailers. The U.S. and international segments accounted for 69% of normalized adjusted EBITDA in the quarter, while Canada represented 31%. In terms of net income and attributable to owners, it amounted to CAD 16.4 million or CAD 0.67 per diluted share in the fourth quarter of 2023, more than doubling over prior year, which was CAD 7.1 million or CAD 0.29 per diluted share. The year-over-year improvement can mainly be attributed to our higher normalized adjusted EBITDA and lower income taxes. These factors were partially offset by several items, including, among others, greater depreciation of property, plant, and equipment, and right of use assets, increased amortization of intangible assets, and higher interest rate on long-term debt, which were all greatly impacted by our newest acquisitions as well as higher interest rates mentioned before. Of note, as mentioned in previous investor calls, we put into place hedging strategies in 2023, including three-year and two-year fixed interest rate swaps, which have provided the company with savings of approximately CAD 500,000 of interest payments monthly for a total of CAD 3.2 million in savings in 2023. Company revenue grew 16% year-over-year to CAD 280 million in the fourth quarter, mainly driven by the acquisitions of BBQ Holdings, Wetzel's Pretzels, and Sauce Pizza and Wine acquisitions. The impact of these transactions delivered revenue growth for corporate restaurants and franchise operations of 50% and 18%, respectively, in the U.S. and international segments. In Canada, revenue from franchise operations declined 1% year-over-year, while food processing, distribution, and retail sales decreased 10% due to the existing market conditions and grocers' heightened focus on promoting house labels. Turning to liquidity and capital resources, cash flows from operations amounted to CAD 47.8 million in the fourth quarter of 2023 compared to CAD 37.4 million in the fourth quarter of 2022. Free cash flows reached CAD 44.3 million or CAD 1.81 per diluted share in the fourth quarter of 2023 compared to CAD 34.8 million or CAD 1.42 per diluted share in the same period in 2022. The 27% increase was the result of our higher EBITDA as well as lower income taxes paid and improvements to our working capital year-over-year. We are especially pleased with our free cash flow growth given the almost doubled interest payments made during the quarter. In the fourth quarter of 2023, we reimbursed CAD 27.6 million of long-term debt, paid CAD 6.1 million in dividends to our shareholders, and repurchased 80,800 shares for a total consideration of CAD 4.2 million on top of paying CAD 12.1 million in interest on our bank facilities. At the end of the quarter, MTY had a very healthy cash position of CAD 58.9 million and long-term debt of CAD 767.4 million, mainly in the form of bank facilities and promissory notes on acquisition. Our revolving credit facility has an authorized amount of CAD 900 million, of which CAD 558 million has been drawn. Finally, our net debt to normalized adjusted EBITDA ratio stood at 2.8x at quarter end. With that, I thank you for your time and will now open the lines for questions. Operator? Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. Our first question comes from George Doumet of Scotiabank. Please go ahead. Hi, good morning. This is Bahamin on behalf of George. Can you give us some colour on the consumer behavior, how it impacted same-store sales? Have you put through any price increase or decrease during the quarter, and how was traffic response to that price change? Yeah. I'll start with the price increases. The answer is there's always some adjustments to prices, but they're very, very minimal. In the past I would say in the past 12-18 months, we had to really control the price increases and make sure that we don't alienate the customer. I would say that the customer today is probably more sensitive to price increases than they were before, probably because we had to do a lot in the previous year. So very minimal price increases. We need to make sure we don't push the customers away. What we're seeing from consumers, it really depends on which brand, but traffic really is keeping at a good level. So traffic is not the problem, but what we're seeing is the average spend tends to go down a little bit for most of our brands. So we have a smaller basket size for any given customer that we have. So that's how our sales have been affected. We're also seeing some groups of customers being a little bit farther from our business. For example, with Papa Murphy's, the EBT category seems to be going away. And I know there's less benefits. The government is putting less emphasis on EBT and putting less resources towards it. So that's affecting our business as well. Okay. How did Papa Murphy's do during the quarter? Also, do you see any deflation and input costs that might suggest the possibility for price decrease going forward? Yeah. Papa Murphy's, for the quarter, was affected by EBT. So our regular non-EBT customers, the traffic is still good. The sales are still good. EBT is going down slightly, so that affected our business. So we're trying to find ways to make up for it. Obviously, the fact that EBT is going down and the fact that the government is putting less resources towards it doesn't help us. So we need to figure out a way to make it up. As far as price deflation, we are seeing a lot more stability, I would say, than we had before. So stability is good. Predictability is good. So that really helps us with the business model. We are seeing some items go down. Packaging, for example, seems to be more reasonable recently. So that helps a lot. We did have the benefit of some price decreases here and there. It's not generalized yet the way the price increases were, but at least we're seeing some hope, and we're certainly seeing some signs that there might be some lower inflation and maybe deflation going forward. Thanks. I'll pass the line. Our next question comes from Sabahat Khan of RBC Capital Markets. Please go ahead. Hi, Eric. Thanks and good morning. I thought you mentioned it a little bit in your press release. I just wanted to get a bit more colour on some of the operational efficiency initiatives you're talking about, maybe just to what extent are those at the head office level versus at the store level. Any commentary you can share there? Yeah. Well, in terms of operational efficiency, this is something we always look at. So there's definitely operational efficiency at the store level that we're looking at. So there's a number of measures that we're trying to take and tools that we're trying to implement to make ourselves better and make our franchisee stores more profitable. If we can measure better what we're doing and analyze versus peers and analyze versus theoretical models, then that helps a lot. As far as the head office is concerned, I did mention that we're implementing a new ERP in the business. I think that's going to help tremendously gain more efficiency. So that's a longer-term project, but obviously, this is something that we need to invest in to reap those benefits down the road. There's also some reshuffling internally where we're rethinking the way we do business a little bit the same way that we had to take a few steps back at the beginning of the pandemic four years ago and relook at our business and rethink at our business. We're in the process of doing that now. There's nothing drastic that we need to announce. We're not cutting heavily in the staff or anything, but we might be able to reorganize some functions, reoptimize some people, and make sure that we elevate the game as much as we can for the organization we have. Okay. Great. And then you mentioned that the ERP is going to be a little while. Just broadly speaking, what's kind of the timeline on executing against some of these initiatives and when those benefits maybe start to show up in some of the numbers over the next while? Yeah. Well, it's an ongoing process, so it's hard to put a date on it. There are some items that were implemented last year or late last year that we should be able to start seeing the benefits now. And then there's always something else going on. So it's hard to put a date on something that's a constant. It's a constant project. It's a forever project. So we're constantly relooking at the way we do business, and we're constantly trying to improve. Maybe a little bit more emphasis on certain items now, but yeah, it's hard to put a date on it. Great. Thanks very much. Our next question comes from Derek Lessard, TD Cowen. Please go ahead. Yeah. Thanks, Eric. I just wanted to maybe clearly, there's pressure on the consumer here, and I just wanted to see if maybe you could give us a sense. I know you pointed out casual and fast casual, but I was curious on the impact that you might be seeing on Cold Stone and how you think that brand in particular might be positioned in this environment. Yeah. Well, Cold Stone performed extremely well in Q4, had a very strong December like most of the business. And then it was the extreme cold wave in most of North America that really affected our sales. And we're kind of limping back into where we think we should be with Cold Stone. But yeah, I'm not super worried for Cold Stone. This is an iconic brand, and people crave Cold Stone. It's something that's a relatively affordable price point for consumer. It's a treat. Obviously, it's not necessarily part of the necessities, but it's also an affordable way for people to have a pleasant experience as a family, as a group. So I think Cold Stone is well positioned in its market to retain its market share and to continue growing. Okay. And within the competitive environment, I guess I'm talking for most of your banners, have you seen any or have you seen any, I guess, increase in competitive behavior, anything irrational that's going on out there in response to sort of that tougher consumer outlook? No. I think most competitors are. They're fierce, as usual, and they come up with new products, new innovations. They come up with new ways of doing things. They relaunch some old products that seem to be very successful. So I don't see the competition being irrational on the price side. There's always some value offers out there, so that's no different. But I don't see anything super irrational. What I see is people being a lot more effective with the way they do marketing, with the way they approach consumers, and how they create a buzz around certain things that are not necessarily new, that are not necessarily different, but that are buzzworthy in today's world. So it's up for us to create that experience and make sure that the food doesn't only mean functional and eating some calories, but more importantly, create an experience for the consumer. Okay. There's one more question before I read queue. I just want to hit on the labor cost. In Canada, it looks like wages, a percentage of revenue, was particularly high this quarter. Is that just wage inflation, or is there any market that you see wage inflation pressure or labor shortages hurting you there? And then again, maybe just get some updated comments on the higher minimum wages in California and the potential impact for you guys there. Yeah. I think there's some seasonality in terms of the labor costs versus the rest of the business. So I'm not worried about the Q4 part. Obviously, minimum wage increases are a thing. And California increasing from $16 to $20 in April is going to hurt. And we know it's not the last increase for California. And it's not the first time we see California take drastic moves, and we'll adjust as we always have. But obviously, it's going to create some inflation on the menu prices. There's no other option. Everybody's going to have to take some price to compensate for that. There's no secret recipe. And what's a little bit more worrisome for us is how many copycat states are there going to be out there. So if it's only California, we're kind of used to it with California. If there are some copycat states, then we'll need to be on notice and make sure that we take the right actions to compensate for it. Okay. Thanks for taking my question, Eric. Once again, if you have a question, please press star, then one. Our next question comes from Michael Glen of Raymond James. Please go ahead. Hey. Good morning, Eric. This ERP implementation, can you just dig into that just a bit? Is this a U.S.-Canada initiative, like cross-border? What exactly are some of the big items that you're looking to achieve with this? Yeah. Well, MTY had the same ERP since forever. So we were still on a small ERP. We were on Sage. We're still on Sage. And we had to, we had overgrown that ERP to the point where we had a number of other systems that were attaching to it to try to compensate for the weaknesses of the ERP. And these systems are getting to end of life now and also getting to their limits. So we had to change the ERP, and we're rethinking all our processes in the way. So it's for the entire business. It's cross-border. We're replacing pretty much all our legacy systems that we have. Some of them are five or six years past the end of life. We're going to be a little bit more robust and certainly a lot more agile in how we can collect and use data, how we can adjust our processes to have better practices for the business. So yeah. So it's a pretty big project. It's something that's going to probably last another two years with some parts going live in 2024 and some parts going live a little bit later. But yeah, big project for us, but lots of positives are going to come out of it. If I think about these ERP implementations, there's always risk attached to them. What type of mitigating steps are you taking within the organization? Yeah. I've gone through a few in my previous lives, and I know the horror stories. So yeah, we obviously did consider that risk of either the ERP not delivering on what we wanted it to deliver or the drastic price overruns, cost overruns that we see in some other businesses. So I mean, there's no substitute for preparation. So spending the right amount of time to scope the project is really key and spending the right amount of time also to prepare everything and put a tight fence around it. We have a really good project team. They're all reporting under Renée. And I think the team so far is doing an outstanding job at really making sure that we do what we need to do. We do as little customization as possible because this is where also you run into cost overruns. So far, I'm really happy with where it's going. We're still on time and on budget. But yeah, the devil lies in the details. So obviously, when the time comes to turn everything on, it's going to be a good test. But so far, so good and pretty confident that the team is doing the right job to keep everything very tight. Okay. And for CapEx, you talked about a normal run rate in 2024. Can you just indicate what that level is exactly from a gross dollar perspective? Yeah. I mean, it should be somewhere around the lines of what you saw in Q4. So hopefully, we'll be able to have a run rate. Some quarters might be a little bit higher. Some quarters might be a little bit lower depending on where there are needs in the business. Sometimes it's large increments that go at once, and then the next quarter it doesn't come back. So it's going to be a little bit more, there's going to be ups and downs, but you should think of Q4 as a normal run rate excluding the ERP, obviously, that's going to cost a little bit more than normal. Okay. And last question for me. So there's been news regarding some of these paybacks associated with the programs that were in effect during the pandemic, so the CERB and the CRB. There's been some stories about the government looking for recoveries on some of these payments. Restaurant industry was a huge benefactor under some of these programs. What are you seeing in terms of your franchisees? Are they facing any reassessments under any of these programs? Yeah. I mean, if they didn't pay the loan, it doesn't result in them having to pay it right away. It just results in the loan being a loan, and they have to repay it over a certain amount of time, and they forego the 20% subsidy. So that's where the CEBA loans. So most of our franchisees were able to either repay it or refinance it so that they got the subsidy. Not all of them, obviously. There are some exceptions to that. But I would say for the vast majority, our franchisees either repaid or refinanced and now have just regular loans that they need to pay. Okay. Thanks for taking the questions. Our next question comes from Vishal Shreedhar of National Bank Financial. Please go ahead. Hi. It's Gabriel Alvarez- Shaw. Thanks for taking our questions. I just wanted to go back to the network stability. It's close to break-even this quarter, last quarter. I was just wondering if you have any thoughts on when you would anticipate just going back to net organic growth and maybe following on that. If you can share any sort of colour you have on your store pipeline as well. Yeah. Well, I was hoping we'd be positive at some point during 2023. Obviously, we fell short of that, and we're still pushing to try to get there in 2024. We control to a certain extent the openings, although there are some surprises out there with the permitting and sometimes the inspections and everything. So sometimes there are delays that we can't control, but to a major extent, we control the openings. In terms of the closings, there can be surprises, and sometimes we get surprised by one franchisee closing multiple stores or some partners internationally and everything. So it's hard for us to predict exactly when we think we're going to go back to positive. We came close three quarters in a row, disappointed not to have made it to a positive number. But we continue on pushing. To answer your question, it can't come soon enough, but I can't give you a date for it, unfortunately. As far as the store pipeline is concerned, I think you can see in our financial statements with our deferred revenues that there are a lot of franchise agreements that are signed where we did collect our franchise fees. I mean, our pipeline has never been healthier. Really happy with where we are and pretty bullish about the future. Okay. Appreciate it. And then the construction issues that we've discussed about before, they've more or less dissipated. They're not concerned for the future. Yeah. In terms of the supply chain related to the construction, it's not perfect yet, but we're really getting there. So I can't say that it's really stopping us at this time. The cities, I think, for the most part, are getting over the hump now, and they're able to start delivering on time and provide inspections in a timely manner. There are still pockets of problems here and there, and sometimes they're pretty dramatic. But all in all, I think that within the next year, we should be back to normal. Hopefully, these hurdles will be behind us and a distant memory. Okay. Appreciate it. That's it. Jump back in with you. Our next question comes from Derek Lessard of TD Cowen. Please go ahead. Yeah. Just a few follow-ups for me. I just wanted to hit back on the ERP implementation, Eric. Are you able to give us maybe a sense of sort of the cost-benefit, sort of the upfront margin impact before it starts to improve? Yeah. Well, not on the margin impact specifically, but yeah, we're looking at a project that should be between CAD 7 million and CAD 10 million, and we're pushing to stay within that range. That's going to be over two years. And yeah. So I can't give you an exact margin impact. I can't give you an exact timing for when the expenditures are going to happen, but this is the magnitude of the project we're looking at. Right. And are you capitalizing that? We're still looking at the possibilities to capitalize versus expense it. This is something that we're doing in conjunction with our auditors to make sure that we have the right position and the right approach for how we account for it. Okay. And one last one for me. Just in terms of the U.S. EBITDA margin, now that you've largely lapped the acquisitions, what would, I guess, a reasonable run rate or baseline run rate for EBITDA margin be going forward? Or should we look at Q4? Yeah. No. What you saw in 2023 was probably the normal run rate for margins. So the integration doesn't cost us any money. So it's effort, but it's not an incremental cost. So what you saw in 2023 should be reflective of what we think the future should give us. Okay. I guess I'll ask the same question if Canada, same answer. Yep. Okay. Thanks, Eric. Our next question comes from Nishant Sharda of CIBC. Please go ahead. Hi. Good morning. Thanks for taking my question. I wanted to know your thoughts regarding the M&A pipeline. How are you thinking about that going into the year? Thank you. Yeah. Thank you. Yeah. Well, there are a lot of transactions available out there. They're not all good. There's a lot of broken stuff that's on the market. There are also some good companies. In this market, it's all a matter of getting expectations aligned with what people are willing to pay. The cost of money is a little bit higher, so we need to adjust for that. We need to be patient as we always have been, and we still want to do M&A. Obviously, this year, given how much debt we have on the balance sheet, we can't do a very large acquisition. We'd probably be more on the smaller or medium-sized acquisitions and then try to pay debt aggressively so that we're a little bit more prepared for larger acquisitions going forward. But yeah, there could be some smaller or medium-sized acquisitions in the future. It's just MTY always has been very, very disciplined in how it acquires and when it acquires and for what price. We'll keep it this way, and we're just working diligently to try to align sellers' expectations with ours. Thank you. I wanted to ask another one on specifically the casual and the fast casual portion of our portfolio as obviously, there was some weakness. So I wanted to understand how are you thinking about strategies to improve that going into the quarter considering the consumer environment? Yeah. That's a good question, and that's something we talk about all the time. So if the consumer is reducing the basket size for us, it's a matter of creating that experience and try to make the consumer go back to normal spending habits. So it's all experiential for us. So if we come up with new stuff or more attractive stuff, they'll probably go for it because people are prepared to pay if they see value and if they see that they have something in return or at least enough in return. So we're working on that. And for some of our brands, we're also working on different day parts, trying to find ways to attract customers for lunch, for example. And what drives customers is different on every brand, but we have a number of initiatives going on with that. For some restaurants, we're trying to drive traffic because this is where we're going to see a difference. For some other restaurants, we're trying to drive basket size because the traffic is up, and we can't necessarily handle more. We just need people to spend more of their time to visit the restaurant. Different initiatives for different brands. Yeah, we did see that weakness in casual and fast casual, and we need to address that for sure. Thank you. I have another question on your thoughts regarding the food processing business. Of course, how are you thinking about that going forward? Yeah. I love food processing. It's a great business. It's been very stable for us. It's a business that we really like. It's a little bit more CapEx-intensive, so obviously, not necessarily aligned with the traditional MTY asset-light business, but still hugely profitable for us considering the returns on investment. We love the food processing, and it's a good way also for us to make our supply chain secure. A lot of our suppliers had short shipments or back orders during different times, and for some reason, our plants never had short shipments and back orders. We always found a way to serve our restaurants, and that also has value. So really happy with that. Okay. Thank you. That would be all from me. Thank you. This concludes the question-and-answer session as well as today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.