Restaurant Brands International Inc. Reports Third Quarter 2024 Results
Consolidated system-wide sales grow +3.2% year-over-yearGlobal comparable sales of +0.3%, including +2.7% at TH Canada and +1.8% at INTLFive franchisor segments deliver year-over-year growth in Adjusted Operating IncomeRBI on track to deliver 8%+ organic Adjusted Operating Income growth for 2024
TORONTO, Nov. 5, 2024 /PRNewswire/ - Restaurant Brands International Inc. ("RBI") (TSX:QSR) (NYSE:QSR) (TSX:QSP) today reported financial results for the third quarter ended September 30, 2024. Josh Kobza, Chief Executive Officer of RBI commented, "Our results demonstrate the resilience of our business and the dedication of our teams and franchisees. We remain focused on providing great value for guests, improving franchisee profitability, and investing in our brands for the long-term. We have been pleased to see an improvement in consolidated comparable sales in October and remain confident we will achieve our 8% plus Adjusted Operating Income growth target for 2024 and beyond."
Third Quarter 2024 Highlights:
Consolidated comparable sales were 0.3% and net restaurants grew 3.8% versus the prior year
System-wide sales increased 3.2% year-over-year
Income from Operations of $577 million versus $582 million in the prior year
Adjusted Operating Income of $652 million increased 6.1% organically (excluding FX and RH) versus the prior year
Diluted EPS of $0.79 was consistent with the prior year
Adjusted Diluted EPS of $0.93 increased 4.6% organically (excluding FX and RH) versus the prior year
Items Effecting Comparability and Restaurant Holdings Segment ReminderWe completed the acquisitions of Carrols Restaurant Group Inc. ("Carrols") ("the Carrols Acquisition") and Popeyes China ("PLK China") ("the PLK China Acquisition") on May 16, 2024 and June 28, 2024, respectively. Our consolidated results include Carrols and PLK China revenues, expenses and segment income from their acquisition dates.
Following the Carrols and PLK China Acquisitions, RBI established a new operating and reportable segment, Restaurant Holdings (RH), which includes results from the Carrols Burger King restaurants and the PLK China restaurants. RBI reports results under six operating and reportable segments consisting of the following: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), Firehouse Subs (FHS), International (INTL) and RH.
RBI plans to maintain the franchisor dynamics in its TH, INTL, BK, PLK and FHS segments ("five franchisor segments") to report results consistent with how the business will be managed long-term given RBI's plans to refranchise the vast majority of the Carrols Burger King restaurants and to find a new partner for PLK China in the future. RH results include Company restaurant sales and expenses, including expenses associated with royalties, rent, and advertising. These expenses are recognized, as applicable, as revenues in the respective franchisor segments (BK and INTL) and eliminated upon consolidation. For more information please review the "Restaurant Holdings Intersegment Dynamics" presentation posted on our IR website under "Events & Presentations" on August 8, 2024.
During 2023 and the first quarter of 2024, BK also acquired restaurants from non-Carrols franchisees ("non-Carrols acquired BK restaurants"). BK owned and operated 165 Company restaurants as of September 30, 2024 as compared to 50 as of September 30, 2023. The results from these restaurants are included in BK Company restaurants sales and expenses.
Key performances indicators are shown for RBI's five franchisor segments. RH results for the Carrols BK restaurants and PLK China restaurants are included in the BK segment and INTL segment, respectively.
Consolidated Operational Highlights
Three Months Ended September 30,
2024
2023
(Unaudited)
System-wide Sales Growth
TH
2.8 %
8.1 %
BK
(1.5) %
6.4 %
PLK
(0.6) %
11.2 %
FHS (a)
(1.3) %
7.0 %
INTL
8.0 %
15.6 %
Consolidated
3.2 %
10.9 %
System-wide Sales (in US$ millions)
TH
$
1,952
$
1,929
BK
$
2,891
$
2,938
PLK
$
1,509
$
1,520
FHS (a)
$
301
$
305
INTL
$
4,780
$
4,532
Consolidated (a)
$
11,433
$
11,224
Comparable Sales
TH
2.3 %
7.6 %
BK
(0.7) %
6.6 %
PLK
(4.0) %
5.6 %
FHS (a)
(4.8) %
3.6 %
INTL
1.8 %
7.7 %
Consolidated
0.3 %
7.0 %
Net Restaurant Growth
TH
0.0 %
(0.4) %
BK
(1.5) %
(2.4) %
PLK
4.1 %
5.3 %
FHS
3.9 %
2.5 %
INTL
7.6 %
9.5 %
Consolidated
3.8 %
4.2 %
System Restaurant Count at Period End
TH
4,504
4,502
BK
7,119
7,224
PLK
3,465
3,329
FHS
1,300
1,251
INTL
15,137
14,069
Consolidated
31,525
30,375
(a)
2023 comparable sales and system wide sales amounts for FHS have been revised to make immaterial corrections and provide comparability with the current calculation methodology. These revisions have no impact on previously reported revenue and adjusted operating income for the FHS segment. These revisions had an immaterial impact to RBI consolidated system-wide sales and no impact to consolidated system-wide sales growth nor comparable sales.
Consolidated Financial Highlights
Three Months Ended September 30,
(in US$ millions, except per share data)
2024
2023
(Unaudited)
Total Revenues
$ 2,291
$ 1,837
Income from Operations
$ 577
$ 582
Net Income
$ 357
$ 364
Diluted Earnings per Share
$ 0.79
$ 0.79
TH
$ 284
$ 269
BK
$ 112
$ 111
PLK
$ 62
$ 58
FHS
$ 12
$ 10
INTL
$ 166
$ 161
RH
$ 16
$ ,
Adjusted Operating Income (a)
$ 652
$ 609
Adjusted EBITDA (a)
$ 748
$ 698
Adjusted Net Income (a)
$ 423
$ 413
Adjusted Diluted Earnings per Share (a)
$ 0.93
$ 0.90
Nine Months Ended September 30,
(in US$ millions, unaudited)
2024
2023
(Unaudited)
Net cash provided by operating activities
$ 1,022
$ 920
Net cash (used for) provided by investing activities
$ (616)
$ (11)
Net cash (used for) provided by financing activities
$ (365)
$ (774)
Free Cash Flow (a)
$ 898
$ 847
As of September 30,
2024
2023
(Unaudited)
Net Debt (a)
$ 12,950
$ 12,072
Net Income Net Leverage
7.2x
9.1x
Adjusted EBITDA Net Leverage (a)(b)
4.8x
4.8x
(a)
Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share, Free Cash Flow, Net Debt, and Adjusted EBITDA Net Leverage are non-GAAP financial measures. Please refer to "Non-GAAP Financial Measures" for further detail.
(b)
Adjusted EBITDA Net Leverage only includes Carrols EBITDA from May 16, 2024 until quarter end.
Discussion of Consolidated Financial ResultsThe year-over-year increase in Total Revenues on an as reported basis was primarily driven by the inclusion of RH results, partially offset by the elimination of franchise and property revenues and advertising revenues and other services related to the RH restaurants.
On an organic basis, the increase in Total Revenues was largely due to the net impact of the non-Carrols acquired BK restaurants and the acquisition of PLK Carrols restaurants. Growth in organic Total Revenues was also driven by increases in system-wide sales at INTL and TH, partially offset by decreases in system-wide sales at BK, PLK and FHS.
The year-over-year decrease in Income from Operations was primarily driven by an unfavorable change in other operating expenses (income), net, an increase in franchise agreement and reacquired franchise rights amortization, and an unfavorable FX Impact partially offset by increases in segment income at our five franchisor segments and the inclusion of RH segment income.
The year-over-year decrease in Net Income was primarily driven by the year-over-year decrease in Income from Operations, an increase in income tax expense and an increase in interest expense, net, partially offset by a favorable year-over-year decrease in loss on early extinguishment of debt.
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 at our five franchisor segments. On an as reported basis, the increase was also driven by the inclusion of RH Adjusted Operating Income, partially offset by unfavorable FX Impacts at TH and INTL.
The year-over-year increase in Adjusted Net Income was primarily driven by increases in segment income at our five franchisor segments and the inclusion of RH segment income, partially offset by an increase in adjusted interest expense, net, an increase in adjusted income tax expense, and an unfavorable FX Impact.
Burger King US Reclaim the FlameIn September 2022, Burger King shared the details of its "Reclaim the Flame" plan to accelerate sales growth and drive franchisee profitability. We are 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 September 30, 2024, we funded $8 million toward the Fuel the Flame investments and $16 million toward our Royal Reset investments. As of September 30, 2024, we have funded a total of $93 million toward the Fuel the Flame investments and $107 million toward our Royal Reset investments.
On April 30, 2024, Burger King announced its Royal Reset 2.0 program and expects to invest an additional $300 million in remodels from 2025 through 2028. Together with the initial Reclaim the Flame investment and plans to remodel 600 of the recently acquired Carrols restaurants, Burger King will be on a path to achieve its goal of 85% to 90% modern image by 2028.
TH Segment Results
Three Months Ended September 30,
(in US$ millions)
2024
2023
(Unaudited)
System-wide Sales Growth
2.8 %
8.1 %
System-wide Sales
$
1,952
$
1,929
Comparable Sales
2.3 %
7.6 %
Net Restaurant Growth
0.0 %
(0.4) %
System Restaurant Count at Period End
4,504
4,502
Supply Chain Sales
$
699
$
706
Company Restaurant Sales
$
11
$
12
Franchise and Property Revenues
$
255
$
253
Advertising Revenues and Other Services
$
79
$
82
Total Revenues
$
1,044
$
1,052
Supply Chain Cost of Sales
$
559
$
572
Company Restaurant Expenses
$
9
$
10
Franchise and Property Expenses
$
83
$
80
Advertising Expenses and Other Services
$
78
$
84
Segment G&A
$
36
$
43
Adjustments:
Franchise Agreement Amortization
$
2
$
2
Cash Distributions Received from Equity Method Investments
$
4
$
4
Adjusted Operating Income
$
284
$
269
Share-based Compensation and Non-Cash Incentive Compensation Expense
$
10
$
13
Depreciation and Amortization, excluding Franchise Agreement Amortization
$
27
$
24
Adjusted EBITDA (a)
$
321
$
307
(a)
Adjusted EBITDA for TH is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures" for further detail.
For the third quarter of 2024, the increase in system-wide sales was primarily driven by comparable sales of 2.3%, including Canada comparable sales of 2.7%.
The year-over-year decrease in Total Revenues on an as reported basis was primarily due to an unfavorable FX Impact. On an organic basis, the increase in Total Revenues was primarily driven by increases in equipment sales related to restaurant renovations, partially offset by a decrease in CPG net sales.
The year-over-year increase in Adjusted Operating Income on an as reported and on an organic basis were primarily driven by a decrease in Segment G&A, largely due to lower employee-related compensation, and a decrease in supply chain cost of sales due to lower average cost of supply chain and CPG inventory, partially offset by a decrease in CPG net sales. The increase in Adjusted Operating Income on an as reported basis was partially offset by an unfavorable FX Impact.
BK Segment Results
Three Months Ended September 30,
(in US$ millions)
2024
2023
(Unaudited)
System-wide Sales Growth
(1.5) %
6.4 %
System-wide Sales
$
2,891
$
2,938
Comparable Sales
(0.7) %
6.6 %
Net Restaurant Growth
(1.5) %
(2.4) %
System Restaurant Count at Period End
7,119
7,224
Company Restaurant Sales
$
60
$
21
Franchise and Property Revenues (b)
$
179
$
183
Advertising Revenues and Other Services (c)
$
122
$
124
Total Revenues
$
362
$
329
Company Restaurant Expenses
$
56
$
20
Franchise and Property Expenses
$
32
$
32
Advertising Expenses and Other Services
$
133
$
131
Segment G&A
$
32
$
37
Adjustments:
Franchise Agreement Amortization
$
2
$
3
Adjusted Operating Income
$
112
$
111
Share-based Compensation and Non-Cash Incentive Compensation Expense
$
8
$
11
Depreciation and Amortization, excluding Franchise Agreement Amortization
$
10
$
9
Adjusted EBITDA (a)
$
131
$
131
(a)
Adjusted EBITDA for BK is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures" for further detail.
(b)
For the three months ended September 30, 2024, Franchise and Property revenues include intersegment revenues with RH consisting of royalties of $20 million and rent of $8 million.
(c)
For the three months ended September 30, 2024, Advertising Revenues and Other Services include intersegment revenues with RH consisting of advertising contributions and tech fees of $18 million.
As a reminder, BK segment results are presented consistently with our franchisor model. As such, results include intersegment Franchise and Property revenues and Advertising Revenues and Other Services from the Carrols Burger King restaurants included in RH (as footnoted above).
For the third quarter of 2024, the decrease in system-wide sales was driven by comparable sales of (0.7)%, including US comparable sales of (0.4)%, and net restaurant growth of (1.5)%.
The year-over-year increase in Total Revenues was primarily driven by the net impact of the non-Carrols acquired BK restaurants, partially offset by a decrease in system-wide sales.
Adjusted Operating Income was relatively consistent on a year-over-year basis primarily due to a decrease in Segment G&A, largely a result of lower compensation-related expenses, and the net impact of the non-Carrols acquired BK restaurants, partially offset by the decrease in system-wide sales and an increase in Fuel the Flame spending versus the prior year period.
PLK Segment Results
Three Months Ended September 30,
(in US$ millions)
2024
2023
(Unaudited)
System-wide Sales Growth
(0.6) %
11.2 %
System-wide Sales
$
1,509
$
1,520
Comparable Sales
(4.0) %
5.6 %
Net Restaurant Growth
4.1 %
5.3 %
System Restaurant Count at Period End
3,465
3,329
Company Restaurant Sales
$
44
$
22
Franchise and Property Revenues
$
79
$
80
Advertising Revenues and Other Services
$
72
$
75
Total Revenues
$
195
$
177
Company Restaurant Expenses
$
38
$
20
Franchise and Property Expenses
$
2
$
2
Advertising Expenses and Other Services
$
74
$
77
Segment G&A
$
19
$
21
Adjustments:
Franchise Agreement Amortization
$
1
$
1
Adjusted Operating Income
$
62
$
58
Share-based Compensation and Non-Cash Incentive Compensation Expense
$
5
$
6
Depreciation and Amortization, excluding Franchise Agreement Amortization
$
3
$
2
Adjusted EBITDA (a)
$
68
$
67
(a)
Adjusted EBITDA for PLK is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures" for further detail.
For the third quarter of 2024, the decrease in system-wide sales was driven by comparable sales of (4.0)%, including US comparable sales of (3.8)%, partially offset by net restaurant growth of 4.1%.
The year-over-year increases in Total Revenues and Adjusted Operating Income were primarily driven by the acquisition of 60 Company restaurants as part of the Carrols acquisition and improvements in PLK's underlying Company restaurant portfolio. As of September 30, 2024, PLK had 100 Company restaurants as compared to 41 in the prior year.
FHS Segment Results
Three Months Ended September 30,
(in US$ millions)
2024
2023
(Unaudited)
System-wide Sales Growth (a)
(1.3) %
7.0 %
System-wide Sales (a)
$
301
$
305
Comparable Sales (a)
(4.8) %
3.6 %
Net Restaurant Growth
3.9 %
2.5 %
System Restaurant Count at Period End
1,300
1,251
Company Restaurant Sales
$
10
$
10
Franchise and Property Revenues
$
27
$
27
Advertising Revenues and Other Services
$
15
$
15
Total Revenues
$
53
$
51
Company Restaurant Expenses
$
9
$
8
Franchise and Property Expenses
$
4
$
4
Advertising Expenses and Other Services
$
16
$
15
Segment G&A
$
11
$
14
Adjusted Operating Income
$
12
$
10
Share-based Compensation and Non-Cash Incentive Compensation Expense
$
2
$
4
Depreciation and Amortization, excluding Franchise Agreement Amortization
$
1
$
1
Adjusted EBITDA (b)
$
15
$
15
(a)
2023 comparable sales and system wide sales amounts for FHS have been revised to make immaterial corrections and provide comparability with the current calculation methodology. These revisions have no effect on previously reported revenue and adjusted operating income for the FHS segment.
(b)
Adjusted EBITDA for FHS is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures" for further detail.
For the third quarter of 2024, the decrease in system-wide sales was driven by comparable sales of (4.8)% partially offset by net restaurant growth of 3.9%.
The year-over-year increase in Adjusted Operating Income was primarily due to a decrease in Segment G&A driven by lower compensation-related expenses.
INTL Segment Results
Three Months Ended September 30,
(in US$ millions)
2024
2023
(Unaudited)
System-wide Sales Growth
8.0 %
15.6 %
System-wide Sales
$
4,780
$
4,532
Comparable Sales
1.8 %
7.7 %
Net Restaurant Growth
7.6 %
9.5 %
System Restaurant Count at Period End
15,137
14,069
Franchise and Property Revenues
$
222
$
210
Advertising Revenues and Other Services
$
20
$
18
Total Revenues
$
243
$
228
Franchise and Property Expenses
$
8
$
1
Advertising Expenses and Other Services
$
25
$
20
Segment G&A
$
48
