Good morning, and welcome to the Restaurant Brands International First Quarter 2022 Earnings Conference Call. . Please note this event is being recorded. I will now hand over to the conference host, Stephen Lichtner, 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 first quarter ended March 31, 2022. As a reminder, a live broadcast of this call may be accessed through the Investor Relations web page 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, 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. Please note that growth metrics discussed during the prepared remarks including consolidated system wide sales growth, net restaurant growth and organic adjusted EBITDA growth exclude results from Firehouse Subs, which we acquired on December 15, 2021 to reflect comparable year-over-year growth figures. And now I'll turn the call over to José. José Cil: Good morning everyone and thank you for joining us on today's call to discuss our first quarter of 2022. We started the year off strong, with progress in key focus areas including Tim Hortons Canada and Burger King U.S. and continued momentum in our international business, while also seeing digital traction across all brands, with home market digital sales reaching their highest levels ever, as a percentage of system wide sales. During the first quarter, we once again grew year-over-year comparable sales, driven by just over 10% comparable sales at Tim Hortons in Canada exceeding our own high single digit expectations that we shared in March and 20% comparable sales growth in our Burger King International business. We also made further progress chipping away at the gap to…

Thanks, José and good morning, everyone. As you know, across our brands, we view digital as an important tool to create a more convenient, seamless guest experience, increase engagement and brand affinity and ultimately drive sales. In the first quarter, we were pleased to deliver favorable momentum across all of our brands. At Tim Hortons in Canada, we saw continued sequential improvement in digital sales, with the market reaching over 36% during the quarter. Meanwhile, Burger King, Popeye's and Firehouse Subs generated 9%, 18% and 30% of sales through digital channels and their respective home markets, sequential improvements from Q4 results. We attribute this improvement to a combination of factors, including growth and delivery, an increase in mobile order and pay continued traction from loyalty and well executed digital campaigns. The most notable campaign this quarter was our Tim Hortons Roll Up to Win contest, an iconic part of the brand's history that has now been brought into the digital age. Traditionally, Roll Up to Win was a fun brand building opportunity and traffic initiative, which we have now transformed into an incredible driver of digital engagement and sales. We ran two Roll Up contests last year that collectively added approximately 3 million new registered members to Tim's rewards, expanding our already strong loyalty program in Canada. In 2022, we sought to further engage those users, embedding them more deeply into our digital ecosystem by building end points based incentives to use mobile order and pay, introducing an unprecedented number of guests to this service mode. We also built upon strong brand partnerships to offer Canadians our largest prize pool ever, worth more than C$100 million. These partner funded prizes allowed us to reduce the required owner investment and level of product cannibalization, meaningfully increasing same store sales contribution year-on-year.…

Thanks, Josh and good morning, everyone. Before walking through our results, I'd like to share a bit more detail on the impact of the actions we announced as it relates to Russia. We had 820 fully franchised Burger King restaurants at the end of 2021 that represented about 2% of our system wide sales and 1.7% of our EBITDA in 2021, During the first quarter, Russia had a roughly $12 million impact on our year-over-year adjusted EBIDA and we anticipate a fairly even impact across the year. In addition from a development standpoint, over the last five years, Russia has averaged about 80 net new restaurants a year. Despite the loss of this contribution, the strength and diversification of our global partners across many growth markets, keeps us well positioned to accelerate overall net restaurant growth in 2022. Shifting to the first quarter overall, our global system wide sales grew 14% to $8.8 billion, up nearly $1 billion year-over-year, and adjusted EBITDA was $530 million up 9% organically excluding Firehouse. As I mentioned, Russia had a negative $12 million impact on our results, which was a negative 2.6% headwind to our adjusted EBITDA growth rate. The remaining gap between our system wide sales growth and organic EBITDA growth was related to our 2021 G&A and technology investments partially offset by positive timing in our ad funds. This quarter, we also made a slight change to the way we report revenues and expenses supporting certain technology initiatives to provide consistency across our brands as well as with industry peers. We previously included revenue at Burger King from technology fees, which are paid by the system as a function of digital sales levels in franchise and property revenues, while the associated technology expenses were included in BK segment G&A. Going forward, we…

Our first question is from Dennis Geiger of UBS. Your line is now open. Please go ahead.

Great, good morning and thanks for the question. I was wondering if José maybe you can talk a little bit more about what you're seeing from your customers across maybe the key home markets in the U.S. and Canada and in particular. Have behaviors changed much and how the consumers are using the brand and maybe most importantly, if you could just kind of tie how the BK and the Tim's brands are positioned in a more challenged consumer spending environment recognizing that, that both brands arguably have more idiosyncratic drivers to improve market share. But just wondering if you could kind of talk about that positioning, looking ahead as it relates to your plans. Thank you. José Cil: Good morning, and thanks for the question, Dennis. Like we've seen consumer confidence tested, surely by the pandemic. And obviously in more recent months by the volatility that we're seeing across North America, for the consumer, the inflationary environment is certainly something that's top of mind. We've seen food at home inflation being under a little bit more pressure over the last six months than food away from home which creates a for the restaurant space, a more positive environment. Other things that we've seen in terms of consumer behavior is that the trends that were accelerated throughout the pandemic, things like off-premise, service modes, whether it's digital rewards, drive-thru delivery, these continue to be sticky. And we're also seeing dine in come back a bit as restrictions have eased, especially here in Canada, but really throughout North America, in our home markets. We've seen dine-in comeback a bit. All of this to say that we're very cognizant of, of the sensitivities that the guest has, and we're taking a thoughtful approach. I think the brands both brands Tim's and BK in North America and Canada for Tim's and U.S. for Burger King both brands have strong kind of balanced approaches to the menu and how we address consumer needs. And our teams have been spending a lot of time thinking about that surely addressing and being thoughtful about the guests perception and what the competition is doing and our franchisees profitability, as we think about addressing the commodity headwinds with pricing initiatives that we've seen throughout the last 6 months to 12 months. Our focus is always on the franchisee on our guests, and making sure we keep in line with and understand what's happening with the competition. And we're going to take a balanced approach throughout and be long term, in our view on how to address the immediate pressures that the consumer is feeling. Thanks for the question.

Our next question is from Brian Mullan of Deutsche Bank. Your line is now open. Please go ahead.

Hey, thank you. Just question on Tim’s in Canada. I'm just wondering if you're able to see a measurable impact from the ad fund contribution increases that took place. Is that something that's helping already or is it or is it a bit too early? And just wonder if that could be a tailwind over the course of this year? And then just related to that, they shared some encouraging commentary about March in particular, is it fair to think that March is back to maybe positive versus ‘19 kind of how you talked about in December, if you're willing to comment? Thank you. José Cil: Yes, Brian, thanks for the question. We, we were encouraged by the positive momentum in Q1 in the second half of Q1. And heading into the second quarter, we're seeing strong, as I mentioned, in my prepared remarks, strong underlying core performance of the business with coffee with breakfast, and continued improvement in in other dayparts as well. Obviously, the ease of restrictions and the increase in mobility has helped as well. And we were, we've been measured in our pricing in Canada, making sure we don't get too far ahead of our skis and get too far ahead of the French consumer as well. I think some of the positive indicators in the first quarter that I mentioned, things like the super urban business and kind of the urbanity there has, has improved significantly, it's one of the better performing areas of the business. It's -- it was the same in Q4. So that, I think that's a testament to the improvement in mobility. We also saw that Ontario was one of the stronger performing regions, which is, which is one that had some of the stronger restrictions over the last 24 months. And we're going to share quite a bit more at the Tim Hortons investor day, the first ever investor day a little bit later this morning. I think it's at 11 o'clock. We have a lot of confidence in the long term. And the full year plan that we have here for Tim. I think on the ad funds just coming back to that question, which is your first one, we -- that was a contribution that we made to the advertising fund here in Canada in 2021. And we feel that the investments we made there, alongside our franchise owners were really important to continue to double down on brand related messages, as well as some of the improvements in coffee quality, as well as some of the innovation on beverage and some of the improvements in breakfast. And we're encouraged by the progress there. And we'll continue to work closely with the owners to make sure we drive that part of the business long term. Thanks so much.

Our next question is from David Palmer of Evercore. Your line is now open. Please go ahead.

Thanks. Question on Burger King rest of world same store sales growth versus pre-COVID levels accelerated, despite Omicron which was pretty good. Which regions have fueled growth in the quarter? And generally, do you expect growth to accelerate, except for I would imagine, you're going to have more Russia negative impact. I think you're including Russia and the comp base there. And I would imagine China will be bigger headwind into 2Q as well. But I'm wondering how we should be thinking about what markets are really fueling the growth and, and maybe some gives and takes in terms of markets going forward. Thanks very much. José Cil: Hey, Dave, thanks for the question. As I mentioned in my prepared remarks, we're excited by the work that's happening internationally and the progress we're making. It's really broad based across regions with the exception of Russia and in China that I mentioned with some headwinds given the more recent restrictions there due to their zero COVID policy. Across regions and in some of the key markets that we have larger markets Spain, Korea and several others, we've seen a combination of good work on the menu side, continued growth on the digital front, off-premise continues to be a strong part of our growth that with delivery, as well as some curbside and digital rewards, types of type of programs. And then macro improvements with restrictions, easing and mobility picking up has seen has helped us drive growth as well in those markets and, and what we're seeing is in store dining in many of those markets, which is such a big part of, of the business is snapping back. So the combination of good plans good digital and, and good kind of macro environment has been positive for that business. And we feel confident in the long term there, the teams are working closely with our master franchisees in all the markets to continue to drive innovation and, and drug good brand messaging and continue to push on the digital platforms that are so important for growth in these markets. Thanks so much for the question.

Our next question is from Brian Bittner of Oppenheimer and Co. Your line is now open. Please go ahead.

Thank you. Thank you very much. Just two questions. One, could you help us understand the level of year-over-year pricing both at Tim Hortons Canada and Burger King U.S.? That's the first question. And second one, just going back to David Palmer's question on the Burger King International business. I appreciate all the color that you just gave. But can you maybe summarize why you believe your comps are now trending so far above pre-COVID? Do you believe you took a lot of market share during COVID outside the U.S. with the Burger King brands? And naturally, these international markets are as they storm out of COVID you're just ending up with a better sales model? Or is it that digital has taken off just any more color on why these levels or comps are so much higher than pre-COVID? José Cil: Yes, thanks, Brian, for the question for the two questions. I'll start with the last one, which continues on with the prior one from the hip. I think simply put, the off-premise business that group quite significantly through the pandemic has stuck, or at least so far remains quite sticky. And on-premise is coming back. And digital has been a big part of both of those, right, so internationally, we have a strong digital business through kiosks as well. And where we have, as an example, in Western markets in Europe, where we have really strong lunch and dinner pushes, the kiosks helped quite a bit to alleviate some of the order, point pressure that some of the restaurants will feel so the digital business has been quite strong. And on-premise is getting back to two levels that we've seen before, which I think the combination of stickiness of off-premise and that on-premise growth is what's driving some significant growth in and what we saw in the first quarter. And we feel confident long term in our plans for those markets in in the quarters to come. On your first question on year-over-year pricing, as I said in one of the earlier comments and responses. We've been very measured, and we're staying close to the consumer, obviously staying close to our franchisees and their P&Ls and staying close to the competition to make sure we take the right steps on pricing. There's we're facing, as everyone knows, pretty meaningful pressure from a commodity standpoint. And so we're responding as appropriate. And we've stayed relatively in line with inflation and CPI, both in the U.S. as well as in, in Canada. In Canada, inflation is kind of lagging about 2%, behind where we see it in the U.S. And so our pricing across the board is roughly in line with those two with those two measures. Thanks so much for the question.

Our next question is from John Glass of Morgan Stanley. Your line is now open. Please go ahead.

Thanks very much. Back on Tim's, is there a way to index or talk about absolute traffic levels at Tim's in Canada versus ‘19 to understand what the opportunity is to recapture that and maybe inside of that, can you talk about profit levels at breakfast understanding that comes through sales are up but there's pricing there's mix there's a lot of dynamics in there. So just looking at three year comps may not be the entire story on transaction specifically. José Cil: Yes, John, thanks so much for the question. We haven't separated traffic and check historically and not planning to do so today. But we have seen improvements quarter-over-quarter in terms of traffic flows into the restaurants part of this as I shared earlier I think is, is a function of the good work that the team is doing on menu innovation as well as kind of core quality improvements. Some of it is a function of the messaging, some of it as a function of mobility improving and at the same time, some of as a function of the measured approach that we're taking on pricing. We're always focused on making sure we don't lose traffic when we take pricing, especially in environment like we're facing today. But broadly speaking, we are seeing improvements in inflows of customers through the drive-thru, as well as in store and through our apps in Tim's Canada. And it's for those reasons I just laid out. Thanks so much.

Our next question is from Jeffrey Bernstein of Barclays. Your line is now open. Please go ahead.

Great, thank you very much. Maybe for the question on corporates potential willingness to help your brands. I guess, most specifically, or most recently, Burger King. I know it was mentioned earlier about the Tim Hortons ad fund contribution that you guys helped with last year, so maybe along those lines. And I know José, you mentioned something about looking at ways to assist franchisees at Burger King on an on-going basis. So I'm just wondering, what are maybe the options that will be considered on your end, as you would define, I guess, helping assist the Burger King franchisees in this scenario? Any color you could provide would be great. Thank you. José Cil: Sure. Thanks for the question, Jeff. Yes, look, we've historically, as we we've talked about our capital allocation approach, we investing in the business has been kind of the top priority, and we've done it with Tim's, we've done it with BK, we've contributed capital to remodels and other programs, we're investing in G&A. And our business as well, I think last quarter, we shared investments, we've made at Burger King to add to grow the field teams by 50% in order to be able to support provide better training and just get closer to the business with our franchisees to be able to help them work through all the plans that we have in place long term for the business. I think as it relates to your specific question on BK, and any contributions or, or approaches we can take to be able to help the business, the focus is on being able to drive growth in the BK U.S. business. And we're looking at that, and I've mentioned this in my prepared remarks and last quarter as well with Tom, that we're looking at and working through plans with the franchisees long term plans around marketing around the advertising fund to drive more media firepower there, in addition to work to accelerate and have a meaningful impact on our real estate and our restaurants image to be able to drive growth there. And so we're we continue to work through that. There's a number of options on the table, both in terms of advertising in terms of image contributions, and we'll share more in the back half of the year as we as we finalize those plans, and you guys will be the first or after a franchisee is the first to know. Thanks so much.

Our next question is from Jared Garber of Goldman Sachs. Your line is now open. Please go ahead.

Hi, thanks for taking the question. It's on Tim Hortons and certainly appreciate the positive results there and that 30% plus I think you noted in the urban locations. Is there any way to frame maybe those non-urban locations and what the comp looks like there? Just as we get a sense of maybe the improving mobility trends, having a boost to those urban locations versus non-urban. José Cil: Hi, Jared. Yes, thanks for the question. We've seen -- the good news is we've seen growth on a year-over-year basis in all urbanity. So rural, suburban, urban and super urban. We've also seen growth in same store sales year-over-year, or comparable sales year-over-year, in all regions, Ontario, Quebec, Western and Atlantic. We've seen growth in different formats, as well, and in different day parts as well. So the growth that we saw in the quarter and the improvements sequentially Q1 versus Q4 was pretty broad based and I think it's a testament to what I mentioned earlier around the good work that team is doing the good plans, the excellent operational work that the franchisees and the owners are doing in their restaurants. And the continued easing of restrictions and improvement in mobility throughout the country. Thanks so much.

Our next question is from Nicole Miller of Piper Sandler. Your line is now open. Please go ahead.

Thank you. Good morning, I wanted to ask a question about Tim Hortons and that 36% of sales or transactions that are digital? Could you speak a little bit more to the cohorts that you can now break that group into and their behavior, especially behind frequency and spend? Thanks. José Cil: Yes, Nicole. Good morning. And thanks for the questions. I would say first of all, we've been really pleased with the work that the team has done here in Canada, and all of our all of our digital programs, particularly on Tim's rewards. I think you'll get a chance to hear a lot more about it a little bit later today, when the team shares some more information during the investor day. But I think a couple of the things that are kind of most, most interesting, to me, at least, are that we've seen in some of that consumer behavior. That's our Tim's rewards members tend to be the most loyal members of Tim’s and the highest frequency. I think the frequency is, I guess, to put it clearly astounding, it's really incredible how often our Tim's rewards members are using our app, how often they come and visit us and go to the stores. And I think one of the other things that we've seen that's been really interesting to our teams here is, is that we see as we deploy new features in the app, things like our hockey challenge, things like roll up, we see those guests start to interact with our app even more frequently. So it's that's driving a lot of our thinking about how we can evolve the Tim's rewards program and how we can evolve the app over time to drive us even further engagement with a such a large and loyal portion of our consumer base. So I think a lot of a lot of great things going on teams doing really, I'd say ground breaking work within our system. And, and hopefully we'll get even more insights into that here in just a few hours.

Our next question is from Jake Bartlett of Truist Securities. Your line is now open. Please go ahead.

Great, thanks for taking the question. Your mind was on the Burger King U.S. business. You shared that some customer satisfaction scores were improving. And I'm hoping you can give some more detail around that maybe some context of where satisfaction levels are now versus a couple years ago, how, how fast or how steep the trajectory of improvement is. And then, through the rest of the year here, you mentioned, your confidence that these efforts are going to start to drive market share gains or improvement in sales in the back half of the year. Can you just help us understand some of the catalysts along the way? Specifically marketing you have a new agency are using? Is there a new marketing campaign that you can tell us when that might start any catalysts along the way? In addition to the metrics of customer satisfaction would be helpful? José Cil: Yes, Jake, thanks for the question. We have seen improvement as I mentioned in my prepared remarks on operations, overall satisfaction at Burger King in the U.S. And it's been a fun, it's the improvements have been quarter-over-quarter the last three quarters, which are encouraging. I think it's great work from the franchisees as well as great work from the field teams that Tom has put in place. The kind of the benefit there is that it's an outcome of a number of different initiatives, including simplification efforts that we started to make in the final quarter of 2021. It's a function also of some of the additional support we're providing in the field. It's just the beginning. I wouldn't consider it a victory lap or a big celebration other than confirmation that we're on the right track. And we're putting resources and efforts behind the right things, which…

Next question is from Andrew Charles of Cowen. Your line is now open. Please go ahead.

Great, thank you guys. I have a two part question. José, to follow up an earlier question, as part of plans to assist BK U.S. franchisees, are you guys exploring ad funded or royalty relief? Just the last two years you guys caught up that store level profits were flat, and obviously the industry is seeing quite a bit of commodity pressure in 2022 particularly would be? And then just my second question, Matt, you highlighted that Burger King saw bad debt expense of 1Q primarily in Russia. But if I recall correctly, bad debt expense is recorded 60 days after royalties are due. And the conflict in Russia didn't escalate really until the middle of the end of February. So if you just help quantify that total bad debt expense in 1Q for Burger King, and how much of that was Russia versus the U.S.? I think investors would really appreciate that. Thanks.

Thanks, Andrew. On your first question, I I'd say that the investments we're looking at, and the work we're doing is to figure out how best to drive overall top line growth and profitability for the business and advertising image. These are areas where we think there's tremendous opportunity, as we've seen with Tim's as an example. So those are areas we're looking at. We're not considering royalty relief as, as one of the areas to look at. Yes, I think, related to the second part of your question on bad debt, I think, the impact from Russia in the quarter, I think we quantified in the prepared remarks is about $12 million. That was a combination of bad debt plus, shifting to cash recognition in the quarter, as we talked about, sort of our move away from the operations in Russia. And so it was a combination of those two things that amounted to the overall impact on the quarter, which, is a pretty good proxy for sort of the overall level of impact from the loss of business there during the quarter to look at going forward. And then outside of Russia there, I would say there's no material, significant bad debt activity to call up. Thanks for the question.

Our next question is from Lauren Silberman of Credit Suisse. Your line is now open. Please go ahead.

Thank you for the question. I wanted to follow up on the comments on the U.S. consumer. Are you seeing any signs of trade down in any regions or markets? And then specific to delivery, are you seeing any shift in trends there? Or I guess how do you thinking about the willingness of consumers to pay the premium for delivery in a more challenging consumer backdrop? Thank you.

Hi, Lauren, thanks for the question. On the on the consumer, the U.S. consumer, I think the behavior has been relatively consistent over the last six months, we haven't seen any material trade down. I think the there's always balanced in how the consumers interact with our brands with core, being a strong part of core is an example of Burger King, being WHOPPER. And other core items we – so we’re seeing strong performance in our core offerings, as well as, in some cases premium. And value continues to be a part of our business that we always provide we think exceptional, everyday value to our customer. So we haven't seen anything material shifting there. And we continue to provide a balanced approach to our customers. Thanks so much for the question. José Cil: And Lauren, maybe I'll take the question on delivery. And particularly for our U.S. businesses are Burger King and Popeyes delivery businesses are probably the most relevant and largest for us. I would say we haven't seen any big departure and trend there. We continue to see growth in both of those businesses. And we're really focused on making sure that we're working really well together with our third party delivery providers to make sure that we bring the best possible experience to our guests, whether they order directly from us in the restaurant or through the delivery platforms. We're very focused on improving enhancing guest experience, things like driver experience, and the operations in the restaurant. So those are our big focus areas. And that's where we've been working to make sure that we continue to drive growth there. José Cil: Well, thanks everyone for your questions and for joining us this morning. We made notable progress this quarter against key priorities including driving double-digit comparable sales growth at Tim Hortons Canada and Burger King International and further narrowing the gap to peers at Burger King in the U.S., reaching our highest levels of digital engagement over ever in our home markets and opening a record number of new restaurants in the quarter and returning over 400 million of capital to shareholders. Our results this quarter reflect the continued effort and the hard work of our team, our franchise owners and their team members and we believe we're well positioned to continue to build off our momentum in the year ahead. Thank you again for joining us and we look forward to connecting with all of you again later this morning at our Tim Hortons Canada investor day. Thanks so much.

This concludes today's call. Thank you for joining. You may now disconnect your line.