Earnings call transcript: MTY Food Group Q1 2026 earnings beat, stock dips

MTY Food Group Inc. reported its first-quarter 2026 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of 0.98 USD, significantly higher than the forecasted 0.7954 USD. Despite this earnings beat, the company fell short on revenue, reporting 267.77 million USD against the projected 282 million USD. The stock price reacted negatively, closing at 40.41 USD, a decrease of 0.79% from the previous day. Notably, InvestingPro data suggests the stock remains undervalued based on its Fair Value analysis, placing it among candidates for the Most Undervalued stocks list.

Key Takeaways

• MTY Food Group’s EPS outperformed expectations by 23.21%.
• Revenue fell short of forecasts, missing by 5.05%.
• Stock price dropped by 0.79% despite the earnings beat.
• Same-store sales declined by 2.5% in Q1 2026.
• Digital sales remain a key growth component, steady at 23% of total sales.

Company Performance

MTY Food Group faced challenging macroeconomic conditions in the first quarter of 2026, resulting in mixed performance across its segments. The company reported a normalized adjusted EBITDA of CAD 60.1 million, consistent with the previous year’s first quarter. However, same-store sales decreased by 2.5%, with declines in both the Canadian and U.S. markets. Despite these challenges, digital sales remained robust, contributing 23% to total sales.

Financial Highlights

• Revenue: 267.77 million USD, below the 282 million USD forecast.
• Earnings per share: 0.98 USD, exceeding the 0.7954 USD forecast.
• Net income attributable to owners: CAD 36.9 million compared to CAD 1.7 million in Q1 2025.
• Free cash flows: CAD 29 million, down from CAD 49.3 million in Q1 2025.

Earnings vs. Forecast

MTY Food Group reported an EPS of 0.98 USD, outperforming the forecast of 0.7954 USD by 23.21%. However, revenue fell short of expectations, with a 5.05% miss. This mixed result reflects the company’s ability to manage costs effectively while facing revenue challenges.

Market Reaction

Despite the positive earnings surprise, MTY Food Group’s stock price declined by 0.79%, closing at 40.41 USD. The stock’s movement suggests that investors are cautious, possibly due to the revenue miss and overall macroeconomic conditions affecting the company’s performance. According to InvestingPro Tips, the company is trading at a low earnings multiple and maintains a perfect Piotroski Score of 9, indicating strong financial health. The platform’s Financial Health score rates MTY as "GREAT" with an overall score of 3.02 out of 5. Investors seeking deeper insights can access 8 additional ProTips and comprehensive metrics on the platform.

Outlook & Guidance

MTY Food Group remains cautiously optimistic about the future, with early Q2 data indicating sequential improvement. The company expects new store openings to be a bright spot in 2026, with nearly 200 locations under construction. Digital sales continue to be a focus, with technology deployments in Canada anticipated to lift sales.

Executive Commentary

Management expressed confidence in the company’s strategic initiatives, stating, "Our investment in digital technologies is expected to drive growth over time." They also acknowledged the challenging environment, noting, "We are seeing signs of improvement, but remain cautious given the broader economic dynamics."

Risks and Challenges

• Supply chain disruptions could impact costs and operations.
• Continued macroeconomic pressures may affect consumer spending.
• The turnaround of underperforming locations, particularly Papa Murphy’s, remains complex.
• Competitive discounting strategies could pressure margins.

Q&A

During the earnings call, analysts questioned MTY’s ability to sustain digital sales growth and manage its store network effectively. Management highlighted their focus on technology and franchisee profitability, addressing concerns about potential store closures and market saturation. For investors seeking a complete analysis, MTY is among the 1,400+ US equities covered by InvestingPro’s comprehensive Pro Research Reports, which transform complex Wall Street data into clear, actionable intelligence through intuitive visuals and expert analysis.

Full transcript - MTY Food Group Inc (MTY) Q1 2026:

Operator: Good morning, and welcome to the MTY Food Group 2026 first quarter 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 for you at the time for questions. If anyone has any difficulty hearing the conference, you may press star zero 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 risks 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 risks and uncertainties related to these forward-looking statements, please refer to the company’s annual information form dated February 19, 2026, which is posted on Cedar Plus.

The Company’s press release, MD&A, and financial statements were issued earlier this morning and are available on its website and on SEDAR+. All figures presented on today’s call are in Canadian dollars unless otherwise stated. This morning’s call is being recorded on Friday, April 10, 2026, at 8:30 A.M. Eastern Time. I would now like to turn the call over to Mr. Eric Lefebvre, Chief Executive Officer of MTY Food Group. Please go ahead, sir.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Thank you, and good morning, everyone. This morning, we released our 2026 first-quarter results, which you can find posted on our website. The macroeconomic conditions remained challenging through the first quarter. Consumer confidence remains low and impacts consumer spending negatively, as reflected in our same-store sales figures and traffic trends. Encouragingly, early Q2 data shows signs of sequential improvement and gives us cautious optimism for the second quarter despite the broader global dynamics. Same-store sales for the first quarter were stronger in Canada than in the U.S. and international segments. Overall, same-store sales decreased by 2.5% in the quarter. Canada was down 0.8%, with the impact of last year’s non-recurring sales tax holiday being felt in most provinces, while U.S. locations were off 3.6%.

Some of our seasonal brands had a soft first quarter, while for some of our other U.S. brands, we took some actions late in 2025 that are in the best interest of our brands in the long term, but that hurt us in the short term. For example, we interrupted gift card sales at Costco for some brands, resulting in reduced visits in the first few months of the year following the holiday periods. Most U.S. brands did sequentially better in March than in the first quarter. Digital sales held steady at 23% of total sales in the quarter. Excluding foreign exchange, digital sales grew 3% compared to the same period last year. Digital sales in Canada were up 13%, while they remained flat in the U.S., with the positive momentum we are seeing across the basket of brands in the U.S. offset by the weakness of one brand.

One of the areas we’ve been focused on is enhancing the digital experience for our guests. We continue to invest in technologies that improve the way we interact with our consumers to improve their overall experience by bringing a more personal touch to our marketing efforts. New tools are being deployed in the U.S. to achieve that, and Canada is finally catching up and should be able to begin deploying similar solutions in Q2. We believe digital sales are a key component for our growth in our industry. As we mentioned on our last call, Q1 is typically a seasonally weaker period for new location openings. We opened 52 locations in the quarter, and we closed 90. We also ended our master agreement with TCBY, which resulted in the elimination of eight stores. The negative store growth in the first quarter was anticipated.

We remain confident that 2026 will produce net locations growth as everything is in place to meet our objectives. We’ve had a good start in Q2, and we have a large number of stores in the pipeline. There are currently just under 200 locations under construction, and we expect new stores to be a bright spot for 2026. Our new store pipeline is robust and ranks among the strongest we’ve ever seen at MTY. A growing share of our new locations is being driven by existing franchise operators. Today, a significant portion of our pipeline comes from these experienced franchisees who offer a stronger, lower-risk expansion profile. We’re also investing in new tools that support identifying the best locations for new stores where white space exists in the market and that show signs of strong traffic flows. With that, I’ll turn it over to Renee to discuss the financials. Renee?

Renee, Chief Financial Officer, MTY Food Group: Thank you, Eric, and good morning, everyone. Starting this quarter, we’ve transitioned to a 52-week reporting basis ending on the Sunday closest to November 30th each year. This quarter reflects the 13-week period ending March 1st, 2026, whereas the comparable period in 2025 is based on the calendar month end basis ending February 28th, 2025. Normalized Adjusted EBITDA came in at CAD 60.1 million for the first quarter, in line with the same period last year. This 2026 period benefited from a CAD 5.5 million Employee Retention Credit related to 2020-2022 fiscal year received from the U.S. government. Franchise Normalized Adjusted EBITDA was CAD 43.2 million in the quarter, down slightly compared to CAD 44 million reported in the same period last year.

Franchise revenue was CAD 90.7 million in the quarter, compared to CAD 92.9 million in the same period last year, primarily impacted by foreign exchange variations due to a weaker U.S. dollar as well as lower system sales. The Canadian segment was essentially flat while the U.S. and International segment was down 3% compared to the prior year period. Franchise normalized operating expenses were also down in the quarter to CAD 47.5 million compared to CAD 48.9 million last year, primarily due to the impact of foreign exchange and lower gift card program costs. Normalized franchise EBITDA margins for the quarter improved slightly to 48% compared to 47% in the same period last year. As we continue to add higher quality new stores and capture efficiencies from our ongoing initiatives, we expect franchisee EBITDA growth to outpace same-store sales growth.

Segment and normalized adjusted EBITDA for the Corporate Store segment came in at CAD 13.2 million, up 8% or CAD 1 million from the same period last year. This includes the CAD 5.5 million Employee Retention Credits I mentioned previously. Excluding this, margins for the segment were 7% compared to 10% in the last period last year. Corporate segment revenue was CAD 109.7 million and Operating Expenses was CAD 96.5 million in the quarter. Corporate revenue and expenses were tightly correlated to lower System Sales and a decrease in the number of corporate-owned locations in the U.S. We are confident in our ability to drive improvements in the Corporate Store over time as macroeconomic trends improve and System Sales accelerate. This would enable us to consistently deliver Corporate segment margins in the high single-digit levels.

Our Food Processing, Distribution and Retail segment delivered Segment and Normalized Adjusted EBITDA of CAD 3.7 million in the period off of a revenue of CAD 40.8 million, compared to EBITDA of CAD 4 million and revenue of CAD 38.2 million in prior year. Margins came in at 9% in the quarter, slightly below the 10% in the same period last year on account of higher supply chain costs. We believe meaningful opportunities exist within the retail channel for top-line and margin expansion as we continue to build scale and strengthen our presence in under-penetrated markets. We reported CAD 36.9 million in net income attributable to owners or CAD 1.62 per share per diluted share, compared to CAD 1.7 million or CAD 0.07 per diluted share in prior year. As Eric mentioned earlier, our asset-light, well-diversified model continues to generate strong free cash flows.

This performance provides us with significant optionality to reduce debt, invest for the future and return capital to shareholders. Cash flows from operations were 40.9 million compared to 64.6 million in the same period last year, and free cash flows net of lease repayments of 29 million in the quarter compared to 49.3 million in the same period last year. The change is mainly attributable to fluctuations in working capital and income taxes paid, partially offset by lower interest paid. The decrease in working capital is mostly due to variances in accounts receivable, payables and accruals due to timing of transactions and payments. We generated 59.9 million in cash flows from operations compared to 58.6 million last year once you exclude variations in non-cash working capital, income taxes and interest paid. We ended the quarter with net debt of approximately 549 million.

Considering our strong cash flow generating ability, our debt to EBITDA of approximately 1.9x is at a level that gives us the opportunity to take advantage of the optionality we possess to deliver enhanced shareholder return. With that, I’d like to thank you for your time and turn it back to Eric for closing remarks.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Thank you, Renee. We’ve built a great business. Our asset-light model is well diversified across geographies, brands and formats, and we continue to invest in the business to drive long-term returns and growth. Our focus on further strengthening the business during the past two years has positioned us for stronger performance once the persistent macroeconomic conditions improve. The strength of our brands and the experience of our team and franchise owners have enabled us to manage through these challenging conditions. While we navigate the recent volatility of the consumer sentiment, we continue to believe in the long-term fundamentals of the business to deliver for shareholders. Before we open the lines for the question period, please note that I cannot comment on the strategic review process that is currently underway. We will provide an update or make announcements as appropriate or as required by law.

We cannot provide a specific timeline or assurance that any transaction will result. In parallel, MTY continues to run the business as usual with the same discipline and long-term focus that’s defined the company since our founding. With that, let’s open the lines for questions. Operator?

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone. If you wish to decline from the polling process, please press star two. Your first question comes from the line of John Zamparo with Scotiabank. Please go ahead.

John Zamparo, Analyst, Scotiabank: Thank you very much. Good morning. I wanted to ask about the comment of sales in March improving from Q1. It’s difficult to reconcile this against the timing of the war. Just wondering if you could elaborate on that. Do you see any impact in consumer sentiment from the start of the war?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Well, it’s hard to find any correlations now. I think it’s too early, but all I can say is our sales have been significantly better in March and continues in April so far. We had a little period in mid-March where there was snowstorms and ice storms in most of Canada, and that also affected the U.S. Other than that, March and April are pretty strong. I’m not sure if or what the impact of the war is, but so far it’s showing in our data that our consumers are resilient and showing up to our stores.

John Zamparo, Analyst, Scotiabank: Okay. In the outlook for this year, you’ve added some language about potential for higher inflation from higher oil and gas prices. I wonder if you could elaborate what the key components are through your supply chain from the potential for higher for longer inflation this year.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. Well, obviously for supply chain, shipping is complicated right now. The cost of shipping, whether it’s ground or air or maritime, is also becoming more expensive as fuel prices increase. Obviously we don’t know how long that’s going to last, and we hope that the solution will come and the fuel prices will go down. For now, we’re starting to see more and more fuel surcharges on our network, and obviously, that funnels through the chain. There is inflation there that’s coming if only from fuel charges. We’ll see how the supply chain is affected, depending on how long the problems last in the Middle East.

John Zamparo, Analyst, Scotiabank: Okay. One more, and I’ll pass it on. I wonder how you feel about the current corporate versus franchise mix at MTY. Should we expect that you might want to sell more corporate stores? If so, would those be more in casual or quick service? Anything you can say on that front?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah, for sure. We’re a little bit heavy on corporate right now, so we are selling some corporate stores. We don’t have a specific initiative to run a fire sale process where we liquidate everything because they do produce good EBITDA and we don’t want to give it away. We are reducing the number of corporate stores. We have sold a few in Q1, and we have already a few that are sold in Q2 as well. You should expect that, well, not necessarily the number to go down because I can’t control everything, but our desire is to reduce that number of corporate stores right now systematically so it’s not going to be a fire sale, but gradually you should see some corporate stores go into the franchise world instead of being run by MTY.

John Zamparo, Analyst, Scotiabank: Okay, that’s good color. Thank you. I’ll get back in the queue.

Operator: Your next question comes from the line of Vishal Shreedhar with National Bank. Please go ahead.

Vishal Shreedhar, Analyst, National Bank: Hi. Thanks for taking my questions. I wanted to get your perspective on discounting, particularly as it relates to the pizza category, but more broadly in how you see that evolving and how you think MTY needs to respond.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. It’s a competitive environment, for sure, and whether you look at one category or the other, ultimately, every time you miss a meal opportunity, you miss a meal opportunity that never comes back. Every food dollar that’s spent is competitive, and I think we should not necessarily look at certain segments more than others just because we all compete for the same meal opportunity. It’s competitive, for sure. Discounting is part of what’s necessary for a lot of our brands. It doesn’t mean you need to discount all your products. You also don’t want to offer discounts where it’s not necessary, where you just basically reduce your revenues for consumers you would have had anyways.

You do need to have an entry point for every customer that will satisfy them and not push them away from your store because you don’t want to miss on a group of four, for example, because one person was looking for more discounts or was looking for an easier entry point. We always have to be conscious of that. The key for us is to offer something, an entry point, and hope that consumers won’t necessarily go for it. If they do go for it, that they buy something else with it. It’s become a necessity for a lot of our brands. We do have brands where it’s not as required. You look at Cold Stone and Wetzel’s, for example.

You don’t need to offer those discounts, but for the vast majority of the other brands, you do need to have an entry point that’s a little bit easier for consumers.

Vishal Shreedhar, Analyst, National Bank: Okay. Do you see, through the course of the year, discounting at MTY’s brands going up? I want to relate that as well, if so, how do you perceive the health of the franchisee at the MTY base?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah, I don’t think we need to ramp up more discounting. We have the programs we needed to have. They’re in place. They’ve been in place for some time, so I don’t think we need to do more. What we need to do is make sure that we have a variety in that space and that the entry point is not always the same product, and that these consumers that are looking for a budget-friendly option, that they also have some variety. I don’t expect that it would go up. As far as franchises are concerned, obviously for us, it’s always the number one priority. It’s easy as a franchisor to discount your product to a point where your franchisee no longer makes money. That can only last so long before your franchisees get in trouble.

For us, the key is to have healthy franchisees that are financially sound, and to offer discounts on products that are also profitable, and find creative ways to help everyone make money, even with slightly discounted products. If you have a higher discount, you’ll probably want to have higher velocity to make up for the lost margin and ultimately have the same amount of dollars in the bank account.

Vishal Shreedhar, Analyst, National Bank: Okay. I was hoping to get your perspective on the suite of customer-facing technologies scheduled to launch at Papa Murphy’s. It’s already launched, if I’m not mistaken, and to get your perspective on how we should anticipate that to benefit trends, is it something that we’ll see or is it more of a gradual benefit?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. That remains to be seen. I hope it will be seen. I think realistically it’s going to be seen over time. There’s many goals. On one side you have customer acquisition, which is always a little bit more challenging, and then you have your customer win-back also for consumers you might have lost or that might have forgotten about you. You have initiatives for existing consumers to try to improve frequency or improve basket. We have a number of tools that are already in place, especially for our main U.S. brands. We’re improving those tools. We’re adopting new technologies that we hope will help us communicate better with these consumers, and help us create frequency, but also make sure that we don’t lose them. For the consumers that we might have lost, try to win them back.

In Canada, we don’t really have anything in place at the moment. It’s very primitive. We feel the adoption of these technologies in the next few months should really create a lift. That remains to be tested. We’ve experienced really good trends when we adopted these technologies in the U.S., and we hope we’re going to see the same thing in Canada.

Vishal Shreedhar, Analyst, National Bank: Thank you.

Operator: Your next question comes from the line of Derek Lessard with TD Cowen. Please go ahead.

Derek Lessard, Analyst, TD Cowen: Yeah, thanks and good morning, everybody. Eric, maybe could you just talk about the thinking behind the interrupted gift card sales, I think you said to Costco? In those comments, you also said that you have other actions going on. Maybe just talk about the other initiatives you got going on in this area.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. Well, for the gift cards at Costco specifically, it’s always difficult because of the discount that’s required by Costco. We did continue the Cold Stone program, for example, which is really key for Cold Stone. For some other brands, it financially didn’t make sense anymore to have that program at Costco. We might choose to do maybe some seasonal offers or timely offers for Costco again, because people do visit Costco. We don’t want it to become almost a cheat code where people go to Costco, before they go to our restaurants, buy CAD 100 of Costco gift cards for CAD 75 and then go to our restaurants, that they would have gone anyways. We’re trying to avoid that discount that’s given to consumers for the wrong reasons. That does create a problem, and especially after the holiday season where we have fewer redemptions.

It’s just a program we couldn’t afford anymore with some specific brands. We’re suffering in the short term, there’s no doubt about it, but that’s going to free up a lot of resources for other initiatives that we’re gonna be putting forward with the team.

Derek Lessard, Analyst, TD Cowen: Okay. Maybe one last one from me. In your prepared remarks, you did highlight some new tools for site selection. Curious on what you’ve seen so far and any incremental results that you can share with us would be helpful.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. The tools are deploying as we speak. Again, this is something we’re pretty positive about, that we’re gonna be even better at site selection. We did have some tools in the past that were good and served a purpose. We feel like in today’s world, the amount of data you can feed into a tool, and how it processes it is really key. The new tools we’re deploying are far superior in our opinion, not only to evaluate the given property, but also to find white space where we might see our competitors are successful and we have no restaurants. Sometimes you don’t suspect some areas to be so productive, and then you realize from the data you now own that maybe you should have a restaurant in there, and the prospects are better.

Again, everything we do is to try to find sites that are going to be productive for our franchisees and profitable, and try to avoid sites that might not necessarily be as productive as they might look. It’s all trying to find the right balance for franchisees to be profitable.

Derek Lessard, Analyst, TD Cowen: Okay. Thanks so much.

Operator: Your next question comes from the line of Michael Glen with Raymond James. Please go ahead.

Michael Glen, Analyst, Raymond James: Hey, good morning. Eric, just in terms of the digital strategy that you’re talking about, are you able just to elaborate a bit more? Is this something that is considered into your CapEx? Is it expensive? I’m just trying to understand how some of that spending gets funded. Yeah, there’s no CapEx there. Most of the funding is done by the advertising funds of the various brands that are using it. We do have a data science team internally. That’s grown quite a bit in the last few years because of how important it is, and that’s funded by MTY. They’re allocated to certain projects right now that are marketing driven. You won’t see that in CapEx, and you also won’t see a lift in the amount of OpEx because these people are already on payroll. You won’t see an impact of these new projects.

Okay. Do you think we could see for the company a common app development or something along those lines, or it would be a digital strategy brand by brand?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Oh, it’s brand by brand. We’ve tried the common app in the past, and it took us two years to be able to detangle everything. Different brands require different strategies and different promotions and different ways to address your consumers. So no, it’s going to be a brand-by-brand thing, but what we’re doing is building a platform and all the connectors with the various new tools that we have, and then each brand is going to have their own strategy, their own set of data that they’re going to be using. So it’s going to be a common tool, but it’s going to be a brand-by-brand strategy.

Michael Glen, Analyst, Raymond James: Okay. Digital’s now becoming a larger portion of your sales. Are the franchise economics for digital sales equivalent to an in-store sale, or just some insight into how digital sales impact the franchisee?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. It really depends which type of digital sales, because we tend to lump everything into the third-party aggregator world. A lot of our digital sales are also first-party. On first-party, if anything, it’s probably better for the franchisee economically. The menu price is the same as in-store, but it’s also typically an order that’s slightly larger. We really like these first-party orders that go through our own websites, our own apps. You have a lot of that. I’ll give you the example of Papa Murphy’s. Almost 100% of our digital sales is done through our first-party app, which is really, really productive for everyone. That’s a good economics. Now, if you look at third-party aggregators, obviously it’s a little bit more complicated. The business model is interesting. As long as these sales are incremental sales, we can make it profitable.

Obviously, our prices are slightly higher on these platforms. The cost is also higher because of the commission and because of the packaging and everything. If it’s an incremental sale, it’s still a profitable proposition for the franchisee. Where it gets less profitable is if you have a substitution of an in-store order by a third-party aggregator order. Obviously, then that becomes a little bit more challenging. Wait, one more check on "But then" rule: "ALWAYS remove starter conjunctions and their compounds (And, But, So, Or, Then, And so, But then, So then) from the beginning of sentences." The last sentence is "Obviously, then that becomes a little bit more challenging." If it was "But then that becomes...", I would remove "But then". If it was "Then that becomes...", I would remove "Then". Since it’s "Obviously, then...", it stays. Wait, check if "Obviously" is a starter conjunction? No. Check if "Obviously" is a starter conjunction? No. Check if "Obviously" is a starter conjunction? No. Check if "Obviously" is a starter conjunction? No. Check if "Obviously" is a starter conjunction? No. Check

Michael Glen, Analyst, Raymond James: Okay. On working capital, there was some investment in working capital that took place through the back half of last year, Q2-Q4. Are you able to give some outlook on how we should think about working capital for the balance of this year?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. The way we look at working cap, there were some timing differences in Q1, and it seems that everything that had a potential to be in our face ended up in our face. For 2026, we feel like working cap should be about flat compared to last year. There’s no reason why the investment we had this quarter wouldn’t come back to us.

Michael Glen, Analyst, Raymond James: Okay. Just one more from me. With your leverage where it is right now, should we think about you looking at M&A? Are you actively looking at M&A?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah, we continue to look at M&A. It’s always a possibility. Obviously, no promises because we don’t control the 100% of the sequence there. Yeah, we continue to look at M&A. Our leverage is very favorable. As we mentioned in previous calls, we wanted to create optionality for ourselves where we could go M&A, we could go NCIB or SIB or any possibility that’s going to be deemed appropriate by the Board. Everything’s on the table.

Michael Glen, Analyst, Raymond James: Okay. We could expect you to become active on the share repurchase program in the near term as well?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: We have that option open.

Michael Glen, Analyst, Raymond James: Yeah. Okay. Thank you.

Operator: Again, if you would like to ask a question, please press star one on your touch-tone phone. Your next question comes from the line of Ryland Conrad with RBC. Please go ahead.

Ryland Conrad, Analyst, RBC: Yeah, thanks very much. Good morning. I guess just to start off on the store network, I appreciate the seasonal weakness, but I was a bit surprised to see net closings increase year-over-year. Were there any one-offs to call out in the quarter? I guess bigger picture, just with respect to the construction pipeline, are you able to characterize the strength that you’re seeing relative to last year? Correct me if I’m wrong, but I think you were previously referencing roughly 100 locations in the pipeline.

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. I’ll start off by saying I was disappointed by the Q1 numbers as well. Again, it was that type of quarter where we had a little bit more closures than anticipated, a little bit fewer openings than anticipated. Again, the pipeline is really strong. We have just under 200 locations under construction at the moment, in addition of the ones that we’ve already opened during the quarter. What we’re seeing now is that there’s no reason to believe that 2026 would not be a positive net store opening. Nothing specific to call out. There were no major one-timers other than, obviously, TCBY master license being terminated. Other than that, there were no one-timers. The cards fell this way for Q1, but we’re still feeling very bullish about 2026.

We feel like the net store opening is going to be a bright spot for us, and the fact that we’re swinging hammers on so many stores is really positive.

Ryland Conrad, Analyst, RBC: Okay, got it. Just the MD&A, I believe mentioned an organic system sales decline of about 8% for Papa Murphy’s. Are you able to put that performance into context, just relative to recent quarters where I think you saw a bit of sequential improvement?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah. I’m not sure exactly about the numbers you quote, but Papa Murphy’s is certainly facing headwinds in terms of sales right now, where again, they should benefit from the tools that we’re deploying now. Hopefully, that’s going to create a dent in the trajectory. We’re also revising the way we do marketing and which promotions we want to push a little bit harder for Papa Murphy’s. We have the Detroit pizza is out now. It seems to be doing a reasonable job in the PMIX and creating maybe some excitement around the brand. Hopefully, that’s going to result in more repeat business going forward. We had a reasonable 2024 with Papa Murphy’s, but then 2025 was complicated and it’s continuing in 2026.

Ryland Conrad, Analyst, RBC: Okay, just still on Papa Murphy’s. I think you took ownership of about 50 underperforming locations last year. Could you give an update just where you’re at with respect to turning those around and getting them back to breakeven and re-franchise?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: It’s proving to be more complicated than anticipated. I won’t lie to you. We do see somewhat of a sales mix and somewhat of an improvement, not a sales mix, but a sales lift, and some improvement in the way we operate the business. It’s taking longer than we thought to turn those around. We are suffering losses with these restaurants at the moment. We did franchise a few, but not many. We’re not giving up. We still believe in these restaurants. The fundamentals that were there in the markets still exist. It’s not impossible that we might have to make decisions with certain stores if we’re continuing to incur losses and we see that there might be less hope. For now, we’re not giving up, but it’s taking longer than anticipated.

Ryland Conrad, Analyst, RBC: Okay. I appreciate the color there. Now lastly for me, I was surprised to see the Employee Retention Credit, as I thought that was largely done last quarter. Could you just give an update there, and should we expect to see any more this year?

Eric Lefebvre, Chief Executive Officer, MTY Food Group: Yeah, we were surprised as well, to be honest. Pleasant surprise. No, now we feel like it’s really done, so there should be no more ERCs in the future.

Ryland Conrad, Analyst, RBC: Okay, perfect. Thank you.

Operator: We have no further questions. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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