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VANCOUVER, British Columbia, Aug. 07, 2024 (GLOBE NEWSWIRE) -- The Keg Royalties Income Fund (the "Fund") (TSX: KEG.UN) is pleased to announce its financial results for the three months ended June 30, 2024 (the "quarter") and the six months ended June 30, 2024 ("YTD").

HIGHLIGHTS

• Royalty Pool Sales(1) up 2.3% to $175.2M for the quarter and down 1.8% to $356.4M YTD
• Keg Restaurants Ltd. ("KRL") Average Sales per Operating Week(1) up 2.3% to $128,000 for the quarter and down 1.2% to $131,000 YTD
• Same Store Sales(1) up 1.7% for the quarter and down 1.9% YTD
• Distributable Cash(1) down 4.3% to $0.282/Fund unit for the quarter and up 8.9% to $0.691/Fund unit YTD
• Special cash distribution of $0.08/Fund unit paid on January 31, 2024

• Payout Ratio(2) was 100.8% for the quarter and 82.1% YTD

Royalty Pool Sales reported by the 105 Keg restaurants in the Royalty Pool were $175,175,000 for the second quarter of 2024, an increase of $3,959,000 or 2.3% from the comparable quarter of the prior year. Year-to-date, Royalty Pool Sales decreased by $6,666,000, or 1.8% to $356,424,000. The increase in Royalty Pool Sales during the second quarter of 2024 was due to an increase in Same Store Sales, while the year-to-date decrease was due to a decrease in Same Store Sales.

Royalty income increased by $158,000 or 2.3% from $6,849,000 in the three months ended June 30, 2023 to $7,007,000 in the three months ended June 30, 2024. For the first six months of 2024, royalty income decreased by $267,000 or 1.8% from $14,524,000 for the six months ended June 30, 2023 to $14,257,000 for the six months ended June 30, 2024.

Distributable Cash available to pay distributions to public unitholders decreased by $144,000 from $3,342,000 ($0.294/Fund unit) to $3,198,000 ($0.282/Fund unit) for the quarter, and increased by $643,000 from $7,207,000 ($0.635/Fund unit) to $7,850,000 ($0.691/Fund unit) year-to-date. During the second quarter of 2024 and 2023, distributions of $3,222,000 ($0.284/Fund unit) were paid to Fund unitholders. During the first six months of both 2024 and 2023, excluding the special cash distribution of $0.08/Fund unit paid on January 31, 2024, distributions of $6,444,000 ($0.568/Fund unit) were paid to Fund unitholders.

In any reporting period, the Fund's Distributable Cash is affected, both positively and negatively, by any changes in non-cash Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities balances recognized in that reporting period. The decrease in the Fund's Distributable Cash in the second quarter of 2024, was primarily attributable to the negative effects of changes in non-cash operating Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities balances during the second quarter of 2024. The increase in the Fund's Distributable Cash in the first six months of 2024, was primarily attributable to the positive effects of changes in non-cash operating Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities balances during the first six months of 2024, as the incremental operating cash flow associated with KRL's 53rd week of operation in the 2023 fiscal year was not received by the Fund until January 2024. The Fund's six months ended June 30 2024, included this extra week of operating cash flow, thereby increasing Distributable Cash and decreasing the year-to-date Payout Ratio.

The Payout Ratio was 100.8% for the second quarter of 2024 and 82.1% year-to-date.

The Fund remains financially well positioned with cash on hand of $2,013,000 and a positive Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities balance of $3,724,000 as at June 30, 2024.

(1) This is a non-IFRS supplementary financial measure. Please refer to the "Non-GAAP and other financial measures disclosure (NI 52-112)" section of this press release.
(2) This is a non-IFRS ratio. Please refer to the "Non-GAAP and other financial measures disclosure (NI 52-112)" section of this press release.

"We are encouraged with the positive financial results of the Fund in the second quarter of 2024, despite the continued challenges facing the full-service restaurant category" said Kip Woodward, Chairman of the Fund. "Which are a direct result of KRL management's continued focus on operating efficiencies and delivering the best guest dining experience."

"We are pleased with KRL's sales performance during the second quarter of 2024. Despite a slight decline in guest visits, same store sales improved by 1.7% during the comparable quarter versus 2023" said Nick Dean, President of KRL. "Our guests continue to see great value from The Keg and they trust that they will receive a consistent experience each time they visit one of our locations. Throughout the remainder of 2024, Management will remain focused on giving every guest our best by delivering a superior product and service experience, and driving guest demand during our peak seasons with world-class marketing and advertising," he concluded.

NON-GAAP AND OTHER FINANCIAL MEASURES DISCLOSURE ("NI 52-112")

NI 52-112 prescribes disclosure requirements that apply to certain Non-IFRS measures known as "specified financial measures". This press release makes reference to certain non-IFRS measures which provides important information regarding the Fund's financial performance and ability to pay distributions to unitholders. By considering these non-IFRS measures in combination with IFRS measures, the Fund believes that readers are provided with additional and more useful information about the Fund's financial performance as opposed to considering IFRS measures alone. The terms "System Sales", "Royalty Pool", "Royalty Pool Sales", "Same Store Sales", "Distributable Cash Before SIFT Tax", "Distributable Cash", "Payout Ratio", "Operating Weeks", "Average Sales per Operating Week" and "Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities" are non-IFRS measures and non-IFRS ratios. These non-IFRS measures reported by the Fund do not have standardized meanings as prescribed by IFRS, and the Fund's method of calculating these measures may differ and may not be comparable to similar measures reported by other issuers.

"System Sales" is a non-IFRS supplementary financial measure representing the gross sales of all corporate restaurants owned by KRL, and the gross sales reported to KRL by franchise restaurants without independent audit, in any period. The total System Sales of KRL are of interest to readers as it best reflects KRL's overall sales performance.

"Royalty Pool" is a non-IFRS supplementary financial measure representing a specific pool of Keg restaurants for which System Sales is calculated, obligating KRL to make monthly royalty payments to the Partnership equal to 4% of these gross sales.

"Royalty Pool Sales" is a non-IFRS supplementary financial measure representing the total gross sales reported by Keg restaurants included in a specified Royalty Pool, for which the Fund receives a royalty of 4% on these reported gross sales in any period.

"Same Store Sales" is a non-IFRS supplementary financial measure representing the overall increase or decrease in gross sales from a group of Keg restaurants (those restaurants that operated during the entire period of both the current and prior years), compared to gross sales for the same group of restaurants for the same period of the prior year.

"Distributable Cash Before SIFT Tax" is a non-IFRS supplementary financial measure and is defined as the periodic cash flows from operating activities as reported in the IFRS condensed consolidated interim financial statements, including the effects of changes in non-cash Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities, plus SIFT tax paid (including current year instalments), less interest and financing fees paid on the term loan, less the Partnership distributions attributable to KRL through its ownership of Exchangeable units.

"Distributable Cash" is a non-IFRS supplementary financial measure and is defined as the amount of cash available for distribution to the Fund's public unitholders and is calculated as Distributable Cash Before SIFT Tax, less current year SIFT tax expense. Distributable cash 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. However, the Fund believes that Distributable Cash, both before and after SIFT tax, provides useful information regarding the amount of cash available for distribution to the Fund's public unitholders.

"Payout Ratio" is a non-IFRS ratio and is computed as the ratio of aggregate cash distributions paid during the period plus any special distributions declared or paid during the same period (numerator) to the aggregate Distributable Cash of the period (denominator).

"Operating Weeks" is a non-IFRS supplementary financial measure representing the number of weeks a restaurant is open for in-store dining, without significant capacity restrictions, during a respective period.

"Average Sales per Operating Week" is a non-IFRS supplementary financial measure and is defined as the sales generated by an average restaurant during those operating weeks when restaurants were fully open for in-store dining, during a respective period. This metric is calculated by dividing total System Sales for any financial period by the total Operating Weeks open during the same financial period.

"Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities" is a non-IFRS supplementary financial measure and is defined as the Fund's current assets less current liabilities before Class C and Exchangeable Partnership units. The Fund believes this metric provides useful information to readers as Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities represents the Fund's current working capital amounts expected to be settled for cash within the next twelve months.

FINANCIAL HIGHLIGHTS

Notes:

(1) The Fund, indirectly through The Keg Rights Limited Partnership (the "Partnership"), earns royalty income equal to 4% of gross sales of Keg restaurants in the Royalty Pool.

(2) The Fund directly earns interest income on the $57.0 million Keg Loan, with interest income accruing at 7.5% per annum, payable monthly.

(3) The Fund, indirectly through the Partnership, incurs administrative expenses and interest on the operating line of credit, to the extent utilized.

(4) The Fund, indirectly through The Keg Holdings Trust ("KHT"), incurs interest expense on the $14.0 million term loan and amortization of deferred financing charges.

(5) Represents the distributions of the Partnership attributable to KRL during the respective periods on the Class A, entitled Class B, and Class D Partnership units ("Exchangeable units") and Class C Partnership units held by KRL. The Exchangeable units are exchangeable into Fund units on a one-for-one basis. These distributions are presented as interest expense in the financial statements.

(6) Fair value gain (loss) is the non-cash decrease or increase in the market value of the Exchangeable units held by KRL during the respective period. Exchangeable units are classified as a financial liability under IFRS. The Fund is required to determine the fair value of that liability at the end of each reporting period and adjust for any increase or decrease, taking into consideration the sale of any Exchangeable units and Additional Entitlements during the same period.

(7) Income taxes include the Specified Investment Flow-through Trust tax ("SIFT tax") expense, and either a non-cash deferred tax expense or deferred tax recovery. The deferred tax expense or recovery primarily results from differences in income recognition between the Fund's accounting methods and enacted tax laws. It is also partially due to temporary differences between accounting and tax bases of the Keg Rights owned by the Partnership.

(8) Distributions to Fund unitholders include all regular monthly cash distributions paid to Fund unitholders during a period and any special distributions, either declared or paid, to Fund unitholders in the same period.

(9) All per unit amounts are calculated based on the weighted average number of Fund units outstanding, which are those units held by public unitholders during the respective period. The weighted average number of Fund units outstanding for the three and six months ended June 30, 2024 were 11,353,500. (three and six months ended June 30, 2023 – 11,353,500).

The Fund (TSX: KEG.UN) is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. ("KRL"). In exchange for use of those trademarks, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the Royalty Pool.

With approximately 10,000 employees, over 100 restaurants and annual System Sales exceeding $700 million, Vancouver-based KRL is the leading operator and franchisor of steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. KRL has been named the number one restaurant company to work for in Canada in the latest edition of Forbes "Canada's Best Employers 2024" survey, securing thirteenth place in the overall ranking across all industries in the country.

This press release may contain certain "forward looking" statements reflecting The Keg Royalties Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those relating to the Keg's ability to continue to realize historical same store sales growth, changes in market and existing competition, new competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Fund units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Keg Royalties Income Fund units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an application for exemption from the registration requirement under U.S. securities laws.

The Trustees of the Fund have approved the contents of this press release.

CONTACT: For further information, contact:
Investor Relations
Tel: (604) 276-0242
investorrelations@kegrestaurants.com