Restaurant Brands International Inc. (“RBI”) (TSX: QSR) (NYSE: QSR) (TSX: QSP) has released its financial results for the full year and fourth quarter ending December 31, 2023. Josh Kobza, CEO of RBI, expressed satisfaction with the company’s progress, highlighting improved guest experiences, enhanced franchisee profitability, and strategic investments in brand growth. He credited the strong operational performance in 2024 to the dedication of RBI teams, franchisees, and their staff.
Key highlights for 2023 include:
- System-wide Sales Growth of 12.2%
- Net Restaurant Growth of 3.9%
- Income from Operations of $2,051 million compared to $1,898 million in the previous year
- Net Income of $1,718 million compared to $1,482 million in the previous year
- Diluted EPS of $3.76 compared to $3.25 in the previous year
- Adjusted Operating Income of $2,200 million, reflecting a 7.5% organic increase over the previous year
- Adjusted Diluted EPS of $3.24 compared to $3.14 in the previous year
- Net Cash Provided by Operating Activities of $1,323 million and Free Cash Flow of $1,203 million
The company also announced changes to its operating and reportable segments, transitioning to five segments:
- Tim Hortons brand in Canada and the U.S. (“TH”)
- Burger King brand in the U.S. and Canada (“BK”)
- Popeyes Louisiana Kitchen brand in the U.S. and Canada (“PLK”)
- Firehouse Subs brand in the U.S. and Canada (“FHS”)
- International operations, covering all brands outside the U.S. and Canada (“INTL”)
Moreover, RBI revised its definition of segment income from Adjusted EBITDA to Adjusted Operating Income (“AOI”). This new measure includes depreciation and amortization (excluding franchise agreement amortization), as well as share-based and non-cash incentive compensation expenses.
To facilitate investor understanding, RBI provided unaudited historical financial and operational data consistent with the revised segment structure and income definition. These changes impact segment allocation of results but do not revise or restate previously reported consolidated financial statements. Investors can access this data on the company’s investor relations webpage under “Financial Information.
Year-over-year increases in Total Revenues, both as reported and on an organic basis, for the full year and fourth quarter were primarily fueled by a rise in system-wide sales across all segments. However, on an as-reported basis, this increase was somewhat offset by adverse FX movements, particularly impacting TH.
The increase in Income from Operations for the full year was chiefly driven by rises in segment income of INTL, TH, PLK, and FHS, along with a favorable change from the impact of equity method investments. This was partially mitigated by an unfavorable change from other operating expenses (income), net, a decline in BK segment income, and unfavorable FX movements.
For the fourth quarter, the increase in Income from Operations was primarily propelled by a favorable change from other operating expenses (income), net, a favorable change from the impact of equity method investments, the non-recurrence of FHS Transaction costs, and increases in segment income of INTL, TH, and PLK. However, this was offset by a decrease in BK segment income.
The rise in Net Income for both the full year and the fourth quarter was mainly due to a greater income tax benefit in the current year compared to the prior year, along with the year-over-year increase in Income from Operations. This was partially counteracted by increases in interest expense and, for the full year, a loss on early extinguishment of debt.
Changes in Adjusted Operating Income on an as-reported and organic basis for both periods were primarily driven by increases in segment income of INTL, TH, PLK, and FHS, albeit partially offset by a decrease in BK segment income. Unfavorable FX movements also impacted the as-reported basis.
The increase in Adjusted Net Income for the full year was driven by rises in segment income of INTL, TH, PLK, and FHS, although partially offset by an increase in adjusted interest expense, a decrease in BK segment income, and unfavorable FX movements. Similarly, for the fourth quarter, the rise in Adjusted Net Income was driven by a decrease in adjusted tax expense and increases in segment income of INTL, TH, and PLK, offset by a decrease in BK segment income and an increase in adjusted interest expense.
Burger King US’s “Reclaim the Flame” plan, announced in September 2022, aims to boost sales growth and franchisee profitability. The plan involves a $400 million investment over its duration, with $150 million allocated to advertising and digital investments (“Fuel the Flame”) and $250 million to remodels, restaurant technology, and enhancements (“Royal Reset”). By December 31, 2023, approximately $40 million had been invested in Fuel the Flame and $16 million in Royal Reset initiatives.
The macroeconomic environment during 2022 and 2023 saw increases in commodity, labor, and energy costs, leading to inflation, foreign exchange volatility, rising interest rates, and a general softening in the consumer environment, exacerbated by conflicts in the Middle East.
