How did the company perform in the second quarter of 2024?

Total revenues were $2,080 million versus $1,775 million, and income from operations was $663 million versus $554 million. Consolidated system-wide sales rose 5.0% and comparable sales rose 1.9%, while Adjusted Operating Income was $632 million, up 9.3% organically.

What drove the increase in income from operations?

The filing attributes the increase mainly to a favorable change from equity method investments, including a $79 million gain recognized on the Carrols acquisition that increased the value of the existing 15% equity interest, plus higher segment income at the five franchisor segments and the inclusion of RH segment income. These were partly offset by higher other operating expenses, an unfavorable FX impact and RH transaction costs.

What is the Carrols acquisition and how does it affect reported results?

RBI acquired Carrols Restaurant Group on May 16, 2024 for an enterprise value of approximately $1,000 million, funded with cash on hand and $750 million of incremental Term Loan B borrowings. Carrols results are included only from May 16 to June 30, 2024, and the Carrols Burger King restaurants are reported in the new RH segment, which the company plans to refranchise the vast majority of.

What is the company's leverage and capital return outlook?

Net debt was $13.2 billion as of June 30, 2024, with Net Income Net Leverage of 7.3x and Adjusted EBITDA Net Leverage of 5.0x. The Board declared a $0.58 per share dividend for the third quarter of 2024 and plans to submit a new normal course issuer bid, subject to TSX approval, to be effective after the current one expires in September 2024.

What guidance did the company update?

The company continues to expect 2024 consolidated capital expenditures, tenant inducements and incentives (excluding RH) of about $300 million. It now expects Adjusted Net Interest Expense of $565 million to $575 million and Segment G&A (excluding RH) of $640 million to $660 million, including share-based and non-cash incentive compensation of $170 million to $180 million. Long-term 2024 to 2028 targets remain 3%+ comparable sales, 5%+ net restaurant growth, 8%+ system-wide sales growth and Adjusted Operating Income growth at least as fast as system-wide sales growth.

QSR 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed August 8, 2024. Cited figures are marked; the original filing is the authoritative source.

Restaurant Brands International Inc. reported results for the three months ended June 30, 2024 in Exhibit 99 to this Form 8-K, furnished August 8, 2024.

Consolidated system-wide sales increased 5.0% year-over-year to $11,252 million^a, with global comparable sales up 1.9%: Tim Hortons Canada comparable sales rose 4.9%, International (INTL) rose 2.6%, and Burger King US was flat at (0.1)%. Total revenues were $2,080 million versus $1,775 million, income from operations was $663 million versus $554 million, and net income was $399 million versus $351 million. Diluted EPS was $0.88 versus $0.77, and Adjusted Operating Income was $632 million, which the filing says increased 9.3% organically.

Adjusted Diluted EPS was $0.86^b, up 3.1% organically. The quarter included the May 16, 2024 acquisition of Carrols Restaurant Group, which the company said had an enterprise value of approximately $1,000 million, and created a new Restaurant Holdings (RH) segment for the Carrols Burger King restaurants. The PLK China acquisition closed June 28, 2024 and will be consolidated beginning in the third quarter of 2024.

The $79 million^c gain recognized on the company's existing 15% Carrols equity interest contributed to the year-over-year increase in income from operations. Net debt was $13.2 billion, with Net Income Net Leverage of 7.3x and Adjusted EBITDA Net Leverage of 5.0x as of June 30, 2024. The Board declared a $0.58 per share dividend payable October 4, 2024, and the company plans to submit a new normal course issuer bid.

The filing reiterates 2024 guidance for capital expenditures of about $300 million^d and updates Adjusted Net Interest Expense to $565 million to $575 million and Segment G&A (excluding RH) to $640 million to $660 million. Long-term guidance for 2024 to 2028 is unchanged.

02—Key points

Key Highlights

Consolidated system-wide sales rose 5.0% year-over-year to $11,252 million, with comparable sales up 1.9%.
Net income was $399 million versus $351 million, and diluted EPS was $0.88 versus $0.77.
Adjusted Operating Income of $632 million increased 9.3% organically; Adjusted Diluted EPS of $0.86 increased 3.1% organically.
Carrols Restaurant Group was acquired May 16, 2024 for an enterprise value of approximately $1,000 million, forming the new RH segment; PLK China closed June 28, 2024.
Burger King US comparable sales were (0.1)% and system-wide sales declined 0.7%, while Tim Hortons Canada comparable sales rose 4.9%.
Net debt was $13.2 billion, with Adjusted EBITDA Net Leverage of 5.0x; a $1,200 million 6.125% First Lien Senior Notes due 2029 was issued to reprice the Term Loan B.
The Board declared a $0.58 per share dividend payable October 4, 2024, and plans a new normal course issuer bid subject to TSX approval.

03—Questions

Frequently Asked Questions

How did the company perform in the second quarter of 2024?
Total revenues were $2,080 million versus $1,775 million, and income from operations was $663 million versus $554 million. Consolidated system-wide sales rose 5.0% and comparable sales rose 1.9%, while Adjusted Operating Income was $632 million, up 9.3% organically.
What drove the increase in income from operations?
The filing attributes the increase mainly to a favorable change from equity method investments, including a $79 million gain recognized on the Carrols acquisition that increased the value of the existing 15% equity interest, plus higher segment income at the five franchisor segments and the inclusion of RH segment income. These were partly offset by higher other operating expenses, an unfavorable FX impact and RH transaction costs.
What is the Carrols acquisition and how does it affect reported results?
RBI acquired Carrols Restaurant Group on May 16, 2024 for an enterprise value of approximately $1,000 million, funded with cash on hand and $750 million of incremental Term Loan B borrowings. Carrols results are included only from May 16 to June 30, 2024, and the Carrols Burger King restaurants are reported in the new RH segment, which the company plans to refranchise the vast majority of.
What is the company's leverage and capital return outlook?
Net debt was $13.2 billion as of June 30, 2024, with Net Income Net Leverage of 7.3x and Adjusted EBITDA Net Leverage of 5.0x. The Board declared a $0.58 per share dividend for the third quarter of 2024 and plans to submit a new normal course issuer bid, subject to TSX approval, to be effective after the current one expires in September 2024.
What guidance did the company update?
The company continues to expect 2024 consolidated capital expenditures, tenant inducements and incentives (excluding RH) of about $300 million. It now expects Adjusted Net Interest Expense of $565 million to $575 million and Segment G&A (excluding RH) of $640 million to $660 million, including share-based and non-cash incentive compensation of $170 million to $180 million. Long-term 2024 to 2028 targets remain 3%+ comparable sales, 5%+ net restaurant growth, 8%+ system-wide sales growth and Adjusted Operating Income growth at least as fast as system-wide sales growth.

04—Continue

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