Sphera Franchise Group S.A. ($SFG)

Good afternoon, and welcome to Sera Franchise Group Results Call for the First Quarter of 2026. My name is Zuzanna Kurek, and I'm Investor Relations Officer at Sphera Franchise Group, and I will moderate today's call. Today morning, we have published our Q1 2026 results, which you can find on our website in the Investor Relations section as well as on BVB's website, Sphera Franchise Group Investor profile. Before we begin, I would like to mention that this call is being recorded and that the recording of the call will be uploaded on our website by Monday, the latest. As stated in the call invite by joining this video conference, you automatically and implicitly consent being recorded. If you do not consent to being recorded, please leave the call. In terms of organizational aspects, we will follow our standard call setup, which means the management will deliver a presentation outlining the Q1 2026 results. And later, we'll have a Q&A session. tyronoloon as the presentation of the management is over. As always, I would like to mention that we might be making forward-looking statements today during this call regarding the future performance of Sphera Franchise Group and that actual results may differ materially, we encourage you to review the disclaimer that we have included in the presentation, which is available on our website as well as which you can see right now on the screen. This disclaimer applies equally to all statements made in today's call. Now we can kick off the call. I would like to introduce the management team that is here with me today and will present our financial results. I am joined today by Calin Ionescu, Chief Executive Officer; Meantime Boudes, Chief Financial Officer; Monica Eftimie, Chief Marketing Officer; Mariano, General Manager of KFC, Romania; and Costica Misaca, General Manager of Pizza Hut and Taco Romania. I will pass now the floor to our CEO, Mr. Calin Ionescu who will share with you some insights about our performance in the first 3 months of 2026. Calin, please?

Thank you. Good afternoon, thank you for joining us today to discuss Sphera Franchise Group results for the first quarter of 2026. So I'd like to be by framing the context in which we operate during the first 3 months of the year. Q1 was not an easy quarter for the food service industry, not for consumer spending in general. We continue to see a tense economic environment. We still elevated inflation, consumer behavior and sustained pressure on operating costs. Today's consumer is more selective with spending than 2 or 3 years ago. In Romania, the impact of the fiscal measures introduced in the second half of 2025 continue to be filled at the start of this year. At the same time, volatility in international markets geopolitical tensions and fluctuation in energy price continue to affect supply chains, logistics costs and the exchange rates. All these partners operator on both consumers and companies. In such a context, the most important thing for a company like Sphera is adaptability, our multi-brand, multi-geographic model, it's increasingly demonstrating its structural advantage in these conditions. In Q1, we saw a meaningful recovery in Romania, especially in KFC, which remains the group's most important operational platform. At the same time, Taco Bell continues its upward trend. It is gaining relevance in our consumer segment where frequency and loyalty are built differently compared to traditional QSR brands. This is important not only for a short-term perspective, but also for how we look at the group's development over the coming years. This momentum translated in the top line growth in the first quarter era generated consolidated sales of around RON 378 million in Q1 2026, up 4.2% compared with the same period last year. Beyond the recovery of the core business, this performance also reflects the contribution of the restaurant open in 2025 and the resilience of demand across our portfolio and markets. From a profitability standpoint, we delivered EBITDA of RON 24 million broadly in line with the per-year periods. The modest fluctuation is attributable to external industry factors with underlying business performance remaining great. In December month, our focus has been not only on expansion but also on the quality of the network and the efficiency of invested capital. The decision regarding the optimization of the Pizza Hut network come precisely from this perspective, prioritizing return on capital over unit count and ensuring every location in our network meets our standards for performance and strategic fit. In parallel, we continue to build Sphera as a more diversified multi-brand platform aligned with new consumption trends. Following the development of Taco Bell and its first international expansion in the Republic of Moldova, the opening of a Metropol Italian unit and the addition of arose to our portfolio to have recently welcomed the Wagamama brand, one of the most recognized inaction restaurant concept globally with strong differentiation and updated potential in the Romanian market. The food service industry is entering a stage where simple expansion is not longer a competitive advantage. What will matter more is the ability to operate efficiently to have relevant brands and to respond quickly to shifts in consumer behavior. And this is exactly the type of organization we are building at Sphera Franchise Group. The results from the first quarter showed that we can continue to grow even in a challenging environment, we are preserving financial flexibility and the capacity to invest in the group's long-term development. Thank you for your trust and support. I will now invite Valentin-Ionut Budes, CFO of Shpera Franchise Group to walk you through the detailed financial results and the outlook for the rest of the year. any?

Thank you, Calin. Good afternoon, everyone, and thank you for joining us today. I will now walk you through the main financial and operational developments for the Q1 2026, which was a quarter in which sales growth came in still a volatile consumer environment with persistent pressures on all operating costs. At the same time, the results reflected the accelerated investment made in the network expansions over the past 12 months and the early stage development for newly open restaurants. I believe it is important to mention that the first quarter is traditionally the softest of the year for the food services industry, both in terms of traffic and profitability as well. In this context, we consider that the Shpera franchise group current performance provides a very healthy foundation for the rest of the remaining quarters of 2026. Now the highlight of Q1, we begin with the main ones for the quarter. at the consolidated level, the group generated sales of almost RON 378 million, which are up 4.2% compared with the same period of last year. Romania remains the main contributor with over RON 326 million and a growth of nearly 5%. These figures are confirming the return of stronger dynamic in the KFC segment for Romania. Italy continued to deliver stable performance with sales of RON 45.6 million and a 2% increase, while Moldova was influenced by the reallocation of one of our restaurant KFC Moldova and recorded overall sales of RON 6.2 million. By brand, KFC remains, by far, the main contributor of our group performance, with still topped RON 324.3 million and the growth of 4.2% versus the same period of last year. Taco Bell continued to be our fastest-growing brand in the portfolio, with revenue up 12.2% and to RON 27.1 million, all of them supported by the accelerated network expansions and a very strong traction among the younger consumers. Pizza had generated revenue of RON 26.3 million in the context of ongoing operational optimization measures, while Chocolate contributed RON 0.3 million on as the company continues to build brand maturity. Now the key indicators. This slide shows more clearly the difference between sales dynamics and the profitability evolution during the first quarter. We have the total expenses increased by approximately 5%, slightly above the sales growth rate mainly due to the inflationary pressures and directly linked to the network development. So in Q1, we managed to secure a normalized EBITDA of RON 24.1 million. It is important to note that Q1, we continue to absorb the impact of the accelerated expansions for coming from the last 12 months. Recently, open locations were still in process of scaling operations, resulting in temporary slightly margin dilution. On the other hand, we are already seeing their contribution to sales growth and the strengthening of our position in the market where they were opened. Now key financials for Q1. We can see the quarter main financials line in detail. We have sales increased by 4.2%, as mentioned, reaching RON 378 million, while restaurant costs increased by 5.2%. The variation was influenced by the elevated operating cost and the fast-paced growth of the restaurant footprint, then parent employee benefits, jumped 4.6% to RON 97 million, reflecting industry-wide wage adjustment and higher number of employees, mainly driven by the new stores opening mentioned. In Q1, Sphera intensified marketing campaigns and brand building initiatives across all the brands in our portfolio, particularly to drive customer traffic and support the newly open restaurants. And as a result, investment in advertising increased by 27.6% year-on-year, reaching the amount of RON 20.6 million. Excluding costs associated with the Pizza Hut network optimization process, we have a normalized EBITDA of RON 24.1 million which, as Colin mentioned, broadly in line with the prior year similar period. Now our restaurant footprint. In the first quarter, we opened 4 new restaurants [indiscernible] units in Romania, Italy and Moldova and one Cioccolat unit in Italy. At the end of March, we're operating 182 restaurants at the group level. And in Q2, we continue as well the expansion with -- by bringing Taco Bell to -- for the first time to Republic of Moldova. Our strategy remains balanced. We continue to invest in markets and concepts where we see strong growth potential, but always in a disciplined manner from a capital and long-term profitability perspective. Now some words about Pizza Hut optimization. The slide refers to one of the most important operational decision made during this quarter. In February, we announced the continuation of the streamlining of Pizza Hut network in Romania. And the strong decision of closing several restaurants mainly due to the continued operational underperformance, which was impacting negatively our brand EBITDA. We believe that in a more volatile economic environment with more cautious customer behavior, operational discipline and capital efficiency, it's more and more essential. Our objective is to improve the brand's long-term profitability profile and recalibrate the network in such a way to reach efficiency. Now brand portfolio expansion in parallel with optimizing the mature networks. We continue to invest in developing our multi-brand platform. The announcement regarding the addition of Wagamama to our portfolio marks our entry into a new segment fast casual pan-Asian dining, where we see strong attractive long-term development opportunities. For us, the diversification means not only expanding the portfolio, but also building this platform that Calin mentioned which is balanced and relevant and offer possibilities for new consumption trends. Waga launched in London in 1992. It's an international restaurant brand is known for its Asian tire concept, efficient operational model and contemporary location design. The brand is built around the famous kisan philosophy focused on continuous improvement and constant adaptation to the customer behavior and needs. Now we have repaired the slide for the budget of this year. It was published and reflected by a pro between growth and financial discipline. We estimate the sales for this year overall to reach RON 1.7 billion, which is up 7.6% versus 2025. And this level will be supported by both comparable restaurant performance and by the contribution of the new units as well. At the same time, we estimate EBITDA of approximately RON 160 million for this year, while we'll continue to invest aggressively in network development. We are planning for this year a record CapEx of around RON 130 million related to the opening of 21 new restaurants that we scheduled to open in 2026. I believe the key message here is that although the economic environment remains clearly volatile. We continue to see strong development opportunities for us, and we will remain focused on profitable growth and disciplined capital allocation. Thank you.

We will now move to the brand performance, and we will begin with KFC.

Thank you, Zuzanna. Good afternoon. Thank you for being here today. I will share with you the progress we've made from our sales perspective for the KFC brand across the 3 markets where operate in Romania, Italy and Republic of Moldova. I will begin with Karma. In reviewing our performance, I'm pleased to highlight that KFC Romania continued its positive trajectory in Q1 2026 with same-store sales increasing by 3% year-on-year marking a further acceleration compared to the positive trend recorded in Q4 2025 and fully reversing the negative evolution seen throughout most of last year. This performance was supported by improved consumer appetite in the domestic market and the contribution of restaurants opened during 2025. On an all-store basis, so Romania grew by 5% year-on-year and Q1 2026, reflecting both the positive same-store evolution and the impact of network expansion. The positive start -- the point the start to the year confirms the resilience of KFC Romania and suggest that demand continues to gradually stabilize following a softer 2025. Now turning to Italy. KFC Italy returned to slight growth on the oil stores based in Q1 2026, with sales increasing by 1.4% year-on-year while same-store sales declined by 5.4% year-on-year. Although the Italian business remains strategically important for the group, the market continued to face a more competitive environment and softer consumer demand compared to Romania. Moving on to Moldova. KFC Moldova recorded a weaker quarter in Q1 2026, with same-store declined by 9.8% year-on-year and all store sales decreasing by 8% year-on-year. The evolution was primarily impacted by the mandatory relocation of the KFC Moldova restaurant in March 2026, which temporarily affected the brand's performance within the market. Despite the software quarterly performance, the group continues to see long-term potential in Moldova where the KFC brand maintains strong awareness and favorable market positioning. The temporary impact from the relocation process is expected to normalize while the restaurant resumes full operations and the new location. I will conclude here. Thank you.

Thank you, good afternoon. I'm pleased to have the opportunity to walk you through the latest sales performance of Pizza Hut and Taco Bell in Romania, and I will begin with Pizza Hut, we remain under pressure in Q1 2026 with sales declining by 3.2% year-on-year on both the same-store and pull store basis. This performance reflects ongoing challenges in driving traffic and maintaining momentum, particularly given the brand's higher exposure to the delivery channel and the continued competitiveness of the QSR market. We remain focused on driving operational efficiency and advancing the network optimization program for Pizza Hut as outlined earlier by Valentine and to restore the business' long-term profitability. As part of these measures, we are still in the process of closing underperforming units, the initial impact expected already within this year. At this stage, 5 of the 7 units planned for closer have already been closed. Moving on to Taco Bell. Taco Bell continued to be the standout expansion-driven growth driver with Inspire's portfolio in Q1 2026. All store sales increased by 12.2% year-on-year filled by the impact of 2025 store openings and growing brand relevance among the younger consumers in Romania. At the same time, Taco Bell recorded a slightly same-store sales decline of 2.4% year-on-year in Q1 2026 compared to the exceptionally strong same-store growth recorded throughout 2025. Nonetheless, the brand remains the group's fastest-growing concept, and its performance continues to confirm strong consumer appetite and significant scalability potential within the Romanian market. That is all from my side. Thank you.

Hello. Good afternoon from me as well. And now moving on from brand performance to like initiatives. As Valentin already highlighted, the first quarter is typically softer for the QSR industry. With this in mind, our primary focus was on developing and refining value-driven campaigns and platforms aiming to identify the optimal mix for each brand to stimulate transaction and sustain positive positive sales trajectory. Consumer behavior remained cautious shaped by the complex economic and political environment currently facing Romania, which continues to influence purchasing decisions and reinforce the prudent approach to spending. I would outline on a selection of key product innovation and campaigns we introduced in the first quarter of 2026. And I will start with KFC. Super campaigns stood out at the beginning of the year with a focus on value and innovation. So Manu, the first major 3scommunication campaign introduce a new value platform for a complete KFC meal featuring the brand's most popular products, chicken and burgers, along with price and the drink at an attractive price point. It's objective was to drive sales and transactions by increasing frequency among existing customers while also attracting light users through a strong price appeal. [indiscernible] was the first innovation led campaign of the year, acting the secondary layer within the communication strategy, delivery through our 360 approach I focused on introducing a new format, featuring 2 recipes inspired by Indian Cuisine. The campaign aimed at boosting sales and transactions by increasing frequency among heavy KFC users seeking novelty while also attracting new and light users interested in experimenting with new taste and formats. We also refreshed the iconic Tuesday market campaign, involving both its product proposition and creative approach. The activation was expanding into a 4 plus 1 day app mechanic while keeping the core activation available in store on Tuesdays turning it into a disruptive 360 value campaign focused on driving transactions. The novel became from an upgraded offer, the Classic 20 Hot Wings bucket now paired with a mini fries bucket at a highly attractive price point. Snack box was our second flagship 360 campaign of the quarter. This initiative centered on the snack box and established everyday value offering enhanced by a promotional price and the layer of innovation. This seems to die introduction of a miner and additional of the partner booster burger to the bundle. The campaign aimed at increasing business frequency among existing consumers with a particular focus on middle and low-income consumers. All 4 campaigns achieved positive same-store sales growth contributing to a strong start to the year from a sales perspective. In terms of the KFC app, we continue to position the the app as the [indiscernible] platform supported by both in-app and in-store communication. The main objectives were to drive transactions and sales within this channel by increasing downloads and expanding the user base. And now moving on to Pizza Hut. At Pizza Hut, we had a very busy start to the year, marked by a strong emphasis on value and innovation of STCs drivers. This approach translated into a dynamic and interactive market in calendar. Pizza bar was the first main campaign of the year, where we extended the promotion our strong from noon to 9:00 p.m. to cover not only the launch but also we paid dinner, while keeping the deal mechanics unchanged. All you can pizza slices across 6 available recipes. The campaign was rolled out nationally across billboards, Sanbrado and digital platforms with the primary objective of driving sales. Czysta the secondary campaign focused on product innovation as a central communication pillar while also serving as a ticket protector across channels. This was achieved through the launch of a new special class amplified by a national rollout across digital and in-store touch points. Valentine Spin pizza is another initiative of the quarter. Over 3-week period around Valentine Day and DracoBete, we launched a limited edition pizza featuring a big staff cost in a heart shape. The initiative helped us stay culturally relevant during a growing seasonal moment in Romania with strong appeal among younger audiences. Double XL and triple XL meal boxes where a secondary campaign, which focused on protecting the average ticket by promoting generous value-driven group offers across online media, available exclusively on our website and mobile app, those bundles were designed to appeal to consumers looking for convenient and affordable options for both small and large groups. And now moving on to Taco Bell. For Taco Bell we rolled out 4 campaigns designed to broaden consumer choice and drive sales at the beginning of the year. Easyl -- we introduced the product at 12.9 lay is a highly accessible entry product with the objective of driving traffic and the trial among new and occasional consumers. The initiative was supported through an integrated channel mix, restaurants, outdoor, digital, social, CRM and delivery. And hence, through play mass to deep on digital engagement. Natural cheese, debride was a premium of woodnovation product centered on indulgence and creating and the BC experience -- the product was designed to attract for fans, heavy users and consumers seeing exciting and differentiated food experience supported across restaurants, outdoor digital, social media and delivery channels. Mass Melon of full menu price at 20.5 lay was designed to deliver strong value and increase frequency, particularly in smaller cities, the offer and to attract price-sensitive consumers while reinforcing cobas accessibility. And the first campaign is the Valentine's Day and Dagoba activation. We deploy a 1 plus 1 Caocaoffer built around the sharing occasions and culturally relevant to local moments. The strategy focused on increasing traffic and accelerating orders across restaurants, Click & Collect and digital channels. And now moving on to the delivery performance. In Q1 of 2026, delivery continue to represent an important component of our commercial mix in line with the broader long-term trend towards convenience driven consumption, the share of delivery sales increased by 1 percentage point compared to Q4 2025, reaching 20% of total group sales consistent with the typical seasonality pattern visible during the winter period and the beginning of the year. In absolute terms, delivery sales grew by 2.6% year-on-year in Q1, reaching 75.4 million lay confirming that that delivery remains resilient and structurally important to channel across the group's portfolio. Thank you. That is all for me now.

Thank you, Monica. This concludes the presentation of our results for the first quarter of 2026. Before we begin the Q&A, we would like to give you 1 to 2 minutes so you can take your questions in the chat box. As a reminder, we will only be taking the text question. There is no option to ask the question slide. Therefore, please use the next 1 to 2 minutes to write them. Thank you. Thank you for the questions. So we'll now begin the Q&A session. While we answer the questions, please keep them coming. If there are other topics you'd like us to address. So the first question is food and material costs slightly improved as a share of sales in Q1 despite the inflationary environment. Is this improvement sustainable for the rest of the year? And how much room is left for procurement efficiencies.

So indeed, in Q1, the better cost ratio, while basically the effect of a combination of multiple initiatives, mainly the procurement discipline that we were mentioning also in the previous call. Also, we took advantage of a favorable product mix. And all the operational optimization projects that we are running internally paid off. However, regarding the continuation of this, as you all know, the inflationary environment is very volatile in Romania. So we will continue to try to maximize as much as possible throughout different initiatives, including renegotiation and the way in which we structured the product and the offer, but all in all, I may say that we will stick with the overall budgeted figures for 2026. So it will not be -- it will be most probably a normalization towards the quarter in stature will end up with the budgeted overall cost of goods sold.

The next question. Advertising expenses increased materially in Q1 as the group supported traffic generation and new restaurants. Should we sweat Q1 advertising as a front-loaded investment? Or is this a new run rate for 2026?

Yes, we should treat it as a one-off investment, by the end of the year, as every year, advertising is going to be 5% of sales.

Thank you. The next question G&A expenses declined 10% year-on-year in Q1 and improved to 3.8% of sales. While the 2026 budget implies G&A expenses increasing by 8.4% for the full year and remaining broadly stable as a percentage of sales. Should we treat the Q1 improvement as a sustainable efficiency gain? Or were the timing effects that should reverse in the following quarters?

So related to this, the Q1 it's a technicality and accounting effect of the earth performance provisions for 2025. This will be reinvested in people throughout the remaining part of the year. So all in all, the effect will be normalized in the remaining 3 quarters, if we are looking the G&A is a consolidated figure for the full year. But again, we are still referring to the value included in the budget of 2026.

After Q1, is management still comfortable with the 2026 budget for sales, normalized EBITDA and normalized profit? Or are there any areas where the risk has shifted compared with the assumptions presented to shareholders?

So I will start answering this question. Obviously, we are very early into the year, just after Q1, and we have visibility of 1.5 months from the second quarter. Based on the -- the context is definitely volatile, and there are a lot of uncertainties. In this moment, we strongly believe that we'll be able to navigate to this context, and we remain committed to the values that we have communicated and the approval in the shareholder meeting for 2026.

Thank you. We'll go to the next question. It's a longer one. Can you please explain the rationale for having a broad portfolio of new brands, Hardrock, Mogamama, Coco, but in a very small number of units. Is this a margin treated exercise or rather margin dilutive. I would guess that scale of which brand is important for their respective profitability. Are there any operating synergies or cost synergies, purchasing synergies? Do you expect each of these grants stand-alone to be profitable?

Yes. So I think the answer is at least as long as the question because there are multiple arguments here. First of all, I will start by mentioning the philosophy behind this strategic decisions of enhancing our portfolio. We see the capability of our group to become a strong platform where every single type of business can be just adding and served immediately in an efficient manner. So -- obviously, the scale is very important for the overall magnitude, but the scale can be the combination of multiple type of businesses as well as far as they are not complicating operationally the infrastructure and the mechanism behind. So Choco, just remember that we have a development intention plan of 20 restaurants, so not quite small, 20, it's a reasonable footprint. In the Hard Rock, it's much less number, 5 restaurants, but with a different magnitude restaurants. So again, I think it can contribute very well to the overall performance of top line. And also Wagamama for which we didn't decide to the magnitude, but it's a business that we believe that can be very easily scale, but we'll see throughout the project of opening the first one. All in all, going now to the point of accretive BTD to our performance, trying to give some more color here, all of them are meant to be accretive to the overall performance of our group in both EBITDA and profitability. So nothing that we'll do will not have profitability philosophy behind it.

I would like to add something at this question of this asset. Both Hardrock and Waga, there are casual dining restaurants that we believe that we can add a lot of sales and a lot of profitability in the future because per unit, usually, they have higher sales and higher profitability. Also, the scalability is on a road is limited for few cities, but in Manga mama, wool of room to open restaurants. Choco even that we signed for 20 in the -- on the beginning, have a potential of maybe other units in each mall in Romania, which means our diversification of portfolio with the base of the future for the next few years.

Okay. And we had the last question before I read it, just a gentle reminder, if you have any other questions for us, please take them now. Otherwise, we will be concluding the store. So the question is, can you comment on traffic versus ticket evolution for Q1 2026?

So all in all, you saw the performance on the top line. From a transaction point of view, obviously, it was a big pressure on -- across the brands but we have managed to offset this by better every ticket, so here, we saw good compensation coming from this aspect that led us by ending up the figures on a positive area for both sensor and total store.

Thank you I see we have answered all of your questions. Thank you all for joining us today. The next call, we're going to post after we published the results for the first half of 2026. And that will be on 31st of August 2026. Until then, we wish you a great day ahead, and we look forward to reconnecting in August. Thank you.