MTY Food Group Inc

TSX:MTY

Earnings Call Analysis

Steady Growth Amidst Mixed Conditions

Papa Murphy's maintained its positive trajectory with mid-single-digit same-store sales growth, benefiting from initiatives rolled out over the past 18-24 months, indicating continuity in its growth trend. The company experienced a setback due to a lost licensing agreement impacting profits and observed a slower pace for both launching new products and the performance of existing ones, yet remains optimistic about future growth. Cold Stone Creamery stands out with the highest number of new openings, signaling a potent area of expansion. In terms of capital expenditures, the company anticipates a return to normal levels in the next quarter.

MTY Food Group's Strong Performance Amidst Economic Challenges

MTY Food Group showcased a robust financial outcome in the third quarter of 2023, powered by a strategic blend of growth through acquisition and same-store sales expansion. They reported a 44% year-over-year leap in normalized adjusted EBITDA, amounting to $72.9 million, while system sales climbed by 33% to reach $1.5 billion. These significant gains were partially credited to recent acquisitions and a healthy 3% growth in same-store sales from established concepts. Notably, this pattern of vigorous financial health has been consistent since the second quarter. Despite the economic headwinds marked by rising interest rates and inflation, MTY Food Group pressed forward with their largest quarterly expansion yet, opening 87 new locations, adding up to a record of 236 for the first nine months of the year.

Continuous Growth with Selective Closures

The operational landscape featured strategic openings and closures; MTY shut down 92 outlets, leading to a net decrease of 5 stores in the third quarter. However, closures were at their lowest rate for a third quarter since 2016, reflecting improvement and marking steady progress towards achieving net store growth. Ending the third quarter, MTY's vast franchise network boasted 7,119 locations primarily franchised at 97%.

Consumer-Centric Sales Increases and Brand Resilience

Same-store sales in Canada and the U.S. rose by 3% and 2%, respectively; international sales remained on par with the previous year. These gains were spread across various concepts, with quick service restaurants such as Papa Murphy's contributing significantly in the U.S., and casual dining bolstering the Canadian market. A shift in consumer behavior has been observed, with increased price-sensitivity pushing the company to enhance value through experience and menu offerings. MTY's vast array of 90 different banners lends itself to a resilient business model fit to weather economic unpredictability.

Capital Allocation Aimed at Growth and Debt Reduction

MTY intends to keep its focus on selective acquisitions while simultaneously prioritizing debt repayment and preparing for future investment opportunities. This balancing act aims to maintain solid organic growth in harmony with MTY's 20-year tradition of expansion through calculated acquisitions.

Financial Growth and Cash Flow Strength Demonstrate Resilience

A significant factor contributing to the year-over-year escalation in normalized adjusted EBITDA was the contribution from acquisitions like BBQ Holdings, Wetzel's Pretzels, and Sauce Pizza and Wine, which propelled a 64% increase in this sector. Furthermore, net income attributable to owners rose strikingly to $38.9 million, or $1.59 per diluted share, up from $22.4 million in the preceding year. The growth in revenue was remarkable at 74%, soaring to $298.1 million, with acquisitions once again playing a key role in this escalation. Liquidity remains strong with operating cash flows reaching $51.7 million and free cash flows at $43.5 million. This financial fortitude is an indicator of MTY's capacity to manage its resources effectively in an inflationary environment, while ensuring continued expansion and shareholder value.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MTY Food Group Inc. Third Quarter 2023 Earnings Conference Call. [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, Wednesday, October 11, 2023.I would now like to turn the call over to Eric Lefebvre, Chief Executive Officer. Please go ahead.

[Eric Lefebvre, executive]

Good morning, everyone. Thank you for joining us for MTY's Third 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 continued to reap the benefits of its dual growth strategy in the third quarter of 2023 with normalized adjusted EBITDA increasing 44% year-over-year to $72.9 million. We are very pleased with the performance of our latest acquisitions, which helped increase system sales 33% to $1.5 billion in the quarter as well as with same-store sales growth of 3% produced by the concepts we have owned for more than 12 months.A few months ago, during our first quarter conference call, I mentioned that most key performance indicators were flashing green across our management dashboard. This strong financial performance was sustained in the second quarter with normalized adjusted EBITDA of $74.6 million and record system sales of $1.5 billion and the momentum continued in the third quarter with comparable numbers across the board.MTY continues to deliver profitable growth with exceptional predictability despite a mixed economic environment marked by higher interest rates, inflationary pressures and heightened price sensitivity on the part of consumers. During the quarter, MTY's network opened 87 locations. This is the highest number of openings in a quarter in our history. That brings our year-to-date total to 236 new locations opened, which is also a record for the first 9 months of a year.Construction and supply chain issues are gradually dissipating while delays to secure permits and schedule inspections are slowly trending back to normal in most jurisdictions. However, obtaining adequate and timely financing for franchisees has been more challenging recently. The cost of money has increased significantly in the last 2 years and banks have become slower to disburse funds, putting pressure on new store development.During the quarter, MTY's network closed 92 locations for a net store closure of 5 locations. Once again, this quarter, we fell just short of our objective to achieve net store growth as we continue to implement measures and best practices to limit the closures as much as possible. The 92 closures represent our best performance in a third quarter since 2016 when our network was much smaller. However, we remain focused on our objective to deliver net store growth.Looking more closely at our network, we ended the third quarter with a total of 7,119 locations, of which approximately 97% were franchised. The geographical split among MTY's locations consisted of 58% based in the U.S., 35% in Canada and 7% international.Moving on to same-store sales. Canada and the U.S. recorded sales increases of 3% and 2%, respectively, while international region was stable compared to the third quarter of 2022. In the U.S., the increase is mainly attributable to quick service restaurants as Papa Murphy's, SweetFrog and Cold Stone Creamery continued to be positive this quarter. In Canada, the sales lift came from the casual dining and quick service restaurant concepts.During the last few months, we've noticed that consumers have become more demanding for their hard-earned dollars in this current environment. The increase in prices over the last 3 years has resulted in higher expectations and our brands have to elevate their game to be relevant in this market. Value does not necessarily mean lower prices but rather an experience that matches or exceeds pricing of our menu.MTY has a diversified restaurant offering, including 90 different banners of various types and formats to satisfy a wide array of customer preferences and increasing our resilience in the face of economic uncertainty. Quick service and fast casual dining concepts make up 90% of our restaurants and over 70% of our system sales. More than 3/4 of our sales are generated by street front locations, while mall and office towers represent 15% and nontraditional locations, 9%.Turning to our capital allocation strategy. We will keep a watchful eye on accretive tuck-in acquisitions while prioritizing debt repayment and building a reserve for future opportunities. Our goal remains to produce solid organic growth to complement the growth from acquisitions, which has been part of MTY's DNA for the past 20 years.I will now turn the call over to Renee, who will discuss MTY's financial results in greater details.

[Renée St-Onge, executive]

Thank you, Eric, and good morning, everyone. As previously mentioned by Eric, normalized adjusted EBITDA totaled $72.9 million in the third quarter of 2023, up 44% from $50.6 million in the third quarter of 2022. The year-over-year increase in normalized adjusted EBITDA is largely due to the acquisitions of BBQ Holdings, Wetzel's Pretzels and Sauce Pizza and Wine, which positively impacted our U.S. and International segment in the third quarter of 2023 and accounted for 64% of the year-over-year growth. The U.S. and international business accounted for 66% of normalized adjusted EBITDA in the quarter, while Canada represented 34%.Our normalized EBITDA margin for the franchising and corporate store segment improved year-over-year with margins of 54% and 10%. The corporate store margin of 10% is a drastic improvement over prior year when the segment reported at a loss.On the retail distribution and manufacturing segment front, margins did see a slight dip from 13% in 2022 to 10% in 2023, mostly due to the termination of a licensing agreement in the U.S. In terms of net income attributable to owners, it amounted to $38.9 million or $1.59 per diluted share in the third quarter of 2023 compared to $22.4 million or $0.92 per diluted share in the same period last year. The year-over-year improvement can be attributed to higher normalized adjusted EBITDA, lower income taxes and the impact of the revaluation of certain derivative interest swap hedging arrangements entered into earlier in 2023. The 3- and 2-year fixed interest rate swap arrangements have also accounted for an average interest saving of $600,000 per month in consumption on our cash flows.These factors were partially offset by several items, including, amongst other, higher depreciation of property, plant and equipment and right-of-use assets as well as greater interest on long-term debt. These increases were the result of the acquisitions of BBQ Holdings, Wetzel's Pretzels and Sauce Pizza and Wine as well as higher market interest rates witnessed across North America.Company revenue grew 74% to $298.1 million in the third quarter of 2023 from $171.5 million in the third quarter of 2022. In the U.S. and International segment, a $104.6 million surge in the corporate-owned location revenue largely due to our acquisitions in the past year contributed to the year-over-year revenue growth. This growth was complemented by a $17.6 million increase in franchising revenues in the U.S. and International segments, of which $13.4 million results from the acquisitions. In Canada, organic revenue growth from franchise operations improved 3% year-over-year on the strength of heightened system sales, while the food processing, distribution and retail division posted similar growth.Turning to liquidity and capital resources. Cash flows from operations amounted to $51.7 million in the third quarter of 2023 compared to $42.3 million in the third quarter of 2022. Free cash flows reached $43.5 million or $1.77 per diluted share in the third quarter of 2023 compared to $40.9 million or $1.67 per diluted share in the same period in 2022, mostly due to the increase in normalized adjusted EBITDA.In the third quarter of 2023, we reimbursed $26.3 million of long-term debt, paid $6.1 million in dividends to our shareholders and $12.4 million in interest on our bank facilities. At the end of the quarter, MTY had a cash position of $54.3 million and long-term debt of $784.3 million, mainly in the form of bank facilities and promissory notes on acquisitions. Our revolving credit facility has an authorized amount of $900 million, of which USD 571.8 million has been drawn at the end of the quarter. Our net debt to normalized adjusted EBITDA ratio stood at 2.8x at quarter end.And with that, I thank you for your time, and we'll now open the line for questions. Operator?

[Operator]

[Operator Instructions] Our first question comes from Derek Lessard of TD Cowen.

[Derek Lessard, analyst]

Congratulations on the quarter. First question is on the resiliency of the consumer. I was just wondering if you could maybe talk about any cracks that you might be seeing, if any, on the back of the economic environment. And then a follow-up to that is, how does the traffic versus check look?

[Eric Lefebvre, executive]

Yes. Well, for the moment, the consumer still is there for us. I mean what we're noticing is the customer is probably more demanding in terms of the experience we're going to deliver to them. And wherever we have cracks is where maybe the experience is not where it should be, and we just need to step up our game. But there is -- customer is there. The customer doesn't throw money at any restaurant anymore. The customer will be a little bit more demanding. The prices have gone up. So the experience has to go up at the same pace. But other than that, the customer is there for us. And we haven't seen massive cracks yet in anything. Most of what's been announced for so long, we haven't necessarily witnessed in our restaurants yet. I don't know if we will or if we won't, but we're certainly preparing for it. We want our teams to be ready. We want our franchisees to be ready. And we're trying to offer good value to our customers, offer good experiences and people are still there.Now we can't take anything for granted. Obviously, the student loan repayments in the U.S. has started again, early October. So this is something we're watching. And obviously, geopolitics is also something we're watching. I don't know if it's going to impact us or not, but certainly something that we need to keep an eye on.

[Derek Lessard, analyst]

Okay. And has the -- have you noticed a change in the competitive environment, given the backdrop?

[Eric Lefebvre, executive]

Not really. I think for the most part, the competition is healthy. Competition is mostly on experience and on food and not necessarily on extreme discounts. So for the moment, the competitive landscape is where we like it to be. We like to compete on our menu. We like to compete on experience. We're not necessarily prepared to go into the deep discount type of competition. But so far, the market seems to be avoiding that and competing on the right ground. So pretty happy with where it is now.

[Derek Lessard, analyst]

Okay. And it looks like -- it appears that you got some good control on wage growth within your business. We did see increased wages in California. Just curious on how you're managing that wage growth and any impact, given that California is your biggest market, curious on the number of stores or corporate stores that you might have there?

[Eric Lefebvre, executive]

Yes. This is definitely an area of concern for us. California is an important market for us and for corporate stores and franchisees. And what's going on there is something we need to watch and prepare for. Again, it's not the first time we see a shock like that. We've seen that in other jurisdictions before, including California. And it is what it is. We're all competing on the same ground. And all our competitors are facing the same wage increase. And hopefully, we'll be able to weather that storm without increasing the menu too much because that's getting a little bit more sensitive. So our teams are working now to try to see where we can be more efficient in our stores, see where we can maybe leverage some of our suppliers to reduce the number of hours we use in our stores and keep our costs under control.

[Derek Lessard, analyst]

Okay. And maybe just one housekeeping for me. It looks like you had a low effective tax rate this quarter. What should we be -- what's a reasonable tax rate assumption to be modeling?

[Eric Lefebvre, executive]

Yes. Well, yes, there's a lot of things going in our favor for the last few quarters in terms of the tax rate. Again, this is not something we can take for granted. There are some elements working for us that might not be there in the future. So probably something in the 20%, 22% range is probably a normal run rate for the long term. But in the short term, there might be some other good quarters in the future, although we can't necessarily predict the impact of everything that's going on in our environment, it looks pretty favorable for now.

[Derek Lessard, analyst]

Yes. So what are those -- what are those drivers, Eric?

[Eric Lefebvre, executive]

Yes. It's mostly the -- it mostly has to do with the way the company is structured between Canada and U.S. So there are some tax advantages and depending on where you finance the company and how your company is structured. So I won't go into the details of that, but there's no crazy foreign tax structure. There's no offshore or overseas tax structure. It's just mostly optimizing the Canada and U.S. taxes.

[Operator]

Your next question comes from Michael Glen of Raymond James.

[Michael Glen, analyst]

Eric, just on the net closures. So if we circle back to -- and going back in time here, but if we circle back to Imvescor, they had a program in place to help their franchisees in terms of renovating stores and keeping stores open. Is this something that you have in place right now? Is that helping at all with what we're seeing from the closure rate?

[Eric Lefebvre, executive]

This is something we had in place until last year. For this year, we terminated most of our rejuvenation programs, but there's still some going on. We do have some plans that are slightly different. They're not necessarily the same structure as Imvescor's plans for most of our brands, but we don't subsidize the renovations as massively as Imvescor did at the time.

[Michael Glen, analyst]

Okay. And you have no plans to push more heavily on this at all at this point in time?

[Eric Lefebvre, executive]

It's something we talk about every time, and there's a balance to be achieved. We've pushed quite a bit on that in the last few years. This year was a time where we see if we can consolidate what we've done in the past few years, and it's looking good. I don't know what it means for the future. I don't know if we're, at the Board level, going to say, well, this is something we want to push on again or if this is something we want to consolidate more, but those are regular discussions that we need to have for strategic reasons. But right now, we do have plans for a few of our brands where it makes the most sense and where strategically we need to do it because a lot of stores are getting to that period where they need to be renovated or some of the networks are getting a little bit older. So it's a brand-by-brand decision. It's not necessarily an MTY-level decision.

[Michael Glen, analyst]

And for the corporate stores, their -- you talk about the level of profitability coming out of those stores right now. Can you -- is there any update about your thoughts surrounding corporate stores? Could we potentially see MTY look to divest some of those corporate stores, particularly on the U.S. side?

[Eric Lefebvre, executive]

There's not going to be a massive program of divestiture of corporate stores. I don't think it would create value for the shareholders. If those stores are profitable and fire sale price is not necessarily something that will produce value for the shareholders. There will be some divestitures here and there where some stores might be a little bit more difficult for us to operate. It might be in geographies where we don't have that critical mass that makes it really efficient for us to have stores. So there might be a few divestitures here and there, but there's not going to be a structured systematic program to divest of all the stores.

[Michael Glen, analyst]

Okay. And then -- so for the -- on the income statement, your -- I think your total interest charges reported in 3Q and [ in 2Q ], it was about $16 million combined in 2Q and then $16.2 million in 3Q. Is that -- like, does your total interest expense -- and this is a long-term debt and your lease interest expense. Is it stabilized at these levels at around the $16 million mark? Or does it potentially move higher with some of the -- with the recent rate moves?

[Eric Lefebvre, executive]

I think it's stabilized until -- if the central banks don't move their rates, I don't think our interest is going to move much from where it is now, other than us getting to a better bracket in our credit agreement where we'd save some money. I think we're at a stable level. Obviously, we don't control what the central banks are doing. As you know, probably half of our debt is variable rates right now. So if rates go up or down, it's going to have an impact on us. And the other impact we can have is for us to deleverage and maybe move it from one bracket to the other in our credit agreements.

[Michael Glen, analyst]

And are you able to say what the leverage level is -- that triggers that is?

[Eric Lefebvre, executive]

Yes. It's -- there's a number of different brackets. Typically, it's about half turns of EBITDA. So right now, for example, if we move under 3 turns of EBITDA, we're going to save a certain amount of bps. And then if we moved under 2.5, we'd save another amount of bps. So this is how the -- it's -- there's a number of different levels where the rates are different. They go up or down. They go up as leverage goes up and they go down as leverage goes down.

[Operator]

[Operator Instructions] The next question comes from Arthur Nagorny of RBC Capital Markets.

[Arthur Nagorny, analyst]

So last year, you mentioned that you had 150 restaurants under construction that are being impacted due to supply chain improvement issues. Just wondering, is some of the strength that we're seeing in recent quarters in new store openings a reflection of construction coming to completion at these locations? And can you also comment on, I guess, where the pipeline of new store openings sits at today?

[Eric Lefebvre, executive]

Yes. So the answer is yes and no. We do -- a lot of the stores we're opening now are stores that have been under construction for a certain amount of time. So yes, definitely, for stores that were swinging hammers in 6 months ago, they would be opening now. But we have the same number of stores under construction at the moment, probably more actually. I don't have the exact number right now, but probably more under construction now than we did the last time we reported on it. So we're certainly stronger because of all the stores that were delayed in the past, but we -- the fact that our pipeline is still really healthy is encouraging for the future.

[Arthur Nagorny, analyst]

Got it. And then in your prepared remarks, you mentioned the tougher financing environment for franchisees impacting the pipeline of new store openings. But can you also comment on the impact that it's having on store closures?

[Eric Lefebvre, executive]

Yes. It doesn't really have an impact on store closures. For the most part, the stores that close are stores that have paid down their debt and the leases are expiring or the franchise agreements are expiring and some franchisees decide to move on or sometimes it's a joint decision where we see that there's no economic model for us in the future, for example, if the landlord increases the rates or various demographic changes or whatever in an area. But it doesn't impact the number of store closures, but definitely for store openings, it slows down the process a little bit.Obviously, economic model for all of our brands is challenged by the debt service costs that have increased materially. So we need to do our homework and make sure we provide an adequate return for our franchisees. And once we achieve that, then it takes a little bit longer for franchisees to find adequate financing, and it takes longer also for the banks to disburse these days. They tend to be a little bit more protective of their capital, and they tend to have more controls over disbursements. But it's not the first time we navigate something like that. We've seen that before. Our teams are trained for it and very patient, and we'll get through it.

[Arthur Nagorny, analyst]

All right. And then last one for me. I guess, pricing is obviously one way to deal with the inflationary backdrop or the minimum wage increases that we're seeing. But can you also talk about your ability to manage the number of menu offerings that you have at your various stores?

[Eric Lefebvre, executive]

Yes. This is a really good question. And this is something that we're constantly reviewing. Introducing new menu items has a certain cost for franchisees. So we're trying to -- for most of our brands, we're trying to introduce new menu items that won't necessarily require new SKUs in the store, new inventory items, try to reuse whatever we already have in the store to optimize the working capital for franchisees and optimize the turnover we have and the volumes we have for each item. Removing some menu items is also part of it. Typically, if we introduce a new menu item, we need to remove at least 1 or 2, try to streamline it, make it simpler for the kitchen also.And then in terms of how we design the menus, how we design the promotions, try to direct our customers to items that might have more favorable food costs, more favorable labor cost is also a strategy that we need to look at. Sometimes you will keep some items that are not as good from a profitability standpoint just because there's something you need to keep on your menu, but you try to direct your customers to something other that will be a little bit more favorable, and that fluctuates over time. Obviously, the prices of various proteins will go up or down over time, and the same happens with all commodities. So yes, it's an art more than a science, but our teams are looking at that on a daily basis.

[Operator]

The next question comes from Nishant Rathi of CIBC.

[Nishant Rathi, analyst]

Congratulations on the results. I had just one question regarding the outlook, if you have, regarding the M&A and if you're looking to -- if there's a pipeline for that?

[Eric Lefebvre, executive]

Yes. M&A is always -- we're always looking at something in terms of M&A. So there's no time where we're not looking at anything. I would say the market right now is a little bit quieter than normal. There are not that many buyers out there. So I think the sellers are choosing their timing probably a little bit more wisely than they have before. We've seen a lot of processes going to the market and fail to either attract buyers or attract offers that are satisfactory to sellers. Obviously, the cost of financing right now and the cost of money is a factor for anyone who wants to buy a company. So I would say that the market is a little bit more quieter. There's not that many sellers out there. And when there's a seller, there's not that many buyers either. So I mean, for us, we're okay with that. We're patient as usual, as I think people that have followed MTY for a long time know how patient we can be, and we're going to wait for the right time and the right opportunity. And in the meantime, we pay down our debt, we build our treasure chest, and we'll be ready for when the time comes.

[Nishant Rathi, analyst]

And I have another question, and I think this would be a little more topical because in the last one week, we have seen some news emerging regarding Wegovy and Ozempic and the other obesity drugs and the impact it could have on the consumption in general. So do you have any thoughts about that? Or how are you looking at that as a risk in near term or long term?

[Eric Lefebvre, executive]

Yes. So sorry, I missed the early part of your question. Can you repeat that?

[Nishant Rathi, analyst]

Sorry. So one of the things which has been in the news in the last few days have been regarding Wegovy and Ozempic and the potential for them to reduce consumption over some time. So just wanted to know your thoughts on that.

[Eric Lefebvre, executive]

Yes. I'm not sure what you're referring to, to be honest. But no, we're not seeing anything in the last few days that would create a dent in the current trajectories we're seeing. So yes, I'm not exactly sure what you're referring to, but I'm not aware of anything that would change materially consumer behavior.

[Operator]

[Operator Instructions] The next question comes from Derek Lessard of TD Cowen.

[Derek Lessard, analyst]

Eric, just a couple of follow-ups for me. Over the last couple of quarters, you've highlighted the improvement that Papa Murphy's kind of like mid-single-digit same-store sales growth. Just curious if you could maybe just give us an update on the progress you're seeing in that banner in particular.

[Eric Lefebvre, executive]

Yes. Papa Murphy's continued to perform well during the quarter, harvesting a lot of what we've -- lot of what we've done, a lot of the initiatives that have been implemented in the last 18 to 24 months. So yes, it's just -- I won't call it smooth sailing, but we're continuing on the same trend.

[Derek Lessard, analyst]

Okay. And maybe just get your thoughts as well on the food processing and the retail segment. Just curious, I think last quarter, it had been slowing a touch. What are the -- some of the trends that you're seeing in that business?

[Eric Lefebvre, executive]

Yes. More of the same. Obviously, you noticed in the U.S. that we've lost that licensing agreement, so that causes a dent in our profits. It takes a little bit longer for us to list the products where we're going to relaunch these products and we're working really hard at doing that. It takes a little bit longer for us to list in the U.S. than we anticipated, but we hope we'll be getting there soon. And Canada, I would say that the market is a little bit slower as well. It's lower for us to launch new products. It's also slower for some of our existing products.So I mean, it's still a really good business segment for us. We're still really happy with it. It's got huge opportunity. We're launching a lot of really interesting products still. Our team is really dedicated at being successful with everything we do. But it's a slower environment. We're dependent on the grocers as well and on the retailers for a certain amount of items. But all in all, I mean, despite the slight slowdown, we're still happy with it, and we're still thinking that it's a really good growth segment for MTY.

[Derek Lessard, analyst]

Eric, is that -- the slowing, do you think it's a function of the inflation and maybe some higher pinch points, let's say? Or is it some pushback that you're getting from the retailers themselves in terms of trying to pass that price on?

[Eric Lefebvre, executive]

The pushback is constant. It's always been like that. So it's nothing new. So the current environment is not different than what it was before. I think the retailers are probably pushing on their private labels a little bit more than they have in the past. You're going to see a lot of advertising of private labels. You're going to see a lot of advertising on the cheaper products, on the bundles and maybe less on the branded products. So it's probably a function of what they promote, what they try to push customers to, and the customer at the same time probably going for discounts a little bit more. But even with that, we have some of our very premium products that are selling like they've never sold before.So the customer -- again, it's a question of value. If you offer value to the customer, even if the price is high, if the experience is there to meet that price tag, customers will accept the price. But yes, I think it's a matter of priorities. It's a matter of adjusting to the markets and all the retailers are adjusting at the moment, and it's causing probably a little slowdown in the market, but nothing that will last forever. We'll be back on our feet pretty quickly, I'm sure.

[Operator]

The next question comes from Michael Glen of Raymond James.

[Michael Glen, analyst]

Eric, on the new openings, maybe you can speak to what are the, say, top 3 banners that you're having success with the openings?

[Eric Lefebvre, executive]

Yes. By far, Cold Stone is the highest. So -- I mean, Cold Stone has been hugely successful in the past 2 years, I would say. And we're still swinging hammers on a lot of stores, too. But yes, Cold Stone by far is the highest in terms of openings. There's a few brands that have been successful as well. But as far as the top-top brand that exceeds all the others, I would say, Cold Stone and then Wetzel's has also been opening a lot of stores in the past -- since we've acquired it. We've had a lot of success with converting the pipeline into new stores. So those would be 2 brands. If I had to name 2, that would be at the top of the list.

[Michael Glen, analyst]

And then just on the cash flow, are you able to give a guidance on your CapEx for the year?

[Eric Lefebvre, executive]

Yes. So I think CapEx will go back to more normal levels in Q4. We do have to finish building 2 of the stores that were pre-committed. But other than that, I think CapEx will go back to normal. I don't anticipate massive CapEx going forward. So Q4 trending back to normal and then after, I don't anticipate any major CapEx for next year.

[Operator]

[Operator Instructions] The next question comes from Derek Lessard of TD Cowen.

[Derek Lessard, analyst]

Sorry, one last one for me. I did notice in your press release, Eric, that you guys pointed to average monthly unit volume of new locations. I was just curious if that number that you provided has trended higher as you focus more on quality locations.

[Eric Lefebvre, executive]

Yes. This is -- it's hard to tell because we stopped using that metric during the pandemic. We thought it was a little bit misleading. So where it's trending, I'd like to say it's trending higher. But I would be lying if I told you I have the last 10 quarters or the last 15 quarters to really have a trend on it. So I'd rather not give you an answer on this point.

[Operator]

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.