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Subsequent Events

• On September 4, 2024, SIR permanently closed the Jack Astor's® location in the North York neighbourhood of Toronto. This restaurant will cease to be a Royalty Pooled Restaurant effective January 1, 2025.

• On September 26, 2024, SIR experienced a cybersecurity incident that has impacted a portion of its IT infrastructure. SIR immediately engaged third-party cybersecurity experts to assist with its containment, remediation and investigation efforts. Despite the related operational disruptions, guest payment platforms remained secure and SIR continued to operate all 54 of its restaurants.

Results of Operations Summary

SIR has advised the Fund that food and beverage revenue from corporate restaurant operations totalled $90.7 million and $271.3 million in Q4 2024 and Fiscal 2024, respectively, compared to $89.3 million and $271.7 million in Q4 2023 and Fiscal 2023, respectively. The increase in Q4 2024 reflects the opening of six new SIR restaurants throughout Fiscal 2024 (Edna + Vita™, four Scaddabush locations and a Duke's Refresher), price increases across SIR's restaurant network, and same store sales growth ("SSSG")⁽¹⁾ generated by Scaddabush and the Signature Restaurants, partially offset by the SSS⁽¹⁾ decline for Jack Astor's and the closure of three restaurants throughout Fiscal 2024 (Reds® Wine Tavern, Reds® Fallsview and Scaddabush Mimico). The slight decrease in Fiscal 2024 was primarily attributable to the SSS⁽¹⁾ decline for Jack Astor's and restaurant closures, partially offset by system-wide price increases, new restaurant openings and SSSG⁽¹⁾ for Scaddabush and the Signature Restaurants. 

SSS⁽¹⁾ performance includes all SIR restaurants, except for those restaurants that were not open for the entire comparable periods in Fiscal 2024 and Fiscal 2023.  Accordingly, SSS⁽¹⁾ performance for Q4 2024 and Fiscal 2024 does not include the new Scaddabush restaurants in Whitby, Guelph and London, Ontario and in the Don Mills neighbourhood of Toronto, since these were not open for both comparable periods in Fiscal 2024 and Fiscal 2023. The new Signature Restaurants, Edna + Vita and Dukes Refresher, located in downtown Toronto are also not included, as well as Abbey's Bakehouse, as it is a seasonal restaurant.

Net income (loss) and comprehensive income (loss) was $10.0 million for Q4 2024, compared to $21.4 million for Q4 2023. Net income (loss) and comprehensive income (loss) was $35.1 million for Fiscal 2024, compared to $(20.2) million for Fiscal 2023. The variances reflect changes in the amortized cost of the Ordinary LP Units and Class A Units of the SIR Royalty Limited Partnership that SIR holds. This resulted in income of $3.9 million in Q4 2024 and $27.4 million in Fiscal 2024, compared to income of $13.1 million in Q4 2023 and an expense of $36.1 million for Fiscal 2023. These non-cash changes in Q4 2024 and Fiscal 2024 are due to changes in the underlying unit price of the Fund compared to the end of Q3 2024 and Fiscal 2023, respectively, and changes to the estimated cash flows derived from the Fund as at Q4 2024.

Adjusted Net Earnings² were $6.1 million and $7.7 million in Q4 2024 and Fiscal 2024, respectively, compared to $8.3 million and $15.9 million in Q4 2023 and Fiscal 2023, respectively. The declines were primarily attributable to a $2.4 million increase in cost of restaurant operations in Q4 2024 compared to Q4 2023, and a $7.3 million increase in cost of corporate restaurant operations in Fiscal 2024 compared to Fiscal 2023.

Liquidity and Capital Resources

As at August 25, 2024, SIR had cash and equivalents of $6.5 million ($8.2 million as at August 27, 2023), and had drawn approximately $34.9 million against the $41.5 million maximum principal borrowing amount under the Company's credit facility.

Outlook

SIR continues to monitor consumer spending behavior in light of current evolving macroeconomic factors, including inflation and interest rates, and their potential impact on the Canadian economy and consumer confidence. Ongoing business impacts due to changes in the minimum wage and higher commodity costs have been influential in the bar and restaurant industry's changes in pricing overall.

SIR continues to innovate and provide immersive new product and service offerings to increase dine-in guest visits to its restaurants and to capitalize on the growth of take-out and delivery services in commercial foodservice.

During Fiscal 2024, SIR completed renovations to nine Jack Astor's restaurants, expanding the total number of renovated Jack Astor's locations to 16 since the beginning of Fiscal 2023. SIR also completed renovations to its Reds® Square One location in Mississauga, Ontario in Q4 2023.

During Fiscal 2024, SIR opened four new Scaddabush restaurants, including one in Whitby, Ontario (during Q1 2024), one in the Don Mills neighborhood of Toronto (during Q3 2024), one in London, Ontario (during Q3 2024), and one in Guelph, Ontario (during Q4 2024). These four new restaurants are expected to be added to the Royalty Pooled Restaurants effective January 1, 2025.

SIR currently has commitments to lease two properties in Barrie and Oshawa, Ontario, upon which it plans to build two new Scaddabush restaurants. There can be no assurance at this time that these planned new Scaddabush restaurants will be opened or will become part of the Royalty Pooled Restaurants.

As a result of the cybersecurity incident that SIR experienced on September 26, 2024, there was a moderate decline in the Company's revenue during the first three weeks following the incident while certain restaurant technology was being restored, as well as increased cost of operations, and other associated costs related to investigation and mitigation of loss services. SIR continues to gather information about the current and longer-term financial and other impacts of this event. SIR maintains a variety of insurance coverages, including cyber insurance, and is in the process of working with its insurance providers to make the necessary claims under its policies.

Reconciliation of Adjusted Net Earnings²

The following table reconciles net income (loss) and comprehensive income (loss) for the 16-week and 52-week periods ended August 25, 2024 and August 27, 2023, respectively, to Adjusted Net Earnings²:

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 54 restaurants in Canada. SIR's Concept brands include Jack Astor's Bar and Grill® with 36 locations and Scaddabush Italian Kitchen & Bar® with 13 locations. SIR also operates one-of-a-kind "Signature" brands including The Loose Moose® and Reds® Square One. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns three additional restaurants, including two Duke's Refresher® + Bar locations and Edna + Vita^TM, which are currently not part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com.

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that receives distribution income from its investment in the SIR Royalty Limited Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.

(1) Same store sales ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"). However, SIR believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. SIR's method of calculating SSS and SSSG may differ from those of other issuers and accordingly, SSS and SSSG may not be comparable to measures used by other issuers. SSSG is the percentage increase in SSS over the prior comparable period. SSS includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable period and Abbey's Bakehouse in Muskoka, Ontario as it is a seasonal restaurant. When a SIR Restaurant is closed, the revenue for the closed restaurant is excluded from the calculation of SSS for both the quarter in which the restaurant is closed and the current year-to-date.

(2) Adjusted Net Earnings (Loss) is calculated by removing the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership from the net income (loss) and comprehensive income (loss) for the period. Adjusted Net Earnings (Loss) is a non-GAAP financial measure and does not have a standardized meaning prescribed by IFRS. Management believes that in addition to net income (loss) and comprehensive income (loss), Adjusted Net Earnings (Loss) is a useful supplemental measure to evaluate SIR's performance. Changes in the amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership is a non-cash transaction and varies with changes in the market price of the Fund units. The exclusion of the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership eliminates this non-cash impact. Management cautions investors that Adjusted Net Earnings (Loss) should not replace net income (loss) and comprehensive income (loss) or cash flows from operating, investing and financing activities (as determined in accordance with IFRS), as an indicator of SIR's performance. SIR's method of calculating Adjusted Net Earnings (Loss) may differ from the methods used by other issuers. Please refer to the reconciliation of net income (loss) and comprehensive income (loss) to Adjusted Net Earnings (Loss) for Q4 2024 and Fiscal 2024 provided in this news release.

Caution concerning forward-looking information

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the "Trust"), the SIR Royalty Limited Partnership (the "Partnership"), SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "should", "would", 'could", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Management's current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; the ability to maintain staffing levels; the impact of inflation, including on input prices and wages; the impact of the war in the Ukraine; changes in tariffs and international trade; changes in foreign exchange and interest rates; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of or other limits placed on restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; changes in environmental laws; privacy matters; accounting policies and practices; changes in tax laws; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund's or SIR's actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR. There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

All of the forward-looking statements made herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR. For more information concerning risks and uncertainties, please refer to the 'Risk Factors' in the Fund's March 14, 2024 Annual Information Form, for the period ended December 31, 2023, and the Fund and SIR's most recent interim and / or annual filings, which are available under the Fund's profile at www.sedarplus.ca.

SOURCE SIR Royalty Income Fund

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