QSR Restaurant Brands International Inc

Consolidated system-wide sales grow 8.1% year-over-year
Global comparable sales of 4.6% driven by 7.5% at TH Canada, 4.2% at BK International, 3.9% at BK US and 6.2% at PLK US
Solid growth in system-wide sales translates into bottom-line growth for franchisees and the Company 
$300 million expanded remodel program at BK US puts business on path to reach 85% to 90% modern image by 2028

TORONTO, April 30, 2024 /PRNewswire/ - Restaurant Brands International Inc. ("RBI") (TSX: QSR) (NYSE: QSR) (TSX: QSP) today reported financial results for the first quarter ended March 31, 2024. Josh Kobza, Chief Executive Officer of RBI commented, "I am proud of the hard work our teams and franchisees are doing to deliver high-quality products, great service and a compelling value proposition for guests every day. Our results are a reflection of their efforts and the strong foundation we have built that sets us up to drive continued improvements in franchisee profitability and deliver our long-term outlook."

First Quarter 2024 Highlights:

• Consolidated comparable sales increased 4.6% and net restaurants grew 3.9% versus the prior year
• System-wide sales increased 8.1% year-over-year
• Income from Operations of $544 million versus $447 million in the prior year
• Net Income of $328 million versus $277 million in prior year
• Diluted EPS was $0.72 versus $0.61 in prior year
• Adjusted Operating Income of $540 million increased 7.7% organically versus the prior year
• Adjusted Diluted EPS of $0.73 decreased (0.9)% organically versus the prior year

Consolidated Financial Highlights

We have five operating segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), Firehouse Subs (FHS) and International (INTL).

The year-over-year increases in Total Revenues on an as reported and on an organic basis were primarily driven by increases in system-wide sales in all our segments. On an as reported basis, INTL was impacted by an unfavorable FX Impact, partially offset by a favorable FX Impact at TH.

The year-over-year increase in Income from Operations was primarily driven by increases in segment income in all of our segments, a favorable change from other operating expenses (income), net, the non-recurrence of FHS Transaction costs and a favorable change from the impact of equity method investments, partially offset by an unfavorable FX Impact and CRG Transaction costs. 

The increase in Net Income was primarily driven by the year-over-year increase in Income from Operations, partially offset by an increase in income taxes and interest expense, net.

The year-over-year increases in Adjusted Operating Income on an as reported and on an organic basis were primarily driven by increases in segment income in all of our segments. On an as reported basis, INTL was impacted by an unfavorable FX Impact, partially offset by a favorable FX Impact at TH.

The year-over-year decrease in Adjusted Net Income was primarily driven by an increase in adjusted income tax expense, an increase in adjusted interest expense and unfavorable FX movements, partially offset by increases in segment income in all of our segments.

Burger King US Reclaim the Flame

In September 2022, Burger King shared the details of its "Reclaim the Flame" plan to accelerate sales growth and drive franchisee profitability. We will be investing $400 million over the life of the plan, comprised of $150 million in advertising and digital investments ("Fuel the Flame") and $250 million in high-quality remodels and relocations, restaurant technology, kitchen equipment, and building enhancements ("Royal Reset").

During the three months ended March 31, 2024, we funded $6 million toward the Fuel the Flame investments, including $5 million toward our support behind the Burger King US advertising fund, and $19 million toward our Royal Reset investments, including $9 million toward remodels. As of March 31, 2024, we have funded a total of $79 million toward the Fuel the Flame investments and $81 million toward our Royal Reset investments.

On April 30, 2024, Burger King announced plans to extend its Long-Term Royal Reset program with plans to invest an additional $300 million in remodels from 2025 through 2028. Through the initial Reclaim the Flame investment, plans to remodel 600 Carrols Restaurant Group restaurants and this extended remodel program, Burger King will be on a path to achieve its goal of 85% to 90% modern image by 2028.

TH Segment Results 

For the first quarter of 2024, the increase in system-wide sales was primarily driven by comparable sales of 6.9%, including Canada comparable sales of 7.5%.

The year-over-year increases in Total Revenues on an as reported and on an organic basis were primarily driven by an increase in system-wide sales as well as an increase in supply chain sales and increases in equipment sales, partially offset by a decrease in consumer packaged goods sales as a result of increased promotional activity and trade investments. The increase in Total Revenues on an as reported basis benefited from a slight favorable FX Impact.

The year-over-year increase in Adjusted Operating Income on an as reported and on an organic basis was primarily driven by the increase in system-wide sales and advertising expenses and other services exceeding advertising revenues and other services in the prior year period as compared to being comparable in the current year period, partially offset by an increase in Segment G&A and supply chain bad debt expense associated with sales of coffee to certain international franchisees. The increase in Segment G&A was primarily driven by higher compensation-related expenses and an increase in professional fees. The increase in Adjusted Operating Income on an as reported basis also benefited from a slight favorable FX Impact.  

BK Segment Results

For the first quarter of 2024, the increase in system-wide sales was driven by comparable sales of 3.8%, including US comparable sales of 3.9%, partially offset by net restaurant growth of (2.4)%.

The year-over-year increase in Total Revenues was primarily driven by an increase in sales from Company restaurants and increases in advertising fund contributions from vendors and franchisees.

Sales and Cost of Sales in the current year quarter were impacted by the acquisition of 89 Company restaurants in the fourth quarter of 2023 and 38 additional Company restaurants on January 16, 2024. As of March 31, 2024, BK owned and operated 175 Company restaurants.

The year-over-year increase in Adjusted Operating Income was primarily driven by the increase in system-wide sales, impact of Company restaurant acquisitions, bad debt recoveries in the current year period compared to bad debt expense in the prior year period, and advertising expenses and other services exceeding advertising revenues and other services in the current period to a lesser extent than in the prior year period, partially offset by a slight increase in Segment G&A.

PLK Segment Results

For the first quarter of 2024, the increase in system-wide sales was driven by comparable sales of 5.7%, including US comparable sales of 6.2%, and net restaurant growth of 4.7%.

The year-over-year increases in Total Revenues and Adjusted Operating Income were primarily driven by the increase in system-wide sales and, to a lesser extent, an increase in Company restaurant sales and profitability.

FHS Segment Results

For the first quarter of 2024, the increase in system-wide sales was driven by net restaurant growth of 3.6% and relatively flat comparable sales of 0.3%.

The year-over-year increase in Total Revenues was primarily driven by an increase in Advertising Revenues and Other Services reflecting the modification of FHS' Advertising fund arrangements to be more consistent with those of our other brands. 

The year-over-year increase in Adjusted Operating Income was primarily driven by the increase in system-wide sales, partially offset by modest increases in Cost of Sales and Segment G&A.  

INTL Segment Results

For the first quarter of 2024, the increase in system-wide sales was driven by net restaurant growth of 8.4%, and comparable sales of 4.2%.

The year-over-year increase in Total Revenues on an as reported and on an organic basis was primarily driven by increases in royalties and higher advertising fund contributions by franchisees and vendors in the limited markets where we manage the advertising funds. The increase in Total Revenues on an as reported basis was partially offset by an unfavorable FX Impact.

The year-over-year increases in Adjusted Operating Income on an as reported and on an organic basis were primarily driven by the increases in system-wide sales, partially offset by higher Segment G&A driven by higher compensation-related expenses and higher Franchise and Property Expenses primarily related to Tim Hortons due to an increase in bad debt expenses. The year-over-year increase in Adjusted Operating Income on an as reported basis was partially offset by an unfavorable FX impact.

Cash and Liquidity

As of March 31, 2024, Total debt was $13.4 billion, Net debt (Total debt less Cash and cash equivalents of $1.0 billion) was $12.3 billion, Net Income Net Leverage was 7.0x and Adjusted EBITDA Net Leverage was 4.8x.

The RBI Board of Directors has declared a dividend of $0.58 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the second quarter of 2024. The dividend will be payable on July 5, 2024 to shareholders and unitholders of record at the close of business on June 21, 2024.

On January 16, 2024, we announced that we have reached an agreement to acquire Carrols Restaurant Group, Inc. ("Carrols") in an all cash transaction for an aggregate total enterprise value of approximately $1.0 billion. The transaction is expected to be completed in the second quarter of 2024, subject to Carrols shareholder approval and other customary closing conditions. The transaction is expected to be financed with cash on hand and an additional $750 million of Term Loan B loans which have been secured on the same terms as the existing Term Loan B under our Credit Agreement.

2024 Guidance (Excluding Carrols)

RBI continues to expect consolidated capital expenditures, tenant inducements and incentives (including BK Royal Reset remodel incentives) of approximately $300 million and adjusted interest expense, net, between $555 million and $565 million.

RBI now expects Segment G&A for 2024 between $665 million and $685 million, including share-based compensation and non-cash incentive compensation expense between $180 million and $190 million.

Long-Term Guidance

RBI hosted an investor event on February 15, 2024 and announced the following long-term consolidated performance that the Company continues to expect to achieve, on average, from 2024 to 2028:

• 3%+ Comparable Sales;
• 5%+ Net Restaurant Growth;
• 8%+ System-wide Sales growth; and
• Adjusted Operating Income growth at least as fast as system-wide sales growth. 

Investor Conference Call 

We will host an investor conference call and webcast at 10:00 a.m. Eastern Time on Tuesday, April 30, 2024, to review financial results for the first quarter ended March 31, 2024. The earnings call will be broadcast live via our investor relations website at http://rbi.com/investors and a replay will be available for 30 days following the release. The dial-in number is 1 (833)-470-1428 for U.S. callers, 1 (833)-950-0062 for Canadian callers, and 1 (929)-526-1599 for callers from other countries. For all dial-in numbers please use the following access code: 967699.

For further information: Investors: investor@rbi.com; Media: media@rbi.com

About Restaurant Brands International Inc.

Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with over $40 billion in annual system-wide sales and over 30,000 restaurants in more than 120 countries and territories. RBI owns four of the world's most prominent and iconic quick service restaurant brands – TIM HORTONS®, BURGER KING®, POPEYES®, and FIREHOUSE SUBS®. These independently operated brands have been serving their respective guests, franchisees and communities for decades. Through its Restaurant Brands for Good framework, RBI is improving sustainable outcomes related to its food, the planet, and people and communities. To learn more about RBI, please visit the company's website at www.rbi.com.

Forward-Looking Statements

This press release contains certain forward-looking statements and information, which reflect management's current beliefs and expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. 

These forward-looking statements include statements about our expectations regarding the effects and continued impact of the (i) our digital, marketing, remodel and technology enhancement initiatives and expectations regarding future expenditures relating to these initiatives, including our "Reclaim the Flame" plan to accelerate sales growth and drive franchisee profitability at Burger King, (ii) our expectations regarding the number of Burger Kings that will be modern image by 2028, (iii) our commitment to growth opportunities, plans and strategies for each of our brands and ability to enhance operations and drive long-term, sustainable growth, (iv) our expectation that the Carrols transaction will be completed in the second quarter of 2024 and financed with cash on hand and term loan debt for which RBI has received a financing commitment, (v) our expectations regarding consolidated capital expenditures, tenant inducements and incentives for 2024, (vi) our expectations regarding Segment G&A and share-based compensation and non-cash incentive compensation for 2024, and (vii) our long term guidance for 2024 to 2028 relating to comparable sales, net restaurant growth, system-wide sales growth and adjusted operating income.

The factors that could cause actual results to differ materially from RBI's expectations are detailed in filings of RBI with the Securities and Exchange Commission and applicable Canadian securities regulatory authorities, such as its annual and quarterly reports and current reports on Form 8-K, and include the following risks related to (1) our substantial indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations; (2) global economic or other business conditions that may affect the desire or ability of our customers to purchase our products, such as inflationary pressures, high unemployment levels, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer perceptions of dietary health and food safety; (3) our relationship with, and the success of, our franchisees and risks related to our nearly fully franchised business model; (4) our franchisees' financial stability and their ability to access and maintain the liquidity necessary to operate their businesses; (5) our supply chain operations; (6) our ownership and leasing of real estate; (7) the effectiveness of our marketing, advertising and digital programs and franchisee support of these programs; (8) significant and rapid fluctuations in interest rates and in the currency exchange markets and the effectiveness of our hedging activity; (9) our ability to successfully implement our domestic and international growth strategy for each of our brands and risks related to our international operations; (10) our reliance on franchisees, including subfranchisees to accelerate restaurant growth; (11) unforeseen events such as pandemics; (12) the ability of the counterparties to our credit facilities' and derivatives' to fulfill their commitments and/or obligations; (13) changes in applicable tax laws or interpretations thereof, and our ability to accurately interpret and predict the impact of such changes or interpretations on our financial condition and results; (14) evolving legislation and regulations in the area of franchise and labor and employment law; (15) our ability to address environmental and social sustainability issues; (16) the conflict between Russia and Ukraine, and the conflict in the Middle East; (17) our and Carrols ability to meet all the closing conditions such that timing of the acquisition of Carrols is consummated as anticipated; (18) our ability to utilize secured loans to fund the Carrols acquisition and (19) litigation or other regulatory matters that could impact the acquisition of Carrols.

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In millions of U.S. dollars, except per share data)
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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Key Operating Metrics

We evaluate our restaurants and assess our business based on the following operating metrics.

• System-wide sales growth refers to the percentage change in sales at all franchise restaurants and Company restaurants (referred to as system-wide sales) in one period from the same period in the prior year. Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for Tim Hortons, Burger King and Firehouse and 17 months or longer for Popeyes. Additionally, if a restaurant is closed for a significant portion of a month, the restaurant is excluded from the monthly comparable sales calculation. 
• System-wide sales growth and comparable sales are measured on a constant currency basis, which means that results exclude the effect of foreign currency translation ("FX Impact") and are calculated by translating prior year results at current year monthly average exchange rates. We analyze key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.
• Unless otherwise stated, system-wide sales growth, system-wide sales and comparable sales are presented on a system-wide basis, which means they include franchised restaurants and Company restaurants. System-wide results are driven by our franchised restaurants, as nearly all system-wide restaurants are franchised. Franchise sales represent sales at all franchised restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales.
• Net restaurant growth ("NRG") refers to the net change in restaurant count (openings, net of permanent closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period. In determining whether a restaurant meets our definition of a restaurant that will be included in our net restaurant growth, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as "alternative formats." These alternative formats are helpful to build brand awareness, test new concepts and provide convenience in certain markets.

These metrics are important indicators of the overall direction of our business, including trends in sales and the effectiveness of each brand's marketing, operations and growth initiatives.

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Supplemental Disclosure - Home Market and International KPIs by Brand

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Supplemental Disclosure - Home Market and International KPIs by Brand

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES 
Supplemental Disclosure
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RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
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Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), and discuss the reasons why we believe this information is useful to management and may be useful to investors. These measures do not have standardized meanings under GAAP and may differ from similarly captioned measures of other companies in our industry.

Non-GAAP Measures

To supplement our condensed consolidated financial statements presented on a GAAP basis, RBI reports the following non-GAAP financial measures: Adjusted Operating Income ("AOI"), EBITDA, Adjusted EBITDA (on a consolidated and a segment basis), Adjusted Net Income, Adjusted Interest Expense, Adjusted Diluted Earnings per Share ("Adjusted Diluted EPS"), Organic revenue growth, Organic AOI growth, Organic Adjusted EBITDA growth, Organic Net Income growth, Organic Adjusted Net Income growth, Organic Adjusted Diluted EPS growth, Free Cash Flow, Net Debt, and Adjusted EBITDA Net Leverage. We believe that these non-GAAP measures are useful to investors in assessing our operating performance or liquidity, as they provide them with the same tools that management uses to evaluate our performance or liquidity and are responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented.

AOI represents income from operations adjusted to exclude (i) franchise agreement amortization as a result of acquisition accounting, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced in the following financial results, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the Firehouse Acquisition consisting of professional fees, compensation-related expenses and integration costs ("FHS Transaction costs"), (ii) non-recurring fees and expense incurred in connection with the Carrols Restaurant Group Acquisition consisting primarily of professional fees ("CRG Transaction costs") and (iii) non-operating costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements as well as services related to significant tax reform legislation and regulations ("Corporate restructuring and advisory fees"). Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations. AOI is used by management to measure operating performance of the business, excluding these other specifically identified items that management believes are not relevant to management's assessment of our operating performance. AOI, as defined above, also represents our measure of segment income for each of our five operating segments.

EBITDA is defined as earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax (benefit) expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net, and (iv) income or expense from non-recurring projects and non-operating activities (as described above). Adjusted EBITDA for each of the five reporting segments is defined as AOI for the respective segment  operations adjusted to exclude (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense associated with the segment and (ii) depreciation and amortization (excluding franchise agreement amortization as a result of acquisition accounting) associated with the segment.

Adjusted Net Income is defined as Net income excluding (i) franchise agreement amortization as a result of acquisition accounting, (ii) amortization of deferred financing costs and debt issuance discount, (iii) loss on early extinguishment of debt and interest expense, which represents non-cash interest expense related to losses reclassified from accumulated comprehensive income (loss) into interest expense in connection with interest rate swaps de-designated in May 2015, November 2019 and September 2021, (iv) (income) loss from equity method investments, net of cash distributions received from equity method investments, (v) other operating expenses (income), net, and (vi) income or expense from non-recurring projects and non-operating activities (as described above). 

Adjusted Interest Expense is defined as interest expense, net less (i) amortization of deferred financing costs and debt issuance discount and (ii) non-cash interest expense related to losses reclassified from accumulated comprehensive income (loss) into interest expense in connection with interest rate swaps de-designated in May 2015, November 2019 and September 2021.

Adjusted Diluted EPS is calculated by dividing Adjusted Net Income by the weighted average diluted shares outstanding of RBI during the reporting period. Adjusted Net Income and Adjusted Diluted EPS are used by management to evaluate the operating performance of the business, excluding certain non-cash and other specifically identified items that management believes are not relevant to management's assessment of operating performance.

Net debt is defined as Total debt less cash and cash equivalents. Total debt is defined as long-term debt, net of current portion plus (i) Finance leases, net of current portion, (ii) Current portion of long-term debt and finance leases and (iii) Unamortized deferred financing costs and deferred issue discount. Net debt is used by management to evaluate the Company's liquidity. We believe this measure is an important indicator of the Company's ability to service its debt obligations.

Adjusted EBITDA Net Leverage is defined as Net Debt divided by Adjusted EBITDA. Net Income Net Leverage is defined as Net Debt divided by Net Income. Both of these metrics are operating performance measures that we believe provide investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt.

Revenue growth, Adjusted Operating Income growth and Adjusted EBITDA growth, Adjusted Net Income growth and Adjusted Diluted EPS growth on an organic basis, are non-GAAP measures that exclude the impact of FX movements. Management believes that organic growth is an important metric for measuring the operating performance of our business as it helps identify underlying business trends, without distortion from the effects of FX movements. We calculate the impact of FX movements by translating prior year results at current year monthly average exchange rates.

Free Cash Flow is the total of Net cash provided by operating activities minus Payments for property and equipment. Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures.

Net Interest Paid is the total of cash interest paid in the period, cash proceeds (payments) related to derivatives, net from both investing activities and financing activities and cash interest income received. This liquidity measure is used by management to understand the net effect of interest paid, received and related hedging payments and receipts.

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Organic Growth
(Unaudited)

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of Income from Operations to Adjusted Operating Income
(Unaudited)