Restaurant Brands International Inc.

All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. You will hear a tone to confirm that you are in the queue. To exit the question queue, you may press star and then two. All callers will be limited to one question. Please note this event is being recorded I would now like to turn the conference over to Kendall Peck, RBI's Head of Investor Relations. Please go ahead.

Thank you, Bailey. Good morning, everyone, and welcome to Restaurant Brands International's earnings call for the third quarter ended September 30th, 2024. As a reminder, a live webcast of this call can be accessed on the Investor Relations webpage at rbi.com forward slash investors, and a recording will be available for replay. Joining me on the call today are Restaurant Brands International's Executive Chairman Patrick Doyle, CEO Josh Kobza, and CFO Sami Siddiqui. Today's earnings call contains forward-looking statements, which are subject to various risks set forth in the press release issued this morning and in our SEC filing. In addition, this earnings call includes non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the press release and trending schedules available on our website. As a reminder, following our acquisition of Carroll's Restaurant Group, which closed on May 16, 2024, and our acquisition of Popeyes China, which closed on June 28, 2024, we introduced a sixth reportable segment, Restaurant Holdings. This segment includes results from operations of Popeyes China Business and the Burger King restaurants acquired as part of the Carroll's acquisition. The consolidated growth metrics discussed during the prepared remarks, including organic adjusted operating income growth, and organic adjusted EPS growth exclude results from our restaurant holding segment. And now I'll turn the call over to Josh.

Thanks, Kendall. Good morning, everyone. Thank you for joining us today. Our teams and franchisees are doing a nice job navigating difficult macro and competitive environments in the US, Canada, and many of our international markets. The brands winning today are consistently executing the fundamentals. They are serving fresh, delicious food and beverages in modern restaurants and providing excellent value to every guest on every occasion. We see the power of great fundamentals and great value in our own businesses, including Tim Hortons and our international division, which drove nearly 70% of our adjusted operating income. Tim Hortons, for example, remains number one value for money in Canada and is one of the only major QSR brands in the market with positive traffic growth in the year to date. And our international business continues to outperform many of our largest global peers. Our goal is for all of our businesses to provide compelling value to guests the right way, with quality products, exceptional service, and unmatched convenience. If we can do this, we'll outperform the competition and deliver sustainable growth for our franchisees and our shareholders. Turning now to our results, comparable sales were relatively flat, up 0.3% year over year, and net restaurants grew 3.8%, which translated into system-wide sales growth of 3.2%. Our cost discipline helped offset softer system-wide sales growth, resulting in organic adjusted operating income growth of 6.1%. We've been encouraged to see the business accelerate in October with consolidated comparable sales of low single digits led by improvements in International, Burger King, and Popeyes. With only two months remaining in 2024 and year-to-date system-wide sales growth of 5.3%, We believe full-year system-wide sales growth will come in slightly below the expectations we laid out for you in August. That said, our year-to-date organic adjusted operating income growth is over 7.5%, and the great work Sammy and team are doing is keeping us on track to exceed 8% AOI growth for the full year of 2024. I'll take a few minutes to walk through the performance of each of our business segments, starting with the largest contributor to AOI, Tim Hortons. Tim's drives 43% of AOI, and Axel and team continue to demonstrate the power of having high quality food and beverages at a great everyday price, excellent restaurant level execution, unrivaled convenience, and dedicated restaurant owners. Tim's in Canada delivered a 2.7% increase in comparable sales, primarily driven by traffic growth. While we continue to see a softer consumer environment impact the broader QSR industry in Canada, Tim's number one restaurant brand love and number one value positioning allow us to maintain our leading market share in coffee baked goods and breakfast sandwiches and wraps. Morning depart sales grew in line with overall sales anchored by mid single digit growth and breakfast sandwiches and wraps. We offered a hot breakfast sandwich for $3 with any size coffee purchase which delivers great value for Canadians and was incremental to both traffic and gross profits for our restaurant owners. We continue to make progress in our PM food journey with our loaded, anytime snacker and flatbread pizza platforms and grew PM main food sales 5.2% year over year. Flatbread pizzas are giving Canadians another reason to visit their local Tim's, boosting restaurant traffic during historically slower day parts and driving higher average check. We've seen nearly 70% of flatbread pizza sales occur after 2 p.m. or on weekends, and the platform is generating 2.5 times higher average checks than non-flatbread tickets. We're balancing PM food extensions with a strong beverage line-up as well. Cold beverage sales represented 43% of total beverage sales this quarter, with some weeks reaching 50%. This is remarkable for a brand that is loved for its hot brewed coffee. We continue to innovate around our cold brew and ice cap offerings to bring Canadians fresh and exciting new options. Following the success of our tiramisu innovation, we introduced the Nutella collaboration, which contributed to a 7% year-over-year increase in cold beverage sales this quarter. An important driver of our performance, in addition to our strong marketing calendar, is strong operations. Matt Moore, his team, and our restaurant owners delivered another quarter of year-over-year improvements in drive-through speed of service. It is truly impressive to visit a drive-through in Canada on a weekday morning and watch the car stack move so quickly. Our ongoing improvements in operations, coupled with our marketing initiatives, remain a consistent driver of traffic growth, and I'm proud to see the dedication of our TIMMS teams and restaurant owners driving positive sales growth and industry outperformance. Moving now to the international segment, which drives 25% of our adjusted operating income. We saw comparable sales in international grow 1.8%, with net restaurant growth of 7.6%, and system-wide sales growth of 8.0%. While a bit slower than earlier in the year, our results were nicely ahead of some of our largest global fears and reflects some great work from our partners around the world. Burger King remains the largest driver of our international business and grew in key markets like Australia, Spain, Korea, the UK, and Japan, each of which accelerated from Q2. This helped offset softer results in France and continued pressures from the difficult operating environment in China and the conflict in the Middle East. I recently joined Tiago, Tom, and about 20 of our country level Burger King leaders capturing over 80% of the brand's global system wide sales for a CEO summit in Italy. It was a very engaging and interactive forum for our top CEOs to connect and share marketing, development, franchising, and operations best practices. It's clear that while Burger King is already established around the world, we still have a long runway for growth and tons of appetite from our master franchisees to deliver the best burger in each of their markets. While overall development in 2024 is going to be a below or long-term target of 5%, which Sammy will address in a bit, I want to give some perspective on where our international net restaurant growth will come from in the years ahead. There is so much opportunity to capture, and one of the best examples is Japan, which I visited two weeks ago. Our performance has improved dramatically in Japan over the past few years, and we are now the clear winner for best burgers in the market. I tried some amazing local Whopper innovations there, and it's clear why they're doing so well. We now have almost 250 locations in Japan with enormous runway and are growing between 40 and 50 locations per year. We're also working to accelerate development in many of our Popeyes markets, and Popeyes UK is a fantastic example. We recently spent time with Tom Crowley and his team in the UK and tried some of the best Popeyes chicken I've eaten anywhere in the world. They're operating beautiful, modern restaurants with exceptional service and are generating great sales and returns. Popeyes UK already has over 55 restaurants in just three years and drives over $130 million in system-wide sales on a trailing 12-month basis. They have a lot of room to grow. And then there's China, where you've seen us take meaningful steps on Tim Hortons and Popeyes this year. We're also actively working to find the right long-term path for Burger King. We know the consumer is momentarily pressured in China, but we are positive on the mid and long-term opportunity for each of our brands in the market. Turning now to Burger King in the U.S. and Canada. Burger King U.S. comparable sales were down 0.4% and net restaurants declined by 1.6%, resulting in a 1.5% decline in system-wide sales. Sales were softer than we'd like this quarter and were impacted by a tough consumer environment over the summer. Our calendar initiatives, including Fiery, were unable to cut through all the value messages in the market and were less impactful than our Royal Crispy Chicken Wraps launch in the prior year. As a result, we saw our gap versus the industry take a slight step back beginning in August, after several quarters where we'd been outperforming Burger QSR peers. As we moved into October, performance has shifted, particularly with the great success of our Addams Family meal, including Wednesday's Whopper, and helped us return to same-store sales outperformance relative to the Burger QSR industry again. Taking a step back, there's a lot going well at Burger King, and it's clear the business is in a much healthier place today than when we launched Reclaim the Flame in September of 2022. At convention last week, Tom and team updated franchisees on the important foundational progress we've made over the past two years that is setting us up for long-term success. We have a new discipline in operations that our franchisees have embraced and are executing, which has driven notable improvements in operations. Our focus on quality remodels is paying off, with mid-teens uplifts, net of control, and even better improvements in franchisee profitability. We're on track to accelerate our pace of remodels and move towards our goal of 85% to 90% modern image by the end of 2028. Accelerating the modern image of our system is one of the primary motives behind our acquisition of Carol's, aside from creating new franchise opportunities for existing and new operators when we move to re-franchise those restaurants over the next few years. Furthermore, our $120 million investment into the ad fund allowed us to break a difficult cycle, significantly increase our share of voice, start regaining the market share, and drive a positive trailing 12-month same store traffic gap versus the industry for the first time in a very long time. The enhancements our digital team has made to our app and delivery capabilities are also driving strong growth in digital sales, which now represent nearly 20% of total sales, up from around 10% in Q3 of 2022. As you know, our ultimate scorecard is franchisee profitability. We're in a completely different and better place than where we were two years ago. We said on this call two years ago that our goal was to reach $175,000 of four-wall EBITDA by the end of this year. We achieved far more than that, reaching $205,000 by the end of last year. We expect average franchisee profitability to be flattish to slightly up for 2024, a pretty great result considering the labor, commodity, and top-line sales pressures facing the industry this year. And we have our sights set on reaching $230,000 by the end of 2026 with a longer-term commitment to drive the system to $300,000 in four-wall EBITDA. Tom and team delivered a powerful message at convention, underpinned by incredible progress over the past couple of years. Our time together at convention really highlighted the optimism, excitement, and confidence the franchisees share in Tom and his team's leadership to take us forward to great success. Turning now to Popeyes. Popeyes U.S. grew net restaurants by 3.6%, while comparable sales declined 3.8%, resulting in a system-wide sales decrease of 0.8%. In a more value-sensitive environment this quarter, Popeyes' calendar was missing some of the offers consumers were looking for, and this resulted in softer comps. Since September, we've reoriented our marketing strategy to better align with the needs of consumers today, while reminding guests what makes Popeyes so special, our delicious, freshly hand-battered and fried chicken. We know we need to provide better value, which we can deliver through better price points and a better experience. As an initial step, Jeff and his team introduced three pieces of chicken for $5 in mid-September and followed it in early October with a $6 big box, leveraging a strong existing brand asset. We're already seeing both offerings drive traffic and sales improvements. Moving beyond the short term, we know that Popeyes has to provide a better experience, and that will come from more consistent operations. Easy to run kitchens are one part of a multi-year opportunity to improve operations and enhance the guest experience. We've identified easier and faster ways to install the upgrades, and we'll continue to incorporate feedback to optimize this investment before scaling it across the US system. We also need to make Popeyes easier to access, and we're exploring new formats to infill in key markets and improve build costs. In the meantime, we continue to enhance our digital capabilities and drive strong growth in digital sales. which were up 21% year over year and reached 28% of total sales. I'll wrap up my comments with Firehouse subs in the U.S. and Canada. The team and our franchisees have done a good job navigating a difficult environment. While unable to offset industry headwinds this quarter, we did bring back a Firehouse fan and a personal favorite of mine, the Hot Sauce Bar, in mid-September. This is an incredibly unique and perfect brand fit for Firehouse, pairing 13 hot and flavorful sauce options with our Hot Subs. Overall, Firehouse saw system-wide sales decrease 1.3%, driven by a comparable sales decline of 4.8%, partially offset by net restaurant growth of 3.9%. Mike and team have been hard at work on new unit development and added 49 net new restaurants since Q3 of 2023. That's nearly 60% more than where we were this time last year. And we're on track to further accelerate development in 2025 with a strong pipeline of new and existing franchisees. In August, I spent time with many of our franchisees in Austin, Texas, celebrating the brand's 30th anniversary. There's a ton of excitement and energy in the system that will allow us to keep opening new restaurants and introducing our delicious hot subs to more and more guests throughout North America. With that, I'll pass it to Sammy to walk you through our financial results for the quarter. Sammy?