Good morning and welcome to the Restaurant Brands International Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Chris Brigleb, please go ahead -- Chris Brigleb, RBI’s Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Restaurant Brands International’s earnings call for the fourth quarter ended December 31st, 2020. As a reminder, a live broadcast of this call may be accessed through the Investor Relations webpage at investor.rbi.com, and a recording will be available for replay. José Cil: Thanks, Chris and good morning everyone. Thank you for joining us on today's call for the fourth quarter and full year ended December 31st, 2020. I hope everyone is doing well and staying healthy. It's been almost a year since the start of the COVID-19 pandemic and our response to mobilize behind a clear set of priorities to confront the crisis. We've seen considerable progress in our objectives over the past year, and the recovery in our business we've seen since March highlights the resilience of our three iconic brands and our network of strong and well-capitalized partners around the world. It's also a testament to the incredible hard work from our restaurant team members, franchisees, and employees to reopen restaurants and get back to safely serving delicious food and coffee to our guests. Burger King, Tim Hortons, and Popeyes are all leaders in their respective categories and offer high-quality craveable food and beverages combined with convenience that few can match. We also offer familiarity and comfort as well as great value, characteristics we've seen consumers gravitate towards in more trying times like those we face today. We've reopened nearly 6,000 restaurants globally since the peak of the crisis. And as of the end of Q4, over 96% of our restaurants were open worldwide with substantially all of our restaurants open in North America and APAC and approximately 94% open in EMEA and Latin America. Although, I would note that in regions like Canada, EMEA and Latin America, many of our restaurants are open; but with continued limitations on dining rooms or walk-in traffic.

Thanks, Jose, and good morning, everyone. We continue to make significant progress this quarter on our goal to build an industry-leading technology platform and grow sales across digital channels. During Q4, digital sales in the U.S. represented 8% of total sales of Burger King and over 16% of total sales at Popeyes. And at Tim Hortons in Canada, digital sales represented 23% of total sales during the quarter. Digital sales in our home markets more than doubled versus a year ago. This continued momentum reinforces our belief that the wave of digital adoption we've seen in the wake of the pandemic has represented a step change in terms of how our guests interact with our brands and how we serve them going forward. Delivery remained a key driver of growth, with delivery sales at Burger King and Popeyes up over 2 times and 3 times in 2020 respectively versus 2019. At Tims, delivery sales are now up about 14 times versus 2019. We’ve achieved essentially full coverage across our brands in home markets, with approximately 10,000 restaurants offering the service via multiple aggregators and through our own apps. This year, we are bringing greater focus to our white-label delivery program, which allows our guests to order food directly through our own brand app or website with delivery fulfillment from third parties. In Q4, we made important advances in our Tims Rewards program as well. We've shared with you previously our focus on increasing registration amongst our guests, so that we can actively engage with them and offer tailored rewards. We successfully shifted to a fully registered program and are encouraged by positive trends we are seeing on registration. We are still very much in the early innings, but we are actively refining our features and segmentation so that over time,…

Thanks Josh and thanks to everyone on the call for joining this morning. In 2020, our full year consolidated system-wide sales were approximately $30.7 billion, representing a 9% decrease year-over-year and reflecting the impact of COVID-19 on our results across regions. Consolidated adjusted EBITDA was $1.864 billion, representing a nearly 18% organic decrease year-over-year. In the fourth quarter, consolidated system-wide sales decreased 8% to about $8.2 billion, while consolidated adjusted EBITDA was just over $500 million, representing a 20% organic decrease year-over-year. Historically, our consolidated adjusted EBITDA growth rate has been closer to our system-wide sales growth. However, in 2020, we saw increased volatility related to the impacts of the pandemic as well as the steps we've taken to reinforce our plans by investing behind our people. More specifically, in the fourth quarter, there were several factors that contributed to the difference in our consolidated growth rates. First, our year-over-year performance across all three brands reflected proactive G&A investments in our digital and technology initiatives as well as adding strong new hires in key areas of the business like marketing, field operations, and technology. As we've discussed, building out best-in-class technology assets is a top strategic priority, which we believe will unlock exciting new avenues for growth over time. Together, these investments, combined with some year-over-year timing shifts in G&A, affected our growth rate by about negative 3% in the fourth quarter. Looking ahead, we expect to continue investing across these key areas of our business in 2021, including the important technology initiatives Josh just mentioned. And while there were some timing impacts in Q4 that will roll off, we think that overall, the annualized level for the quarter is fairly representative of capturing the investments we plan to make this year. Second, beyond the year-over-year sales decline, there were…

Thank you. We will now begin the question-and-answer session. Today's first question comes from Nicole Miller with Piper Sandler. Please go ahead.

Thank you and good morning. Thanks for great update. I have a lot of questions. I'll ask just one, and I'll ask it on digital. So we now are starting to see brands at scale flex pricing power in the marketplace. I'm thinking about Chipotle, let's say, last week talking about 13%, right, in the marketplace. And then, holding price steady to really have a value opportunity when you go direct to the app, on the brand app. So what is your point of view in terms of the ability to price your flexing power, now that you're going to have more digital tools? And is it different by brand? Thank you. José Cil: Hey, Nicole, thanks for the question. I think on pricing as it relates to digital, we continue to be very surgical there with our franchisees in different markets around North America and around the globe. Pricing through our app and white label, we think we have some pricing power there, certainly, and we've tested various different opportunities to look at pricing as a driver of transactions through our mobile app versus through third-party aggregators. I think it's an important element that our teams are working closely with our franchisees on, and we continue to test and adjust to see what can drive more consumer demand, while at the same time addressing our owner profitability. Josh, you might have something additional to add there?

Yes. Hi, Nicole. Good morning. I think, just to add to Jose's comments. I think one of the other things that we think is interesting on, as we think about developing further some of our own apps is the value that we can deliver to our guests on our apps through our loyalty programs potentially. One of the things that we mentioned this morning is that in addition to our loyalty program, we have through Tims Rewards that we're testing a loyalty program at Burger King. And I think that's just another way to think about the value that we can deliver on our own platforms when our guests interact with us on bk.com or via the app. And whether they're ordering and picking up and the drive-thru or at the restaurant or ordering through a white-label delivery offer, we think we can deliver a great experience and a lot of value to our guests in that channel. José Cil: Thanks for the question Nicole.

Thank you. Our next question today comes from Chris Carril with RBC Capital Markets. Please go ahead.

Hi. Thanks for taking the question. So, I wanted to return to the topic of development, and thanks for all the details so far. So, could you talk a little bit more about what gives you confidence in the reacceleration of development in 2021? And I know you mentioned strong unit economics, but is there anything else you would point to specifically as it relates to growth this year? And then any detail on which markets specifically you expect to see a reacceleration of growth? That would be really helpful. José Cil: Chris, its Jose. Thanks for the question. Look, I think what's important about development in our business and at RBI with our three great brands is that our franchisees that are in the business all across the globe internationally and domestically, whether they've been with us for decades or they've been with us for just a few years, they're all in this to create value for themselves, in some cases, for their families, for their investors. The great news is that they believe in our brands. They believe in being customer or guest-centric. They know that there's incredible demand out there for what we offer on the food and beverage side, in chicken, coffee, and burgers. And they know there's an opportunity -- or there's many opportunities in the markets in which they operate, and they believe in the power of investing for growth. And it's not because we have contracts that we believe in what can happen and what will happen, we believe, in 2021. It's because we see significant opportunities. Our franchise partners see the significant opportunities that exist. Obviously, there's been a tremendous dislocation in the industry independents and smaller chains are struggling. Real estate has become -- or opportunities in real estate have become…

And our next question today comes from David Palmer at Evercore ISI. Please go ahead.

Thank you. Good morning. I'm wondering about some of the unit growth -- the net unit growth, the inputs of that coming into '21, how that played out in 2020? And I'm thinking by region because my perception is that you might have higher franchise revenue in places like the U.S. than some region like Asia Pacific, for example. And if that's true, then maybe we should be more cognizant of the closure rates in those regions versus the U.S.. So any color on that and how it might impact the model into '21? Thanks. José Cil: Hey David, thanks for the question. Yes, we shared some detail in the prepared remarks in terms of openings and closures and that we landed in 2020, essentially where we said we'd land back in Q2, which is same restaurant count in 2020 as we had in 2019 or roughly the same. The mix of closures, we obviously saw closures and took advantage of the situation to help optimize the portfolio in many markets across the globe internationally as well as domestically. We -- there was a number of -- we had started already a closure program at Burger King in the U.S., we had mentioned that back in 2018 and 2019, and we continued that in 2020 and accelerated somewhat there. But we also had some opportunistic closures in international markets in Europe and Asia, as well as in Latin America. So that was an important part of how we landed in a flat net restaurant growth number for 2020. And we saw the openings that I mentioned the north of 1,100 openings in 2020 come from a number of different markets as well. It wasn't -- that the mix was different for closures and openings. It was kind of consistent as we've seen throughout the last many years by region and by country. So I'm not sure if that answers your question. Matt, if you -- do you have anything else to add to that?

Yes. I would just -- I think that all makes sense. It's a good summary. I think, Jose mentioned the BK U.S. closures. We had talked about that at our Investor Day back in 2019. And so, we were working through that program already and continue to work through that and made really great progress in the year. I think, just overall, we feel really good about how we're able to execute on the proactive closure plan that we talked about over the past couple of quarters. And we think it's a really great thing, great help to our franchisees and our systems around the world to remove unprofitable restaurants from the system; improve brand image; and overall, improve profitability and cash flow for our partners around the world, and that's also a piece of our outlook and our confidence in growing with our partners and driving NRG back to the levels that we saw in 2018 and 2019. José Cil: Yes. And one more thing, David, on the closures. When you look at closures in North America, we talked about this in the context of the U.S. closure plan. The closures that we're -- we've delivered so far, the average volume for those stores is -- even if our average volumes in the U.S. are north of 1 point -- 3.5 or 4 for Burger King, as an example, the closures are somewhere in the neighborhood of $800,000. So the delta between what we're closing and what we're opening is pretty significant, which is why we keep highlighting the importance of these opportunistic closures to help continue to drive health and profitability in the system for the benefit of our franchisees. Thanks for the question.

And our next question today comes from John Glass with Morgan Stanley. Please go ahead.

Thanks and good morning. On the digital menu boards, could you just provide a little bit more of what you're actually -- I know it's early days, but what you're experiencing from a lift? You said there was a check benefit, maybe what that has been by the two brands. If there's a throughput benefit, maybe what that's been. And just maybe a mechanics question. In the Tims business, do those flow through the distribution business that we should be aware of the revenue and potential margin impact? And I know I'm being a little bit greedy here, but just in terms of the G&A commentary, I just want to clarify, despite the puts and takes in the fourth quarter in G&A, that's the right run rate to think about 2021? Or are you taking something out of that and saying the run rate is lower? I just want to make sure I understand how you think about G&A in 2021. Thanks.

Hey, John. Good morning. It's Josh. Thanks for the question on the ODMBs. Yes, we're really pleased with the progress so far, especially in Burger King in the U.S. and Tims in U.S. and Canada and we've made a lot of progress over the past year or so in the rollout of the physical hardware and software and getting to over 3,000 locations so far. And so, I think we feel really good about sort of the pace of rollout and the quality of our installations and it gives us a lot of confidence in our ability to continue that program and execute on the time line that we've set out there. And I think it's also given our franchisees a lot of confidence and excitement in what's coming to the system, because they see the impact on the guests. I would say that, I think, we're a bit early to quantify some of the impacts that you talked about, which is why our commentary has been a bit more qualitative. But we have seen a lot of the things that you talked about. So when we install these new digital menu boards and the drive-thrus, we're seeing impacts to the guest satisfaction that we measure in those restaurants and especially in the service motive of the drive-thru. In many cases, we're seeing benefits to speed. We think some of that is just that it's easier to read and easier to confirm the orders you see back on those digital menu boards, the confirmation of what you're actually ordering. We think is really helpful. It also helps order accuracy. And then also, we have been -- in different ways in the different brands for Burger King and for Tims, we're using different suggestive selling technologies that we're pretty encouraged. We're still developing those and evolving those technologies, but we're already seeing the ability to drive some pretty observable sales upside from the technologies. I think that's something that we'll continue to evolve and improve over time as we roll them out to more restaurants and improve the technology that we have. So, I think it's very exciting. It's something that impacts a lot of our restaurants and so many of our guest experiences because of how prevalent it is in terms of service modes for our business across the US and Canada. We feel good about the pace of rollout and the ability to impact a lot of guests over the next 12 to 24 months, and we'll keep updating you all as we make progress and get more data on that front. And I'll hand it over to Matt for the second part of your question.

Hi John. Thanks for the question. Just maybe to provide a little bit more color on my comments around G&A. I talked through the impact that it had in the quarter of about a 3% drag on EBITDA. And I think the impact is roughly split between the items that I called out versus some timing and non-recurring items in the quarter. And the comment that I was making about the annualized level is that because we are continuing to invest behind some of these important initiatives that we talked about, especially on the tech and digital side, we will continue to grow our investments there to drive our plan for this year and beyond to drive sales generating and topline -- top sales generating activities and topline growth. So, that's why I mentioned that the Q4 level, on an annualized basis, should be fairly representative. Some things will come out, but we're going to keep investing behind those initiatives through 2021. And going forward, as we've done in the past just in general, I think we'll be very disciplined and focused on making the right investments, the most impactful ones to support our teams, to support our tech initiatives, and all the important projects that Josh talked about in the prepared remarks. I think, John, I think you had another -- an additional question there on the mechanics of how ODMBs flow through in the Tims business from a distribution standpoint. Josh or -- yes, you guys want to clarify that one.

Let me clarify that one. It doesn't flow through the revenue or expenses of the supply chain business. José Cil: Yes, John, that moves through the add fund. Thanks, John. Appreciate it. Next?

And our next question comes from Dennis Geiger with UBS. Please go ahead.

Great. Morning and thanks for the question. And José and team, thanks for the commentary on the Tims' performance in the quarter. I think the flat and drive-thru performance at various points and the comparable US store outperformance; I think clearly highlights the COVID impact drag. But maybe, José, just wondering if you could talk a bit more about what those pieces tell you about the Tims' recovery this year as restriction ease and as mobility increases, especially when you layer on some of the new menu items and loyalty and the customer experience initiatives that you talked about, just how that frames how you're thinking about that recovery? And I think you also talked about gaining market share in the quarter or during the year, just wondering what -- how you think about that playing out as we work through 2021 as well? Thank you. José Cil: Hi Dennis. Thanks for the question. Look there were some -- as I mentioned in my prepared remarks, some encouraging signs in Q4 for Tims. Our December exit rate was high single-digit negative, which is the best performance we've seen since the onset of COVID. Obviously, we're not doing cartwheels on that, but we are encouraged by the performance and the improvement sequentially that we've seen in the business. We saw the drive-thru business perform better and continue to perform better throughout the quarter. And it got to about flat in various points of the fourth quarter. And drive-thru continues. We have about 2/3 of our business is drive-thrus in Canada and we've seen continued momentum there from the beginning of the pandemic through the fourth quarter, and that momentum continues today. Off-premise has been a key driver of sales. We've also -- and we've seen improvements in growth in -- not…

Our next question today comes from Brian Bittner with Oppenheimer & Company. Please go ahead.

Thanks. Good morning. Question on the Burger King U.S. business. When you look at the U.S. sales performance for Burger King, there's been a pretty wide underperformance gap versus the industry, versus your big competitors the last couple of quarters. And I understand January is improving along with the industry. But what do you -- what's your specific diagnosis for this performance gap you've been witnessing in the Burger King U.S. business versus the peer group? And what ultimately do you think is the secret sauce that you need to deploy in 2021 to narrow this gap or perhaps ultimately reverse and start outperforming? José Cil: Hey, Brian, thanks for the question. Yes, I think the diagnosis or the assessment of why we haven't had a stronger performance in the BK U.S. business as we would have liked. I think, I've been pretty open about that over the last several quarters. And now the issue, I think, is our promotional approach, both to value and to new products. I think we've -- in value, in particular, over -- it's an important part of the business. It's a big segment of the QSR business and in particular, in fast food hamburger space. And we've been a bit kind of choppy in terms of how we've address value. We haven't -- we've been doing a lot of bundling and we've been doing promotional activations, including paper coupons and other value approaches, which haven't been resonating as well. And we've had gaps in that performance or that offering of value to our guests. And so we haven't had a value proposition, an everyday value proposition that's been credible and reliable and something that our consumers can count on for quite some time. And over the last few quarters, I mentioned that we would…

And today's final question comes from Sara Senatore with Bernstein. Please go ahead.

Hi, this is Leo for Sara. Thanks for taking the question. I have a question on Tims. As we think about driving comps going forward, now that the core coffee offering has improved, what is the opportunity for specialty beverages like espresso based in Canada? And on the same topic, what have you seen in terms of the plant-based beverages? And what does that say about Tims customer receptivity to -- for beverage offerings? Thank you. José Cil: Thanks for the question. Yes, look, we think that obviously, the definition of coffee is expanding. It's not just brewed coffee anymore, and we've made important investments in a number of initiatives related to our core offering over the last 12 months or so. I've talked about that fresh brewers, water filtration with a dark roast, and those are important to get the core right. But we've also expanded with dairy alternatives in the last 12 months. We -- probably 15 months, we've added almond milk and other offerings that we think -- skim milk as well that we think continue to expand and open up the menu to different customers and giving them the opportunity to enjoy our Tims coffee and the way they like it. And so those are important moves that we've made over the last 12, 15 months. We think there's an opportunity with espresso-based. Long-term, we think there's a tremendous opportunity with cold beverages as well. We've seen -- we've innovated and seen growth throughout the last 12, 15 months on that front and continue to see that as a tremendous opportunity. But as we've mentioned several times over the last few quarters, we need to get the basics right and the plan that we've laid out for the Tims business is all about prioritizing our resources, our energy, and focusing all of our teams on getting back to what made Tim Hortons famous with quality beverages, quality food offerings, baked goods, and being exceptional at service, and connecting well with our communities. We think that, over time, is going to kind of set the foundation for us to be able to grow. And specialty beverages expanding into other offerings, I think, will be a key part of the growth for Tims in Canada for years to come. Thanks so much for the question.

Ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to José Cil for final remarks. José Cil: Great. Thanks so much, Rocco. We've made a lot of progress in 2020, a year which none of us expected. But we're even more excited looking forward in 2021 and beyond and believe our three brands are on the right path to emerge from the crisis even stronger. We're excited to get back to growth this year with our partners around the world and look forward to sharing more with you as the year progresses. Thank you again for your time today. Stay safe and stay healthy. Thanks everyone.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.