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PERIOD RESULTS

SRS, a key driver of distribution growth for Unitholders, was 1.7% for the Period compared to 6.6% reported in the second quarter of 2023. SRS for the Period was principally due to menu price increases.  SRS was 0.4% YTD compared to 15.2% reported year-to-date in 2023.  SRS was principally due to menu price increases, partially offset by macroeconomic challenges faced by the full-service restaurant industry that negatively impacted guest traffic.  The COVID-19 restrictions that existed during the first half of 2022 were a significant factor in the positive SRS reported year-to-date in 2023.

Franchise Sales of Boston Pizza Restaurants in the Royalty Pool were $236.8 million for the Period compared to $233.7 million for the second quarter of 2023. The $3.1 million increase in Franchise Sales for the Period was primarily due to positive SRS.  Franchise Sales of Boston Pizza Restaurants in the Royalty Pool were $458.8 million YTD compared to $457.9 million year-to-date in 2023. The $0.9 million increase in Franchise Sales YTD was primarily due to positive SRS.

The Fund's net and comprehensive income was $7.5 million for the Period compared to $12.8 million for the second quarter of 2023.  The $5.3 million decrease in the Fund's net and comprehensive income for the Period compared to the second quarter of 2023 was primarily due to a $6.0 million decrease in fair value gain, an increase in net interest expense of $0.2 million and an increase in administrative expenses of $0.1 million, partially offset by a $0.8 million decrease in deferred income tax expense and an increase in Royalty⁶ and Distribution Income⁷ of $0.2 million.  The Fund's net and comprehensive income was $15.9 million YTD compared to $19.5 million year-to-date in 2023.  The $3.6 million decrease in the Fund's net and comprehensive income YTD compared to the same period in 2023 was primarily due to a $3.6 million decrease in fair value gain, an increase in net interest expense of $0.3 million and an increase in administrative expenses of $0.1 million, partially offset by a $0.4 million decrease in deferred income tax expense.

Cash generated from operating activities for the Period was $9.6 million compared to $9.8 million in the second quarter of 2023.  The decrease of $0.2 million was primarily due to a decrease in working capital of $0.3 million and an increase in administrative expenses of $0.1 million, partially offset by an increase in Royalty and Distribution Income of $0.2 million and a decrease in income taxes paid of $0.1 million.  Cash generated from operating activities YTD was $18.7 million compared to $19.0 million in the same period in 2023. The decrease of $0.3 million was primarily due to a decrease in working capital of $0.1 million, an increase in administrative expenses of $0.1 million and an increase in income taxes paid of $0.1 million.

The Fund generated Distributable Cash of $7.5 million for the Period compared to $7.9 million for the second quarter of 2023.  The decrease in Distributable Cash of $0.4 million or 4.5% was primarily due to decreased cash flows generated from operating activities of $0.2 million, increased Class B Unit entitlement of $0.1 million and decreased income taxes paid of $0.1 million.  The Fund generated Distributable Cash of $14.8 million YTD compared to $15.0 million for the same period in 2023. The decrease in Distributable Cash of $0.2 million or 1.5% was primarily due to decreased cash flows generated from operating activities of $0.3 million and increased Class B Unit entitlement of $0.1 million, partially offset by lower interest paid on debt of $0.1 million and increased income taxes paid of $0.1 million.

The Fund generated Distributable Cash per Unit of $0.352 for the Period and $0.696 YTD compared to $0.365 per Unit and $0.699 per Unit, respectively, for the same periods in 2023.  The decrease in Distributable Cash per Unit of $0.013 or 3.6% for the Period and $0.003 or 0.4% YTD and was primarily attributable to the decrease in Distributable Cash outlined above, partially offset by fewer Units outstanding compared to the same periods in 2023 due to the Fund's normal course issuer bid that was in effect from June 20, 2023 to June 19, 2024 ("NCIB").

The Fund's Payout Ratio for the Period was 96.2% compared to 88.0% in the second quarter of 2023.  The increase in the Fund's Payout Ratio for the Period was due to Distributable Cash decreasing by $0.4 million or 4.5% and distributions paid increasing by $0.3 million or 4.4%.  YTD the Fund's Payout Ratio was 96.5% compared to 89.7% year-to-date in 2023.  The increase in the Fund's Payout Ratio YTD was due to distributions paid increasing by $0.8 million or 6.0% and Distributable Cash decreasing by $0.2 million or 1.5%.  Payout Ratio is calculated by dividing the amount of distributions paid during the applicable period by the Distributable Cash for that period.  The Fund's Payout Ratio is typically higher in the first and fourth quarters compared to the second and third quarters since Boston Pizza restaurants generally experience higher Franchise Sales levels during the summer months when restaurants open their patios and benefit from increased tourist traffic.  On a trailing 12-month basis, the Fund's Payout Ratio was 91.9% as at June 30, 2024.

DISTRIBUTIONS

During the Period, the Fund declared distributions on the Units in the aggregate amount of $7.2 million or $0.339 per Unit.  During the second quarter of 2023, the Fund declared distributions on the Units in the aggregate amount of $6.9 million or $0.321 per Unit.  During the Period, the Fund paid distributions on the Units in the aggregate amount of $7.2 million or $0.339 per Unit.  During the second quarter of 2023, the Fund paid distributions on the Units in the aggregate amount of $6.9 million or $0.321 per Unit.  The amount of distributions declared and paid during the Period increased by $0.3 million or $0.018 per Unit due to the monthly distribution rate increasing from $0.107 per Unit to $0.113 per Unit commencing with the January 2024 distribution (the "2024 Distribution Increase"), partially offset by fewer Units being outstanding during the Period compared to the second quarter of 2023 due to the NCIB.  YTD, the Fund declared distributions on the Units in the aggregate amount of $12.0 million or $0.565 per Unit.  During the same period in 2023, the Fund declared distributions on the Units in the aggregate amount of $11.3 million or $0.525 per Unit.  YTD, the Fund paid distributions on the Units in the aggregate amount of $14.3 million or $0.672 per Unit.  During the same period in 2023, the Fund paid distributions on the Units in the aggregate amount of $13.5 million or $0.627 per Unit.  The amount of distributions declared YTD increased by $0.7 million or $0.040 per Unit due to the monthly distribution rate increasing from $0.102 per Unit to $0.107 per Unit commencing with the March 2023 distribution (the "2023 Distribution Increase") and the 2024 Distribution Increase, partially offset by fewer Units being outstanding YTD compared to the same period in 2023 due to the NCIB.  The amount of distributions paid YTD increased by $0.8 million or $0.045 per Unit due to the 2023 Distribution Increase and the 2024 Distribution Increase, partially offset by fewer Units being outstanding YTD compared to the same period in 2023 due to the NCIB.

On August 1, 2024, the trustees of the Fund declared a distribution for the period of July 1, 2024 to July 31, 2024 of $0.113 per Unit, which will be payable on August 30, 2024 to Unitholders of record on August 21, 2024.  Including the July 2024 distribution, which will be paid on August 30, 2024, the Fund will have paid out total distributions of $439.6 million or $26.81 per Unit, which includes 259 monthly distributions and two special distributions.

FINANCIAL SUMMARY

The tables below set out selected information from the Fund's unaudited condensed consolidated interim financial statements together with other data and should be read in conjunction with the unaudited condensed consolidated interim financial statements and MD&A of the Fund for the three-month and six-month periods ended June 30, 2024 and June 30, 2023, and the Fund's audited annual consolidated financial statements for the year-ended December 31, 2023.

SUMMARY OF QUARTERLY RESULTS

SUMMARY OF QUARTERLY RESULTS (continued)

THIRD SUPPLEMENTAL CREDIT AGREEMENT

Prior to June 14, 2024, Boston Pizza Holdings Limited Partnership ("Holdings LP") and Boston Pizza Royalties Limited Partnership ("Royalties LP") had credit facilities with a Canadian chartered bank (the "Bank") in the amount of up to $88.6 million that were scheduled to expire on July 1, 2026 (the "Original Credit Facilities").  In 2024, a fundamental reform of major interest rate benchmarks was undertaken globally, including the replacement of some interbank offered rates ("IBOR") with alternative rates.  On June 28, 2024, the administrator, Refinitiv Benchmark Services UK Limited, ceased publication of the Canadian Dollar Offered Rate ("CDOR").  The Fund's IBOR exposure was indexed to CDOR prior to June 14, 2024.  To address the cessation of CDOR being published, Holdings LP, Royalties LP and the Bank entered into a Third Supplemental Credit Agreement dated June 14, 2024 (the "Third Supplemental Credit Agreement") to amend the Original Credit Facilities to replace the current rates that are based upon CDOR with corresponding rates that are based upon the Canadian Overnight Repo Rate Average ("CORRA").  For more information on the Third Supplemental Credit Agreement, please refer to the Fund's MD&A for the period-ended June 30, 2024 available on SEDAR+ at www.sedarplus.ca.

SHORT-TERM OUTLOOK

The two principal factors that affect SRS are changes in guest traffic and changes in average guest cheque.  BPI's and BP Canada LP's strategies to drive higher guest traffic include attracting a wide variety of guests into the restaurant, sports bar and take-out and delivery parts of each location, offering a compelling value proposition to guests and leveraging a larger marketing budget versus the previous year along with a revised calendar of national and local store promotions.  Increased average cheque levels are expected to be achieved through a combination of menu mix changes and increases to menu prices.

The success of BPI, BP Canada LP and Boston Pizza restaurants, and the amount of Franchise Sales, Royalty, Distribution Income and Distributable Cash available for distribution to Unitholders, are dependent upon many economic factors, including impacts of inflation, increases in interest rates, rising input costs, unemployment rates, consumer confidence, recession, supply chain disruption, labour availability and other globally disruptive events.  Despite the current state of economic uncertainty, Boston Pizza restaurants have been able to generate solid Franchise Sales and offer affordable dining options, both on and off-premise, for guests in economically uncertain times.  As demonstrated during COVID-19, BPI, BP Canada LP and Boston Pizza restaurants have the ability to adapt to changes in operating environments and economic conditions.  However, with supply chain challenges, rising interest rates, increasing input costs and labour shortages impacting most of the restaurant industry, together with widespread focus on sustainability and climate-related issues, BPI's management remains cautious.  The focus of BPI's management is to adapt the business to successfully mitigate these challenges and maintain positive sales levels in 2024.

The trustees of the Fund will continue to closely monitor the Fund's available cash balances given the uncertain economic outlook and industry challenges.

Forward Looking Information

Certain information in this press release constitutes "forward-looking information" that involves known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Fund, Boston Pizza Holdings Trust, Boston Pizza Royalties Limited Partnership, Boston Pizza Holdings Limited Partnership, Boston Pizza Holdings GP Inc., Boston Pizza GP Inc., BPI, BP Canada LP, Boston Pizza Canada Holdings Inc., Boston Pizza Canada Holdings Partnership, Boston Pizza restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.  All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Fund or its trustees expect or anticipate will or may occur in the future, including such things as, Boston Pizza's ability to deliver solid financial performance in a tough economic environment, optimism regarding future prospects and confidence in the capacity to continue providing dining experiences to valued guests, Boston Pizza restaurants generally experiencing higher Franchise Sales levels during the summer months when restaurants open their patios and benefit from increased tourist traffic, BPI and BP Canada LP's ability to implement strategies driving higher guest traffic and increased average cheque levels, increased average cheque levels achieved through a combination of menu mix changes and increases to menu prices, continued impact of supply chain challenges, high interest rates and increasing input costs, the success of BPI, BP Canada LP and Boston Pizza restaurants, and the amount of Franchise Sales, Royalty, Distribution Income and Distributable Cash available for distribution to Unitholders, being dependent upon many economic factors, including impacts of inflation, increases in interest rates, rising input costs, unemployment rates, consumer confidence, recession, supply chain disruption, labour availability and other globally disruptive events, continued ability to offer affordable dining options, Boston Pizza restaurants having the ability to adapt to changes in operating environments and economic conditions, BPI's management remaining cautious, the focus of BPI's management being to adapt the business to successfully mitigate challenges and maintain positive sales levels in 2024, and the trustees of the Fund continuing to closely monitor the Fund's available cash balances given the uncertain economic outlook and industry challenges, and other such matters are forward-looking information.  When used in this press release, forward-looking information may include words such as "anticipate", "estimate", "may", "will", "expect", "believe", "plan", "should", "continue" and other similar terminology.  The material factors and assumptions used to develop the forward-looking information contained in this press release include the following: the Fund maintaining the same distribution policy, expectations related to future general economic conditions, expectations related to guest traffic and average guest cheques, and expectations that the Fund's Payout Ratio is typically higher in the first and fourth quarter, and Boston Pizza restaurants maintaining operational excellence.  Risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking information contained herein, relate to (among others): competition, demographic trends, business and economic conditions, interest rates and inflationary pressures, legislation and regulation, reliance on operating revenues, accounting policies and practices, the results of operations and financial condition of BPI, BP Canada LP and the Fund, pandemics and national health crises, in particular COVID-19, extreme weather events, as well as those factors discussed under the heading "Risks and Uncertainties" in the most recent Annual Information Form of the Fund.  This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this press release.  Except as required by law, neither the Fund nor BPI assumes any obligation to update previously disclosed forward-looking information.  For a complete list of the risks associated with forward-looking information and the Fund's business, please refer to the "Risks and Uncertainties" and "Note Regarding Forward-Looking Information" sections included in the most recent Annual Information Form of the Fund available at www.sedarplus.ca and www.bpincomefund.com.

The trustees of the Fund have approved the contents of this news release.

Notes – Non-GAAP, Specified Financial Measures and Other Information

1. "Franchise Sales" is the basis upon which Royalty and Distribution Income are payable, and means the gross revenue: (i) of the corporate Boston Pizza restaurants in Canada owned by BPI that are in the Royalty Pool; and (ii) reported to BP Canada LP by franchised Boston Pizza restaurants in Canada that are in the Royalty Pool, without audit or other form of independent assurance, and in the case of both (i) and (ii), after deducting revenue from the sale of liquor, beer, wine and revenue from BP Canada LP approved national promotions and discounts and excluding applicable sales and similar taxes. Nevertheless, BP Canada LP periodically conducts audits of the Franchise Sales reported to it by its franchisees, and the Franchise Sales reported herein include results from sales audits of earlier periods. Franchise Sales is reported on a quarterly basis in the Fund's financial statements, however, the financial statements do not report it on a monthly basis.  Therefore, when disclosed on a monthly basis herein, this is a supplementary financial measure under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure ("NI 52‑112").  The Fund believes that Franchise Sales for this month provides useful information to investors regarding recent performance of Boston Pizza.
   
   

2. "Same Restaurant Sales" or "SRS" is a supplementary financial measure under NI 52-112 and therefore may not be comparable to similar measures presented by other issuers.  BPI defines SRS as the change in Franchise Sales of Boston Pizza restaurants as compared to the Franchise Sales for the same period in the previous year (where restaurants were open for a minimum of 24 months).  BPI believes that SRS provides investors meaningful information regarding the performance of Boston Pizza restaurants.
   
   

3. "Distributable Cash" is a non-GAAP financial measure under NI 52-112.  Distributable Cash is not a standardized financial measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers.  The Fund defines Distributable Cash to be, in respect of any particular period, the Fund's cash flows generated from operating activities for that period (being the most comparable financial measure in the Fund's primary financial statements) minus (a) BPI's entitlement in respect of its Class B Units in respect of the period (see note 8 below), minus (b) interest paid on debt during the period, minus (c) principal repayments on debt that are contractually required to be made during the period, minus (d) the current income tax expense in respect of the period, plus (e) current income tax paid during the period (the sum of (d) and (e) being "SIFT Tax on Units").  Management believes that Distributable Cash provides investors with useful information about the amount of cash the Fund has generated and has available for distribution on the Units in respect of any period.  The tables in the "Financial Highlights" section of this press release provide a reconciliation from this non-GAAP financial measure to cash flows generated from operating activities, which is the most directly comparable IFRS measure.  Current income tax expense in respect of any period is prepared using reasonable and supportable assumptions (including that the base rate of specified investment flow-through tax will not increase throughout the calendar year and that certain expenses of the Fund will continue to be deductible for income tax purposes), all of which reflect the Fund's planned courses of action given management's judgment about the most probable set of economic conditions.  There is a risk that the federal government of Canada could increase the base rate of SIFT Tax or that applicable taxation authorities could assess the Fund on the basis that certain expenses of the Fund are not deductible.  Investors are cautioned that if either of these possibilities occurs, then the actual results for this component of Distributable Cash may vary, perhaps materially, from the amounts used in the reconciliation.
   
   

4. "Distributable Cash per Unit" is a non-GAAP ratio under NI 52-112.  Distributable Cash per Unit is not a standardized financial measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers.  The Fund defines Distributable Cash per Unit for any period as the Distributable Cash generated in that period divided by the weighted average number of Units outstanding during that period.  Management believes that Distributable Cash per Unit provides investors with useful information regarding the amount of cash per Unit that the Fund has generated and has available for distribution in respect of any period.
   
   

5. "Payout Ratio" is a non-GAAP ratio under NI 52-112.  Payout Ratio is not a standardized financial measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers.  The Fund defines Payout Ratio for any period as the aggregate distributions paid by the Fund during that period divided by the Distributable Cash generated in that period.  Management believes that Payout Ratio provides investors with useful information regarding the extent to which the Fund distributes cash generated on Units.
   
   

6. Boston Pizza Royalties Limited Partnership ("Royalties LP") licenses BPI the right to use various Boston Pizza trademarks in return for BPI paying Boston Pizza Royalties Limited Partnership a royalty equal to 4% of Franchise Sales of Boston Pizza restaurants (the "Royalty") in the Fund's royalty pool (the "Royalty Pool").
   
   

7. "Distribution Income" is income received indirectly by the Fund on Class 1 LP Units and Class 2 LP Units of BP Canada LP.  See the "Overview – Purpose of the Fund / Sources of Revenue" section of the Fund's MD&A for the Period for more details.
   
   

8. "BPI Class B Unit entitlement" is a supplementary financial measure under NI 52-112 and therefore may not be comparable to similar measures presented by other issuers.  The BPI Class B Unit entitlement is the interest expense on Class B Units in respect of a period plus management's estimate of how much cash BPI would be entitled to receive pursuant to the limited partnership agreement governing Royalties LP (a copy of which is available on www.sedarplus.ca) on its Class B Units if Royalties LP fully distributed any residual cash generated in respect of that period after the Fund pays interest on debt, principal repayments on debt and SIFT Tax on Units in respect of that period.  Management believes that the BPI Class B Unit entitlement is an important component in calculating Distributable Cash since it represents the amount of residual cash generated that BPI would be entitled to receive and therefore would not be available for distribution to Unitholders.  Management prepares such estimate using reasonable and supportable assumptions that reflect the Fund's planned courses of action given management's judgment about the most probable set of economic conditions.

SOURCE Boston Pizza Royalties Income Fund

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