RBI: Reports Second Quarter 2018 Results

Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for the second quarter ended June 30, 2018. Chief Executive Officer Daniel Schwartz commented, «During the second quarter, we continued to grow each of our three iconic brands, and we made good progress against the 2018 priorities that we outlined last quarter. At Tim Hortons, we have implemented a number of initiatives under our ‘Winning Together’ plan – including the launch of Breakfast Anytime – which we believe will drive improved comparable sales over the long run. We also delivered strong system-wide sales growth at Burger King and Popeyes, driven by accelerated net restaurant growth. We are very optimistic about the long-term growth potential for each of our brands and remain focused on driving improved guest satisfaction and franchisee profitability».

Consolidated Operational Highlights

(Unaudited)			Q2/2018			Q2/2017
System-wide Sales Growth
		TH	2.2%			2.6%
		BK	8.4%			10.6%
		PLK	10.7%			3.3%
System-wide sales (in USD millions)
		TH	USD	1,741.7		USD	1,645.9
		BK	USD	5,403.4		USD	4,961.1
		PLK	USD	937.6		USD	890.4
Comparable Sales
		TH	-%			(0.8)%
		BK	1.8%			3.9%
		PLK	2.9%			(2.7)%
Net Restaurant Growth
		TH	3.0%			4.3%
		BK	6.4%			6.0%
		PLK	7.5%			5.3%
System Restaurant Count at Period End
		TH	4,794			4,655
		BK	17,022			16,000
		PLK	2,975			2,768

.
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 franchised restaurants, as approximately 100 percent 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

(in USD millions, except per share data)	Q2/2018			Q2/2018			Q2/2017
(Unaudited)	New Standard			Previous Standards			Previous Standards
Total Revenues	USD	1,343.4		USD	1,144.3		USD	1,132.7
Net Income Attributable to Common Shareholders	USD	167.6		USD	169.1		USD	89.5
Net Income Attributable to Common Shareholders and Noncontrolling Interests	USD	314.0		USD	316.8		USD	175.6
Diluted Earnings per Share	USD	0.66		USD	0.67		USD	0.37
TH Adjusted Ebitda(1)	USD	285.5		USD	288.6		USD	281.1
BK Adjusted Ebitda(1)	USD	236.4		USD	232.0		USD	216.8
PLK Adjusted Ebitda(1)	USD	40.2		USD	42.5		USD	33.2
Adjusted Ebitda(2)	USD	562.1		USD	563.1		USD	531.1
Adjusted Net Income(2)	USD	313.2		USD	312.4		USD	241.7
Adjusted Diluted Earnings per Share(2)	USD	0.66		USD	0.66		USD	0.51

(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 are non-GAAP financial measures. Please refer to “Non-GAAP Financial Measures” for further detail.

Effective January 1, 2018, we adopted the new revenue recognition accounting standard («New Standard»). Our consolidated financial statements for 2018 reflect the application of the New Standard, while our consolidated financial statements for 2017 were prepared under the guidance of previously applicable accounting standards («Previous Standards»). Our results presented herein indicate which revenue recognition methodology applies in each respective period.

The implementation of the New Standard impacted our year-over-year results on a consolidated basis and for each segment as follows:

• Total Revenues increased primarily as a result of the inclusion of advertising fund contributions
• Selling, General, and Administrative Expenses increased as a result of the inclusion of advertising fund expenditures

Under Previous Standards, Total Revenues for the second quarter grew primarily as a result of system-wide sales growth, as well as a favorable impact of FX movements, partially offset by a decrease in supply chain related revenues at TH.

Net Income Attributable to Common Shareholders for the quarter, under both Previous Standards and the New Standard, was driven by growth in segment income, the change in other operating expenses (income), net (driven by FX), and the redemption of our preferred shares in December of 2017.

Under Previous Standards, Adjusted Ebitda for the quarter grew 3.7 percent on an organic basis versus prior year results, driven primarily by an increase in revenues at BK and PLK, partially offset by a decrease in supply chain related revenues at TH.

TH Segment Results

(in USD millions)	Q2/2018			Q2/2017
(Unaudited)	New Standard			Previous Standards
System-wide Sales Growth		2.2%			2.6%
System-wide Sales	USD	1,741.7		USD	1,645.9
Comparable Sales		-%			(0.8)%
Net Restaurant Growth		3.0%			4.3%
System Restaurant Count at Period End		4,794			4,655
Sales	USD	548.0		USD	553.9
Franchise and Property Revenues	USD	275.0		USD	218.4
Total Revenues	USD	823.0		USD	772.3
Cost of Sales	USD	417.4		USD	417.1
Franchise and Property Expenses	USD	68.8		USD	79.8
Segment SG+A	USD	80.3		USD	22.2
Segment Depreciation and Amortization	USD	25.8		USD	24.7
Adjusted Ebitda(1)(3)	USD	285.5		USD	281.1

(3)TH Adjusted Ebitda includes USD 3.2 million of cash distributions received from equity method investments for the three months ended June 30, 2018 and 2017.

For the second quarter of 2018, system-wide sales growth was primarily driven by net restaurant growth of 3.0 percent. Comparable sales were flat, including Canada comparable sales of 0.3 percent.

Under Previous Standards, Total Revenues for the quarter declined (0.3) percent ((3.8) percent excluding the impact of FX movements) versus prior year, primarily reflecting a decrease in supply chain related revenues, partially offset by a favorable impact of FX movements.

Under Previous Standards, Adjusted Ebitda for the quarter increased 2.7 percent ((1.0) percent excluding the impact of FX movements) versus prior year, primarily as a result of a favorable impact of FX movements, partially offset by a decrease in Total Revenues.

BK Segment Results

(in USD millions)	Q2/2018			Q2/2017
(Unaudited)	New Standard			Previous Standards
System-wide Sales Growth		8.4%			10.6%
System-wide Sales	USD	5,403.4		USD	4,961.1
Comparable Sales		1.8%			3.9%
Net Restaurant Growth		6.4%			6.0%
System Restaurant Count at Period End		17,022			16,000
Sales	USD	18.9		USD	25.2
Franchise and Property Revenues	USD	399.2		USD	268.5
Total Revenues	USD	418.1		USD	293.7
Cost of Sales	USD	16.7		USD	23.9
Franchise and Property Expenses	USD	31.4		USD	31.6
Segment SG+A	USD	145.5		USD	34.1
Segment Depreciation and Amortization	USD	11.9		USD	12.7
Adjusted Ebitda(1)	USD	236.4		USD	216.8

.
For the second quarter of 2018, system-wide sales growth was driven by net restaurant growth of 6.4 percent and comparable sales of 1.8 percent, including US comparable sales of 1.8 percent.

Under Previous Standards, Total Revenues for the quarter grew 4.3 percent (3.3 percent excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.

Under Previous Standards, Adjusted Ebitda for the quarter grew 7.0 percent (6.3 percent excluding the impact of FX movements) versus prior year, primarily as a result of an increase in Total Revenues.

PLK Segment Results

(in USD millions)	Q2/2018			Q2/2017
(Unaudited)	New Standard			Previous Standard
System-wide Sales Growth		10.7%			3.3%
System-wide Sales	USD	937.6		USD	890.4
Comparable Sales		2.9%			(2.7)%
Net Restaurant Growth		7.5%			5.3%
System Restaurant Count at Period End		2,975			2,768
Sales	USD	19.3		USD	23.0
Franchise and Property Revenues	USD	83.0		USD	43.7
Total Revenues	USD	102.3		USD	66.7
Cost of Sales	USD	14.8		USD	19.2
Franchise and Property Expenses	USD	2.2		USD	2.3
Segment SG+A	USD	47.6		USD	14.4
Segment Depreciation and Amortization	USD	2.5		USD	2.4
Adjusted Ebitda(1)	USD	40.2		USD	33.2

.
For the second quarter of 2018, system-wide sales growth was driven by net restaurant growth of 7.5 percent and comparable sales of 2.9 percent, including US comparable sales of 1.8 percent.

Under Previous Standards, Total Revenues for the quarter grew 1.6 percent (1.8 percent excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.

Under Previous Standards, Adjusted Ebitda for the quarter grew 28.0 percent (28.4 percent excluding the impact of FX movements) versus prior year, as a result of an increase in Total Revenues as well as effective cost management.

Cash and Liquidity

As of June 30, 2018, total debt was USD 12.2 billion, and net debt (total debt less cash and cash equivalents of USD 1.0 billion) was USD 11.3 billion. The RBI Board of Directors has declared a dividend of USD 0.45 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2018. The dividend will be payable on October 1, 2018 to shareholders and unitholders of record at the close of business on September 7, 2018.