On Wednesday, Restaurant Brands Intl (TSX:QSP) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Restaurant Brands Intl reported a 3.2% increase in comparable sales and a 6.2% system-wide sales growth, translating to a 10.7% growth in organic adjusted operating income and mid-teen EPS expansion.
The company resumed share repurchases in March, buying back $60 million worth of shares by the end of April, signaling confidence in their business strategy.
Burger King US achieved nearly 6% comparable sales growth fueled by operational improvements and marketing initiatives like the elevated Whopper and collaborations with popular IPs.
Tim Hortons maintained strong performance with 1.5% sales growth in Canada, despite macroeconomic challenges, and plans to accelerate restaurant remodels and expand partnerships.
Popeyes faced a 6.5% decline in comparable sales; however, strategic focus areas include improving execution, focusing on core offerings, and establishing a value proposition to drive a turnaround.
The company continues to expect 8% organic AOI growth and plans to accelerate net restaurant growth to 5% by 2028, supported by a strategic partnership in China and increased investments in new and remodeled locations.
Full Transcript
OPERATOR
Good morning and welcome to the Restaurant Brands Intl’s first quarter 2026 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question you may Press Star, then 1. On your telephone keypad you will hear a tone to confirm that you are in the queue. Once you exit the question queue, you may press star, then two. All calls will be limited to one question and please note this event is being recorded. I would now like to turn the conference over to Kendall Peck, Restaurant Brands Intl’s vice president of treasury and Investor Relations. Please go ahead.
Kendall Peck (Vice President of Treasury and Investor Relations)
Thank you. Operator. Good morning everyone and welcome to Restaurant Brands Intl’s earnings call for the quarter ended March 31, 2026. Joining me on the call today are Restaurant Brands Intl’s Executive Chairman Patrick Doyle, CEO Josh Kobza and CFO Sami Siddiqui. Following remarks from Josh, Sami and Patrick, we will open the call to questions. Today’s discussion may include forward looking statements which are subject to risks detailed in the press release issued this morning and in our SEC filings. We will also reference non GAAP financial measures, reconciliations of which can be found in the press release and trending schedules available on our Investor Relations website. As a reminder, organic Adjusted Operating Income (AOI) growth is on a constant currency basis and excludes results from the Restaurant holdings segment for calendar planning purposes. Our preliminary Q2 earnings call is scheduled for the morning of August 6, 2026. And now I’ll turn the call over to Josh.
Josh Kobza (Chief Executive Officer)
Good morning everyone and thank you for joining us. When we met with you in Miami, at our Investor Day in late February, we made clear commitments to the investment community and highlighted a vision for RBI through 2028. We laid out a path to 5%+ net restaurant growth,, predictable earnings growth and an investment-grade balance sheet,. While being the partner of choice for the best franchisees and the employer of choice for the best talent, we also committed to returning capital to shareholders in a meaningful and sustained way through a growing dividend and the resumption of share repurchases with the goal of delivering consistent double-digit total shareholder returns,. And we’ve acted quickly on that commitment. We began repurchasing shares in March for the first time in over two years. Reflecting our conviction in the business, Investor Day laid out the vision for the company we are building and Q1 is an early proof point that we’re moving in the right direction. We converted strong top line results including comparable sales growth, of 3.2% and system wide sales growth of 6.2% into 10.7% organic AOI growth and mid teens EPS expansion while continuing to invest behind our brands and return capital to shareholders. This combination of top line growth, cost discipline, and shareholder returns is exactly what we’re aiming to deliver on a consistent basis. At Burger King. Tom and his team’s work under Reclaim the Flame is starting to show up in the numbers. We saw strong performance on both an absolute and relative basis this quarter, delivering nearly 6% comparable sales growth, in the U.S. and significantly outperforming the industry. Importantly,, that performance wasn’t driven by one collaboration or campaign. Over the last four years, the team has strengthened the foundation of the business from restaurant standards to the quality and consistency of the guest experience, and that’s now enabling our brand elevation efforts to land more effectively in Q1. We continued to take a balanced approach to value and family offerings and layered on exciting improvements to the Whopper, both of which are driving higher engagement and repeat visits. In addition to the momentum at Burger King, both International and Tim hortons delivered their 20th consecutive quarters of positive comparable sales, reflecting the quality of our franchisees, our brand strength and our teams. International continued to stand out, delivering 5.7% comparable sales and 11.1% system wide sales growth, reinforcing its role as one of our most important long term growth engines. We also closed our Burger King China joint venture with cpe, a milestone we’re excited about and one that sets the business up for the kind of growth that we know it’s capable of. Overall, the momentum we built in Q1 gives me confidence. It reflects focused execution, engaged franchisees and the strength of the plan that we, laid out in February. We’re executing against it and we’re doing it in a way that the founders of our brands would be proud of with discipline and ownership mindset and a genuine commitment to building something durable for our franchisees, our guests and our shareholders. With that, let’s turn to our segment highlights. Starting with Tim Hortons, which represents roughly 41% of our operating profit. Tim’s delivered comparable sales growth of 1.5% in Canada, outperforming a relatively flat QSR industry amid a backdrop of lower consumer confidence and unfavorable weather. In January and March, growth was broad based across all dayparts, with notable strength in morning and late night, largely driven by cold beverages and breakfast foods. We remain focused on defending and extending our leadership in coffee, breakfast and baked goods. In Q1, we achieved the number one position in Brand Health’s Best Breakfast, ranking for the first time, leading our nearest competitor by approximately two points, and we’re focused on building from that position of strength. During the quarter we launched our $3 breakfast sandwich or wrap with a coffee, supporting our value leadership and ensuring Canadians can access their favorite core Tim’s products at a great everyday price. We continue to build our presence in the PM Dayparts,. Our $8.99 loaded wrap meals helped drive higher combo incidents throughout the quarter and with continued execution improvements, we remain confident in the long term opportunity to grow this part of the business. Across dayparts, beverages remain a key driver of our business. Beverage sales grew 2% year over year with another quarter of standout performance in cold beverages up 10% and continued strength in espresso based drinks and tea, up 8%. As we move into the warmer months, we’re excited to provide guests with more cold beverage innovation including recent launches like Protein and Zero Sugar Quenchers,. Underpinning these results is continued operational progress. We’re making steady improvements with strong execution from our restaurant owners and team members reflected in an average Google rating of 4 stars for the quarter. Overall guest satisfaction also improved over 2 points year over year with the PM daypart reaching an all time high in Q1. At the same time, we’re enhancing our digital experience and deepening guest engagement with a nearly 40% digital sales mix in Q1 supported by initiatives like Roll up to Win, which returned in February with a refreshed, more engaging experience. We’re looking forward to launching our loyalty partnership with Canadian Tire in the second half of the year, bringing more guests to the TIMS platform alongside another iconic Canadian brand. Finally on development while Q1 reflected normal seasonality, we remain confident in our path to accelerate growth in 2026 following our return to positive NRG in Canada last year. Tim’s is a brand that earns its industry outperformance quarter by quarter through quality food and beverages, compelling everyday value, a consistently high quality guest experience and as a result the loyalty of millions of Canadians who make it part of their daily routine. As we head into summer with an exciting innovation pipeline, continued focus on operational excellence and accelerating unit growth, we remain confident in the path ahead for this business. Turning now to international which represents 29% of our operating profit. International delivered another quarter of strong results with comparable sales of 5.7% and net restaurant growth of 4.5%, driving system wide sales growth of over 11%,. Performance was driven by solid execution of both menu innovation and everyday value leading to broad based momentum across some of our largest markets including Burger King in Spain, Germany, Australia, Brazil, China, Korea and Japan. Our local teams continue to launch innovative products that are locally relevant, create guest excitement and drive incremental visits. We expanded Baby Burgers into Germany and Spain, building on the platform’s strong performance in France last summer. In Korea, premium beef innovation like the Garlic Bulgogi Maximum Burger, drove positive guest response while in Australia, Hungry Jacks launched new unique beverages like Nutella Iced Coffee. At the same time, innovation must be balanced with strong value for money. Positioning, markets, like Brazil continue to execute a solid base of everyday value, while in China we recently launched a value oriented whole muscle chicken sandwich that has been met with incredible guest feedback. This combination of innovation and value has enabled us to deliver some of the strongest and most consistent international sales results in the industry over the past few years. During the first quarter we also closed our joint venture agreement with CPE at, Burger King China in March. Patrick, Sami Thiago and I spent time in Beijing with the Burger King China team, including Chairman Johnson Huang, and Deputy CEO Danny Tan, and we all came away energized about the path ahead. The team there is exceptional and the early results speak for themselves. With double digit comparable sales growth and notable margin improvement in the first quarter, the team is already demonstrating its restaurant expertise and deep knowledge of the Chinese market with a clear plan to optimize the supply chain,, enhance the brand’s marketing and improve restaurant build costs, to drive stronger returns. As we highlighted at Investor Day, BK China is an important component of our path back to 5% plus NRG by 2028 and CPE has injected $350 million of primary capital into the business fully funding development over the next five years, starting with a return to modestly positive net restaurant growth this year in 2026. While we were in China, we also spent time with the Popeyes China team which is working to solidify brand positioning, and increase awareness. We’re looking forward to accelerating development this year and positioning the business for success under a new long term operator within the next two years. The first quarter demonstrated how the international business continues to be a reliable source of growth for us, consistently outperforming, building on a strong base of scaled markets and with no shortage of catalysts ahead. From CPE’s ambitions in China to Popeyes continued acceleration all around the world. Shifting now to Burger King which represents roughly 18% of our operating profits, US same store sales grew 5.8%, outperforming the Burger QSR industry by over 5 points this quarter. This is the result of four years of disciplined execution from Tom and his team that has positioned us and the system to successfully welcome guests back through impactful marketing. Our marketing continues to be anchored on three key elevating our core menu, connecting with families and kids and delivering consistent everyday value, value. This quarter we launched the elevated Whopper, featuring a new glazed bun, creamier mayo and clamshell packaging which is driving positive guest feedback and the highest Whopper average unit volumes in over three years. In April, we drove further trial and engagement with lapsed guests through nationwide Whopper Wednesday, reminding guests why our Flame grilled burger is the very best in the industry. We also rolled out $3.99 King Jr.,. Meals as part of our strategy to re engage with families and kids and saw continued growth in King Jr., average unit volumes as a result. And on value, our $5 duos and $7 trios continue to perform well, complementing our premium offerings and providing guests with choice and a consistent value message. A key highlight this quarter was our direct engagement with guests and the launch of our Brand Elevation campaign,. In February, Tom personally spoke with more than 1,500 guests as part of a listening campaign to better understand what they love about Burger King and where we have opportunities to improve. The feedback was really encouraging. There is clear latent love for the brand and we received valuable input that’s shaping our menu elevation roadmap, and providing the team with ideas to further strengthen brand love and deepen guest connections. Our marketing efforts are supported by ongoing improvements in operations and strong alignment with our franchisees, as evidenced by their 97% vote to maintain their elevated ad fund contribution which we announced at Investor Day,. Overall, this was an exciting quarter for Burger King and it serves as a strong proof point that our strategy is working. When we invite guests back to experience a better Burger King,, they come and they stay. What’s most encouraging is that these results are not isolated data points, They reflect a brand that’s earning back guest trust and building real momentum and we believe we’re still in the early innings of that journey. Now turning to Popeyes where net restaurant growth, of 1.2% was more than offset by a comparable sales decline of 6.5%, resulting in system wide sales declining by 3.9%. While results were softer than we’d like to see, we have a clear understanding of the underlying drivers and we are moving quickly, to address them at Investor Day. Peter laid out three key pillars required to get Popeyes back on track. 1. Improving in restaurant execution and guest service 2. Narrowing our focus on our core offerings and third, rebuilding a consistent everyday value proposition. During our franchisee roadshows in April, we brought these priorities together into a clear, actionable framework which was met with strong alignment and excitement, from our franchise operators. To improve execution, we have increased field support to enable higher frequency shoulder to shoulder training on our brand standards. We held our inaugural Restaurant General Manager Guest Experience rallies across roughly 20 cities over the past two months featuring interactive training focused on delivering great guest service. I attended our rally in Miami and saw firsthand the incredible energy and engagement from our managers. We’re beginning to see early improvements in product satisfaction and operational metrics, though it will take time for these to translate into top line results. We’re also focused on the core of what we do best, bone in chicken tenders and the sandwich. A tighter focus makes it easier to execute well in the restaurant and ensures our marketing is working harder behind fewer, stronger beds to rebuild a consistent base of everyday value, we launched our $5 faves platform offering guests choice of their favorite Popeyes items at an affordable price point and we’re already seeing signs that of underlying improvement and value scores. We’ll continue to evolve this platform while exploring additional offerings for group occasions. So while there’s more work to do on Popeyes, the plan is clear, franchisee alignment is strong and the energy in the system tells me we’re ready to execute and deliver some great results. I’m confident our efforts will support a return to positive comps in the second half of 2026. Finally, Firehouse Subs delivered net restaurant growth of 8.1% and relatively flat comparable sales resulting in 7.2% system wide sales growth. We continue to see solid development momentum supported by a strong pipeline of franchise partners, average paybacks of less than four years and increasing brand awareness as highlighted at our Investor Day. I’m excited to see Firehouse become a more meaningful contributor to RBI’s growth over time and remain confident that the brand will deliver another year of accelerated unit growth in 2026. With that, I’ll pass it over to Sami to talk through our financial results for the quarter.
Sami Siddiqui (Chief Financial Officer)
Sami thanks Josh and good morning everyone. Today I’ll discuss our Q1 financial results, capital structure and 2026 financial guidance. But before that, I want to recap a few takeaways from our investor day. First, we remain confident in the durability of our long term algorithm anchored by approximately 3% same store sales and and 8% organic AOI growth supported by disciplined cost management and accelerating net restaurant growth. We are on track to deliver roughly 1800 net new restaurants per year by 2028, coming from three building blocks, 3 to 400 from our businesses in the US and Canada, 3 to 400 from our three brands in China and around 1100 from international, including about 700 from our top 10 growth markets and 400 from the balance of the portfolio. Second, we are continuing to simplify the business and have a path to sunset restaurant holdings by the end of 2027. Third, we announced our intention to become an investment grade company and remain on track to achieve corporate investment grade leverage by 2028. And finally, we continue to generate strong free cash flow which allows us to do it all. Invest in high return organic growth opportunities, support our path to investment grade leverage and return capital to shareholders through a growing dividend and share repurchases. As Josh mentioned, we resumed share buybacks in March and have repurchased $60 million through April 30, an indication of confidence in our business momentum and our view that our shares remain undervalued. Now on to our results. Beginning with our financials in Q1 we delivered comparable sales growth of 3.2%, net restaurant growth of 2.6% and system wide sales growth of 6.2%. We translated that to organic AOI growth of 10.7% and nominal adjusted EPS growth of 14.6%. Strong comparable sales were led by nearly 6% growth in both international and Burger King US. And while Q1NRG marks a low point for the year due to typical seasonality, we remain on track to accelerate in 2026. Organic AOI growth outpaced system wide sales growth this quarter driven by a few factors. First, we saw $12 million of net bad debt recoveries primarily stemming from International compared to approximately $8 million of net bad debt expense in the prior year period. Second, we benefited from a $12 million decline in segment G and A, excluding restaurant holdings. And third, we closed the Burger King China joint venture transaction with CPE on January 30th and began recording royalty revenues from BK China in the International segment. Once again, these tailwinds were partially offset by a $13 million AOI drag from Tim Hortons advertising and other services compared to $2 million in the prior year period, primarily due to the timing of certain marketing related expenses. We expect to see a similar aoi drag in Q2 which will partially reverse in the back half of the year. As a result, we anticipate a full year AOI drag of approximately $20 million in 2026 compared to $14 million in 2025. As a reminder, the Tim Hortons advertising expenses and other services line item include CPG marketing expenses which are funded by Tim Hortons Corporate. Now turning to EPS Adjusted eps increased to $0.86 per share this quarter from $0.75 last year, representing nominal growth of 14.6%. This was driven by our AOI growth as well as a modest year over year decrease in adjusted net interest expense from $128 million to $124 million and an FX tailwind of approximately $0.04. Our adjusted effective tax rate this quarter was 18.5%, in line with our expectations for the full year of between 18 and 19%. Moving to cash flow and capital allocation, we generated nearly $200 million of free cash flow in Q1, including the impact of $53 million of CapEx and cash inducements and a $26 million benefit from our swaps and hedges. In March, we resumed share repurchases, repurchasing a total of $34 million of stock in the quarter and $26 …
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