Good morning, and welcome to the Restaurant Brands International Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Brigleb, 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 third quarter ended September 30, 2020. 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; and 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. Let’s quickly review the agenda for today’s call. José will start with some opening remarks on our performance during Q3 and our ongoing recovery from the COVID-19 pandemic before providing additional detail around our performance at Tim Hortons, Burger King and Popeyes. Josh will then provide an update on technology at RBI, and to conclude, Matt will review our financial results before opening the call up for Q&A. I’d now like to turn the call over to José. José Cil: Thanks, Chris and good morning, everyone. Thank you for joining us on today’s call for the third quarter of 2020. I hope everyone is doing well and staying safe. Since the onset of the COVID-19 pandemic in March, we’ve mobilized behind a clear set of priorities to confront the crisis and our considerable progress behind these objectives over the past seven months has helped drive a significant recovery across our business. The recovery we’ve seen since March highlights the resilience of our three iconic brands and our network of strong and well-capitalized partners around the world. It’s also a testament…

Thanks, José, and good morning, everyone. This quarter, we continued to make important advances in building out our digital capabilities and deploying them across brands. With many elements of our technology infrastructure now in place and fully integrated, we’ve increased our focus on improving and personalizing our interactions with our guests through our digital platforms. We believe this type of tailored interaction will be an increasingly important differentiator as digital adoption continues to increase over time. One key example of our efforts around personalization ties into our initiative to upgrade our drive-thrus with the installation of outdoor digital menu boards. These updated menu boards offer a variety of advantages versus the legacy paper-based menu boards. Key among them is the ability to adjust displays in real time to account for anything from weather patterns to the basket of items, a guests just started to billed wall ordering. As José mentioned earlier, we’ve now installed outdoor digital menu boards in over 800 Tim Hortons drive-thrus across U.S. and Canada. We’ve also installed them in over 1,500 Burger King drive-thrus across the U.S., where in Q3; we started to rollout our predictive selling technology designed by our Guest Intelligence team. Though it’s still early days, we’re really encouraged by the increases to check and overall sales we’ve seen at both brands. In addition to personalization, the digital menu boards we’re installing also have the functionality to add remote, contactless payment, to allow guests to both order and pay at the menu board and speed up our drive-thru lanes. And we’re about to go into field testing with one of our longstanding payment providers. We’ve also designed the menu boards to be easily modified to integrate loyalty scanning at the menu board to simplify operations at the pickup window and improve speed of…

Thanks, Josh, and good morning, everyone. Our results for the third quarter reflect a continued recovery across our business. Consolidated system-wide sales were approximately $8.3 billion representing a 5% decrease year-over-year, but a nearly 30% sequential increase versus the second quarter. In the third quarter, consolidated adjusted EBITDA was $561 million representing a nearly 6% decrease on an organic basis year-over-year, but an increase of over 55% versus the second quarter. In addition, our adjusted EBITDA growth was approximately in line with our system-wide sales growth in the third quarter. We did see a continued impact to adjusted EBITDA growth from our ad funds in Q3. Although, we saw a reversion of the trend we’ve called out in recent quarters. In Q3, growth in ad fund revenues exceeded growth and expenses by nearly $14 million resulting an impact of approximately positive 2% on our consolidated organic adjusted EBITDA growth rate. Offsetting this impact was the shift we saw in sales mix across brands, reflecting a relatively greater decline in sales at Tims, where in addition to franchise royalties, we also generate EBITDA from property and supply chain activities. Moving on to segment level performance, at Tim Hortons, our third quarter adjusted EBITDA was $258 million, which represents a decrease of approximately 13% on an organic basis. This decrease was driven primarily by an approximately 14% decrease in system-wide sales, which included an approximately 12% decrease in global comparable sales. That was partially offset by global net restaurant growth of 1%. The year-over-year decrease in adjusted EBITDA at Tims also reflected a decrease in supply chain sales, which was driven by the decline in restaurant traffic and volumes we experienced during the quarter in Canada. The rent relief we provided to Tim Hortons restaurant owners in Canada has continued to diminish…

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Nicole Miller of Piper Sandler. Please go ahead.

Good morning, and thank you for the update. In terms of franchisee cash flow, I’m wondering what level of comp makes them whole either on a year-over-year basis? Or maybe what the prior plan was pre-pandemic, if you could just compare and contrast, what might be standalone margin or labor benefits, I’m thinking it’s less comp than we might think, and could even be a negative comp? And then you have a very committed pipeline for development. So when you think about that playing out what is likely to happen, first to return the 5% plus global BK growth? Or a possible acceleration for Popeyes into the double digit range? Thanks.

Nicole, thanks for the question. It’s Matt here. I think on the first part here, in terms of your question around franchisee profitability and cash flow, I think it’s really both sides. We’ve seen a good recovery in sales from the lows of the peak of the crisis. But that’s also been combined with some really strong operational adaptation by our franchisees, plus the work that we’ve done together with our franchisees and some of the support programs that were put in place in the early days. And I think, where we see ourselves now is, we’ve gotten back to pretty healthy average restaurant sales across our brands with strong unit economics. And then on top of this, there’s been some cash flow savings, as we mentioned earlier in the year. Some of the capital projects were paused and so there’s been some cash flow savings there. So I think, overall, we’re pretty confident. Our franchisees will end the year in a strong position to return back to growth and in a pretty healthy position as it relates to profitability as well as cash flow. And then I think, in terms of your second question on development, we’ve been working hand-in-hand with our partners, as we mentioned last quarter, to build strong pipelines of growth for next year. I think we’ve made good progress shoring up capital and making plans and budgeting for growth with our partners. And they’re very eager as we are to return to growth as part of the expansion of their business and their value creation as we head into next year. And we feel very confident that we have the right partners that have – will have access to capital as we move forward to move back to our pace of growth in our goal of getting to 40,000 restaurants over the next eight to 10 years. Thanks for the question.

Our next question comes from John Glass of Morgan Stanley. Please go ahead.

Thanks and good morning. First, I had just a clarification, then a question. The clarification, José is, I think you gave some color on September for some of the brands, but could you just be clear what maybe the exit rate was for the Burger King U.S. business and the Tims Canada business, if there’s any way you want to kind of color what you think September – October looks like. And then the question I have is, how do – how are the menu board installations funded? Is that through the franchisees? Is it through the ad fund? Is it through – is there a corporate contribution? What’s the cost and how is that funded for those menu board installations? José Cil: John, thanks for the question. We’ll start with the second question on menu board installations. So Matt, you want to touch on that briefly?

Yes, sure. John, so on the menu boards, as we mentioned we have a really big push and what we think is a critical and important strategic project for both BK and Tims with some big goals here. I think we’re already well underway as we talked about earlier this year and rolling out our ODMB’s across the Tims system. We’re at about 800. We have a few hundred more to go this year and we think we’ll complete the system sometime next year. We talked about that being about CAD120 million investment in the past which has been funded through the ad fund and access that they have in terms of liquidity from the float of gift card cash that exists there. And then on the BK side, I think we’re also moving pretty quickly here and very excited about rolling out ODMB’s across the system. We’ve been making good progress. I think Josh touched on that in the prepared remarks. We’ve had a good alignment with our partners around the business case and the opportunity of rolling out ODMB’s. And they’re excited about the project and aligned with the timeline. I think in terms of funding for those, where we’re involved in the property, which is a little bit more limited in the U.S., this contributions that we would make. But by and large, I think it’s a rollout plan that our partners at BK are aligned with and excited about rolling out. José Cil: Thanks, Matt. And John, on the first question as I discussed in my prepared remarks, we saw a strong quarter-over-quarter recovery for Tims in Canada from a low of about minus 30% in Q2 in same-store sale to about 14% negative in Q3. What we saw in Q3, the continuation of the factors…

Our next question comes from Mark Petrie of CIBC. Please go ahead.

Good morning. I wanted to follow-up on the topic of net restaurant growth, and obviously, there’s lots of moving parts and unknown factors. But two things, I guess, do you expect closures are largely captured in 2020? Or do you think some of that spills beyond sort of typical run rate would spill into 2021? And also in 2021, do you expect, you’re going to be able to get back to sort of the previous expectations on opening pace, or should we think of that – think of it as more of a transition year and how might that vary in each brands home market versus international? Thanks. José Cil: Yes, Mark. Thanks for the question. I think as we talked about this year, it was heavily impacted by COVID obviously, and we had a CapEx pause, and as part of that, we really wanted to focus with our partners on optimizing the portfolios and setting ourselves and our partners up with the best base to grow from as we move forward and get back to development. And as I mentioned before, I think we’re making good progress. We think about development really over a multi-year period. And we’ve been really focused here over the last few months on capital reinforcement and balance sheet management with our partners, as we go through 2021 planning and development. And at the same time, look to optimize those portfolios, as we talked about, as part of that, as we think about closing out this year, we mentioned we sort of – what we expect to be roughly around the same restaurant count to end this year as last year. And then moving forward into next year, we think we’re moving in the right direction with strong partners who are eager to lock in capitalization and eager to grow again. And we think about that over a multi-year time period, and we feel very confident that we will have a path with our partners and the line of sight that we see in the growth opportunities in our big markets – our big priority markets around the world that we’ll be able to get back to strong growth and move toward the 40,000 restaurant goal that we set out for ourselves and get back on track there. Thanks for the question.

Our next question comes from Dennis Geiger of UBS. Please go ahead.

Good morning. Thank you. José, thanks for the commentary on the Tim Hortons strategic plan to drive further improvement from here. Just wondering if it’s possible to talk a bit more about that recovery, and if you’re kind of able to isolate the COVID impact to some extent and talk about how the brand is positioned now, relative to the beginning of the year. I’m not sure if it’s some of the customer satisfaction metrics that you mentioned, or if it’s performance at some of the stores that are in less restrictive regions right now, and how they’re looking, but just kind of what all that means for the recovery from here. Obviously, it’s tough with mobility and restrictions, I assume, but just given all the initiatives you have, if you can kind of give some high-level comments around where the brand is, from where it was and what that means for the recovery, maybe in the next year? Thank you. José Cil: Thanks for the question, Dennis. Yes, look, I touched on in quite a bit of detail of our Q3 performance, I think despite some of the near term challenges, we’re making significant progress behind the long-term initiatives that we laid out at the beginning of the year. As you’ll recall it the three areas we talked about and are focusing on quite intensely our quality of our core platforms modernizing of – or modernization of the brand via technology at the drive-thru as well as through our loyalty program and then innovation in high impact products and platforms that support the core. And so we’ve made a lot of progress on these initiatives over the last seven months. First, in terms of the quality initiatives, fresh brewers and water filtration as I mentioned in our comments, we’re…

Our next question comes from Sara Senatore of Bernstein. Please go ahead.

Thank you very much. I also had a question on Tims. You did talk a lot about the mobility, I guess. It’s sort of a two-part question one is, is there any risk that there are kind of longer-term implications in terms of work-from-home, that kind of thing, that’s a category that seems to be most likely to have a structural change, if there is one. And secondary to that, are there – do you contemplate things that you could do to mitigate the exposure? And as Matt pointed out, your EBITDA exposure is a lot higher than to some sale. So, whether it’s the real estate or the supply chain, ways to unlock value and then maybe return cash to shareholders, which I think is something that a lot of your shareholders would advocate. José Cil: Thanks for the question there, Sara. I think the dog had a question as well. Anyhow, I’ll touch on the first point and Matt, maybe you can touch on the second point. I think as it relates to mobility in Canada, it’s really – it’s hard to – I’m not in the business of predicting and projecting. So hard to tell how this is going to evolve in the coming quarters. Our focus has been on ensuring – in the immediate term, ensuring that we deliver our great products, our coffee, and our big goods in donuts and other products safely. And we’re working very closely with our owners to ensure we do that consistently across the country. And I’m really proud of the work that our franchisees, our owners have done – have executed and done over the last seven, eight months as well as our teams. So on that front, we’re very focused and continue to be focused on executing our game plan – our short-term game plan, and then continue to invest heavily into our long-term plans that I just kind of laid out in response to Dennis’ question related to modernizing – modernization of the brand on the drive-through side, and then loyalty continuing to invest in quality on the product side, on the coffee side and then innovating where we think there’s an opportunity to innovate to drive frequency and trial. So we’re excited about the long-term. We continue to stay vigilant in the short-term and make sure we do the right thing for the business. And then how this evolves, we’ll continue to stay close to it and keep you posted on our progress.

Yes. And Sarah, I think, José sort of described everything very well there in terms of the core priorities. But I think, just overall I’m thinking about how we move forward and how we set ourselves up in the best possible position to deliver and grow over the long-term. I think, it’s all about the long-term plans. It’s all about investing in – sticking to our investment behind the quality of our core platforms, the innovation that we talked about and investing – I think, importantly investing to modernize our brands via tech and focus on off-premise. And so you mentioned, the real estate side, we participate in the real estate across Canada. And we think that’s a great opportunity for us to really take advantage of the amazing asset that we have in the Tim Hortons system and the network of drive-thrus and off-premise capabilities that we have across the country and push that even further to the next level, as we think about modernizing our drive-through capabilities and integrating tech even more into what we’re doing through our loyalty program, where as Josh mentioned, we’ve made a ton of progress over the past year and moving that forward into an impactful program that’s driving positive incremental returns for us. And then I think along the way, as we continue to invest behind our core products as we talked about, with the fresh brewer rollout and some of the early success we’ve seen there in terms of product satisfaction and share. We think those things are going to position us very well to come out of this situation stronger than when we entered and be on a good path to drive growth in Canada over the long run. Thanks for the question.

Our next question comes from Chris Carril of RBC Capital Markets. Please go ahead.

Hi. Good morning. And thanks for taking the question. So given the continued industry-wide focus on drive-through, and in your case, the rollout of the digital menu boards, where’s your current thinking on the reopening of dining rooms? Obviously there are safety and capacity restriction considerations. But curious to hear how you’re weighing other factors as those restrictions or concerns are alleviated, primarily the benefit to margins from focusing on drive-through? And then related to this, how would you characterize drive-through efficiency and capacity currently given utilization and where sales are today? José Cil: Great. Thanks, Chris for the question. I’ll take the first one. I think, as it relates to dining rooms and the reopening of dining rooms. Obviously the first priority there is ensuring that we do it safely and we’re working closely with – at the local and municipal level both with the communities as well as with our franchise owners to ensure we do that safely. Our teams have put incredible focus on what procedures and what steps we need to take to do so in a safe manner. We’ve added PPE and all sorts of other protections in the restaurants to ensure that our team members, as well as our guests feel safe. We have a strong off-premise business. We have a strong drive-through as well as digital business delivery, as well as mobile order prepayment and curbside pickup, which allow us to operate well and continue to serve guests in almost any circumstance and to do so safely. As it relates to – there’s different unit economics for each of these service modes, but our focus is on ensuring that we do so, we serve our guests any way they want and do so in a safe matter. And that’ll continue to be the focus of our teams and our business at this time. Josh, do you want to touch on the second question on drive-through?

Yes. Chris, thanks for the question. Just with respect to the question of drive-through efficiency and capacity, certainly the shift to more off-premise and more volumes in the drive-through, where we’ve seen a ton of growth does put some pressure on the drive-through. And I think you’ve seen us have a lot of focus on operations and a lot of focus on simplicity of our offering and less innovation that allowed us to work with our franchisees a lot more on operations and speed in the drive-through. And I think you also see a lot of focus on the drive-through and a lot of the operations innovation that we’ve been focused on. Just a few examples of that some of which we talked about in the other releases this morning. I think if you look at some of the drive-through digital menu board innovation that we brought out, one of the big elements of that is very efficiency focused. So for example, at Tim Hortons, we’re looking at ways to have our guests pay and/or scan their loyalty cards at the menu boards, which would allow for a significant efficiencies in the drive-through process, and allow us to both enhance the guest experience and speed up that experience. So we think that would be an amazing innovation, something that we haven’t really seen others do, and we think it could really enhance the guest experience for all of our guests at Tims. Another big focus for us throughout our BK systems has been converting single drive-thrus to double drive-thrus. We’ve done this in quite a number of our restaurants in the U.S., we’re doing it in as many of our new restaurants as we can in the U.S. And we think that’s a huge advantage to drive both guest experience and throughput in our drive-thrus. And I’d say the – maybe a third angle on this that we’ve really been focused on is our kitchen engineering. This has been a particular focus in especially in Popeyes, where the concept is evolved a lot as we’ve added the chicken sandwich, and that’s a whole new process for our teams and for our kitchens. So we’ve been looking at ways to make our kitchens more efficient and allow us to drive faster drive-through throughput. So we’re doing a ton of work on this front to make sure that we can drive greater efficiency in our drive-thrus and continue to make the guest experience better every day.

Our next question will come from David Palmer of Evercore ISI. Please go ahead.

Thanks. And thanks for your color on Tims. Just a follow-up to your answer to, I think it was Dennis Geiger’s question. You mentioned improving coffee share. Are you back to growing coffee share in Canada and is that translating to a broader share gain within Canadian quick service? Any color there would be helpful. And then when you do update drive-thrus at Tims and Burger King with better technology and the better AI enabled functionality, not just the hardware, but also some of this new software. What’s the impact to same-store sales from that? And what is the return on investment proposition to franchisees? Thanks. José Cil: David, thanks for the question. Yes. On the question of coffee share, as I mentioned, we’ve seen some progress over the last seven, eight months since the beginning of the year on coffee share. I think overall the pod gotten smaller given mobility and all the other issues that I touched on earlier. I think our brand being well positioned in the country with drive-thrus 2,700 – approximately 2,700 drive-thrus throughout the country, gives us the ability to continue to serve Canadians even in the most difficult of circumstances. So our focus has been on doing that with our teams, with our franchise owners and making sure we do so safely. And I think it’s been a really strong effort on the part of the team during the pandemic, and we continue to be focused on those elements of service and delivering a great tasting coffee consistently. And appreciate the question. I’ll pass the second one to Josh to touch on that.

Hi, David. Good morning. And thanks for the question on the drive-thrus. So just a couple of thoughts on this one. I’d say that when you look holistically at the investments we’re making in the drive-thrus, so I would look at the combination of – especially with Burger King, where we’re doing a lot of conversions of single drive-thrus to double drive-thrus, we’re upgrading to digital menu boards. And then when we’re adding the AI-driven suggestive selling, we’re seeing probably some of the best ROI that we think there is out there for our franchisees. And that’s why there’s so much interest from the franchisee community in making these investments. So we’re seeing really strong sales uplifts from the investments that our franchisees are making. And I think it’s a combination of all three of those elements, the conversions to double drive-through, the investments in the digital menu boards, which really creates, I think a much more attractive guest experience and the software that’s able to do the suggestive sell. And I think we’re seeing similar things at Tim Hortons, where we’re just starting in Canada to tickle that some of the suggestive sell software was a little bit earlier there. But I think it’s going to – we’re going to see a really attractive result over time.

This concludes our question-and-answer session. I would like to turn the conference back over to José Cil for any closing remarks. José Cil: Great. Thank you so much. We’ve made a lot of progress over the past seven months in our confidence. We’re advancing in all the right areas to emerge from the pandemic, well positioned for the long-term. Thank you again for your time today. Take care and stay safe.

The conference has now concluded. Thank you for attending today’s presentation. And you may now disconnect.