Mr. Josh Kobza reports

RESTAURANT BRANDS INTERNATIONAL INC. ANNOUNCES REVISED SEGMENT REPORTING

Restaurant Brands International Inc. has provided details of its shift in reportable segments and definition of segment income.

Beginning with the fourth quarter and year ended Dec. 31, 2023, Restaurant Brands will report results under five reportable segments: (1) Tim Hortons (TH); (2) Burger King (BK); (3) Popeyes Louisiana Kitchen (PLK); (4) Firehouse Subs (FHS); and (5) international (INTL). The TH, BK, PLK and FHS segments include results from each brands' operations in the United States and Canada. INTL includes consolidated results from each brands' operations outside of the United States and Canada. This shift in reportable segments reflects how the company's leadership intends to oversee and manage the business going forward.

In addition, Restaurant Brands has transitioned its definition of segment income from adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to adjusted operating income (AOI). Unlike adjusted EBITDA, AOI includes depreciation and amortization (excluding franchise agreement amortization), as well as share-based compensation and non-cash incentive compensation expense. The company will continue to report adjusted EBITDA on a consolidated and segment-level basis for supplemental purposes.

Josh Kobza, chief executive officer of Restaurant Brands, commented: "Our announcement today reflects how I plan to oversee and manage our business moving forward. We have four amazing brands being led by five ambitious leaders across our home markets and international. I am excited to provide them with even greater autonomy over their strategic decisions so they can move quickly to accelerate growth."

Matthew Dunnigan, chief financial officer, added: "Our business leaders are prioritizing investments that will drive long-term growth and attractive returns for our shareholders. Our transition to adjusted operating income will provide increased focus on all the operating expenses associated with these investments and add greater accountability for delivering strong returns through profitability growth over time."

The company has included supplemental unaudited information containing 11 quarters of historical financial and operational metrics (from the first quarter of 2021 through the third quarter of 2023) for these five reportable segments in this press release, in a Form 8-K published today and in an excel file posted to the company's website. Additional details on each segment are included in the supplemental information below. The supplemental unaudited historical business segment information does not represent a restatement or reissuance of previously issued financial statements, and relates entirely to segment presentation with no effect on previously reported consolidated results.

The company will report under these segments and with its new segment income definition beginning with its results for the fourth quarter and year ended Dec. 31, 2023, which will be announced before market open on Feb. 13, 2024.

About Restaurant Brands International Inc.

Restaurant Brands 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, Restaurant Brands is improving sustainable outcomes related to its food, the planet, and people and communities.

Supplemental information

Restaurant Brands' reportable segments

It has five reportable segments: (1) Tim Hortons; (2) Burger King; (3) Popeyes Louisiana Kitchen; (4) Firehouse Subs; and (5) International. The TH, BK, PLK and FHS segments include results from each brands' operations in the United States and Canada. INTL includes consolidated results from each brands' operations outside of the U.S. and Canada, collectively representing over 120 countries and territories globally.

Key revenue drivers by segment

The company's business generates revenues from the following sources: (i) sales, consisting primarily of supply chain sales, which represent sales of products, supplies and restaurant equipment to franchisees, as well as sales of consumer packaged goods (CPG) to retailers, and sales at company restaurants; (ii) franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants, and franchise fees paid by franchisees; (iii) property revenues from properties the company leases or subleases to franchisees; and (iv) advertising revenues and other services, consisting primarily of advertising fund contributions based on a percentage of sales from franchised restaurants.

As of Sept. 30, 2023, the primary revenue drivers for each segment were as shown in the associated table.

International segment foreign currency information

For the nine months ended Sept. 30, 2023, the international segment system-wide sales were primarily derived from the following currencies: Euro (approximately 37 per cent of system-wide sales), British pound (approximately 6 per cent), Australian dollar (approximately 6 per cent), Chinese yuan (approximately 6 per cent), Brazilian real (approximately 5 per cent) and Turkish lira (approximately 5 per cent). The company also derived approximately 1.5 per cent of system-wide sales from the Argentine peso.

For the vast majority of international franchise agreements, system-wide sales are converted to either U.S. dollar, European euro, British pound or Australian dollar (main currencies) at month-end foreign exchange rates, and royalties are paid to Restaurant Brands in main currencies.

Key expense drivers by segment

The company's primary business expenses are related to the following: (i) cost of sales, consisting primarily of costs associated with the management of its TH supply chain, cost of products sold to retailers, and food, paper and labour costs of company restaurants; (ii) franchise and property expenses, consisting primarily of depreciation of properties leased to franchisees, and rental expense associated with properties subleased to franchisees; and (iii) advertising expenses and other services consisting primarily of expenses relating to marketing, advertising and promotion, technology initiatives, and depreciation and amortization. As a reminder, the company generally manages advertising expenses to equal advertising revenues in the long term, however in some periods there may be a mismatch in the timing of revenues and expenses, or higher expenses due to the company's support of certain marketing program initiatives -- such as Restaurant Brands' $80-million investment behind the Tim Hortons Canada advertising fund in 2021 and its current (Q4 2022 through Q4 2024) $120-million advertising investment in Burger King U.S. as part of the brand's multiyear Reclaim the Flame program.

As of Sept. 30, 2023, the primary expense drivers for each segment were as shown in the associated table.

In addition to the above, the company reports segment general and administrative expenses (G&A), which consist primarily of salary and employee-related costs for non-restaurant employees, share-based compensation and non-cash incentive compensation expense (SBC), professional fees, information technology systems, general overhead for the company's corporate offices, and depreciation and amortization of assets related to its corporate functions. Segment G&A excludes FHS transaction costs, and corporate restructuring and advisory fees.

Key operating metrics

Restaurant Brands evaluates its restaurants and assesses its business based on the following operating metrics.

System-wide sales growth refers to the percentage change in sales at all franchised 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 Subs, and 17 months or longer for Popeyes Louisiana Kitchen. Additionally, if a restaurant is closed for a significant portion of a month (such as during a renovation), 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. The company analyzes key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.

System-wide sales represent sales at all franchise restaurants and company-owned restaurants. The company does not record franchise sales as revenues, however, its royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales.

Net restaurant growth refers to the net increase in restaurant count (openings, net of permanent closures) over a trailing 12-month period, divided by the restaurant count at the beginning of the trailing 12-month period.

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

In Restaurant Brands' 2022 financial reports, its key business metrics included results from its franchised Burger King restaurants in Russia, with supplemental disclosure provided excluding these restaurants. The company did not generate any new profits from restaurants in Russia in 2022 and does not expect to generate any new profits in 2023. Consequently, beginning in the first quarter of 2023, the company's reported key business metrics exclude the results from Russia for all periods after Dec. 31, 2021.

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