Restaurant Brands International Inc. Q1 FY2025 earnings call

• Navigated a dynamic macro backdrop, with Q1 results reflecting softness but improved sales momentum in April. - Tim Hortons Canada executed initiatives like new menu items (e.g., scrambled eggs loaded breakfast box with Ryan Reynolds) and operational improvements, with trends improving in April. - International segment had strong performance in many markets, with Burger King in international benefiting from strong brand positioning, modern restaurants, and good execution. - Burger King in the U.S. focused on remodels, operational standards, and value offerings. - Popeyes in the U.S. and Canada implemented the Easy to Love strategy, focusing on operational consistency and kitchen upgrades. - Firehouse Subs saw growth in comparable sales and digital strength.

Tim Hortons Canada had relatively flat comparable sales of 0.1% (adjusted for Leap Day) while lapping strong prior year sales. Burger King in the U.S. saw a 1.1% decrease in comparable sales (adjusted for Leap Day). Popeyes in the U.S. and Canada had net restaurant growth of 3% but comparable sales declined 4% (adjusted for Leap Day). Firehouse Subs in the U.S. and Canada grew comparable sales by 0.6% (adjusted for Leap Day), net restaurants grew 5.9%, and system-wide sales 7.3%. International segments (excluding BK China held for sale) had 2.6% comparable sales (adjusted for Leap Day) and 8.6% system-wide sales growth.

• Confident of at least 8% organic adjusted operating income growth in 2025. - Reframed long-term outlook with 3%+ comparable sales and 8%+ organic AOI growth through 2028, updating net restaurant growth expectations. - 2025 adjusted net interest expense expected in the $500M-$520M range, tax rate预计在18%-19% range.

• Macro environment challenges impacting performance. - BK China held for sale and transition risks. - FX rate fluctuations impacting AOI. - Tariff impacts on COGS.

Q: Wondering if you could talk a little bit more about what you're seeing with Tim Hortons in Canada. How much do you think you are being impacted by the Canada macro environment right now and maybe expectations for the brand's resiliency in the market if the challenging backdrop persists?

A: Morning, Dennis. It's Josh. Thanks for the question. I think you've done a lot of great points. And for me, it really does go back to the -- back to basics plan that we've been executing for, I think, five years or more now. I think Axel and team are doing an incredible jump across all the fundamentals, and that's why -- you've seen Tim’s in Canada performed so well over the last few years, and it's why we're so confident that it's going to continue performing well in the coming quarters and years. In Q1, I think we had more of an in-line quarter with the other big brands in the market. And I think to your point, we did see a little bit of a dip in consumer confidence. If you look at the Canadian Consumer Confidence Index, but importantly, we've seen that come back in the second quarter to date so far. We've seen a bit of an improvement in consumer confidence. And I also mentioned that Tim sales have come back really strong. We've got some awesome things going on in the business. You just saw us launch the -- a new loaded scrambled eggs box with Ryan Reynolds, that's doing great. And we have a lot of exciting stuff for the rest of the year. So we're feeling really good about the Tim's business. It's been doing wonderful, and we're very confident that we'll continue to do that in the future.

Q: Great. Thanks, Josh.

A: You're welcome.

Q: Looking outside the U.S., rest of world markets, how are trends in the informal leading out market in your key markets coming out of the first quarter and as you look out to the year, just how you view the consumer in your key markets? And then separately, how are you looking at your market share trends in key markets around geographies around the world?

A: So a few thoughts on the international business and some of the trends there. Maybe a few kind of stepping back thoughts on the International business, too. I would tell you that we were really pleased with the results in Q1. We had same-store sales of positive 2.6%, and that gets up into kind of the high 3s, excluding the impact of leap day. So I think that's a pretty good absolute result and also a pretty good relative result when you look at some of the other global brands out there. It's really an incredible business that we have and very diversified business. We're in around 200 brand country combinations, and our top 10 markets are about 60% of our international system-wide sales. So a lot of different dynamics in each of those countries. I think when you look at the Burger King brand in international, it's a bit different. It has some really great qualities that are -- that position it to grow so well. We've got a strong brand positioning. We've got modern restaurants in almost all of our markets. We have a lot more digital business as well. And because of a lot of those things, we have pretty great brand perception and really good food quality perception in those markets, where we balance some of our favorites like the whopper with strong localization that each of our teams bring. We also have a different level of execution and guest service. I think we're much more consistent across our international markets. That allows us to perform much better. And we have some incredible partners. I mentioned a couple of them earlier, but across the globe in places like France, Spain and so many others, we have some of the best international master franchisees that you could ask for. If you -- if we start -- if we kind of go through a couple of the major markets, I'll do it by region and share a few thoughts on what's going well and what needs some work. If we start with EMEA, which is by far our biggest market, we performed particularly well in Germany and the U.K., where we had really good both menu innovation and some good value proposition. So I think we outperformed a bit in those two markets. And on the other hand, places like France probably underperformed a little bit. But I would say the business in France is incredible. I was just there a few weeks ago with Alex, Simon and Olivier Bertrand, who run the business. They're terrific. They've built a wonderful business, and they're doing all the basics right. So I'm very confident we're going to get back to the right place in terms of same-store sales performance in France. Moving to APAC. A couple of the standout markets there where I think we're taking share are places like Australia, Japan and Korea. So those have been some of the biggest performers for us. Australia, in particular, has been very consistent over the last few years. I think Chris Green and the team there are doing awesome. So that's been good. And then we've -- over the last couple of years and in recent quarters, we've had a softer performance in China. That's a lot of the reason that we stepped in and took over the business here in February. And as I mentioned, we're already seeing some progress. So I think we're making progress on the underlying fundamentals, kind of fixing the business, getting a local team in place, but we're actually already seeing some improvement in sales trends there as well. And then finally, in -- there are two biggest markets in Latin America, are Brazil and Mexico. And in Brazil, performance has been really good. The team has done a really nice job of increasing our share of voice and media and bringing some pretty compelling value propositions there, things like our two for 25 AI promotions have allowed us to perform well on a relative basis. Mexico has been a little bit softer. I would attribute that more to kind of a market-wide softness though we're doing some good things. And -- for me, one of the greatest highlights there that I had a chance to see a month or two ago with our Tim's business, which is just doing fantastic, growing really quickly and taking a lot of market share. Stepping back a little bit from BK. Just one last thought on international business performance is that we talk about -- when we talk about international, as I just did, we tend to talk about our Burger King business, given it's our biggest global brand. And I think we're going to be talking increasingly about Popeyes over time. We've grown that business tremendously since we acquired it. We're now at about 1,500 international restaurants. And we think that's going to keep growing at a really rapid clip over the next few years. We've got some fantastic markets, places like the U.K., increasingly places like Brazil and Spain. So we've got some great and fast-growing markets across the globe. And I think that's going to be an increasingly large part of our business mix and our growth mix over the next few years. So overall, I think good performance. As we mentioned with the rest of the business, we've seen further improvements as we stepped into Q2. So the international business has been and continues to do well. Thanks, David.

Q: Great. Thanks, Josh.

A: You're welcome.