Good morning and welcome to the Restaurant Brands International Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.I would now like to turn the conference over to Chris Brigleb, RBI’s Head of Investor Relations. Mr. Brigleb, please go ahead.

Thank you, operator. Good morning everyone, and welcome to Restaurant Brands International’s earnings call for the fourth quarter and full year ended December 31, 2019. As a reminder, a live broadcast of this call maybe accessed through the Investor Relations webpage at investor.rbi.com and a recording will be available for replay.Joining me on the call today are Restaurant Brands International’s CEO, José Cil; COO, Josh Kobza; and CFO, Matt Dunnigan.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 filings. In addition, this earnings call includes non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the press release available on our website.Let’s quickly review the agenda for today’s call. José will start with some opening remarks and highlights for the fourth quarter and then discuss our performance at Tim Hortons, Burger King and Popeyes. Josh will then provide an update on technology at RBI, both as a review of what we've accomplished thus far and a frame for key areas of focus moving forward. To conclude, Matt will review our financial results before opening the call up for Q&A.I'd now like to turn the call over to José. José Cil: Thanks, Chris and good morning everyone. Thank you for joining us on today's call. I'll begin my remarks today with a summary of our performance in 2019, which reflected the underlying strength of our global business and the power of our growth algorithm. I will then share my views and the key drivers of our performance last year, as well as our specific plans and priorities for 2020.On a consolidated basis we delivered strong results in 2019. Our system-wide sales grew over 8% to $34 billion for the full year and nearly 10%…

Thanks José and good morning, everyone. We haven't had a dedicated section on technology in the past, but we think it's appropriate to share some thoughts with you today given what an important priority technology represents for us and the significant progress we have achieved.We started about two years ago on a new journey to make technology a core competency at RBI. Digital adoption in the restaurant space is very advanced in Asia and is accelerating now in the U.S. and other parts of the world. It is our view that in order to be successful as our industry evolves we must offer industry-leading digital experiences, integrated with our physical restaurants and technology in order to win with guests going forward.Today, I'll share a brief update on what we've accomplished so far, and where we are going in 2020. Over these past two years, we have made significant progress to catch up with key competitors in core technology offerings, and I'll breakdown our efforts in four key initiatives.First, we have built a strong team led by our CIO, Frank Liberio who has over 20 years experience overseeing some of the largest global restaurant technology networks and who joined our team in 2019. As well as Teddy Sherrill, our CTO who joined in late 2018 after building an educational technology firm he cofounded and who currently leads software development of our guest-facing platforms.Together with Frank and Teddy, we recruited from leading tech companies to build out Miami and Toronto-based teams in engineering, product and design, as well as digital teams within the brands to drive guest experience in new digital sales channels.Second, we have made and continue to make investments in core infrastructure improvements to enable the future of digital ordering and e-commerce. The consolidation of the Popeyes POS system from…

Thanks Josh. As you may recall, during our Investor Day, we set up a simple historical growth algorithm that laid out the key components of how our business grows. In the algorithm, we shared our historical template of 2% to 3% consolidated comparable sales growth combined with approximately 5% global unit growth has historically produced system-wide sales growth of about 7%. And after normalizing for the impact of acquisitions, this sales growth has translated into mid- to-high single-digit organic EBITDA growth.This year even despite seeing some softness in our sales at Tim Hortons, we were able to deliver results very much in line with this framework. In 2019, our system-wide sales growth of 8.3% led to consolidated adjusted EBITDA of $2,304 million, up 6.5% organically year-over-year. And in the fourth quarter, consolidated adjusted EBITDA grew 7.8% on an organic basis, representing our highest growth rate in eight quarters dating back to 2017, primarily attributable to healthy year-over-year sales growth at Burger King and Popeyes.In our view, this demonstrates both the underlying strength and consistency of our business model, as well as the added benefit from diversification that we get from having a multi-brand model with significant operations in all regions around the world.At the segment level, Tim Hortons 2019 adjusted EBITDA was $1,122 million, which represents a 1. 5% organic increase year-over-year. This growth was driven primarily by an increase in supply chain sales, the biggest drivers of which were shifts in product mix, growth in our retail business and growth in equipment sales.In addition, our EBITDA growth also reflected lower segment G&A expenses year-over-year. In the fourth quarter, Tim Hortons adjusted EBITDA was $297 million, representing a decrease of 0.2% year-over-year. This variation was driven primarily by a decrease in global comparable sales, which was partially offset by the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Dennis Geiger with UBS. Please go ahead.

Good morning. Thank you. José thanks for all the insights and the [indiscernible] details on Tim Hortons, just wondering if you could talk a bit more about the changes made to the loyalty program, specifically maybe if you could highlight different customer behaviors that you may be able to affect the financial impact from the adjustments?Your focus on app download and utilization is clear, but maybe just anything that you look for from the tiered loyalty system benefits there across dayparts, whether the recent drag that you've seen from the program changes some and anything else on your research and testing of the program? Thank you. José Cil: Hey, Dennis thanks for the question. I'm going to have Josh walk you through some of those details.

Yes. Hey, Dennis good morning, and thanks a lot. So we've done a lot of work thinking about where we take the loyalty program next and we're very excited about the changes that are coming up here just in a few weeks actually. And I think if you go back, we were really pleased with the initial adoption of loyalty program as we've talked about a bunch. We saw a huge reaction from our guest and I think they were really pleased with the rewards that we were able to bring to them.And now I think we're ready to take our next steps with loyalty in the new year here. We've done a lot of research together with both with our guests and with some of the best experts across the loyalty industry and spent a lot of time looking at some of our peers both here in Canada and other geographies in the U.S. to think through where we should take the program next.Really with a big focus on our guests and how we take the business forward in the best way in the long run. And I think some of the exciting things, some of the key features about where we're going to take loyalty are, one, we're going to be able to open up the menu and bring rewards across a number of additional menu items.That was one of the big pieces of feedback that we heard is that we have many guests who want to be able to be rewarded across many other categories in our menu. And one of the great features of the new program is that we'll be able to offer rewards in terms of food items, in terms of donuts, in terms of ice cap. So we're really able to broaden the…

The next question comes from Nicole Miller with Piper Sandler. Please go ahead.

Good morning and thanks for the update. I want to ask about Tim Hortons and a couple of things. First, how is Canada overall as a region? How is the peer performance there? Even if you know it, it's better, the same or worse, context would be helpful?Second, I wanted to simplify the dollars going into the plan. So the $100 - or excuse me $100 million of ad funds, does that reduce other aspects of advertising? I just want to understand that or other financial means to support the plan?And then just third, and I'm sorry it's a little harsh, so I apologize. But I was trying to compare and contrast these comments back to the Analyst Day and there was commentary at the end of the prepared remarks today about things generally being the same from that plan. But if that's the case, I mean why now on Tim's this is going to work?I'm assuming there's going to be some elements that are being reprioritized and just essentially saying, what do you want us to expect? It's okay, if you're going to buy comp through loyalty this way to get the data, but then we should be understanding that maybe this quarter is an anomaly in terms of same-store sales? Thank you very much. José Cil: Hey, Nicole, thanks for the question. I think I'll start with kind of the third and fourth questions around the Tims - or the third and fourth sub-questions on Tim's plan and what we shared in May. And as I've mentioned, I've spent probably 60%, 70% of my time in Canada since October, working closely with Axle and the team to address some of the gaps that we have in the plan and in the team.We've hired a lot - a number…

Yes. Hi, Nicole. It's Matt here. In terms of the capital investment I think as José mentioned, we think this is an important part of the overall plan at Tim's to drive sales over the long term and the right place to invest our resources. And so with the CAD100 million investment that will be made over time over the next five to six years and as a result of that, I think we'll also see some pretty significant savings within the ad fund, saving millions of dollars per year on menu printing and delivery. So overall, we don't really expect a material impact on ad fund spending. José Cil: And just to come back to your final question on performance. As you know, we don't provide guidance. But that said, we see no - there's been no material change in initiatives or performance Q1 to-date versus Q4. The things, we've talked about are structural changes and investments we're making around coffee, breakfast, loyalty 2.0 drive-through outdoor digital menu boards, coffee communication all the time. And these initiatives are aimed at providing layers of sales growth over time throughout the year and beyond and we're confident that these will have an impact on the topline in the coming years. Thank you so much.

The next question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Great. Thank you very much. Another question on Tim's. José, I'm just wondering if whether you could talk about franchise relations. It sounds like you've met with, like you said, 1000-plus owners in recent weeks. So I'm just wondering how you'd describe that today and whether or not the recent comp headwinds, and like you said, the profitability down this year has kind of overrode the prior successful efforts it seemed like in improving relations with franchisees.And on the base of that, just can you just provide us the percentages in terms of the percentage of the system that, like you said, invest to modernize, but where the system is in terms of remodeling the entire units and whether the franchisees in your discussions are keen to invest on that or whether they'd be a little bit more hesitant to do so ahead of their required remodel cycle? Thank you. José Cil: Great. Thanks, Jeff. Yes look despite our recent performance relationships with our owners continue to improve in Canada and we're communicating with them more than ever. And as I mentioned just last week, I finished traveling the country. I was in Vancouver, Calgary, Toronto, London, Ottawa, Montréal, and I went all the way east to Halifax and we shared our plan with over 1,000 owners at these town hall meetings that we hosted.Our Tim's owners they're super passionate about their amazing Tim's brand and not surprisingly they have - and as they should, they have high expectations of us as leaders of the Tim's brand and business and that's what I love about our owners. The community engagement, op simplification, fewer more impactful new products, sharper brand communications, and of course, restaurant profitability, these are top of mind in our priorities for our owners in Canada.I'll tell you…

The next question comes from Patricia Baker with Scotiabank. Please go ahead.

Thank you very much. Good morning, everyone. Not surprisingly I'm also going to ask a question on Tim's and you may have partially answered it, but I'm still going to ask it. I really appreciate all the color you've provided on what your plan is for 2020 to try and close the gaps on Tim's current performance and where you think it will go to. In 2018 you launched the Winning Together plan. I'm just curious, looking back it would be obvious I think that where Tim's is performing now is not where you thought it would be when you launched the Winning Together plan. So can you talk about the Winning Together plan, what worked, what didn't work? And when you kind of take a look backwards, should you have included more of that focused on the core when you did the Winning Together plan? José Cil: Thanks Patricia. Yes, I think I touched on our strategy and our game plan going forward and some of the reflection after a few months of assessment of our current performance and kind of our history over the last several years. I think I've touched on the things that we identified as opportunities and how we're going to move forward.I think the key for us is that, we're famous, an incredibly well-penetrated brand in Canada. People love this brand. They love the experiences they have there and consider it a second home in many cases. And I think what we didn't do well in the past - in the recent past is that we spent too much time trying to create initiatives on the fringes that were not initiatives or limited time offers or innovations that supported the core of our business around coffee. The - kind of the expanding definition of what coffee is around breakfast and around baked goods.And so we feel that the initiatives and the plan that we have around elevating our core, focusing on innovating for growth in our core and modernizing the brand with loyalty 2.0, as well as enhancing the drive-through experience, which is a big and growing part of our business, which really hasn't been touched in decades. We think the initiatives that we have in our sites and that we're focused on, and removing everything else from the periphery is going to allow us to drive growth in this great brand for years to come. Thank you.

The next question comes from David Palmer with Evercore ISI. Please go ahead.

Thanks. Good morning. And thanks for that commentary on Tim's. Question on that brand, as you reposition the loyalty program, how confident are you in the testing of that phase two loyalty and how are you doing that differently than the previous version?And relatedly, I would assume the loyalty shift will help franchisees regain some lost margin from phase one, but is it also fair to say, there will be some sales sacrifices initially as you push consumers to a mobile relationship? Just some of these consumers will be less keen to make the leap to the phone.And then lastly, as you think about that 3 point drag from phase one rewards, do you think that could become a tailwind by the second half of the year maybe making positive comps more likely in that second half? Thank you.

Hey, Dave, it's Josh. Thanks for the questions. So as we noted a little bit earlier, we think that loyalty is contributing right now about negative 3% to our overall comp. And as we think about what's going to happen with the next phase of loyalty, the goal is really about driving the - about two things as I said earlier, right? One is being able to open-up the menu and give more options and the other thing is about moving more into a digital form of a program. So we have done a lot of research, and I mentioned earlier, we've done research both with our guests and worked a lot with experts in the industry.So we think, we've done as much research as we can do trying to make sure that we have the right form of the program going forward that our guests are going to respond well to, and that we have a pretty good understanding of how our guests are likely to respond to the program. There's always uncertainty with these programs about how exactly they'll respond.I'd say, we don't - we don't expect to see a material change as I mentioned earlier in terms of our overall investment in rewards as we move forward into the next phase of the program. That's not the intent and that's not our expectation. But as you think about how the impact of the program is likely to evolve as you move through the rest of the year, obviously in Q1 of the year nothing will have changed too much. But as we move into Q2, you'll be lapping the prior year when we had the existing version of the program in place. But we had a bit of a traffic benefit, due to the initial excitement in Q2 of 2019. So I'd say it was more sales neutral. And we think that as you get into the second half of 2019 as we're lapping that, as we got further into the second half of 2019, we think some of that incremental traffic have - it faded away as some of the excitement came off.So as we get into the second half of 2020, we think that some of the year-on-year investment could farther into the second half of 2020 start to become somewhat less of a headwind. And we hope that some of our initiatives around personalization and trying to make the program more incremental could start to become more of a benefit. So hopefully that helps to think through of how we think about the program and how it could evolve as we move through 2020.

The next question comes from Sara Senatore with Bernstein. Please go ahead.

Good morning. This is actually Elijah for Sara. So I just had a quick one on BK. I think you mentioned that the Impossible Whopper stayed strong, but also that you saw strength across the core menu, but the comps were still soft. So it seems like that lift from the Impossible has quickly dissipated, can you just talk about that? And then also, the competitive environment in general? Thanks. José Cil: Yes. Thanks Elijah. Our sales levels in Q4 at Burger King in the U.S. were very healthy and in line with what we saw in Q3. We continue to do well in the premium segment. However, we were lapping as I mentioned in my prepared remarks, we were lapping strong traffic in the same period in 2018 driven by dollar nuggets, King Box and also $0.89 pancake promotion. We feel really good about our plan at Burger King in the U.S. long term. We have a strong core offering.I think the addition of Impossible Whopper in the 2 for $6 platform gives us an opportunity to address one of the points of feedback we received from many guests which is the price point was a little high for the QSR consumer. So having it available in the 2 for $6 platform gives folks more access to it which is really exciting and we're seeing that to be an important point for consumers long term. We also have initiatives around breakfast. We have initiatives around value long term. So we feel good about the business plan for BK in the U.S. and look forward to keeping you posted on our progress in the coming quarters.

The Next question comes from Brian Bittner with Oppenheimer. Please go ahead.

Thanks, good morning. For Popeyes, I think this is the first time ever that Popeyes has opened over 100 units in a single quarter. And you talked in your prepared remarks that the backlog is really going to start unlocking maybe this year next year and the year after. How do you want us thinking about Popeyes unit growth in 2020? And what portion of your new openings is going to come from the U.S. versus international over the next couple of years? José Cil: Thanks Brian. We don't break out on a go-forward basis where the development is going to come from. But obviously the performance in the U.S. of the Popeyes business and as we shared for Q4 and for the full year has created a lot of excitement with our existing franchise partners here in the U. S., as well as with new prospective investors that are very interested in being part of this system, which is quickly becoming one of the more exciting franchise business models in all QSR in the U.S.So we think, long term there is a lot of room for growth for Popeyes in the U.S. Obviously, internationally we think there's a tremendous opportunity for growth. Clearly, Asia is a place where fried chicken and chicken in general does quite well and we think we can be a really compelling second offer in the region.We have a huge size gap or penetration gap versus the market leader in Asia. And we think we have a really compelling offer from a product standpoint to do some important growth there in years to come. And - but it's not just Asia. In the U.S., we think Europe is an exciting and growing market. We've opened in Spain. We have other markets as well in Europe that have potential for growth.Latin America is a market where fried chicken does quite well and we've opened in Brazil and had a really exciting growth rate in 2019. I think it's just the beginning of growth for the Popeyes brand in Latin America, in Europe and Asia, and especially in the U.S. as well. So we're excited about the prospects and we're working hard to build our team's capabilities from a development standpoint and working with our partners to ramp up growth over time. Thank you so much.

The next question comes from Peter Sklar with BMO Capital Markets. Please go ahead.

You're late this year in terms of calendar, the roll-up to win promotion at Tim Hortons. You indicated in your commentary that you will be proceeding with it. Just wondering why you're late? And especially in the context of one of your principal competitors, I believe, started with their dollar coffee promotion today. So the concern would be that you're going to lose some momentum this quarter because you are late with the program?

Hey, Peter it's Josh, good morning and thank you for the question. So the phasing of roll up is mostly due to making sure that we have the right timing with respect to the next phase of Tim's Rewards and then bringing in roll up after that. So we'll have news on roll up to come I think in the quite near future, and we just want to make sure that we give time for our guests to have things in a proper order and kind of understand each of those new pieces of news.

The next question comes from David Tarantino with Baird. Please go ahead.

Hi, good morning. My question is on Popeyes. And I was just wondering if you could help us understand the very impressive comps performance that you had in the fourth quarter? And how much of that was maybe trial around the relaunch of the Chicken Sandwich versus maybe a sustainable improvement in traffic or customer counts? And I'm just asking in the nature of sort of level setting what we should be assuming going forward in terms of the sustainability of the trend you saw in the fourth quarter? José Cil: Thanks, David. As they say a rising tide lifts all boats. Well in Q4, we saw the tide rise at Popeyes quite a bit and the traffic driven by the demand of the Popeyes Chicken Sandwich helped drive growth in our entire menu in the quarter. Just to give you an idea about that, following the launch of the chicken sandwich in November, only about 50% of total tickets of Popeyes in Q4 contained a purchase of the Chicken Sandwich, which means a lot of the growth came from growth in other categories in our menu, which is quite exciting.We're also encouraged by the fact that on a significant majority of the tickets with - that included Chicken Sandwich, guests spent more on non-sandwich items than on the Chicken Sandwich itself, which led obviously to very healthy ticket levels and growth across the menu. We're super excited and super encouraged with the levels that we saw from the gross sales and levels of volumes that we saw from the Chicken Sandwich in Q4 and throughout the quarter.We think long-term this is obviously a platform that's going to give us an opportunity to engage more guests with Popeyes. We've mentioned several times in past calls and other sessions that when…

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.