Mr. Josh Kobza reports

RESTAURANT BRANDS INTERNATIONAL INC. REPORTS THIRD QUARTER 2023 RESULTS

Restaurant Brands International Inc. (RBI) has released financial results for the third quarter ended Sept. 30, 2023. Josh Kobza, chief executive officer of RBI, commented: "I am proud of the strength we're seeing across our brands due to the efforts of our franchisees and our teams, which helped drive another quarter of double-digit systemwide sales growth and home market franchisee profitability growth. These results reflect our focus on enhancing operations, delivering great guest and team member experiences, and providing great value with the best-quality products in each of our brands' respective categories. I am confident we are well positioned to enter 2024 with momentum."

Third quarter 2023 highlights:

• Consolidated comparable sales increased 7 per cent and net restaurants grew 4.2 per cent versus the prior year;
• Systemwide sales increased 10.9 per cent year over year;
• Net income of $364-million versus $530-million in prior year;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $698-million increased 9.3 per cent organically versus the prior year;
• Diluted EPS (earnings per share) was 79 cents versus $1.17 in prior year;
• Adjusted diluted EPS of 90 cents decreased 5.6 per cent organically versus 96 cents in the prior year.

RBI has four operating segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK) and Firehouse Subs (FHS). The company'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 compand on an organic basis were primarily driven by increases in systemwide sales in all of the company's segments. On an as-reported basis, the increase was partially offset by unfavourable FX (foreign exchange) movements, which impacted TH.

The year-over-year decrease in net income was primarily driven by income tax expense in the current year compared with an income tax benefit in the prior year, an unfavourable change from other operating expenses (income), net, unfavourable FX movements, loss on early extinguishment of debt, an increase in share-based compensation and non-cash incentive compensation expense, and an increase in interest expense, net, partially offset by increases in segment income across all of the company's segments.

The year-over-year increases in adjusted EBITDA on an as-reported basis and on an organic basis were largely driven by increases in adjusted EBITDA across each of the company's segments.

The year-over-year decrease in adjusted net income was primarily driven by an increase in adjusted income tax expense, an increase in share-based compensation and non-cash incentive compensation expense and an increase in adjusted interest expense, partially offset by increases in adjusted EBITDA in all of the company's segments.

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 Sept. 30, 2023, RBI financed approximately $2-million toward its Fuel the Flame digital investment and $10-million toward its Royal Reset investments. As of Sept. 30, 2023, RBI has financed a total of $33-million toward the Fuel the Flame investments and $45-million toward its Royal Reset investments.

Macroeconomic environment

During 2022 and year-to-date 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. This has resulted in increases in inflation, foreign exchange volatility and rising interest rates, which may be exacerbated by the conflict in the Middle East and could have an adverse impact on the company'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 the company's restaurant operations during the nine months ended Sept. 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 third quarter of 2023, the increase in systemwide sales was primarily driven by comparable sales of 6.8 per cent, including Canada comparable sales of 8.1 per cent, and net restaurant growth of 5.5 per cent.

The year-over-year increases in total revenues on an as-reported and on an organic basis were primarily driven by an increase in systemwide sales and increase in sales to retailers. 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 increase in sales to retailers, partially offset by an increase in cost of sales largely driven by higher year-over-year average cost of inventory. The increase in adjusted EBITDA on an as-reported basis was partially offset by unfavourable FX movements.

BK segment results

For the third quarter of 2023, the increase in systemwide sales was driven by comparable sales of 7.2 per cent, including rest-of-the-world comparable sales of 7.6 per cent and U.S. comparable sales of 6.6 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. The increase in total revenues on an as-reported basis was also driven by favourable FX movements.

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 and bad debt recoveries in the current year compared with bad debt expenses in the prior year. This was partially offset by higher segment G&A (general and administrative expenses) due to higher compensation-related expenses as well as advertising expenses and other services exceeding advertising revenues and other services in the current year to a greater extent than in the prior-year period. The increase in adjusted EBITDA on an as-reported basis was also driven by favourable FX movements.

PLK segment results

For the third quarter of 2023, the increase in systemwide sales was driven by net restaurant growth of 11.3 per cent and comparable sales of 7.0 per cent, including U.S. comparable sales of 5.6 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.

FHS segment results

For the third quarter of 2023, the increase in systemwide sales was driven by comparable sales of 3.4 per cent, including U.S. comparable sales of 3.9 per cent, and net restaurant growth of 2.6 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 the company's modification of the advertising fund arrangements to be more consistent with those of its other brands.

Cash and liquidity

As of Sept. 30, 2023, total debt was $13.4-billion, net debt (total debt less cash and cash equivalents of $1.3-billion) was $12.1-billion, net income net leverage was 9.1 times and adjusted EBITDA net leverage was 4.8 times. During the quarter, the company amended its credit agreement to increase the availability under the revolver from $1-billion to $1.25-billion to increase the term loan A facility to $1,275-million, to increase the term loan B facility to $5,175-million at an increased rate of SOFR (secured overnight financing rate) plus 225 basis points, to remove the basis point adjustment to the term SOFR across all facilities, and to extend the maturity of the revolver and the term loan A to Sept. 21, 2028, and of the term loan B to Sept. 21, 2030.

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 fourth quarter of 2023. The dividend will be payable on Jan. 4, 2024, to shareholders and unitholders of record at the close of business on Dec. 21, 2023.

On Aug. 31, 2023, the company's board of directors approved a share repurchase program that allows it to purchase up to $1-billion of its common shares until Sept. 30, 2025. This approval follows the expiration of the company's prior two-year authorization to repurchase up to the same $1-billion amount of the company's common shares. Additionally, the company repurchased approximately 2.1 million of the company's common shares for a total of $142-million, of which 400,000 of these repurchases had not yet settled and therefore were not cancelled as of Sept. 30, 2023, and, as of Sept. 30, 2023, $858-million is remaining under the authorization.

Subsequent events

Subsequent to Sept. 30, 2023, through Oct. 31, 2023, RBI repurchased 5.5 million of the company's common shares for $358-million and, as of Oct. 31, 2023, had $500-million remaining under the share repurchase authorization.

In October, 2023, the company entered into new cross-currency rate swap contracts between the euro and U.S. dollar, in which the company receives quarterly fixed-rate interest payments on the U.S.-dollar aggregate amount of $1.4-billion through the maturity date of Oct. 31, 2026. At inception, these cross-currency rate swaps were designated as hedges and are accounted for as net investment hedges. In connection with these new cross-currency rate swaps, the company settled its existing cross-currency rate swap contracts between the euro and U.S. dollar with a notional value of $400-million and $500-million with a maturity date of Feb. 17, 2024, and received $59-million in cash as part of this settlement.

Investor conference call

RBI will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Friday, Nov. 3, 2023, to review financial results for the third quarter ended Sept. 30, 2023. The earnings call will be broadcast live through the company's investor relations website 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: 370104.

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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