Mr. Josh Kobza reports

RESTAURANT BRANDS INTERNATIONAL INC. REPORTS SECOND QUARTER 2023 RESULTS

Restaurant Brands International Inc. (RBI) has released financial results for the second quarter ended June 30, 2023. Josh Kobza, chief executive officer of RBI, commented: "I am very proud of the continued performance of our teams and our franchisees, who helped drive 14-per-cent growth in systemwide sales and another quarter of improved franchisee profitability. We are generating positive momentum and results behind each of our iconic brands by focusing on new menu innovations, supported by exceptional marketing and operations. I know the team is very motivated by the significant growth opportunities ahead of us in our home markets and around the world."

Second quarter 2023 highlights:

• Consolidated comparable sales increased 9.6 per cent and net restaurants grew 4.1 per cent versus the prior year;
• Systemwide sales increased 14.0 per cent year over year;
• Net income of $351-million versus $346-million in prior year;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $665-million increased 10.3 per cent organically versus the prior year;
• Diluted EPS (earnings per share) was 77 cents versus 76 cents in prior year;
• Adjusted diluted EPS of 85 cents increased 6.6 per cent organically versus the prior year.

RBI has four operating segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK) and Firehouse Subs (FHS). RBI's financial results and operational highlights are disclosed based on these segments each quarter.

The year-over-year increases in total revenues on an as-reported basis and on an organic basis were primarily driven by increases in systemwide sales in all of RBI's segments. On an as-reported basis, the increase was partially offset by unfavourable FX (foreign exchange) movements.

The year-over-year increase in net income was primarily driven by increases in segment income in all RBI's segments and a decrease in income tax expense. These factors were partially offset by an unfavourable change from other operating expenses (income), net, an increase in interest expense, net, unfavourable FX movements, and an increase in share-based compensation and non-cash incentive compensation expense.

The year-over-year increase in adjusted EBITDA on an as-reported basis and on an organic basis were largely driven by increases in BK, TH and PLK adjusted EBITDA. On an as-reported basis, the increase was partially offset by unfavourable FX movements, which primarily impacted TH adjusted EBITDA.

The year-over-year increase in adjusted net income was primarily driven by increases in adjusted EBITDA in RBI's TH, BK and PLK brands, partially offset by unfavourable FX movements, an increase in adjusted interest expense, and an increase in share-based compensation and non-cash incentive compensation expense.

Burger King U.S. 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. RBI will be investing $400-million over the life of the plan, comprising $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 quarter ended June 30, 2023, RBI financed approximately $12-million toward the Fuel the Flame investment, including $10-million toward advertising, and $11-million toward its Royal Reset investment. As of June 30, 2023, RBI has financed a total of $32-million toward the Fuel the Flame investment and $35-million toward its Royal Reset investment.

Macroeconomic environment

During 2022 and the first half of 2023, there were increases in commodity, labour and energy costs partially due to the macroeconomic impact of both the war in Ukraine and COVID-19. Further significant increases in inflation could affect the global, Canadian and U.S. economies, resulting in foreign exchange volatility and rising interest rates, which could have an adverse impact on RBI's business and results of operations if RBI and its franchisees are not able to adjust prices sufficiently to offset the effect of cost increases without negatively impacting consumer demand.

In addition, the global crisis resulting from the spread of COVID-19 impacted RBI's restaurant operations during the six months ended June 30, 2022. Certain markets, including China, were significantly impacted as a result of government-mandated lockdowns. These lockdowns, which have since been lifted, resulted in restrictions to restaurant operations, such as reduced, if any, dine-in capacity and/or restrictions on hours of operation in those markets.

TH segment results

For the second quarter of 2023, the increase in systemwide sales was primarily driven by comparable sales of 11.4 per cent, including Canada comparable sales of 12.5 per cent, and net restaurant growth of 5.8 per cent.

The year-over-year increases in total revenues on an as-reported basis and on an organic basis were primarily driven by an increase in systemwide sales as well as increases in commodity prices passed on to franchisees. The increase in total revenues on an as-reported basis was partially offset by unfavourable FX movements.

The year-over-year increases in adjusted EBITDA on an as-reported basis and on an organic basis were primarily driven by the increase in systemwide sales and by lower segment G&A (general and administrative expenses), partially offset by an increase in cost of sales, including the impact of increases in commodity prices and advertising expenses exceeding advertising revenues in the current-year period to a greater extent than in the prior-year period. The increase in adjusted EBITDA on an as-reported basis was partially offset by unfavourable FX movements.

BK segment results

For the second quarter of 2023, the increase in systemwide sales was driven by comparable sales of 10.2 per cent, including rest-of-the-world comparable sales of 11.6 per cent and U.S. comparable sales of 8.3 per cent, and net restaurant growth of 2.4 per cent.

The year-over-year increases in total revenues on an as-reported basis and on an organic basis were primarily driven by the increase in systemwide sales as well as an increase in sales from company restaurants. The increase in total revenues on an as-reported basis was partially offset by unfavourable FX movements. Sales and cost of sales in the current-year quarter were also impacted by the temporary acquisition of 17 company restaurants during the quarter.

The year-over-year changes in adjusted EBITDA on an as-reported basis and on an organic basis were primarily driven by the increase in systemwide sales. This was partially offset by advertising expenses exceeding advertising revenues in the current year due to the Fuel the Flame investment as compared with advertising revenues exceeding advertising expenses in the prior year and higher segment G&A primarily due to the non-recurrence of a payroll tax benefit in the prior-year period as well as compensation-related expenses. The increase in adjusted EBITDA on an as-reported basis was partially offset by unfavourable FX movements.

PLK segment results

For the second quarter of 2023, the increase in systemwide sales was driven by net restaurant growth of 10.9 per cent and comparable sales of 6.3 per cent, including U.S. comparable sales of 4.2 per cent.

The year-over-year increases in total revenues and adjusted EBITDA on an as-reported basis and on an organic basis were primarily driven by the increase in systemwide sales. The increases in total revenues and adjusted EBITDA on an as-reported basis were partially offset by unfavourable FX movements.

FHS segment results

For the second quarter of 2023, the increase in systemwide sales was driven by comparable sales of 2.1 per cent, including U.S. comparable sales of 2.6 per cent, and net restaurant growth of 2.1 per cent.

The year-over-year increases in total revenues and adjusted EBITDA were primarily driven by the increase in systemwide sales. In addition, increases in advertising revenues and other services and advertising expenses and other services reflect RBI's modification of the advertising fund arrangements to be more consistent with those of its other brands.

Cash and liquidity

As of June 30, 2023, total debt was $13.3-billion, net debt (total debt less cash and cash equivalents of $1.2-billion) was $12.1-billion, net income net leverage was 8.1 times, and adjusted EBITDA net leverage was 4.9 times.

The RBI board of directors has declared a dividend of 55 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the second quarter of 2023. The dividend will be payable on Oct. 4, 2023, to shareholders and unitholders of record at the close of business on Sept. 20, 2023.

Investor conference call

RBI will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Tuesday, Aug. 8, 2023, to review financial results for the second quarter ended June 30, 2023. The earnings call will be broadcast live through RBI's investor relations website 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: 951241.

About Restaurant Brands International Inc.

Restaurant Brands International is one of the world's largest quick-service restaurant companies with over $40-billion in annual systemwide sales and over 30,000 restaurants in more than 100 countries. 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.

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