01—Abstract
Summary
Summary of the 10-Q filed August 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Restaurant Brands International Inc. (QSR) reported second-quarter 2024 total revenues of $2,080 milliona, up from $1,775 million in the prior-year quarter, and net income of $399 million versus $351 million.
Income from operations rose to $663 millionb from $554 million, though results were helped by a $79 million step acquisition gain tied to the Carrols Acquisition, recorded in (Income) loss from equity method investments. Basic and diluted EPS were $0.89 and $0.88 for the quarter, compared with $0.77 and $0.77 a year earlier. Adjusted Operating Income, the company's non-GAAP segment measure, was $632 million versus $577 million.
The quarter was shaped by the May 16, 2024 acquisition of Carrols Restaurant Group for $543 millionc in cash, with about $431 million of assumed debt fully extinguished by June 30, 2024. The company also acquired Popeyes China on June 28, 2024, and created a new Restaurant Holdings segment. Company restaurant sales rose to $347 million from $68 million, largely from Carrols.
Total debt, net, increased to $13,672 milliond from $12,921 million, and the company recorded a $32 million loss on early extinguishment of debt tied to credit facility amendments and a 6.125% First Lien Senior Notes offering of $1,200 million. At June 30, 2024, cash and cash equivalents were $942 million and revolver availability was $1,247 million. Operating cash flow was $482 million for the six months, versus $487 million a year earlier, while investing outflows rose to $559 million largely due to the Carrols purchase.
The company stated that cash flow from operations and revolver availability should be sufficient to fund obligations over the next twelve months. Management also declared a $0.58 per share dividend payable October 4, 2024, and $500 million remained under the share repurchase authorization, with no repurchases made in the first half of 2024.
02—Key points
Key Highlights
- Total revenues were $2,080 million for the three months ended June 30, 2024, up from $1,775 million, and $3,819 million for the six months, up from $3,365 million.
- Net income was $399 million for the quarter versus $351 million, including a $79 million gain from the Carrols step acquisition.
- Income from operations was $663 million for the quarter, compared with $554 million a year earlier.
- Carrols Acquisition closed May 16, 2024 for $543 million in cash, adding Company restaurant sales of $230 million from acquisition date through June 30, 2024.
- Long-term debt was refinanced through a $1,200 million 6.125% First Lien Senior Notes offering and a $750 million Term Loan B increase, followed by a repricing that reduced Term Loan B principal to $4,750 million; a $32 million loss on early extinguishment was recorded.
- Cash and cash equivalents were $942 million and Revolving Credit Facility availability was $1,247 million as of June 30, 2024.
- Quarterly dividend of $0.58 per common share was declared, payable October 4, 2024, and $500 million remained under the share repurchase authorization.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 8, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $2.08B$1.77B | +17.2% |
| Operating Expenses | $1.42B$1.22B | +16.1% |
| Operating Income | $663.00M$554.00M | +19.7% |
| Net Income | $280.00M$241.00M | +16.2% |
| EPS (Basic) | $0.89$0.77 | +15.6% |
| EPS (Diluted) | $0.88$0.77 | +14.3% |
| Shares Outstanding (Basic) | 317.00M312.00M | +1.6% |
| Shares Outstanding (Diluted) | 453.00M458.00M | −1.1% |
05—Questions
Frequently Asked Questions
What drove the increase in net income this quarter?
The filing attributes the $48 million increase in net income for the quarter primarily to a $79 million favorable change from equity method investments, mainly a gain recognized in connection with the Carrols Acquisition, plus a $23 million increase in TH segment income and the inclusion of $14 million of RH segment income. These were partly offset by a $32 million loss on early extinguishment of debt and a $27 million increase in income tax expense.
How did the Carrols Acquisition affect the balance sheet and debt?
Total cash paid was $543 million, and about $431 million of Carrols debt was assumed and fully extinguished by June 30, 2024. Goodwill rose to $6,140 million from $5,775 million, and reacquired franchise rights of $371 million were recorded at the acquisition date. Total debt, net, rose to $13,672 million from $12,921 million at December 31, 2023.
What did management say about liquidity?
As of June 30, 2024, the company had $942 million of cash and cash equivalents and $1,247 million of borrowing availability under its Revolving Credit Facility. Management stated that cash flow from operations, combined with revolver availability, will provide sufficient liquidity to fund current obligations, debt service and capital spending over the next twelve months.
How did segment performance compare?
Segment income for TH rose to $269 million from $246 million for the quarter, BK rose to $114 million from $110 million, PLK rose to $62 million from $56 million, and INTL rose to $160 million from $154 million. The new RH segment contributed $14 million of segment income. Adjusted Operating Income was $632 million versus $577 million.
What are the upcoming shareholder returns and remaining buyback capacity?
The board declared a cash dividend of $0.58 per common share payable October 4, 2024 to shareholders of record on September 20, 2024. The company did not repurchase any common shares in the three or six months ended June 30, 2024, and $500 million remained under its share repurchase authorization that runs until September 30, 2025.
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