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SAME STORE SALES GROWTH ("SSSG")
SSSG, the key driver of yield growth for shareholders of the Company, decreased 3.8% (2023 – increased 4.0%) for the Quarter, and decreased 3.0% for the Year (2023 – increased 8.2%). SSSG is not affected by the additional day during the leap year, as SSSG is calculated using a 13- and 52-week comparative basis.

SSSG is driven by the change in the customer check and customer traffic, both of which are affected by changes in pricing and sales mix. During the Quarter and Year, consistent with the general market trends, at both brands restaurant traffic decreased due to the current economic situation and its impact on consumer discretionary spending, and was also impacted by the heightened competitive landscape. The average customer check for the Pizza Pizza brand decreased in the Quarter, and was relatively flat for the Year, as the brand introduced new value-oriented offerings. At Pizza 73, during the Quarter and Year, the average check increased.

MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVE
The Company declared shareholder dividends of $5.7 million for the Quarter, or $0.2325 per share, compared to $5.7 million, or $0.230 per share, for the prior year comparable quarter. The payout ratio is 104% for the Quarter and was 96% in the prior year, comparable quarter.

The Company declared shareholder dividends of $22.9 million for the Year, or $0.93 per share, compared to $21.8 million, or $0.8875 per share, in 2023. The payout ratio is 110% for the Year and was 97% in 2023. The Company's policy is to distribute all available cash in order to maximize returns to shareholders over time, after allowing for reasonable reserves.  Despite seasonal variations inherent to the restaurant industry, the Company's policy is to make equal dividend payments to shareholders on a monthly basis in order to smooth out income to shareholders.

The Company's working capital reserve, excluding the credit facility, is $6.1 million at December 31, 2024, which is a decrease of $2.2 million in the Year due to the decrease in royalty income and the 104% payout ratio. The reserve is available to stabilize dividends and fund other expenditures in the event of short- to medium-term variability in System Sales and, thus, the Company's royalty income. The Company has historically targeted a payout ratio at or near 100% on an annualized basis.

EARNINGS PER SHARE ("EPS")
Fully-diluted basic EPS decreased 3.6% to $0.240 for the Quarter compared to the prior year comparable quarter.

As compared to basic EPS, the Company considers adjusted EPS⁽⁵⁾ to be a more meaningful indicator of the Company's operating performance and, therefore, presents fully diluted, adjusted EPS. Adjusted EPS for the Quarter decreased 3.9% to $0.245 when compared to the prior year comparable quarter.

RESTAURANT DEVELOPMENT 
As previously announced, the number of restaurants in the Company's Royalty Pool increased by 31 locations to 774 on the January 1, 2024 Adjustment Date, and consists of 672 Pizza Pizza restaurants and 102 Pizza 73 restaurants. The number of restaurants in the Royalty Pool was unchanged through 2024.

During the Quarter, Pizza Pizza Limited ("PPL") opened eight traditional and three non-traditional Pizza Pizza restaurants, and closed three non-traditional Pizza Pizza restaurants. PPL also opened one traditional and one non-traditional Pizza 73 restaurant, and closed three non-traditional Pizza 73 restaurants.

During the Year, PPL opened 21 traditional and 23 non-traditional Pizza Pizza restaurants, and closed three traditional and 19 non-traditional Pizza Pizza restaurants. PPL also opened two traditional and two non-traditional Pizza 73 restaurants, and closed three non-traditional Pizza 73 restaurants.

PPL management expects to grow its traditional restaurant network by 3-4% and continue its renovation program through 2024.

Readers should note that the number of restaurants added to the Royalty Pool each year may differ from the number of restaurant openings and closings reported by PPL on an annual basis as the Years for which they are reported differ slightly.

CREDIT FACILITY
On June 19, 2024, in response to the cessation of the Canadian Dollar Offered Rate ("CDOR"), the benchmark interest rate on bankers' acceptances, the credit facility was amended. The amendment transitioned the $47.0 million term loan from bankers' acceptances to Canadian Overnight Repo Rate Average ("CORRA") loans. The remaining terms and conditions are consistent with those of the previous credit facility. The fixed interest rate on the swaps remained unchanged with this amendment, and the effective interest rate remained at 2.685% for the Quarter and Year.

Subsequent to December 31, 2024, the Company's existing credit facility was extended for three-years with new maturity date of April 24, 2028. Mandatory repayment remains interest-only until the loan matures.  The facility will bear interest at CORRA rate plus a credit spread of 1.00% to 1.50%, depending on the level of certain financial ratios.

SELECTED FINANCIAL HIGHLIGHTS
The following tables set out selected financial information and other data of the Company and should be read in conjunction with the December 31, 2024 audited consolidated financial statements of the Company ("Financial Statements"). Readers should note that the 2024 results are not directly comparable to the 2023 results due to there being 774 restaurants in the 2024 Royalty Pool compared to 743 restaurants in the 2023 Royalty Pool.

A copy of the Company's interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") will be available at www.sedarplus.ca and www.pizzapizza.ca after the market closes on March 31, 2025.

As previously announced, the Company will host a conference call to discuss the results. The details of the conference call are as follows:

A recording of the call will also be available on the Company's website at www.pizzapizza.ca.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including information regarding the Company's dividend policy, its ability to meet covenants and other financial obligations, and the potential business and financial impacts of the COVID-19 pandemic on the Company, PPL and its franchisees and restaurant operators and their ability to achieve their business objectives, constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this report, such statements include such words as "may", "will", "expect", "believe", "plan", and other similar terminology in conjunction with a discussion of future events or operating or financial performance. These statements reflect management's current expectations regarding future events and operating and financial performance and speak only as of the date of this MD&A. The Company does not assume any obligation to update any such forward looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.  These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: changes in national and local business and economic conditions including those resulting from the COVID-19 pandemic (such as customers' ability and willingness to visit restaurants and their perception of health and food safety issues, discretionary spending patterns and supply chain limitations, and the related financial impact on PPL and its franchisees and restaurant operators), impacts of legislation and governmental regulation, accounting policies and practices, competition, changes in demographic trends and changing consumer preferences, and the results of operations and financial condition of PPL. The foregoing list of factors is not exhaustive and should be read in conjunction with the other information included in the foregoing MD&A, the PPL financial statements for the Year ended December 31, 2024 and the related MD&A and the Company's Annual Information Form.

www.pizzapizza.ca and www.pizza73.com or www.sedarplus.ca.

Exhibit One: Reconciliation of Non-IFRS Measures

The Company's earnings, as presented under IFRS includes non-cash items, such as deferred tax, that do not affect the Company's business operations or its ability to pay dividends to shareholders. The Company believes its earnings are not the only, or most meaningful, measurement of the Company's ability to pay dividends or measure the rate at which the Company is paying out its earnings. Therefore, the Company reports the following non-IFRS measures:

• Adjusted earnings available for distribution to the Company and PPL;

• Adjusted earnings from operations;

• Adjusted earnings available for shareholder dividends;

• Adjusted earnings per share ("EPS");

• Payout Ratio; and

• Working Capital.

The Company believes that the above noted measures provide investors with more meaningful information regarding the amount of cash that the Company has generated to pay dividends, and, together with Interest Paid on Borrowings and SSSG, help illustrate the Company's operating performance and highlight trends in the Company's business. These measures are also frequently used by analysts, investors, and other interested parties in the evaluation of issuers in the Company's sector, particularly those with a royalty-based model. The adjustments to net earnings as recorded under IFRS relate to non-cash items included in earnings and cash payments accounted for on the statement of financial position. Investors are cautioned, however, that this should not be construed as an alternative to net earnings as a measure of profitability. The method of calculating the Company's NI 52-112 non-IFRS financial measures: Adjusted earnings available for distribution to the Company and Pizza Pizza Limited, Adjusted earnings from operations, Adjusted earnings available for shareholder dividends, Adjusted EPS, Payout Ratio, Working Capital, Interest Paid on Borrowings and SSSG for the purposes of this MD&A may differ from that used by other issuers and, accordingly, these measures may not be comparable to similar measures used by other issuers.

The table below reconciles the following to "Earnings for the Year before income taxes" which is the most directly comparable measure calculated in accordance with IFRS:

• Adjusted earnings available for distribution to the Company and Pizza Pizza Limited;

• Adjusted earnings from operations; and

• Adjusted earnings available for shareholder dividends.

The Basic EPS and the Adjusted EPS calculations are based on fully diluted weighted average shares, and both include PPL's Class B and Class D Exchangeable Shares since they are exchangeable into and economically equivalent to the Shares.  See "Adjusted EPS".

Adjusted EPS is calculated by dividing Adjusted earnings from operations, as explained above, by the fully diluted weighted average shares.

Payout Ratio is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company presents the Payout Ratio to illustrate the earnings being returned to shareholders. The Company's Payout Ratio is calculated by dividing the dividends declared to shareholders by the adjusted earnings from operations, after paying the distribution on Class B and Class D Exchangeable Shares, in that same period.

Working Capital is defined as total current assets less total current liabilities. The Company views working capital as a measure for assessing overall liquidity and its ability to stabilize dividends and fund unusual expenditures in the event of short- to medium-term variability in Royalty Pool System Sales During the Year, the borrowings of $47.0 million have been reclassified to current liabilities as the facility is scheduled to come due in April 2025. Excluding the impact of the borrowings, the working capital reserve would be $6.1 million as compared to $8.2 million at December 31, 2023. The use of the working capital during the Year relates to the payout ratio of 110%.

SSSG is a key indicator used by the Company to measure performance against internal targets and prior Year results. SSSG is commonly used by financial analysts and investors to compare PPL to other QSR brands. SSSG is defined as the change in period gross revenue of Pizza Pizza and Pizza 73 restaurants as compared to sales in the previous comparative period, where the restaurant has been open at least 13 months.  Additionally, for a Pizza 73 restaurant whose restaurant territory was adjusted due to an additional restaurant, the sales used to derive the Step-Out Payment may be added to sales to arrive at SSSG. It is a key performance indicator for the Company as this measure excludes sales fluctuations due to store closings, permanent relocations and chain expansion.

The following table calculates SSSG by reconciling Royalty Pool System Sales, based on calendar periods, to PPL's 13-week sales reporting period used in calculating same store sales.

SOURCE Pizza Pizza Royalty Corp.

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