Restaurant Brands International Inc. Reports Second Quarter 2019 Results

RBI announces system-wide sales growth of nearly 8% and surpasses 26,000 restaurants globally

RBI announces system-wide sales growth of nearly 8% and surpasses 26,000 restaurants globally

Restaurant Brands International Inc. (TSX/NYSE: QSR, TSX: QSP) last week reported financial results for the second quarter ended June 30, 2019.

Jose Cil, Chief Executive Officer of Restaurant Brands International Inc. (“RBI”) commented, “During the second quarter, we grew global system-wide sales nearly 8% and crossed two restaurant milestones with more than 26,000 restaurants globally, including more than 18,000 Burger King restaurants.”

“We are excited by the tremendous opportunity for restaurant growth in front of us, most recently highlighted by new partnerships we announced for Popeyes in China and Spain, and Tim Hortons in Thailand,” continued Cil.  “We are working closely with our restaurant owners to deliver an enhanced guest experience including technology like delivery, kiosks and outdoor digital menu boards.  We also continue to attract leading talent in the industry to join our company and to contribute to our aspiration to build the most loved restaurant brands in the world.”

Consolidated Operational Highlights

Three Months Ended June 30,

2019

2018

System-wide Sales Growth

(Unaudited)

TH

1.6 %

2.2 %

BK

9.8 %

8.4 %

PLK

8.8 %

10.7 %

Consolidated

7.9%

7.3 %

System-wide Sales (in US$ millions)

TH

$

1,716

$

1,742

BK

$

5,717

$

5,403

PLK

$

1,012

$

938

Consolidated

$

8,445

$

8,083

Net Restaurant Growth

TH

1.6 %

3.0 %

BK

5.8 %

6.4 %

PLK

6.1 %

7.5 %

Consolidated

5.0 %

5.8 %

System Restaurant Count at Period End

TH

4,872

4,794

BK

18,008

17,022

PLK

3,156

2,975

Consolidated

26,036

24,791

Comparable Sales

TH

0.5 %

— %

BK

3.6 %

1.8 %

PLK

3.0 %

2.9 %

Note: System-wide sales growth and comparable sales are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants. System-wide sales are driven by sales at franchise restaurants, as approximately 100% of current restaurants are franchised. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales.

Consolidated Financial Highlights

Three Months Ended June 30,

(in US$ millions, except per share data)

2019

2018

(Unaudited)

Total Revenues

$

1,400

$

1,343

Net Income Attributable to Common Shareholders and Noncontrolling Interests

$

257

$

313

Diluted Earnings per Share

$

0.55

$

0.66

TH Adjusted EBITDA(1)

$

287

$

286

BK Adjusted EBITDA(1)

$

252

$

236

PLK Adjusted EBITDA(1)

$

41

$

40

Adjusted EBITDA(2)

$

580

$

562

Adjusted Net Income(2)

$

331

$

313

Adjusted Diluted Earnings per Share(2)

$

0.71

$

0.66

As of June 30,

2019

2018

(Unaudited)

LTM Free Cash Flow(2)

$

1,275

$

1,141

Net Debt

$

11,218

$

11,254

Net Leverage(2)

5.0x

5.0x

(1)

TH Adjusted EBITDA, BK Adjusted EBITDA and PLK Adjusted EBITDA are our measures of segment profitability.

(2)

Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share, LTM Free Cash Flow, and Net Leverage are non-GAAP financial measures. Please refer to “Non-GAAP Financial Measures” for further detail.

Effective January 1, 2019, we adopted the new lease accounting standard (“New Standard”). Our consolidated financial statements for 2019 reflect the application of the New Standard, while our consolidated financial statements for 2018 were prepared under the guidance of the previously applicable lease accounting standard (“Previous Standard”).

The year-over-year change in Total Revenues on a GAAP basis was primarily driven by system-wide sales growth,  the impact of the New Standard on franchise and property revenues and an increase in supply chain sales, partially offset by FX movements.

The decrease in Net Income Attributable to Common Shareholders and Noncontrolling Interests for the second quarter was primarily driven by an increase in income tax expense provision resulting from an adjustment related to a prior restructuring transaction that is not applicable to ongoing operations and unfavorable results from other operating expenses (income), net driven by FX movements.

The year-over year change in Adjusted EBITDA on an organic basis was primarily driven by system-wide sales growth.

TH Segment Results 

Three Months Ended June 30,

(in US$ millions)

2019

2018

(Unaudited)

System-wide Sales Growth

1.6 %

2.2 %

System-wide Sales

$

1,716

$

1,742

Comparable Sales

0.5 %

— %

Net Restaurant Growth

1.6 %

3.0 %

System Restaurant Count at Period End

4,872

4,794

Sales

$

551

$

548

Franchise and Property Revenues

$

291

$

275

Total Revenues

$

842

$

823

Cost of Sales

$

420

$

417

Franchise and Property Expenses

$

90

$

68

Segment SG&A

$

77

$

80

Segment Depreciation and Amortization

$

26

$

26

Adjusted EBITDA(1)(3)

$

287

$

286

(3)

TH Adjusted EBITDA includes $5 million and $3 million of cash distributions received from equity method investments for the three months ended June 30, 2019 and 2018, respectively.

For the second quarter of 2019, system-wide sales growth was primarily driven by net restaurant growth of 1.6%. Comparable sales were 0.5%, including Canada comparable sales of 0.7%.

The year-over-year change in GAAP Total Revenues was primarily driven by supply chain sales and the impact of the New Standard on franchise and property revenues, partially offset by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by supply chain sales.

The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by supply chain sales and system-wide sales growth. This is primarily offset by FX movements on a GAAP basis.

BK Segment Results

Three Months Ended June 30,

(in US$ millions)

2019

2018

(Unaudited)

System-wide Sales Growth

9.8 %

8.4 %

System-wide Sales

$

5,717

$

5,403

Comparable Sales

3.6 %

1.8 %

Net Restaurant Growth

5.8 %

6.4 %

System Restaurant Count at Period End

18,008

17,022

Sales

$

19

$

19

Franchise and Property Revenues

$

428

$

399

Total Revenues

$

447

$

418

Cost of Sales

$

17

$

17

Franchise and Property Expenses

$

42

$

32

Segment SG&A

$

149

$

146

Segment Depreciation and Amortization

$

12

$

12

Adjusted EBITDA(1)(4)

$

252

$

236

(4)

BK Adjusted EBITDA includes $1 million of cash distributions received from equity method investments for the three months ended June 30, 2019.  No cash distributions were received from equity method investments for the three months ended June 30, 2018.

For the second quarter of 2019, system-wide sales growth was driven by net restaurant growth of 5.8% as well as comparable sales of 3.6%, including US comparable sales of 0.5%.

The year-over-year change in GAAP Total Revenues was primarily driven by system-wide sales growth and the impact of the New Standard on franchise and property revenues, partially offset by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by system-wide sales growth.

The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by system-wide sales growth. This is partially offset by FX movements on a GAAP basis.

PLK Segment Results

Three Months Ended June 30,

(in US$ millions)

2019

2018

(Unaudited)

System-wide Sales Growth

8.8%

10.7%

System-wide Sales

$

1,012

$

938

Comparable Sales

3.0%

2.9%

Net Restaurant Growth

6.1%

7.5%

System Restaurant Count at Period End

3,156

2,975

Sales

$

19

$

19

Franchise and Property Revenues

$

92

$

83

Total Revenues

$

111

$

102

Cost of Sales

$

16

$

15

Franchise and Property Expenses

$

3

$

3

Segment SG&A

$

54

$

47

Segment Depreciation and Amortization

$

3

$

2

Adjusted EBITDA(1)

$

41

$

40

For the second quarter of 2019, system-wide sales growth was driven by net restaurant growth of 6.1% as well as comparable sales of 3.0%, including US comparable sales of 2.9%.

The year-over-year change in Total Revenues on a GAAP and on an organic basis was primarily driven by system-wide sales growth.

The year-over-year change in Adjusted EBITDA on a GAAP and on an organic basis was primarily driven by system-wide sales growth, partially offset by higher SG&A.

Cash and Liquidity

As of June 30, 2019, total debt was $12.2 billion, net debt (total debt less cash and cash equivalents of $1.0 billion) was $11.2 billion, and net leverage was 5.0x. The RBI Board of Directors has declared a dividend of $0.50 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2019. The dividend will be payable on October 3, 2019 to shareholders and unitholders of record at the close of business on September 17, 2019.

About Restaurant Brands International Inc.

Restaurant Brands International Inc. (“RBI”) is one of the world’s largest quick service restaurant companies with ~$32 billion in system-wide sales and over 26,000 restaurants in more than 100 countries and U.S. territories. RBI owns three of the world’s most prominent and iconic quick service restaurant brands – TIM HORTONS®, BURGER KING®, and POPEYES®. These independently operated brands have been serving their respective guests, franchisees and communities for over 45 years.