Sportscene Group Inc. — Interim / Quarterly Report 2021

Jul 15, 2021

INTERIM REPORT

FOR THE THIRD QUARTER OF FISCAL 2021

DATED JULY 15, 2021

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MESSAGE TO SHAREHOLDERS

The Quebec government has introduced a reopening plan that provides for a gradual easing of public health restrictions as of May 28, 2021. We welcome this development and are working hard to ensure the successful resumption of our restaurant operations while maintaining the customer and employee experience for which our banner is known.

We are proud to have weathered the worst of this health crisis and with the support of multiple government programs and the dedication of our staff, to have preserved our financial health. While we continue to face structural challenges such as workforce availability and supply chain issues, we are emerging from this unprecedented situation with an enhanced off-premise offering, a well-established grocery store distribution network and an improved local supply strategy. It is also encouraging to see our clientele eager to return as we gradually reopen our dining rooms.

In order to regain our full cruising speed and return to profitability, our priorities will be focused on optimizing our activities in this new operating context and continuously improving our customer experience. In anticipation of the reopening, we have restarted several promising initiatives, including investments in staff training and recruitment. We have also invested in state-of-the-art technology, notably to update our “Club Cage” mobile application and to support the growth of “La Cage at Home” offpremise dining. We also recently signed a new supply agreement with a Quebec-based supplier for our popular ribs sold in grocery stores, which will allow Sportscene to stand out even more in a market that remains highly competitive.

With the hope of steady improvement in the pandemic situation and some return to normalcy, we can now look to the future. We are entering a new chapter, with improved operational efficiencies, a leaner cost structure, a more diversified revenue sources and a product offering which responds to consumer trends.

The pandemic has allowed us to demonstrate the agility, resilience and innovation of our people and the flexibility of our business model. With the support of our employees and partners, we are emerging from the worst of the crisis with a clear plan to pursue our mission to create a unique, enjoyable experience for our customers.

JEAN BÉDARD

Chairman of the Board, President and Chief Executive Officer

July 15, 2021

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INTERIM MANAGEMENT DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATION AND FINANCIAL CONDITION FOR THE 13- AND 39-WEEK PERIODS ENDED MAY 30, 2021

Description of the business

Sportscene Group Inc. (“Sportscene” or “the Company”) is a pioneer and a leader in the atmosphere restoration market in Quebec, where it has been operating since 1984. Its operations and results are divided into four different segments.

Restaurant operations : Sportscene’s core business is the operation of corporate and joint venture restaurants. As at the date hereof, there are 27 restaurants in this segment, including 25 operating under the La Cage – Brasserie Sportive (“La Cage”) banner. This segment generated 34.9% of Sportscene’s consolidated revenues during the first three quarters of fiscal 2021 (after inter-segment eliminations). The La Cage – Brasserie Sportive restaurants, which are located across Quebec and enjoy a strong brand image, offer full restaurant services in a sports-themed décor. These restaurants are known for their thematic nature, their high-quality food made with fresh, local products and their use of the most advanced audiovisual and communication technologies. Over the last three years, the Company has begun to integrate restaurants operating under other banners, including P.F. Chang’s (Asian cuisine). Sportscene currently owns two restaurants under these other banners.

Retail activities : La Cage-branded products are sold in grocery stores for several years now. With the acquisition of Moishes in 2019, the Company also added the existing distribution of the products from that iconic steakhouse, helping to drive significant revenue growth in this segment. In fiscal 2020, the Company expanded the La Cage product line and retail distribution network. As a result, this segment generated 57.1% of consolidated revenues for the first three quarters of fiscal 2021 (after inter-segment eliminations).

Franchising activities : Sportscene is the franchisor of 13 La Cage – Brasserie Sportive restaurants. Revenues for this segment include entrance fees and royalties, as well as revenues from construction and technological support services provided to franchisees and joint ventures. This segment generated 5.7% of Sportscene’s consolidated revenues for the first three quarters of fiscal 2021 (after inter-segment eliminations).

Other activities: This segment includes event catering services, operation of a sports complex and other real estate as well as the sale of broadcasting rights for sporting events. It generated 2.3% of consolidated revenues for the first three quarters of fiscal 2021 (after inter-segment eliminations).

Sportscene is a public company whose shares trade on the TSX Venture Exchange under the ticker symbol SPS.A. The Company currently employs approximately 1,700 people, including the employees furloughed following the closure of restaurant dining rooms. Prior to the start of the pandemic, the Company employed approximately 2,500 people in its restaurants and head office.

Introductory comments

General

This interim management discussion and analysis (“MD&A“) provides an analysis of the operating results for the 13- and 39-week periods ended May 30, 2021, compared with the results for the corresponding periods ended May 24, 2020. It also provides an analysis of cash flows and changes in the Company’s financial condition between August 30, 2020, the end of the previous fiscal year, and May 30, 2021. The MD&A should be read in conjunction with the condensed interim consolidated financial statements and accompanying notes for the 13- and 39-week periods ended May 30, 2021, which have not been audited

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by an independent auditor, and with the audited consolidated financial statements and accompanying notes for the fiscal year ended August 30, 2020.

These documents, along with other complementary documents, including previous interim and annual MD&As and press releases, are available on the SEDAR website, at www.sedar.com.

Unless otherwise indicated, all comparative figures concerning the results for the 13- and 39-week periods ended May 30, 2021, are compared to the figures for the 13- and 39-week periods ended May 24, 2020.

In this MD&A, “Sportscene Group Inc.”, “Sportscene” and “the Company” designate Sportscene Group Inc. and its subsidiaries, or Sportscene Group Inc. or one of its subsidiaries, as applicable. The information presented in this MD&A takes into account any material events that occurred prior to July 15, 2021, the date of approval of the condensed interim consolidated financial statements and the interim MD&A by the Company’s Board of Directors.

Compliance with IFRS

Unless otherwise indicated, the financial information presented in this MD&A, including the amounts appearing in the tables, is expressed in Canadian dollars and is prepared in accordance with International Financial Reporting Standards (“IFRS”). The information presented in this MD&A also includes measures that are not performance measures consistent with IFRS. Because they do not have a standardized meaning prescribed by IFRS, such measures may not be compatible with similar measures presented by other issuers.

Sportscene uses the “consolidated adjusted EBITDA” measure because it allows management to assess the Company’s operational performance and its business segments. Consolidated adjusted EBITDA corresponds to income/loss before financial expenses, amortization, other gains/losses, net income/net loss of joint ventures and income tax for each of the Company’s business segments, to which are added the Company’s share of earnings (loss) before financial expenses, amortization and income tax of the joint ventures, as well as government assistance deducted from amortization and financial expenses. Generally speaking, EBITDA is a widely accepted financial measure of a company’s ability to service its debt. Investors should not consider it as an alternative to operating revenues or net income, as a measure of operating performance or cash flows, or as a measure of liquidity.

In addition to consolidated adjusted EBITDA, the following are not performance measures consistent with IFRS. “Total restaurant sales” represents the sales of all restaurants operating under the Company’s various banners, whether corporate, joint venture or franchise units. This performance measure indicates the Company’s overall growth and reflects the direct impact of restaurant openings and closures. “Average same-restaurant sales” is used to isolate the impact of restaurant openings and closures in order to assess the actual trend in the sales of units that have been in operation for two full consecutive years.

“Short-term available cash” includes cash and cash equivalents, as well as investments, if any. “Total net debt” consists of the sum of long-term debt (including the current portion), lease liabilities (including the current portion) and contingent consideration, net of short-term available cash.

The reader is referred to Table 11 of this MD&A, which provides a quantitative reconciliation of the nonIFRS financial data.

Forward-looking statements

This MD&A is designed to assist investors in understanding the nature and importance of changes and trends, as well as the risks and uncertainties associated with the Company’s results of operation and financial condition. Statements in this MD&A that describe Sportscene’s objectives, projections, estimates, expectations or forecasts may constitute forward-looking statements within the meaning of securities legislation. In addition, the impact of COVID-19 on the industry in which the Company operates

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and on the Company itself is constantly changing and all related forward-looking statements herein are subject to change. The actual impact may differ materially from expectations.

Sportscene’s management would like to point out that, by their very nature, forward-looking statements involve a number of risks and uncertainties such that the Company’s actual and future results may differ materially from those indicated. No assurance can be given that the results, performance or achievements expressed or implied by the forward-looking statements will be realized. Unless required to do so under applicable securities legislation, management does not assume any obligation to update or revise forward-looking statements to reflect new information, future events or other changes.

Context of the COVID-19 pandemic

The public health risks related to the COVID-19 pandemic continue to have a significant impact on the Company’s activities, projects, revenues, operating results, liquidity and debt levels. Despite the recent lifting of public health restrictions across the province, the outlook for the next quarters remains very difficult to assess given the uncertainty surrounding the pandemic, including restrictions that could be imposed by governments, COVID-19-related concerns surrounding going out in public, the emergence of new variants, additional measures that may be required, the availability and efficacy of vaccines and the effect of precautionary measures such as physical distancing and masks on consumer behaviour. In addition, the COVID-19 pandemic has impacted on workforce availability and the supply chain. The Company cannot predict all of the potential effects or when the situation will fully recover. The reader is referred to the “Risks and uncertainties” section of the annual MD&A for fiscal 2020.

Recent developments

Reopening plan and gradual resumption of restaurant operations in all regions of Quebec

On March 13, 2020, a state of emergency was declared in Quebec allowing the government to put in place measures to ensure the protection of the public health in the face of the COVID-19 pandemic.

With the public health situation showing recent improvements, the Quebec government has introduced a relief plan across the province. As of May 28, 2021, the reopening plan provides for the elimination of certain measures, such as the curfew, and the reopening of restaurant outdoor terraces in red zones and restaurant dining rooms in orange zones. As of the date hereof, the entire province of Quebec was once again in the green zone, which means additional easing of measures in terms of restaurant operations and capacities compared to the situation that prevailed on April 15, 2021, the date of the last MD&A. Conditions permitting, the Quebec government may lift all public health measures at the end of August.

Despite these positive recent developments, the full extent of the public health crisis and its long-term repercussions on the economy are not yet fully known. So far, it has resulted in extreme volatility in the financial markets, higher commodity prices, issues surrounding workforce availability and supply chain disruptions. The pandemic may have a longer-term impact on the Company’s business and growth plans, the extent of which will depend on future developments, policies and measures. The Company continues to actively monitor developments and diligently comply with all government directives and measures.

Impact of the pandemic on the evolution of the strategic plan and mitigation measures

Over the past years, Sportscene has integrated new thematic restaurant banners, further improved its customer and employee experience and diversified its activities by focusing on new distribution channels for reaching consumers. This strategic shift has resulted in significantly enhanced popularity of the La Cage banner, a steadily increase in profitability and laid a solid foundation for a new phase of growth.

Optimization of the restaurant network

The arrival of the COVID-19 pandemic in Quebec in early March 2020, forced the government to introduce public health measures that affected the Company’s operations as of March 13, 2020, about three weeks into its third quarter of fiscal 2020. In the new operating context, the Company was obliged

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to react quickly and evaluate the profitability of its network of facilities. As a result, since the beginning of the pandemic, a number of facilities have had to be permanently closed.

Development of new distribution channels

Products available in grocery stores:

Since fiscal 2019, the Company has been working to the increase the number of products offered in grocery stores by expanding the range of Aliments du Quebec -certified La Cage products, to which were added Moishes branded products since the acquisition of the iconic steakhouse in the second quarter of fiscal 2019.

In fiscal 2020, the Company entered into a number of distribution agreements for its La Cage-branded products, which are now available in most major grocery store chains in Quebec. These efforts have contributed to the significant growth in revenues from retail activities.

As a result, retail sales represented 57.1% of Sportscene’s revenues for the first three quarters of fiscal 2021. For the year to date, retail sales have generated $23.6 million in revenues, 24.7% over the equivalent period in fiscal 2020.

La Cage at Home:

In order to keep its restaurants operating and serve its customers off-premise, Sportscene also developed the new La Cage at Home concept, which it began promoting in the third quarter of fiscal 2020, with an enhanced offering of delivery, take-out and ready-to-cook meals featuring local Quebec products. The pandemic has whetted consumers’ appetite for local products, and the Company will therefore continue to incorporate them into its menu and to promote Quebec products, including beers, wines and spirits.

Cash preservation

Since the beginning of the pandemic, the Company has managed its operations and expenses prudently, negotiated rent reduction agreements with its lessors, make sure to retain its key employees, further developed its off-premise dining options and prepared for rapid reopening of its restaurant dining rooms, which was allowed in certain regions as of February 8, 2021, toward the end of the second quarter, and more broadly as of May 28, 2021, two days before the end of the third quarter of fiscal year 2021.

The Company has also benefited from federal assistance programs, including the Canada Emergency Wage Subsidy (“CEWS”), which covered a portion of wages. CEWS assistance to the Company totalled $6.5 million in the first three quarters of fiscal 2021. The government extended the assistance program until the end of September 2021, subject to certain eligibility criteria. Sportscene was also eligible for the Canada Emergency Rent Subsidy (“CERS”), receiving $2.4 million in the same period, and obtained concessions of $1.2 million from its lessors on amounts owed. The Company has been eligible for the Emergency Assistance Program for Small and Medium-sized Businesses (“PAUPME”), a provincial program, as of the third quarter of this fiscal year, and received $2.5 million in assistance covering the period from October 2020 to May 2021. As the conditions for recognition of this assistance were not met as at the end of the previous quarters, the entire amount for which the Company was eligible under the program for that period was recognized in the third quarter. The Company has received a total of $11.3 million in government assistance under these programs since the beginning of the current fiscal year.

Sportscene also ensures that its debt remains at an acceptable level and, as a precautionary measure, has $7.6 million available in temporary investments to respond to unforeseen events associated with the current pandemic.

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Summary of financial position:

As at May 30, 2021, the Company had $7.3 million in available financing capacity on its $25 million revolving credit facility. The credit facility bears interest at the prime rate and, as of the date hereof, matures in June 2024. No repayments are required before maturity. The Company has obtained a relief of its financial and restrictive covenants until August 29, 2021.

Despite the recent positive developments in the public health situation, it impossible to predict the duration of the pandemic and its economic impact, and it is difficult to assess its impact on the mid- to long-term financial health of consumers and on their discretionary spending. These factors could also have a negative impact on the Company’s future financial performance. A return to a pre-COVID-19 level of sales will depend on the return of restaurant traffic, the evolution of government measures, the number of facilities in the network and diversification of the distribution network. Management expects the economic uncertainty to persist for another 24 months or so. Sportscene Group remains proactive in its efforts to mitigate the impact of the pandemic on its operations and financial results. Despite all the Company’s efforts and the measures it has put in place, particularly to preserve its cash, the ongoing crisis has adversely affected the economy in general and the economic outlook, and consequently has had a negative impact on Sportscene Group’s operations and financial performance, which will continue for some time.

Quarterly information

Table 1: Principal financial information for the past quarters (unaudited)[(1)]

(in thousands of $, except per-share amounts)

		First	Second	Third	Fourth
		quarter	quarter	quarter	quarter
Fiscal year ended August 29, 2021		(13 weeks)	(13 weeks)	(13 weeks)
	Total restaurant sales(2)(3)	11,940	6,320	8,868
	Consolidated revenues	13,565	13,932	13,822
	Net loss	(461)	(889)	(441)
	Loss per share
	●Basic	(0.05)	(0.11)	(0.05)
	●Diluted	(0.05)	(0.11)	(0.05)
	Fiscal year ended August 30, 2020	(13 weeks)	(13 weeks)	(13 weeks)	(14 weeks)
Total restaurant sales(2)(3)		38,495	38,496	8,884	15,820
	Consolidated revenues	38,373	34,678	16,672	20,125
	Net income (loss)	1,708	732	(7,168)	688
	Earnings (loss) per share
	●Basic	0.20	0.09	(0.83)	0.09
	●Diluted	0.19	0.09	(0.83)	0.09
	Fiscal year ended August 25, 2019	(13 weeks)	(13 weeks)	(13 weeks)	(13 weeks)
	Total restaurant sales(2)(3)	34,243	35,521	38,624	36,981
	Consolidated revenues	27,987	29,551	31,553	33,502
	Net income	1,027	545	1,096	1,215
	Earnings per share
	●Basic	0.13	0.07	0.13	0.13
	●Diluted	0.13	0.07	0.13	0.12

(1) Quarterly results for fiscal 2020 and 2021 take into account the impact of the adoption of new accounting standard IFRS 16. As permitted by this new accounting standard, comparable data for fiscal 2019 has not been restated and therefore might not be comparable.

(2) Total sales generated by all restaurants operating under the La Cage – Brasserie Sportive banner and the Company’s other banners, whether corporate units, joint ventures or franchises.

(3) See Table 11 for the reconciliation of non-IFRS financial measures.

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Quarterly trends and seasonality

Prior to the COVID-19 pandemic, the Company’s operations were heavily influenced by the timing of sporting events, as a result of which the third quarter was generally the strongest quarter of the year. In recent years, the repositioning of the La Cage banner has helped to reduce the relative importance of the “event” effect in the Company’s business model, thereby helping to attenuate the seasonal nature of its activities and allow for more balanced and profitable management of its operations throughout the year. Consistent with the Company’s strategy, this positive trend should be reinforced in the years to come by the incorporation of other banners operating in the themed restaurant market, the growth of retail sales of its branded products and the development of additional distribution channels for reaching consumers.

Table 2: Other selected consolidated quarterly information (unaudited)

(in thousands of $, except per-share amounts and number of shares)

Operating results

Operating results
	13	weeks	39	weeks
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Total restaurant sales(1)	8,868	8,884	27,128	85,875
Consolidated revenues	13,822	16,672	41,319	89,723
Consolidated adjusted EBITDA(2)	2,051	(1,611)	4,824	7,427
Net loss	(441)	(7,138)	(1,791)	(4,698)
Loss per Class A share
• Basic	(0.05)	(0.83)	(0.21)	(0.54)
• Diluted	(0.05)	(0.83)	(0.21)	(0.54)
Class A shares outstanding (in thousands)
• Basic	8,568	8,548	8,557	8,548
• Diluted	8,568	8,548	8,557	8,548
Cash dividends paid on Class A shares	-	-	-	0.15
Financialposition data
		May 30,	August 30,	May 24,
		2021	2020	2020
		$	$	$
Short-term available cash(3)		8,446	8,390	4,358
Total assets		100,692	107,990	104,129
Shareholders’ equity		31,498	33,422	32,725
Total debt(4)		53,847	55,514	50,925

(1) Total sales generated by all restaurants operating under the La Cage – Brasserie Sportive banner and the Company’s other banners, whether corporate units, joint ventures or franchises.

(2) See Table 11 for the reconciliation of non-IFRS financial measures.

(3) Includes cash and cash equivalents, as well as investments, if any.

(4) Includes long-term debt, contingent consideration and lease liabilities, including their current portions. See Table 9 for more details.

Restaurant network trends and results for the period ended May 30, 2021

Table 3: Changes in the number of restaurants since the beginning of fiscal 2021

	Corporate units(1)	Jointventures(2)	Franchises(2)	Total
As at August 30,2020	28	3	11	42
Constructions Transactions Closures	- (1) (2)	- (1) -	- 2 -	- - (2)
As at May 30, 2021	25	2	13	40

(1) Corporate restaurants operate under the La Cage ‒ Brasserie Sportive and P.F. Chang's banners .

(2) Restaurants held in joint venture and those owned by franchisees operate under the La Cage ‒ Brasserie Sportive banner.

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Changes in the restaurant network since the beginning of the fiscal year

At the beginning of the fiscal year, the Company’s restaurant network, including corporate units, joint ventures and franchises, consisted of 42 restaurants, of which 38 were La Cage restaurants (24 corporate units, 3 joint ventures and 11 franchises) and 4 were operating under other banners.

As at May 30, 2021, the Company’s network of restaurants consisted of 40 units, of which 38 were La Cage restaurants (23 corporate units, 2 joint ventures and 13 franchises) and 2 were operating under other banners.

Overall restaurant performance

During the 13-week period ended May 30, 2021, revenues from corporate and joint venture restaurants were limited almost exclusively to off-premise dining activities due to the public health measures in effect. It was not until May 28, 2021, two days before the end of the third quarter, that restaurants were once again allowed to welcome and serve customers in all regions of the province with certain restrictions depending on alert levels. Franchised facilities benefited more from on-site dining sales during the third quarter of fiscal 2021, as many of them were located in zones classified as “orange” or “yellow”. Despite the recent easing of public health measures, Sportscene’s restaurant operations were significantly disrupted during the 13- and 39-week periods ended May 30, 2021.

For the 13-week period ended May 30, 2021, total restaurant sales for the Company’s corporate units, joint ventures and franchises, regardless of the banner under which they operated, amounted to $8.9 million, unchanged from the same quarter last year. In the third quarter of fiscal 2020, the government ordered the province’s dining rooms to closed as of March 13, 2020, nearly three weeks into the quarter. In the third quarter of fiscal 2021, only a small number of the network’s restaurant dining rooms were allowed to remained open owing to their favourable location. Total year-to-date restaurant sales for the 39-week period ended May 30, 2021, totaled to $27.1 million, a 68.4% reduction from the equivalent period in fiscal 2020 due to the evolving COVID-19 pandemic and public health measures. (Please see Table 11 for the reconciliation of non-IFRS financial data and the following section for comments on changes in restaurant and consolidated sales.)

Operating results for the 13- and 39-week periods ended May 30, 2021

Recognition of restaurant revenues and expenses

The network of restaurants operating under the Company’s various banners consists of corporate restaurants (including subsidiaries) and joint venture and franchise outlets. In its consolidated financial statements, Sportscene recognizes all the revenues and expenses of its corporate units, as well as the share of the net income/loss attributable to non-controlling interests in some of its subsidiaries. Net income or net loss of joint ventures, being restaurants in which the Company holds an interest of 50% or less, is accounted for using the equity method, in accordance with IFRS 11, “Joint Arrangements”, and is isolated and presented separately. In the case of the franchises, the Company recognizes revenues mostly in the form of royalties, entry fees and contributions to the National Advertising Fund.

Given these different accounting methods and changes in the makeup of the restaurant network from year to year or quarter to quarter, management considers that, aside from consolidated revenues, net income and cash flows, the best indicators of the Company’s performance are the trends in total restaurant sales and consolidated adjusted EBITDA.

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Table 4: Consolidated and segmented revenues[(1) ] (unaudited)

(in thousands of $, except percentages)

			13 weeks ended	13 weeks ended				39 weeks ended	39 weeks ended	39 weeks ended
			May 30, 2021		May 24, 2020			May 30, 2021			May 24, 2020
Revenues from restaurant operations(2)(3)	4,734		34.2%	7,232	43.4%		14,414	34.9%	59,021		65.8%
Revenues from retail activities(2)(4)	7,998		57.9%	8,498	51.0%		23,588	57.1%	18,921		21.1%
Revenues from franchising activities(2)(5)		841	6.1%	399		2.4%	2,349	5.7%		6,179	6.9%
Other revenues(2)(6)		249	1.8%	543		3.2%	968	2.3%		5,602	6.2%
Consolidated revenues	13,822		100.0%	16,672	100.0%		41,319	100.0%	89,723		100.0%

(1) For further details, see Note 18, “Segmented information”, of the notes to the condensed interim consolidated financial statements.

(2) After inter-segment eliminations.

(3) Revenues generated by corporate restaurants, regardless of the banner under which they operate.

(4) Includes revenues derived from grocery store sales of La Cage and Moishes brand products.

(5) Includes entry fees and royalties paid by the franchise and joint venture outlets, as well as revenues from services offered to them, most notably for restaurant construction and renovation and technological support.

(6) Includes revenues generated by event catering, operation of a sports complex and other real estate and the sale of sporting events broadcasting rights.

Comments on operating results for the 13- and 39-week periods ended May 30, 2021

Third quarter

The Company’s consolidated revenues were $13.8 million for the quarter ended May 30, 2021, $2.9 million or 17.1% lower than for the same quarter last year.

The decrease stems mainly from restaurant operations , where revenues decreased by $2.5 million or 34.5% to $4.7 million. It is mainly attributable to disruptions caused by the COVID-19 pandemic, which was responsible for the closure of the majority of dining rooms over a longer period in the third quarter of this fiscal year than in the third quarter of last year. Revenues from restaurant operations represent 34.2% of consolidated revenues for the quarter, compared to 43.4% in the same quarter last year.

Revenues from retail activities slipped $0.5 million or 5.9% to stand at $8.0 million, mainly due to raw materials supply issues in the third quarter of 2021 and the impact of expansion of the distribution network in 2020, which at that time generated strong orders from the new grocery store chains to establish their inventory. For the third quarter this year, revenues from retail activities represent 57.9% of consolidated revenues, up from 51.0% in the same quarter last year.

Revenues from franchising activities increased by $0.4 million to $0.8 million. A higher number of franchised restaurant dining rooms were able to remain open in the third quarter of 2021 due to their favourable geographic location. In addition, in the third quarter ended May 24, 2020, early in the pandemic, the Company granted the entire network a royalty holiday, which had a direct impact on revenues for this segment. Revenues from franchising activities represent 6.1% of consolidated revenues for the third quarter of 2021, compared to 2.4% for the same period last year.

Revenues from other activities declined $0.3 million or 54.1% to $0.3 million. This reduction is attributable to a stronger impact of COVID-19 in the third quarter of 2021, when most other activities, including event catering and operation of the sports complex, were suspended. Revenues from other activities represent 1.8% of consolidated revenues, compared to 3.2% for the same quarter of the previous fiscal year.

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Year-to-date

Sportscene’s consolidated revenues for the 39-week period ended May 30, 2021, were $41.3 million, $48.4 million or 53.9% lower than for the corresponding period in fiscal 2020.

Most of the decrease was attributable to restaurant operations , for which year-to-date revenues fell by $44.6 million or 75.6% to $14.4 million, primarily owing to more severe disruptions caused by the COVID-19 pandemic in the first three quarters of the current fiscal year and, to a lesser extent, to the permanent closure of five establishments in the last 12 months. Revenues from restaurant operations represent 34.9% of consolidated revenues, compared to 65.8% in the same period last year.

Year-to-date revenues from retail activities increased $4.7 million or 24.7% to $23.6 million. This growth is mainly attributable to the expansion of the distribution network to new grocery store chains since the second half of fiscal 2020. The COVID-19 pandemic has also caused a shift in consumption from restaurants to grocery stores. Revenues from retail activities represent 57.1% of consolidated revenues, up from 21.1% in the first three quarters of last fiscal year.

For the 39-week period ended May 30, 2021, revenues generated by franchising activities decreased by $3.8 million or 62.0% to $2.3 million. The closure of restaurant dining rooms and the interruption of renovation and construction activities due to COVID-19 were more significant in the first three quarters of the current fiscal year. Revenues from franchising activities represent 5.7% of consolidated revenues, compared to 6.9% for the equivalent period last year.

Year-to-date revenues from other activities decreased by $4.6 million or 82.7% to $1.0 million. This reduction is attributable to the impact of COVID-19, which forced a slowdown in the majority of other activities, including event catering and operation of the sports complex. Revenues from other activities represent 2.3% of consolidated revenues, compared to 6.2% in the first three quarters of the previous fiscal year.

Table 5: Consolidated and segmented adjusted EBITDA[(1) ] (unaudited)

(in thousands of $)
	13 weeks ended				39 weeks ended
	May 30, 2021		May 24, 2020		May 30, 2021	May 24, 2020
Adjusted EBITDA(1)from restaurant operations(2)	2,149			(587)	4,365	6,823
Adjusted EBITDA(1)from retail activities(2)	993			1,027	2,578	1,341
Adjusted EBITDA(1)from franchising activities(2)	(1,197)			(2,109)	(2,556)	(1,919)
Adjusted EBITDA(1)from other activities(2)		106		58	437	1,182
Consolidated adjusted EBITDA(1)		2,051		(1,611)	4,824	7,427

(1) See Table 11 for the reconciliation of non-IFRS financial measures.

(2) After inter-segment eliminations.

Comments on profitability for the 13- and 39-week periods ended May 30, 2021

Third quarter

Consolidated adjusted EBITDA for the third quarter increased by $3.7 million to $2.1 million. The various government assistance programs and the significant effort devoted to reducing expenses offset the effect of the drop in consolidated revenue and consolidated gross margin owing to COVID-19. In the third quarter of fiscal 2021, the Company was granted a total of $5.4 million under the CEWS, CERS and PAUPME programs, $2.2 million of which was receivable as at May 30, 2021.

Adjusted EBITDA from restaurant operations rose $2.8 million from a loss of $0.6 million to stand at $2.2 million. This improvement resulted from the government assistance received and the cost cutting measures in place in the third quarter, while most government assistance measures had not yet been rolled out in the corresponding period in fiscal 2020.

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Adjusted EBITDA from retail activities was $1.0 million, unchanged from the same quarter last year. Lower marketing expenses compared to the previous fiscal year, when the Company was working to launch and promote its products with new grocery store chains, helped to improve the margins for this segment despite slightly lower sales.

The adjusted EBITDA loss from franchising activities improved by $0.9 million to stand at $1.2 million. The change was attributable to the partial reopening of franchised and joint-venture restaurant dining rooms in the third quarter of this fiscal year compared to their total closure for most of the third quarter of fiscal 2020.

Despite lower sales, adjusted EBITDA from other activities remained unchanged at $0.1 million thanks to the introduction of mitigation measures.

Year-to-date

Year-to-date consolidated adjusted EBITDA fell by $2.6 million to $4.8 million, due to the partial shutdown of restaurant operations, franchising activities and other activities since March 13, 2020. The pandemic’s impact on the Company's profitability has been mitigated by Government support measures and cost cutting efforts, combined with the growth in retail sales.

Year-to-date adjusted EBITDA from restaurant operations fell by $2.5 million or 36.0% to $4.4 million. This reduction is attributable to the pandemic and the resulting closure of almost all dining rooms since the beginning of the current fiscal year and significant costs and losses related to openings and closings over the same period, offset to some degree by government assistance and cost control measures.

Year-to-date adjusted EBITDA from retail activities increased by $1.2 million or 92.2% to $2.6 million due to lower marketing expenses than last year, when significant efforts were being invested in growing the distribution network and expanding the range of products offered to consumers.

Despite significant expense reductions by the franchisor and support from government assistance programs, year-to-date adjusted EBITDA from franchising activities amounted to a loss of $2.5 million, down $0.6 million from a loss of $1.9 million in the corresponding period last year. This variance is almost entirely attributable to the impact of COVID-19, which led to the closure of multiple dining rooms and hence lower royalty payments, as well as losses arising from the suspension of construction activities.

Year-to-date adjusted EBITDA from other activities fell $0.7 million to $0.4 million as a result of the near-complete shutdown of the activities of this segment during the pandemic.

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Table 6: Consolidated gross margin,[(1)] earnings (loss) before income taxes and consolidated net loss (unaudited)

(in thousands of $, except percentages and loss per share)

	13 weeks ended	13 weeks ended	13 weeks ended	13 weeks ended	13 weeks ended	39 weeks ended	39 weeks ended
	May 30, 2021			May24,2020		May 30, 2021	May24,2020
Consolidatedgross margin(1)	5,640				7,049	16,444	53,282
Consolidated gross margin(1)(as a % of revenues)	40.8%				42.3%	39.8%	59.4%
Consolidated adjusted EBITDA(1)	2,051				(1,611)	4,824	7,427
Amortization		670			2,392	3,623	7,237
Financial expenses		80			503	808	1,551
Government assistance deducted from amortization and financial expenses(2)		1777			-	2,764	-
Other(gains)losses(3)			(71)		5,062	(483)	4,752
EBITDA ofjoint ventures(4)			5		(42)	176	564
Net loss (income) of joint ventures			140		204	280	(206)
Loss before income taxes		(550)			(9,730)	(2,344)	(6,471)
Income tax recovery		(109)			(2,592)	(553)	(1,773)
Net loss		(441)			(7,138)	(1,791)	(4,698)
Lossper share (in$)
● Basic	(0.05)				(0.83)	(0.21)	(0.54)
● Diluted	(0.05)				(0.83)	(0.21)	(0.54)
Weighted average number of shares outstanding(in thousands)
● Basic	8,568				8,548	8,557	8,548
● Diluted	8,568				8,548	8,557	8,548

(1) See Table 11 for the reconciliation of non-IFRS financial measures.

(2) In accordance with IFRS, a portion of government rent assistance has been applied against amortization of right-of-use assets and interest on lease liabilities. These amounts have been included in the calculation of the consolidated adjusted EBITDA as they are considered monetary items.

(3) Other (gains) losses include gains on business combinations achieved in stages and gains/losses on the disposal and impairment of property, plant and equipment. For further details, see Note 7 of the notes to the condensed interim consolidated financial statements.

(4) Earnings (loss) before financial expenses, amortization and income tax of the joint ventures. For further details, see Table 11.

Third quarter

Consolidated gross margin for the 13-week period ended May 30, 2021, fell $1.4 million or 20% to stand at $5.6 million, primarily due to the decline in revenues from restaurant operations. As a percentage of revenues, consolidated gross margin was 40.8%, down from 42.3% in the third quarter of the previous fiscal year, resulting from a mix of the mitigation and support measures put in place since the beginning of the pandemic and higher commodity prices.

The amortization expense decreased by $1.7 million to stand at $0.7 million, due to the recognition of $1.3 million in government assistance applied against amortization of right-of-use assets, the reduction in the net value of property, plant and equipment resulting from the recognition of impairment charges in fiscal 2020 and the temporary suspension of investing activities since the onset of the pandemic.

Financial expenses decreased by $0.4 million to stand at $0.1 million, primarily due to the application of $0.4 million in government assistance against interest on lease liabilities.

The Company received a total of $5.4 million in government assistance (CEWS, CERS and PAUPME) in the third quarter, including the $1.3 million applied against the amortization expense of right-of-use assets and the $0.4 million applied against interest on lease liabilities. In the third quarter of fiscal 2020, only the

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CEWS was in place, with $0.8 million in assistance recognized in that period. Other government assistance programs for businesses in the context of the pandemic were not yet in place.

Sportscene thus posted a $0.1 million gain under “ Other (gains) losses ” from the disposal of an investment in joint ventures and a gain realized on the termination of a lease, compared to a loss of $5.1 million recognized in the third quarter of last year, stemming mainly from an impairment charge on property, plant and equipment to account for the impact of COVID-19 on the Company’s sales and the remaining terms on leases.

The Company’s share of EBITDA from joint ventures remained negligible due to restaurant dining room closures, as well as to the smaller number of restaurants held in joint venture during the period.

The Company recorded income taxes recoverable of $0.1 million compared to $2.6 million for the third quarter of last year, due to the loss before income taxes for the period.

Sportscene ended the third quarter of fiscal 2021 with a net loss of $0.4 million or $0.05 per share (basic and diluted), compared to a net loss of $7.1 million or $0.83 per share (basic and diluted) for the same quarter of the previous fiscal year.

Year-to-date

Consolidated gross margin for the 39-week period ended May 30, 2021, was $16.4 million, down $36.8 million or 69.1%, primarily due to the decline in revenues from restaurant operations. Year-to-date consolidated gross margin represented 39.8% of revenues, down from 59.4% in the first three quarters of the previous fiscal year as a result of the significant change in revenue mix.

The amortization expense decreased by $3.6 million to $3.6 million due to the application of $2.1 million in government assistance against amortization of right-of-use assets, the reduction in the net value of property, plant and equipment resulting from the recognition of impairment charges in fiscal 2020, and the temporary suspension of investing activities since the beginning of the pandemic.

Financial expenses decreased by $0.7 million to stand at $0.8 million, mainly due to the application of $0.7 million in government assistance against interest on lease liabilities.

The Company received a total of $11.3 million in government assistance (CEWS, CERS and PAUPME) since the start of the year. At the end of the third quarter of fiscal 2020, only the CEWS was in place, with $0.8 million in assistance recognized by the Company. The other two government assistance programs for businesses in the context of the pandemic were not yet in place.

The gain of $0.5 million recognized under “ Other (gains) losses ”, from the disposal of an investment in a joint venture, compares to a loss of $4.7 million in the first three quarters of the last fiscal year, stemming primarily from an asset impairment charge.

The share of EBITDA from joint ventures was $0.2 million, down $0.4 million due to the closure of restaurant dining rooms and to the smaller number of restaurants held in joint venture during the period.

Income tax recoverable amounted to $0.6 million compared to $1.8 million in the first three quarter of the previous fiscal year, due to the loss before income tax for the period.

As a result, Sportscene ended the first 39 weeks of fiscal 2021 with a net loss of $1.8 million or $0.21 per share (basic and diluted), compared to a net loss of $4.7 million or $0.54 per share (basic and diluted) for the corresponding period last year.

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Cash flows for the 39-week period ended May 30, 2021

Table 7: Summary of cash flows (unaudited)

(in thousands of $)

39 weeks ended	May 30, 2021	May 30, 2021		May 24, 2020
Operating activities:
Net loss		(1,791)		(4,698)
Non-cash components of net loss		5,020		10,078
Operating cash flows		3,229		5,380
Net changes in non-cash balances		(532)		2,719
Cash flows from operating activities		2,697		8,099
Cash flows (used in) from financing activities		(1,941)		1,195
Cash flows used in investing activities		(700)		(5,494)
Increase in cash and cash equivalents		56		3,800
Cash and cash equivalents, end of period		8,446		4,358

In the first three quarters of fiscal 2021, cash flow from operating activities (or cash flow before net changes in non-cash working capital balances) amounted to $3.2 million, compared to $5.4 million in the same period in fiscal 2020. The $2.2 million decrease stems primarily from a decrease in consolidated adjusted EBITDA (excluding the impact of IFRS 16) for the 39-week period. In addition, dividends received from joint ventures at the end of the third quarter were $0.1 million in fiscal 2021 compared to $0.4 million in fiscal 2020.

Net changes in non-cash working capital balances used cash flow of $0.5 million in the first three quarters of the fiscal year due to a reduction in accounts payable following the payment of arrears (for more information, please see “ Financial position as at May 30, 2021 ”, below), compared to cash flow of $2.7 million generated in the first three quarters of the previous fiscal year.

Financing activities used cash flows of $1.9 million during the period, primarily for the repayment of $3.2 million in lease liabilities, with $1.1 million drawn on the revolving credit facility.

Investing activities used total net cash flow of $0.7 million compared to $5.5 million used last year. Given that investing activities have been suspended since the onset of the COVID-19 pandemic, these funds were essentially used to acquire property, plant and equipment associated with renovations initiated before the onset of the pandemic.

Thanks to prudent management of expenses and cash flow, cash and cash equivalents remained at $8.4 million as at May 30, 2021, compared to $4.4 million at the end of the 39-week period the previous year. As a precautionary measure, the Company has drawn $7.5 million on its revolving credit facility over the past 12 months so as to have the necessary funds on hand to respond to unforeseen events associated with the ongoing pandemic.

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Financial position as at May 30, 2021

Table 8: Summary of financial position (unaudited)

(in thousands of $, except ratio)

	May 30, 2021	May 30, 2021	August 30, 2020	August 30, 2020	May 24, 2020	May 24, 2020
Assets:
Current		21,671		23,316		19,016
Non-current		79,021		84,674		85,113
Total assets	100,692		107,990		104,129
Liabilities:
Current liabilities		18,246		22,437		22,268
Non-current liabilities		50,948		52,131		49,136
Total liabilities		69,194		74,568		71,404
Shareholders’ equity:		31,498		33,422		32,725
	100,692		107,990		104,129
Working capital:	3,425		879		(3,252)
Current ratio	1.19:1		1.04:1		0.85:1

During the 39-week period ended May 30, 2021, total assets decreased by $7.3 million. The changes in the key asset items can be summarized as follows:

• Total non-current assets decreased by $5.7 million, mainly owing to decreases of $2.3 million in the value of right-of-use assets and $2.0 million in the value of property, plant and equipment due to the amortization for the period. The value of investments in joint ventures declined by $0.8 million, mainly owing to the disposal of investments in two joint ventures in the first three quarters of the year, and notes receivable and other assets decreased by $0.4 million following the receipt of tax credits receivable.

• Total current assets decreased by $1.6 million, mainly as a result of a $2.9 million decrease in accounts receivable, notably from the collection of accounts receivables associated with retail sales, which are closely tied to the promotional calendar of the various retailers.

Total liabilities decreased by $5.4 million as a result of the following key changes:

• Total non-current liabilities decreased by $1.2 million, primarily because of a $2.4 million reduction in the net book value of lease liability assets, partially offset by $1.1 million drawn on the revolving credit facility.

• Total current liabilities decreased by $4.2 million, mainly from the payment of arrears in supplier accounts payable, notably deferred payments to lessors. There was also a decrease in accounts payable related to retail activities, and in accrued expenses such as salaries, vacation pay and tax remittances as a result of the general slowdown in activities.

Finally, shareholders' equity as at May 30, 2021, was down $1.9 million at $31.5 million, due to the net loss of $1.8 million.

At the same date, working capital showed a surplus of $3.4 million, for a current ratio of 1.19:1, compared to $0.9 million as at August 30, 2020, for a ratio of 1.04:1. This $2.5 million improvement is mainly due to use of the revolving credit facility, as shown under non-current liabilities, to pay down a portion of the accounts payable arrears under current liabilities, and by the receipt of government assistance, mainly consisting of the subsidy obtained under the provincial PAUPME program.

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Table 9: Indebtedness (unaudited)

(in thousands of $, except ratio)

	May 30, 2021	May 30, 2021	August 30, 2020
Total net debt:
Long-term debt(includingcurrentportion)		27,310	25,852
Contingent consideration		2,217	2,127
Lease liabilities(includingcurrentportion)		24,320	27,535
Total debt		53,847	55,514
Less: short-term available cash		(8,446)	(8,390)
Total debt net of cash		45,401	47,124
Debt-to-invested-capital ratio:
Invested capital:
Shareholders’ equity		31,498	33,422
Total net debt		45,401	47,124
Total		76,899	80,546
Total net-debt-to-invested-capital ratio		59.0%	58.5%

In fiscal 2020, the Company renegotiated its principal credit agreement in order to establish a revolving credit facility for a maximum of $25 million. As at the date hereof, the credit facility bears interest at the prime rate and matures in June 2024. No principal repayments are required before maturity.

As explained previously, total net debt has decreased by $1.7 million since the beginning of fiscal 2021 to stand at $45.4 million as at May 30, 2021, compared to $47.1 million on August 30, 2020. The ratio of total net debt to invested capital increased from 58.5% as at August 30, 2020, to 59.0% as at May 30, 2021. As of the same date, the Company had $7.3 million in borrowing capacity available on its revolving credit facility, in addition to $8.4 million in short-term available cash.

As at May 30, 2021, the Company was in compliance with all restrictive covenants related to its financing agreements. In the light of recent developments affecting the global economy in general and the restaurant sector in particular, much uncertainty remains as to the duration of the pandemic and public health measures that could be put in place by the government. Thanks to the growth in the Company’s results over the past three years, Sportscene is in a strong financial position to deal with the current situation. Nevertheless, faced with so many uncertainties, management is obliged to significantly reduce its budget forecasts for fiscal 2021. During the previous fiscal year, the Company obtained an amendment to its financing agreement from its lender, as well as an easing of its financial and restrictive covenants until August 29, 2021. Beyond that period, the debt covenants in effect prior to the easing should in principle apply. The Company is in ongoing discussions with its lenders and agreements with the financial institutions are expected to be renegotiated in the coming weeks in order to update forecasts and to obtain, if needed, additional debt covenant relief, depending on the most recent information regarding the evolution of the pandemic, mandatory public health measures and available government programs.

In addition to the cost control measures discussed above, Sportscene continues to work closely with its commercial partners, including its franchisees, suppliers, lessors and financial institutions, to manage its available cash flow efficiently. The Company also continues to take every step necessary to benefit from any government assistance programs for which it might be eligible.

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Share capital information

Stock option plan

On July 15, 2021, 993,178 Class A shares were reserved for stock options for officers, directors and consultants, including 295,178 for which options had not yet been granted. Under the terms and conditions of the Company’s stock option plan for Class A shares, the 442,000 outstanding options entitle their holders to acquire Sportscene shares at a weighted average exercise price of $3.38 per share.

Dividends

The Board of Directors’ practice with respect to dividends is to assess, on a timely basis, the relevance of paying dividends in the light of market conditions, the Company’s financial position and working capital requirements, and the achievement of performance indicators in line with management’s objectives.

In the current context of the ongoing pandemic and the Company’s desire to preserve its cash, no dividends will be declared before the end of the fiscal year 2021.

2021 outlook and objectives

After successfully repositioning the La Cage – Brasserie Sportive banner, the Company undertook to develop new avenues for expansion, continued to optimize its main banner to extract additional value and completed the updating of most of its restaurants. These measures have driven significant revenue and profitability growth for the Company in recent years.

The recent developments affecting the restaurant industry and the population as a whole have had, and will continue to have, an impact on the Company’s operations in the short and medium term. Although the government recently announced a gradual easing of public health measures, the duration of the pandemic and its longer-term effect on the economy remain difficult to predict. The Company is currently working on ensuring the success of the reopening of its restaurant activities in line with evolving public health standards, customer traffic and workforce availability. Depending on how the public health situation evolves and new health measures that may continue to apply, Sportscene’s primary objective is to consolidate the reopening of its dining rooms and the return to normal operations, while continuing to offer a safe environment for its customers and employees and to align its operational structure with a continuously changing context.

The diversification of Sportscene’s operations has enabled it to maintain a certain level of revenues, thus mitigating the impact of the pandemic on its financial results. Given the growing appeal of off-premise dining, the Company will continue to devote significant efforts to the promotion of its La Cage at Home dining platform and to grow its retail activities. With the gradual reopening of dining rooms network-wide, Sportscene is working to maintain state-of-the-art sanitary measures and to further adapt its menu for both off-premise and on-premise dining. These actions are aligned with Sportscene’s constant pursuit of the best possible customer and employee experience.

Capital expenditures

Because of the ongoing pandemic, acquisitions of property, plant and equipment and other capital expenditures will be kept at a minimum for the duration of the COVID-19 crisis.

Off-balance-sheet arrangements

Financing agreements

The Company has guaranteed debts of joint ventures for a maximum amount of $0.6 million ($1.3 million as at August 30, 2020).

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Related-party transactions

Transactions conducted in the normal course of business with joint ventures, officers and other related parties are assessed at market value. Related-party transactions for the 13- and 39-week periods ended May 30, 2021, were as follows:

Table 10: Related-party transactions (unaudited)

(in thousands of $)

	13 weeks ended	13 weeks ended	13 weeks ended	39 weeks ended	39 weeks ended
	May 30, 2021		May 24, 2020	May 30, 2021	May 24, 2020
Operating revenues(with joint ventures):
Franchises		10	43	74	513
Royalties for the National AdvertisingFund		5	28	44	310
Construction contracts		-	-	1	821
Rentals		-	7	-	73
Other		22	47	78	354
Total		37	125	197	2,071
Operating expenses(with officers and other related parties):
Compensation		268	144	930	755

During the 39-week period ended May 30, 2021, the Company incurred negligible expenses with entities related to directors ($0.3 million during the 39-week period ended May 24, 2020). As at May 30, 2021, the Company had a balance of $0.5 million receivable from its joint ventures ($0.3 million as at August 30, 2020).

Non-IFRS financial measures

Table 11: Reconciliation of non-IFRS financial measures

(in thousands of $, except percentages)

(in thousands of $, except percentages)
	13 weeks ended				39 weeks ended
	May 30, 2021		May 24, 2020		May 30, 2021	May 24, 2020
Restaurant revenues – La Cage(1)		4,229		6,642	12,555	53,062
Restaurant revenues – Other banners(1)		505		590	1,859	5,959
Salesgenerated byfranchises andjoint ventures		4,134		1,652	12,714	26,854
Total restaurant sales		8,868		8,884	27,128	85,875
Earnings (loss) before financial expenses, amortization, net loss/income of joint ventures and income tax		340	(6,631)		2,367	2,111
Other(gains)losses		(71)		5,062	(483)	4,752
Government assistance deducted from amortization and financial expenses(2)		1,777		-	2,764	-
Earnings (loss) before financial expenses, amortizationandincome taxofthe jointventures(3)		5		(42)	176	564
Consolidated adjusted EBITDA		2,051	(1,611)		4,824	7,427
Revenues	13,822		16,672		41,319	89,723
Less: cost of sales		8,182		9,623	24,875	36,441
Consolidatedgross margin		5,640		7,049	16,444	53,282
Gross margin(as a % of revenues)		40.8%		42.3%	39.8%	59.4%

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Segmented consolidated adjusted EBITDA[(4) ]

			Earnings (loss) before financial expenses, amortization, net loss/income of joint ventures and income tax	Other (gains) losses	Gov’t support deducted below EBITDA(2)	Earnings (loss) before financial expenses, amortization and income tax of the joint ventures(3)	Consolidated adjusted EBITDA
13 weeks ended	May 30, 2021	Restaurant	461	(71)	1,777	(18)	2,149
		Retail	959	-	-	34	993
		Franchising	(1,186)	-	-	(11)	(1,197)
		Other activities	106	-	-	-	106
	May 24, 2020	Restaurant	(5,758)	5,196	-	(25)	(587)
		Retail	1,044	-	-	(17)	1,027
		Franchising	(2,423)	314	-	-	(2,109)
		Other activities	506	(448)	-	-	58
39 weeks ended	May 30, 2021	Restaurant	1,952	(483)	2,764	132	4,365
		Retail	2,521	-	-	57	2,578
		Franchising	(2,543)	-	-	(13)	(2,556)
		Other activities	437	-	-	-	437
	May 24, 2020	Restaurant	1,457	4,846	-	520	6,823
		Retail	1,305	-	-	36	1,341
		Franchising	(2,241)	314	-	8	(1,919)
		Other activities	1,590	(408)	-	-	1,182

(1) Restaurant revenue figures are disclosed in Note 5, “Revenues”, of the notes to the condensed interim consolidated financial statements.

(2) In accordance with IFRS, a portion of government rent assistance has been applied against amortization of right-of-use assets and interest on lease liabilities. These amounts have been included in the calculation of the consolidated adjusted EBITDA as they are considered monetary items.

(3) For further details, see Note 12, “ Investments in joint ventures ”, of the notes to the condensed interim consolidated financial statements.

(4) For further details, see Note 18, “ Segmented information ”, of the notes the condensed interim consolidated financial statements.

Significant accounting policies

New accounting standards applied in 2021

Amendments to IFRS 16 ‒ Leases (“IFRS 16”)

In response to the COVID-19 pandemic, the International Accounting Standards Board “IASB” published an amendment to IFRS-16 whereby entities who are granted rent concessions are exempted from considering them as a lease modification if they are a direct consequence of the COVID-19 pandemic and meet certain requirements:

• the revised consideration is substantially the same as or less than the original consideration;

• the rent concession relates to payments due on or before June 30, 2022; and

• no other substantive changes have been made to the terms of the lease.

The Company has applied this simplification measure to all eligible rent concessions, which amounted to $1.2 million for the 39-week period ended May 30, 2021.

Amendments to IFRS 3 – Business combinations (“IFRS 3”)

In October 2018, the IASB published amendments to IFRS 3, Business combinations , effective for fiscal years beginning on or after January 1, 2020. These amendments are intended to clarify the definition of a business, to assist in determining whether an acquisition should be accounted for as a business

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combination or as an asset acquisition. These amendments make the new definition of a business more restrictive, which could decrease the number of business combinations that are accounted for. The amendments also include the option to use a concentration test. This is a test that simplifies the assessment to be made and gives rise to the acquisition of an asset if almost all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or in a group of similar identifiable assets. The Company’s adoption of the amendments to IFRS 3 effective August 31, 2020, had no effect on its condensed interim consolidated financial statements for the 39-week period ended May 30, 2021.

Supplementary information

Supplementary information about the Company, including its latest annual and quarterly reports and its press releases, is available on the SEDAR website, at www.sedar.com.

Chairman of the Board, President and Chief Executive Officer (signed) JEAN BÉDARD

Vice-President, Finance (signed) FRANÇOIS-XAVIER PILON , CPA, CA

July 15, 2021

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