Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for the second quarter ended June 30, 2017. Chief Executive Officer Daniel Schwartz: «In the second quarter, we continued to grow system-wide sales and profitability for all three of our iconic brands. In particular, we had notable strength at Burger King (BK), with both strong comparable sales growth and net restaurant growth. We also made good progress integrating Popeyes, and continue to be excited about the long term growth potential for the brand. We appreciate all of the hard work from our franchisees and their teams to deliver a great guest experience, and we are confident in our ability to create further value for all of our stakeholders for many years to come».
Second Quarter 2017 Highlights
- Total Revenues of 1,132.7 million USD versus 1,040.2 million USD in prior year period
- Net Income Attributable to Common Shareholders of 89.5 million USD versus 90.9 million USD in prior year period
- Diluted EPS of 0.37 USD versus 0.38 USD in prior year period
- Comparable sales growth, in constant currency, of (0.8) percent at Tim Hortons (TH), 3.9 percent at Burger King (BK), and (2.7) percent at Popeyes Louisiana Kitchen (PLK)
- System-wide sales growth, in constant currency, of 2.6 percent at TH, 10.6 percent at BK, and 3.3 percent at PLK
- Adjusted Ebitda of 531.1 million USD was up 8.8 percent on an organic basis versus prior year combined results (including Popeyes)
- Adjusted Diluted EPS of 0.51 USD versus 0.41 USD in prior year period
- RBI declared dividends of 0.20 USD per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2017
Consolidated Operational Highlights
| (unaudited) | Q2/2017 | Q2/2016 | |||||
| Comparable Sales Growth(1) | |||||||
| TH | (0.8)% | 2.7% | |||||
| BK | 3.9% | 0.6% | |||||
| PLK(2) | (2.7)% | 0.7% | |||||
| Net Restaurant Growth(3) | |||||||
| TH | 4.3% | 3.3% | |||||
| BK | 6.0% | 3.9% | |||||
| PLK(2) | 5.3% | 6.5% | |||||
| System Restaurant Count at Period End | |||||||
| TH | 4,655 | 4,464 | |||||
| BK | 16,000 | 15,100 | |||||
| PLK(2) | 2,768 | 2,628 | |||||
| System-wide Sales Growth(1) | |||||||
| TH | 2.6% | 4.8% | |||||
| BK | 10.6% | 5.9% | |||||
| PLK(2) | 3.3% | 6.5% | |||||
| System-wide sales(4) (in USUSD millions) | |||||||
| TH | USD | 1,645.9 | USD | 1,667.9 | |||
| BK | USD | 4,961.1 | USD | 4,544.1 | |||
| PLK(2) | USD | 890.4 | USD | 756.9 | |||
(1) Comparable sales growth and system-wide sales growth are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants.
(2) For 2017, PLK comparable sales growth, system-wide sales growth and system-wide sales are for the period from March 28, 2017 through June 30, 2017. Comparable sales growth and system-wide sales growth are calculated using the same period in the prior year (March 28, 2016 through June 30, 2016). For 2017, net restaurant growth is for the period from July 11, 2016 through June 30, 2017. Restaurant count is as of June 30, 2017 for the current period, and as of July 10, 2016 for the comparative period, inclusive of temporary closures. For 2016, PLK figures are shown for informational purposes only and are consistent with PLK’s former fiscal calendar. Consequently, PLK results for 2017 may not be comparable to those of 2016.
(3) Commencing in 2017, we are presenting net restaurant growth on a percentage basis, reflecting the net increase in restaurant count (openings, net of closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period. This presentation has been applied retrospectively to the earliest period presented to provide period-to-period comparability. Previously, we presented net restaurant growth as the number of new restaurants opened, net of closures, during a stated period. We have disclosed restaurant count at period end which can be used to determine net restaurant growth as previously presented.
(4) System-wide sales are driven by sales at franchised restaurants, as approximately 100 percent of current restaurants are franchised. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales.
Consolidated Financial Highlights
PLK revenues and segment income from March 28, 2017 through June 30, 2017 are included in our consolidated statement of operations for the three months ended June 30, 2017.
| (unaudited – in USD millions, except per share data) | Q3/2017 | Q3/2016 | ||||
| Total Revenues | USD | 1,132.7 | USD | 1,040.2 | ||
| Net Income Attributable to Common Shareholders | USD | 89.5 | USD | 90.9 | ||
| Net Income Attributable to Common Shareholders | ||||||
| and Noncontrolling Interests(5) | USD | 175.6 | USD | 179.2 | ||
| Diluted Earnings per Share | USD | 0.37 | USD | 0.38 | ||
| TH Adjusted Ebitda(6) | USD | 281.1 | USD | 279.0 | ||
| BK Adjusted Ebitda(6) | USD | 216.8 | USD | 200.1 | ||
| PLK Adjusted Ebitda(6) | USD | 33.2 | N/A | |||
| Adjusted Ebitda(7) | USD | 531.1 | USD | 479.1 | ||
| Adjusted Net Income(7) | USD | 241.7 | USD | 192.4 | ||
| Adjusted Diluted Earnings per Share(7) | USD | 0.51 | USD | 0.41 | ||
(5) Includes net income available to common shareholders and net income attributable to noncontrolling interests related to the Class B exchangeable limited partnership units of Restaurant Brands International Limited Partnership.
(6) TH Adjusted Ebitda, BK Adjusted Ebitda and PLK Adjusted Ebitda are our measures of segment profitability.
(7) Adjusted Ebitda, Adjusted Net Income, and Adjusted Diluted Earnings per Share are non-GAAP financial measures. Please refer to “Non-GAAP Financial Measures” for further detail.
Total Revenues for the second quarter grew primarily as a result of the inclusion of our PLK segment, as well as system-wide sales growth at both TH and BK. Net Income Attributable to Common Shareholders for the quarter was driven by the inclusion of our PLK segment and growth in TH and BK segment income, offset primarily by an increase in other operating expenses.
Adjusted Ebitda for the quarter grew 8.8 percent on an organic basis versus prior year combined results (including Popeyes), driven primarily by revenue growth.
TH Segment Results
| (unaudited in USD millions) | Q2/2017 | Q2/2016 | ||||
| Comparable Sales Growth(1) | (0.8)% | 2.7% | ||||
| System-wide Sales Growth(1) | 2.6% | 4.8% | ||||
| System-wide Sales(4) | USD | 1,645.9 | USD | 1,667.9 | ||
| Net Restaurant Growth(3) | 4.3% | 3.3% | ||||
| System Restaurant Count at Period End | 4,655 | 4,464 | ||||
| Sales | USD | 553.9 | USD | 535.5 | ||
| Franchise and Property Revenues | USD | 218.4 | USD | 224.3 | ||
| Total Revenues | USD | 772.3 | USD | 759.8 | ||
| Cost of Sales | USD | 417.1 | USD | 417.7 | ||
| Franchise and Property Expenses | USD | 79.8 | USD | 77.4 | ||
| Segment SG+A(8) | USD | 22.2 | USD | 15.1 | ||
| Segment Depreciation and Amortization(9) | USD | 24.7 | USD | 26.1 | ||
| Adjusted Ebitda(6)(10) | USD | 281.1 | USD | 279.0 | ||
(8) Segment selling, general and administrative expenses (“Segment SG+A”) includes segment selling expenses and segment management general and administrative expenses.
(9)Segment depreciation and amortization consists of depreciation and amortization included in cost of sales and franchise and property expenses.
(10) TH Adjusted Ebitda includes 3.2 million USD and 3.3 million USD of cash distributions received from equity method investments for the three months ended June 30, 2017 and 2016, respectively.
For the second quarter of 2017, system-wide sales growth was driven by net restaurant growth of 4.3 percent, partially offset by a decline in comparable sales growth of (0.8) percent, which was primarily driven by Canada comparable sales growth of (0.6) percent.
Total Revenues for the quarter grew 1.6 percent (5.5 percent excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.
Adjusted Ebitda for the quarter grew 0.8 percent (4.7 percent excluding the impact of FX movements) versus prior year, primarily as a result of Total Revenues growth.
BK Segment Results
| (unaudited in USD millions) | Q2/2017 | Q2/2016 | ||||
| Comparable Sales Growth(1) | 3.9% | 0.6% | ||||
| System-wide Sales Growth(1) | 10.6% | 5.9% | ||||
| System-wide Sales(4) | USD | 4,961.1 | USD | 4,544.1 | ||
| Net Restaurant Growth(3) | 6.0% | 3.9% | ||||
| System Restaurant Count at Period End | 16,000 | 15,100 | ||||
| Sales | USD | 25.2 | USD | 23.1 | ||
| Franchise and Property Revenues | USD | 268.5 | USD | 257.3 | ||
| Total Revenues | USD | 293.7 | USD | 280.4 | ||
| Cost of Sales | USD | 23.9 | USD | 20.3 | ||
| Franchise and Property Expenses | USD | 31.6 | USD | 34.5 | ||
| Segment SG+A(8) | USD | 34.1 | USD | 37.4 | ||
| Segment Depreciation and Amortization(9) | USD | 12.7 | USD | 11.9 | ||
| Adjusted Ebitda(6) | USD | 216.8 | USD | 200.1 | ||
.
For the second quarter of 2017, system-wide sales growth was driven by net restaurant growth of 6.0 percent and comparable sales growth of 3.9 percent, which was primarily driven by US comparable sales growth of 3.0 percent.
Total Revenues for the quarter grew 4.7 percent (5.8 percent excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.
Adjusted Ebitda for the quarter grew 8.3 percent (9.7 percent excluding the impact of FX movements) versus prior year, primarily as a result of Total Revenues growth.
PLK Segment Results
| (unaudited in USD millions) | Q2/2017 | Q2/2016 | ||||
| Comparable Sales Growth(1)(2) | (2.7)% | 0.7% | ||||
| System-wide Sales Growth(1)(2) | 3.3% | 6.5% | ||||
| System-wide Sales(2)(4) | USD | 890.4 | USD | 756.9 | ||
| Net Restaurant Growth(2)(3) | 5.3% | 6.5% | ||||
| System Restaurant Count at Period End(2) | 2,768 | 2,628 | ||||
| Sales | USD | 23.0 | N/A | |||
| Franchise and Property Revenues | USD | 43.7 | N/A | |||
| Total Revenues | USD | 66.7 | N/A | |||
| Cost of Sales | USD | 19.2 | N/A | |||
| Franchise and Property Expenses | USD | 2.3 | N/A | |||
| Segment SG+A(8) | USD | 14.4 | N/A | |||
| Segment Depreciation and Amortization(9) | USD | 2.4 | N/A | |||
| Adjusted Ebitda(6) | USD | 33.2 | N/A | |||
.
For the second quarter of 2017, system-wide sales growth was driven by net restaurant growth of 5.3 percent, partially offset by a decline in comparable sales growth of (2.7) percent, which was primarily driven by US comparable sales growth of (3.3) percent.
Cash and Liquidity
As of June 30, 2017, total debt was 11.8 billion USD, and net debt (total debt less cash and cash equivalents of 3.4 billion USD) was 8.3 billion USD. Our cash and cash equivalents reflects approximately 1.8 billion USD of proceeds from our May note offering and incremental term loan as well as approximately 0.8 billion USD of proceeds from the settlement and termination of our previous Canadian dollar cross currency swap. On August 2, 2017, the RBI Board of Directors declared a dividend of 0.20 USD per common share and Class B exchangeable limited partnership unit of Restaurant Brands International Limited Partnership for the third quarter of 2017. The dividend will be payable on October 3, 2017 to shareholders and unitholders of record at the close of business on September 15, 2017.
