MTY Food Group successfully navigated a demanding market environment to deliver an impressive performance in the final quarter of fiscal year 2025, marking a significant turnaround with positive net unit expansion. The company showcased strong financial health through substantial free cash flow and a reduced debt burden, setting a positive tone for the upcoming year. Strategic enhancements in customer engagement, technological advancements, and brand fortification are poised to underpin continued growth.
MTY Food Group's Strategic Achievements and Future Outlook Unveiled at Q4 Earnings Call
During its fourth-quarter and year-end earnings conference call, MTY Food Group, a prominent player in the quick-service and casual dining sectors, revealed a robust conclusion to fiscal year 2025. CEO Eric Lefebvre highlighted that the company achieved a net addition of 19 locations in Q4, propelling MTY into positive net unit growth for the entire year, a milestone not seen since 2013. This achievement was attributed to fortified partnerships with franchisees, strategic investments in high-return areas, and enhanced business monitoring tools. Lefebvre expressed confidence in sustaining this momentum into 2026, despite anticipated seasonal softness in the first quarter.
Key brands spearheading this expansion include Cold Stone and Wetzel's, which were lauded as leaders in new openings. Other segments, such as Taco Time in Canada and Thai Express, also demonstrated significant growth potential with ambitious targets for the coming year. While same-store sales experienced a slight decline of 1.7% in Q4, performance varied regionally; Canada remained stable, whereas the U.S. saw a 2.8% decrease. Management is committed to long-term improvements for both consumers and franchisees, focusing on leveraging data science for consumer engagement, expanding omni-channel capabilities, particularly in the Canadian market, and continuous brand innovation.
CFO Renée (as identified during the call) reported a normalized adjusted EBITDA of CAD 87.7 million for the fourth quarter, a substantial 48% year-over-year increase. This surge was primarily driven by a one-time CAD 29.5 million income boost from gift card breakage, stemming from unredeemed balances of an acquisition. Excluding this extraordinary item, segment profits from franchise operations remained flat in Canada but saw a decline in the U.S., mirroring respective same-store sales trends. The company anticipates franchisee EBITDA growth to outpace same-store sales, fueled by the addition of high-quality new stores and operational efficiencies.
The corporate store segment also demonstrated strength, with a 23% rise in segment profit and normalized adjusted EBITDA to CAD 7.9 million, improving margins from 5% to 7%. MTY projects further enhancements in this segment, aiming for high single-digit margins. The food processing, distribution, and retail division recorded an impressive 27% revenue growth, driven by a shift from licensing to becoming the direct vendor for certain products, with stable profit margins of 11%. Net income attributable to owners reached CAD 32.1 million, or CAD 1.40 per diluted share, benefiting from the gift card breakage and the absence of a prior-year impairment loss related to Papa Murphy's.
Management underscored the company's robust cash generation and balance sheet agility. Fiscal year 2025 saw free cash flow per share, post-lease payments, hit CAD 5.68, marking the strongest two-year period in MTY's history. The quarterly dividend was also increased by 12% to CAD 0.37 per share. Fourth-quarter cash flow from operations stood at CAD 46.2 million, with free cash flow, after lease repayments, climbing 38% to CAD 37.6 million. Net debt was approximately CAD 580 million, with a healthy debt-to-EBITDA ratio of about 2x. Capital expenditures for 2025 are expected to normalize, following elevated levels in previous years, with targeted investments in profitable ventures. A strategic review initiated by the board is currently underway, though no timeline or outcome guarantee was provided. The company continues to operate with a 'business as usual' approach during this process. In the highly competitive pizza category, particularly concerning Papa Murphy's, new technology tools and loyalty programs are being rolled out to enhance stability, despite a volatile market landscape.
MTY Food Group's strategic focus on operational excellence, franchisee support, and innovative growth initiatives appears to be yielding positive results, setting a promising trajectory for its diverse portfolio of brands. The emphasis on strengthening core operations while exploring new avenues for expansion demonstrates a forward-thinking approach in a dynamic industry.
