MTY Food Group (MTY), a prominent player in the quick-service restaurant industry, has announced a strong financial performance for fiscal 2023. The company reported record system sales of $5.6 billion and a 33% increase in system sales, driven by strategic acquisitions and organic growth. The normalized adjusted EBITDA stood at $271.9 million, with free cash flows reaching $154.1 million. Despite facing challenges such as increased interest costs and higher capital expenditures, MTY achieved significant growth, including a 25% increase in digital sales, which hit the $1 billion mark. The company also opened 94 new stores in the fourth quarter and increased its quarterly dividend by 12%.
Key Takeaways
- MTY Food Group's fiscal 2023 system sales hit a record $5.6 billion.
- Normalized adjusted EBITDA reached $271.9 million, with free cash flows of $154.1 million.
- Digital sales grew by 25%, reaching $1 billion.
- The company opened 94 new stores during the fourth quarter.
- MTY announced a 12% increase in its quarterly dividend to $0.28 per common share.
- Papa Murphy's, part of MTY's portfolio, is implementing operational efficiency initiatives and a new ERP system.
Company Outlook
- MTY expects to achieve net organic growth in 2024.
- The company is actively managing store openings and closings.
- Franchisees are repaying or refinancing government pandemic loans.
Bearish Highlights
- Papa Murphy's saw a decline in EBT customers, impacting the business.
- The casual and fast casual segments are showing weakness.
Bullish Highlights
- The company's network has 7,116 locations, with the majority in the U.S. and Canada.
- MTY is satisfied with the progress of its projects, which are on schedule and within budget.
- The food processing business is stable, profitable, and contributes to a secure supply chain.
Misses
- The company is facing increased interest costs and higher capital expenditures.
Q&A Highlights
- CEO Eric Lefebvre discussed the normal run-rate for capital expenditures in 2024.
- Lefebvre emphasized a disciplined approach to smaller to medium-sized acquisitions.
- He acknowledged the impact of minimum wage increases and the potential need for menu price adjustments.
In terms of future plans, MTY Food Group is focusing on smaller or medium-sized mergers and acquisitions (M&A) due to current high debt levels. The company is committed to a disciplined acquisition strategy and aligning seller expectations. They are addressing weaknesses in their casual and fast-casual portfolio by working on enhancing the consumer experience and attracting customers through various initiatives. The company also noted the stability and profitability of its food processing business, which secures the supply chain for their restaurants. MTY's CEO, Eric Lefebvre, expressed satisfaction with the company's progress and is optimistic about achieving net organic growth in the coming year.
Full transcript - None (MTYFF) Q4 2023:
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MTY Food Group, Inc. Fourth quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today. Thursday, February 15, 2024. I would now like to turn the conference call over to Eric Lefebvre, Chief Executive Officer. Please go ahead.
Eric Lefebvre: Thank you. Good morning, everyone. Thank you for joining us for MTY’s fourth quarter conference call for fiscal 2023. The press release and MD&A with complete financial statements and related notes were issued earlier this morning and are available on our website as well as on SEDAR. During the call, we will be referring to forward-looking statements and to certain numbers that are non-IFRS measures. You can refer to our MD&A For more details. I also remind you that all figures presented on today's call are in Canadian dollars unless otherwise stated. MTY delivered a remarkable financial performance in fiscal 2023 with record results across the board including system sales of $5.6 billion and normalized adjusted EBITDA of $271.9 million, which led to free cash flows of $154.1 million, or $6.30 per diluted shares. We're especially proud of those free cash flows as they were realized despite the drastic increase in interest costs, which more than quadrupled during the year, and higher than normal capital expenditures during the year. Our dual growth strategy leveraging strategic acquisitions and organic growth largely enabled us to overcome uncertain market conditions and inflationary pressure during the past year. MTY generated system sales growth of 33% year-over-year, largely due to the acquisitions of Barbecue Holdings late in our 2022 fiscal year and Wetzel’s Pretzels and Sauce Pizza early during the 2023 fiscal period. Excluding acquisitions and foreign exchange impact, system sales were up 4% with our Canadian divisions, accounting for most of the organic growth. In the fourth quarter, system sales improved 11% to $1.3 billion, while same store sales dropped 0.9% year-over-year as consumers reined in discretionary spending, which affected certain segments of our portfolio. The comparable sales declined came mainly from brands demanding a higher price point, while our quick service restaurant business remained solid in Canada and in the U.S. I'm also encouraged by the positive outcome of the company's increased efforts and usage of beta digital marketing, online ordering and websites during the past year. Our digital sales grew 25% year-over-year to $1 billion in fiscal 2023. Excluding acquisitions and foreign exchange impact digital sales rose 5%. There's still a lot of work to do to achieve our objectives, but we continue to take steps to make the customer experience as seamless and engaging as possible, so that the growth momentum continues in the future. The fourth quarter was also highlighted by 94 new store openings, the highest number in any given quarter in our history. That brought us within a few stores of breaking even versus store closures for the third consecutive reporting period. Our pipeline of future store openings remains strong at year-end, and we're confident that we will continue to open new locations at the solid base in the future. At the end of the fourth quarter, our network had 7,116 locations in operation of which 6,897 were franchised or other operating agreements and 219 or corporately owned. 58% of our locations are in the U.S., 35% in Canada and 7% International. Turning to our fourth quarter results, we generated strong normalized adjusted EBITDA and cash flows from operations of $6.4 million and $47.8 million, respectively. The 79% conversion rate of EBITDA into free cash flows sequentially better than in recent quarters, and is reflective of our efforts to maximize cash flows and optimize our asset light model. As previously communicated, additions to property plant and equipment decreased significantly in the fourth quarter to $3.2 million. We expect CapEx will return to our normal run rate in 2024 with some ups and downs as the business adjustment its environment. Of note, we are now going full throttle on our new ERP implementation. This is an investment that will look back 2024 and 2025 and that will benefit the company for an extended period thereafter. To conclude it shouldn't be noted that we recently announced a 12% increase in our quarterly dividend to $0.28 per common share, reflecting our confidence in our ability to generate strong free cash flows in the future. I will now turn the call over to Renee, who will discuss MTY’s fourth quarter results in general in greater details.
Renee St-Onge: Thank you, Eric and good morning everyone. As mentioned earlier normalize adjusted EBITDA totaled $60.4 million in the fourth quarter of 2023, up 13% from $53.5 million in the fourth quarter of 2022. The year-over-year increase in normalized adjusted EBITDA is largely due to the acquisitions of Barbecue Holding with Wetzel’s Pretzels and Sauce Pizza and Wine for the U.S. and international segments, which accounted for $9.8 million of the increase in the segment's partially offset by a $4.1 million decrease in our Canadian operations. The decrease in Canada comes mainly from higher provisions for lease buyouts and disputes as well as lower profitability generated by our retail segments, which saw sales and margins shrink as a result of the current economic environment affecting groceries and retailers. The U.S. and international segment accounted for 69% of normalized adjusted EBITDA in the quarter, while Canada represented 31%. In terms of net income attributable to owners, it amounted to $16.4 million or $0.67 per diluted share in the fourth quarter of 2023, more than doubling over prior year which was $7.1 million or $0.29 per diluted share. The year-over-year improvements can mainly be attributed to our higher normalized adjusted EBITDA and lower income taxes. These factors were partially offset by several items including amongst others, greater depreciation of property, plant and equipment and right of use assets, increased average integration of intangible assets and higher interest rates on long-term debt which were all greatly impacted by our newest acquisitions as well as higher interest rates mentioned before. Of note, as mentioned in previous investor calls, we've put into place hedging strategies in 2023, including three-year and two-year fixed interest rate swaps, which have provided the company with savings of approximately $500,000 of interest payments monthly for a total of $3.2 million in savings in 2023. Company revenue grew 16% year-over-year to $280 million in the fourth quarter, mainly driven by the acquisitions and Barbecue Holdings, Wetzel’s Pretzels and Sauce Pizza and Wine acquisition. The impact of these transactions delivered revenue growth for corporate restaurants and franchise operations a 50% and 18% respectively, in the U.S. and international segments. In Canada, revenue from franchise operations declined 1% year-over-year while food processing distribution and retail sales increased 10% due to the existing market conditions and grocers’ heightened focus on promoting house labels. Turning to liquidity and capital resources. Cash flow from operations amounting to $47.8 million in the fourth quarter of 2023, compared to $37.4 million in the fourth quarter of 2022. Free cash flow is reached $44.3 million or $1.81 per diluted share in the fourth quarter of 2023 compared to $34.8 million or $1.42 per diluted share in the same period in 2022. The 27% increase was the result of our higher EBITDA as well as lower income taxes paid and improvements to our working capital year-over-year. We are especially pleased with our free cash flow growth given the almost doubled interest payments made during the quarter. In the fourth quarter of 2023, we reimbursed $27.6 million of long-term debt paid $6.1 million in dividends to our shareholders and repurchased 80,800 shares for a total consideration of $4.2 million on top of paying $12.1 million in interest on our bank facilities. At the end of the quarter MTY had a very healthy cash position of $58.9 million and long term debt of $767.4 million mainly in the form of bank facilities and promissory notes on acquisition. Our revolving credit facility has an authorized amount of $900 million, of which $558 million have been drawn. Finally, our net debt to normalize suggested in the debt ratio stood at 2.8 times a quarter end. And with that, I thank you for your time. And will now open the line for questions. Operator?
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from George Doumet of Scotiabank. Please go ahead.
Bahamin Abdolpanah: Good morning. This is Bahamian on behalf of George. Can you give us some color on the consumer behavior, how it impacted same-store sales? And have you put through any price increase or decrease during the quarter? And how was traffic response to that price change?
Eric Lefebvre: Yeah. I'll start with the price increases. The answer is there's always some adjustments to prices, but we're -- they're very, very minimal. I would say, in the past 12 to 18 months, we had to really control the price increases and make sure that we don't alienate the customer. I would say that the customer today is probably more sensitive to price increases than they were before, probably because we had to do a lot in the previous year. So very minimal price increases. We need to make sure we don't push the customers away. What we're seeing from consumers, it really depends on which brand. But traffic really is keeping at a good level. So traffic is not the problem, but what we're seeing is the average spend tends to go down a little bit for most of our brands. So we have a smaller basket size for any given customer that we have. So that's how our sales have been affected. We're also seeing some groups of customers being a little bit further from our business, for example, with Papa Murphy's, the EBT category seems to be going away. And I know there's less benefits, the government is putting less emphasis on the EBT and putting less resources towards it. So that's affecting our business as well.
Bahamin Abdolpanah: Great. How did Papa Murphy's perform during the quarter? Also, do you see any deflation in input costs that might suggest the possibility for price decrease going forward?
Eric Lefebvre: Yeah. Papa Murphy's for the quarter was affected by EBT. So our regular non-EBT customers. The traffic is still good. The sales are still good. EBT is going down slightly. So that affected our business. So we're trying to find ways to make up for it. Obviously, the fact that EBT is going down and the fact that the government is putting less resources towards it doesn't help us. So we need to figure out a way to make it up. As far as price deflation, we are seeing a lot more stability, I would say, than we had before. So it -- stability is good. Predictability is good. So that really helps us with the business model. We are seeing some items go down. Packaging (NYSE:PKG), for example, seems to be more reasonable recently. So that helps a lot. We did have the benefit of some price decreases here and there. It's not generalized yet the way the price increases were, but at least we're seeing some hope, and we're certainly seeing some signs that there might be some lower inflation and maybe deflation going forward.
Bahamin Abdolpanah: Thanks. I’ll pass the line.
Operator: Our next question comes from Sabahat Khan of RBC Capital Markets. Please go ahead.
Sabahat Khan: Great. Thanks and good morning. Kind of mentioned it a little bit in your press release. I just wanted to get a bit more color on some of the operational efficiency initiatives you're talking about. Maybe just to what extent are those at the head office level versus at the store level? Any commentary you can share there?
Eric Lefebvre: Yeah. Well, in terms of operational efficiency. This is something we always look at. So there's definitely operational efficiency at the store level that we're looking at. So there's -- there's a number of measures that we're trying to take and tools that we're trying to implement to make ourselves better and make our franchisee stores more profitable if we can measure better what we're doing and analyze versus peers and analyzed versus theoretical models, then that helps a lot. As far as the head office is concerned, I did mention that we're implementing a new ERP in the business, I think that's going to help tremendously gain more efficiency. So that's a longer-term project. But obviously, this is something that we need to invest in to reap those benefits down the road. And there's also some reshuffling internally, where we're -- we're rethinking the way we do business, a little bit the same way that we had to take a few steps back at the beginning of the pandemic four years ago, and relook at our business and rethink of our business, and we're in the process of doing that now. So there's nothing drastic that we need to announce. We're not cutting heavily in the staff or anything. But we might be able to reorganize some functions, reoptimize some people and make sure that we elevate the game as much as we can for the organization we have.
Sabahat Khan: Okay. Great. And then you mentioned that the ERP is going to be a little while. Just broadly speaking, what's kind of the time line on executing against some of these initiatives and when those benefits maybe start to show up in some of the numbers over the next while?
Eric Lefebvre: Yeah. Well, it's an ongoing process. So it's hard to put a date on it. There are some items that were implemented last year or late last year that we should be able to start seeing the benefits now. And then there's always something else going on. So it's hard to put a date on something that's constant, it's a constant project. It's a forever project. So we're constantly relooking at the way we do business, and we're constantly trying to improve. Maybe a little bit more emphasis on certain items now. But yeah, it's hard to put a date on it.
Sabahat Khan: Great. Thanks very much.
Operator: Our next question comes from Derek Lessard, TD Cowen. Please go ahead.
Derek Lessard: Yeah, thanks, Eric. I just want to maybe -- clearly, there's pressure on the consumers here. And I just wanted to see if maybe you could give us a sense. I know you pointed out casual and fast casual, but I was curious on the impact that you might be seeing on Cold Stone and how you think that brand in particular might be positioned in this environment.
Eric Lefebvre: Yeah. Well, Cold Stone also performed extremely well in Q4, had a very strong December like most of the business. And then it was the extreme cold wave in most of North America that really affected our sales. And we're kind of limping back into where we think we should be with Cold Stone. But yeah, I'm not super worried for Cold Stone, this -- this is an iconic brand and people crave cold stone. It's something that -- that's a relatively affordable price point for consumers. It's a treat. Obviously, it's not necessarily part of the necessities, but it's also an affordable way for people to have a pleasant experience as a family as a group. So I think Cold Stone is well positioned in its market to retain its market share and to continue growing.
Derek Lessard: Okay. And within the competitive environment, I guess I'm talking for most of your banners, have you seen any or -- have you seen any, I guess, increase in competitive behavior? Anything irrational that's going out there -- that's going on out there in response to sort of that tougher consumer outlook?
Eric Lefebvre: No, I think it's -- I think most competitors are -- they're fierce as usual. And they come up with new products, new innovations. They come up with new ways of doing things. They relaunched some old products that seem to be very successful. So I don't see the competition being irrational on the price side. There's always some value offers out there. So that's no different, but I don't see anything super irrational. What I see is people being a lot more effective with the way they do marketing, with the way they approach consumers and how they create a buzz around certain things that are not necessarily new, that are not necessarily different, but that was buzz worthy in today's world. So it's up for us to create that experience. And make sure that the food doesn't only mean functional in eating some calories, but more importantly, create an experience for the consumer.
Derek Lessard: Okay. And there's 1 more question before I requeue. I just want to hit on the labor cost. In Canada, it looks like wage as a percentage of revenue was particularly high this quarter. Is that just wage inflation? Or is there any market that you see wage inflation pressure or labor shortages hurting you there? And then again, maybe just get some updated comments on the higher minimum wages in California and the potential impact for you guys there?
Eric Lefebvre: Yeah. I think there's some seasonality in terms of the labor cost versus the rest of the business. So I'm not worried about the Q4 part. Obviously, minimum wage increases are rating and California increasing from $16 to $20 in April is going to hurt, and we know it's not the last increase for California. And it's not the first time we see California take drastic moves, and we'll adjust as we always have. But obviously, it's going to create some inflation on the menu prices. There's no other option. Everybody is going to have to take some price to compensate for that. There's no secret recipe. And what's a little bit more worrisome for us is how many copycat states or -- they're going to be out there. So if it's only California, we're kind of used to it with California. But if there are some copycat states, then we'll need to be on notice and make sure that we take the right actions to compensate for it.
Derek Lessard: Okay. Thanks for taking the question, Derek.
Operator: [Operator Instructions] Our next question comes from Michael Glen of Raymond James. Please go ahead.
Michael Glen: Hey, good morning. Eric, can you -- this ERP implementation, can you just dig into that just a bit. Is this a U.S.-Canada initiative? Like cross-border, like what exactly are some of the big items that you're looking to achieve with this?
Eric Lefebvre: Yeah. Well, MTY had the same ERP since forever. So we were still on a small ERP. We were on Sage. We're still on Sage. Then we had overgrown that ERP to the point where we had a number of other systems that we're attaching to it to try to compensate for the weaknesses of the ERP. And these systems are getting to end of life now and also getting to their limits. So we had to change the ERP, and we're rethinking all our processes in the way. So it's for the entire business. It's cross-border. We're replacing pretty much all our legacy systems that we have. Some of them are five or six years past the end of life. So we're going to be a little bit more robust and certainly a lot more agile in how we can collect and use data, how we can adjust our processes to have better practices for the business. So yeah, so it's a pretty big project. It's something that's going to probably last another two years, with some parts going live in 2024 and some parts going live a little bit later. But yeah, big projects for us, but lots of positives are going to come out of it.
Michael Glen: And if I think about these ERP implementations, there's always risk attached to them. Like what type of mitigating steps are you taking within the organization?
Eric Lefebvre: Yeah. I've gone through a few in my previous lives, and I know the horror stories. So yeah, we obviously -- we did consider that risk of either the ERP not delivering on what we wanted to deliver or the drastic price overruns, cost overruns that we see in some other businesses. So I mean there's no substitute for preparation. So it's spending the right amount of time to scope the project is really key and spending the right amount of time also to prepare everything and put a tight fence around it. We have a really good project team. They're all reporting under Renee. And I think the team so far is doing an outstanding job at really making sure that we do what we need to do. We do as little customization as possible because this is where also you're run into cost overruns. And so far, I'm really happy with where it's going. We're still on time and on budget. But yeah, the devil lies in the details. So obviously, when the time comes to turn everything on, it's going to be a good test, but so far, so good and really confident that the team is doing the right job to keep everything in very tight.
Michael Glen: Okay. And for CapEx, you talked about a normal run-rate in '24. Can you just indicate what that level is exactly like from a gross dollar perspective?
Eric Lefebvre: Yeah, should be -- I mean, it should be somewhere around the lines of what we saw in Q4. Hopefully, we'll be able to have a run-rate. So some quarters might be a little bit higher, some quarters might be a little bit lower depending on where there are needs in the business. Sometimes it's large increments that go at once and then the next quarter, it doesn't come back. So it's going to be a little bit more -- it's going to be ups and downs, but you should think of Q4 as a normal run-rate, excluding the ERP, obviously, that's going to cost a little bit more than normal.
Michael Glen: Okay. And last question for me. So there's been news regarding some of these paybacks associated with the programs that were in -- that were in access during the pandemic. So the CERB and the CRB, there's been some stories about the government looking for recoveries on some of these payments. Restaurant industry was a huge benefactor under some of these programs. Like what are you seeing in terms of your franchisees? Are they having -- are they facing any reassessments under any of these programs?
Eric Lefebvre: Yeah. I mean if they didn't pay the loan, it doesn't result in them having to pay it right away. It just results in the loan being a loan, and we have to repay it over a certain amount of time and before go to 20% subsidy. So that's where to see the loans. So most of our franchisees were able to either repay it or refinance it so that we got the subsidy, not all of them. Obviously, there are some exceptions to that. But I would say, for the vast majority, our franchisees either repaid or refinanced and now have just regular loans that they need to pay.
Michael Glen: Okay. Thanks for taking the questions.
Operator: Our next question comes from Vishal Shreedhar of National Bank Financial.
Unidentified Analyst: It's Gabriel on for Vishal. Thanks for taking our questions. I just wanted to go back to the network stability. It's close to breakeven this quarter, last quarter. I was just wondering if you have any thoughts on when you would anticipate is going back to like net organic growth? And maybe following on that, do you have any -- if you can share any sort of color you have on your store pipeline as well?
Eric Lefebvre: Yes. Well, I was hoping we'd be positive at some point during 2023. Obviously, we fell short of that, and we're still pushing to try to get there in 2024. There are -- we control to a certain extent, the openings, although there are some surprises out there with the permitting and sometimes the inspections and everything. So sometimes, there are delays that we can't control. But to a major extent, we control the openings. In terms of the closings, there can be surprises and sometimes we get surprised by one franchisee closing multiple stores or some partners internationally and everything. So it's hard for us to predict exactly when we think we're going to go back to positive. We came close three quarters in a row, disappointed not to have made it to a positive number. But we continue on pushing. So to answer your question, no. it can't come soon enough, but I cannot give you a date for it, unfortunately. And as far as the store pipeline is concerned, I think you can see in our financial statements with our deferred revenues that there are a lot of franchise agreements that are signed where we did collect the franchise fees. And we are -- I mean our pipeline has never been healthier. So really happy with where we are and pretty bullish about the future.
Unidentified Analyst: Okay. Appreciate it. And then the construction issues that we've discussed about before. They more or less anticipated they're not concerned for the future.
Eric Lefebvre: Yeah. In terms of the supply chain related to the construction, it's not perfect yet, but it's -- we're really getting there. So I can't say that it's really stopping us at this time. The cities, I think, for the most part, are getting over the hump now. And they're able to start delivering on time and -- and provide inspections on a timely manner. There are still pockets of problems here and there, and sometimes they're pretty dramatic. But all in all, I think that within the next year, we should be back to normal. And hopefully, these hurdles will be behind us in distant memory.
Unidentified Analyst: Okay. Appreciate it. That’s it. I’ll jump back in the queue.
Operator: Our next question comes from Derek Lessard of TD Cowen. Please go ahead.
Derek Lessard: Yeah. Just a few follow-ups for me. I just wanted to get back on the ERP implementation, Eric. Are you able to give us maybe a sense of sort of the cost benefit sort of the upfront margin impact before it starts to improve?
Eric Lefebvre: Yeah. Well, not on the margin impact specifically, but we're looking at a project that should be between $7 million and $10 million and we're pushing to stay within that range. That's going to be over two years. And yeah, I can't give you an exact margin impact. I can't give you an exact timing for when the expenditures are going to happen, but this is the magnitude of the project we're looking at.
Derek Lessard: Right. And are you capitalizing that?
Eric Lefebvre: We're still looking at the possibilities to capitalize versus expensive. So this is something that we're doing in conjunction with our auditors to make sure that we have the right position and the right approach for how we account for it.
Derek Lessard: Okay. And one last one for me. Just in terms of the U.S. EBITDA margin, now that you've largely lapped the acquisitions what would, I guess, a reasonable run-rate or baseline run-rate for EBITDA margin be going forward? Or should we look at Q4?
Eric Lefebvre: Yeah. What you saw in 2023 was probably the normal run-rate for margins. So there's -- the integration doesn't cost us any money. So it's effort, but it's not incremental cost. So what you saw in 2023 should be reflective of what we think the future should give us.
Derek Lessard: Okay. I guess I'll ask the same question for Canada. Same answer.
Eric Lefebvre: Yeah.
Derek Lessard: Okay, thanks, Eric.
Operator: Our next question comes from Nishant Rathi of CIBC. Please go ahead.
Nishant Rathi: Hi, Eric. Good morning. Thanks for taking my question. I wanted to know your thoughts regarding the M&A pipeline. How are you thinking about that going into the year? Thank you.
Eric Lefebvre: Yeah. Thank you. Yes. Well, there are a lot of transactions available out there. They're not all good. There's a lot of broken stuff that's on the market. There are also some good companies. In this market, it's all a matter of getting expectations aligned what people are willing to pay. The cost of money is a little bit higher. So we need to adjust for that. So we need to be patient as we always have been, and we still want to do M&A. Obviously, this year, given how much debt we have on the balance sheet, we can't do a very large acquisition. So it would probably be more on the smaller or medium-sized acquisitions and then try to pay that aggressively so that we're a little bit more prepared for larger acquisitions going forward. But yeah, there could be some smaller or medium-sized acquisitions in the future. And it's just, MTY always has been very, very disciplined in how it acquires and when it acquires and for what price. And we'll keep it this way. And we're just working diligently to try to align sellers' expectations with ours.
Nishant Rathi: Thank you. I wanted to ask another one on specifically the casual and the fast casual portion of our portfolio. As obviously, there was some weakness, so I wanted to understand how you're thinking about our strategies to improve that going into the quarter considering the weak consumer environment.
Eric Lefebvre: Yeah. That's a good question, and that's something we talk about all the time. So if the consumer is reducing the basket size for us, it's a matter of creating that experience and trying to make the consumer go back to normal spending habits. So it's all experiential for us. So if we come up with new stuff or more attractive stuff, they'll probably go for it. Because people are prepared to pay if they see value. And if they see that there's -- you have something in return or at least enough in return. So we're working on that. And we're also for some of our brands, we're also working on different day parts, find ways to attract customers for lunch, for example, and what drives customers is different on every brand. But we have a number of initiatives going on with that. And for some restaurants, we're trying to drive traffic because this is where we're going to see difference. And for some other restaurants, we're trying to drive basket size because the traffic is up. And we can't necessarily handle more. We just need people to spend more every time they visit the restaurant. So different initiatives for different brands. But yeah, we did see that weakness in casual and fast casual, and we need to address that for sure.
Nishant Rathi: Thank you. And I have another question on your thoughts regarding the food processing business, of course. How are you thinking about that going forward?
Eric Lefebvre: Yeah. I love food processing. It's a great business. It's been very stable for us. It's a business that we really like. It's a little bit more CapEx intensive. So obviously, not necessarily aligned with the traditional MTY asset-light business, but still hugely profitable for us, considering the returns on investment, where we love the food processing. And it's a good way also for us to make our supply chain secure. A lot of our suppliers had short shipments or back orders during different times. And for some reason, our plants never had short shipments in back orders. We always found a way to serve our restaurants. And that also has value. So really happy with that.
Nishant Rathi: Okay. Thank you. That would be -- that would be all for me. Thank you.
Operator: This concludes the question-and-answer session as well as today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.
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