Restaurant Brands International Inc. Reports Second Quarter 2023 Results

Consolidated system-wide sales growth of +14% year-over-year

Global comparable sales of +10%, led by +12% at TH Canada, +12% at BK International and +8% at BK US

RBI surpasses the 30,000-restaurant mark globally, generating over $40 billion in system-wide sales over the last 12 months

Topline strength helped deliver another quarter of improvement in both franchisee and RBI profitability

TORONTO, Aug. 8, 2023 /PRNewswire/ - Restaurant Brands International Inc. ("RBI") (TSX: QSR) (NYSE: QSR) (TSX: QSP) today reported 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% growth in system-wide 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% and net restaurants grew 4.1% versus the prior year
• System-wide sales increased 14.0% year-over-year
• Net Income of $351 million versus $346 million in prior year
• Adjusted EBITDA of $665 million increased 10.3% organically versus the prior year
• Diluted EPS was $0.77 versus $0.76 in prior year
• Adjusted Diluted EPS of $0.85 increased 6.6% organically versus the prior year

Consolidated Financial Highlights

We have four operating segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK) and Firehouse Subs (FHS). Our 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 and on an organic basis were primarily driven by increases in system-wide sales in all of our segments. On an as reported basis the increase was partially offset by unfavorable FX movements.

The year-over-year increase in Net Income was primarily driven by increases in segment income in all our segments and a decrease in income tax expense. These factors were partially offset by an unfavorable change from other operating expenses (income), net, an increase in interest expense, net, unfavorable 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 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 unfavorable 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 our TH, BK and PLK brands, partially offset by unfavorable FX movements, an increase in adjusted interest expense and an increase in share-based compensation and non-cash incentive compensation expense.

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 quarter ended June 30, 2023, we funded approximately $12 million toward the Fuel the Flame investment, including $10 million toward advertising, and $11 million toward our Royal Reset investment. As of June 30, 2023, we have funded a total of $32 million toward the Fuel the Flame investment and $35 million toward our Royal Reset investment.

Macro Economic Environment
During 2022 and the first half of 2023, there were increases in commodity, labor, 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 our business and results of operations if we and our 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 our 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 system-wide sales was primarily driven by comparable sales of 11.4%, including Canada comparable sales of 12.5%, and net restaurant growth of 5.8%.

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 increases in commodity prices passed on to franchisees. The increase in Total Revenues on an as reported basis was partially offset by unfavorable FX movements.

The year-over-year increases in Adjusted EBITDA on an as reported and on an organic basis were primarily driven by the increase in system-wide sales and by lower Segment G&A, 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 unfavorable FX movements.

BK Segment Results

For the second quarter of 2023, the increase in system-wide sales was driven by comparable sales of 10.2%, including rest of the world comparable sales of 11.6% and US comparable sales of 8.3%, and net restaurant growth of 2.4%.

The year-over-year increases in Total Revenues on an as reported and on an organic basis were primarily driven by the increase in system-wide 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 unfavorable 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 and on an organic basis were primarily driven by the increase in system-wide sales. This was partially offset by advertising expenses exceeding advertising revenues in the current year due to the Fuel the Flame investment as compared to advertising revenues exceeding advertising expenses in the prior year and higher Segment G&A primarily due to the nonrecurrence 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 unfavorable FX movements.

PLK Segment Results