Restaurant Brands International aims for 8%+ organic AOI growth in 2025 while advancing international momentum and portfolio simplification

Earnings Call Insights: Restaurant Brands International (QSR) Q3 2025

MANAGEMENT VIEW

* CEO Joshua Kobza stated that Q3 was a strong quarter, highlighting, "Comparable sales were up 4%. Net restaurant growth was 2.8% and system-wide sales grew 6.9%. Combined with disciplined cost management across the business, this top line performance drove 8.8% organic adjusted operating income growth and double-digit nominal EPS growth." He emphasized, "These results demonstrate that our strategy is working, fueling continued momentum through the strength of our brands, the dedication of our teams and franchisees and the value we're delivering to guests every day."
* Kobza noted that Tim Hortons Canada and the international business, which represent about 70% of adjusted operating income, have delivered 18 consecutive quarters of positive same-store sales and that Burger King U.S. is "making meaningful strides strengthening the brand's value proposition through delicious menu innovation, better operations and impactful remodels."
* He announced that Burger King China has been classified as held for sale, with active efforts to identify a new controlling shareholder, stating, "We see a clear path to reigniting growth in this important market and remain confident we'll find the right partner to continue driving it forward."
* CFO Sami Siddiqui said, "For the third quarter, system-wide sales grew 6.9%. Organic AOI grew 8.8% and nominal adjusted EPS increased 10.7%." He added, "We generated $566 million of free cash flow, including the impact of $110 million of CapEx and cash inducements and a $35 million benefit from our swaps and hedges."
* Siddiqui provided updates on capital allocation, highlighting, "We fully repaid the approximately $100 million remaining on our Tim Hortons facility that was maturing in October, consistent with our plan to prioritize deleveraging. As a result, we ended Q3 with total liquidity of approximately $2.5 billion, including $1.2 billion of cash and a net leverage ratio of 4.4x."
* Executive Chairman J. Doyle stated, "Tim Hortons and our international business continue to set the standard with steady high-quality growth built on strong fundamentals." He also emphasized, "We are going to be a much simpler story. We've got engaged franchisees, motivated teams and a culture that values doing things the right way for our guests, our operators and our shareholders."

OUTLOOK

* The company reiterated its confidence in delivering at least 8% organic AOI growth in 2025, with Kobza stating, "With that focus and with disciplined execution across our teams, we remain confident in our path to delivering at least 8% organic AOI growth in 2025."
* Siddiqui said, "We continue to expect our adjusted effective tax rate to be in the 18% to 19% range" and provided guidance that "2025 CapEx and cash inducements, including capital expenditures, tenant inducements and incentives to be around $400 million, down from our prior guidance of $400 million to $450 million."
* The company expects net restaurant growth of around 3% and continues to forecast adjusted net interest expense of around $520 million for 2025.
* Siddiqui highlighted, "We remain on track to refranchise between 50 and 100 restaurants in 2025" and to complete the sale of Burger King China.

FINANCIAL RESULTS

* Kobza reported, "Comparable sales were up 4%" for the quarter.
* Siddiqui highlighted, "Organic AOI grew 8.8% and nominal adjusted EPS increased 10.7%. Adjusted EPS increased to $1.03 per share this quarter from $0.93 last year."
* Free cash flow generation was stated at $566 million, with a net leverage ratio of 4.4x and total liquidity of approximately $2.5 billion.
* Segment G&A, excluding restaurant holdings, is now expected to come in at the low end of guidance ($600 million to $620 million).
* The company continues to record Burger King China as discontinued operations while seeking a buyer.

Q&A

* Dennis Geiger, UBS: Asked about the Burger King U.S. turnaround trajectory. Kobza responded that they are "really pleased with the work that Tom and the team have done now over a number of years." J. Doyle added that the approach at Burger King mirrors the turnaround at Tim Hortons, focusing on “improving the consistency of execution, the attractiveness of the restaurants...the service levels, the food quality.”
* David Palmer, Evercore ISI: Inquired about beef costs and their impact on plans. Siddiqui responded, "Beef costs this year have been at all-time highs...we view these kind of impacts as temporary and our franchisees view it that way as well, although they are a significant impact." Kobza addressed competitive concerns, stating, "I don't think anything that the competitors are doing is impacting Tom and the team's plan."
* Danilo Gargiulo, Bernstein: Asked about protein lattes in Canada. Kobza described them as "one more iteration of that idea. I think it's been working pretty well so far. We've seen high incrementality of that new product."
* Brian Bittner, Oppenheimer: Queried about Tim Hortons share trends and the Canadian macro. Kobza noted, "Our same-store sales are about 3 points higher than the other large QSRs."
* Gregory Francfort, Guggenheim: Asked about international business share gains. Kobza cited "broad-based improvement," with France and China showing especially notable gains.
* John Ivankoe, JPMorgan: Sought clarity on remodel numbers and refranchising timing. Kobza said, "We expect to do about 400 this year. We're really pleased with the uplift," and Siddiqui explained the Crown Your Career refranchising process.
* Hyun Jin Cho, Goldman Sachs: Asked about Burger King remodel performance post-year 1. Siddiqui stated, "It's about 100 basis point continued uplift from the remodels."
* Andrew Charles, TD Cowen: Asked about Burger King store-level cash flow targets. Kobza pointed to beef cost declines and strong franchisee relationships as supporting continued investment.
* Sara Senatore, BofA Securities: Asked about Tim Hortons loyalty members and beverage mix. Kobza stated, "We have seen a shift. I think the shift from hot to cold beverage is something that you've seen across the industry...In terms of margins, they're both good margin products."
* Brian Harbour, Morgan Stanley: Asked about Popeyes challenges. Kobza said the focus is on "improving the sales trajectory" through operational consistency and marketing adjustments.
* Pratik Patel, Barclays: Asked about income cohorts and QSR trends. Kobza indicated there hasn't been a big departure, but noted "October has started out a bit choppier in the U.S."

SENTIMENT ANALYSIS

* Analysts maintained a generally positive tone, congratulating management on solid results and focusing questions on strategic execution, turnaround trajectories, and operational improvements.
* Management's tone was confident and forward-focused during prepared remarks, emphasizing execution and discipline. In Q&A, responses remained constructive, with Kobza and Siddiqui expressing confidence in ongoing plans, using phrases like "we remain confident" and "we're really pleased."
* Compared to the previous quarter, management's tone was slightly more optimistic, reflecting accelerated growth and successful execution; analysts' tone shifted from cautious to more encouraging.

QUARTER-OVER-QUARTER COMPARISON

* Organic adjusted operating income growth accelerated from 5.7% in Q2 to 8.8% in Q3, with nominal adjusted EPS growth rising from 9.2% to 10.7%.
* Same-store sales and system-wide sales growth improved across major brands, particularly in Tim Hortons, Burger King International, and China.
* Management reiterated its commitment to the 8%+ organic AOI growth target and provided more details on refranchising and capital allocation priorities.
* The tone in Q3 was more upbeat, with management highlighting successful execution and momentum, compared to Q2’s more cautious outlook amid a dynamic consumer environment.

RISKS AND CONCERNS

* Elevated beef costs in the U.S. are creating short-term margin pressures for Burger King, with Siddiqui noting the impact and ongoing monitoring of market movements.
* Popeyes U.S. reported softer results with a 2% decline in comparable sales, with management acknowledging "more work to do" and a need to "focus on our core offerings...and deliver consistent value."
* Burger King China remains held for sale, and the company is working to identify a new controlling shareholder, representing an ongoing structural risk.
* The U.S. QSR environment showed some choppiness in October, as mentioned by Kobza.

FINAL TAKEAWAY

Management emphasized that Restaurant Brands International delivered robust top and bottom line growth in Q3 2025, driven by strong execution across Tim Hortons, International, and Burger King U.S., while Popeyes faced challenges needing operational focus. With a clear path to at least 8% organic AOI growth in 2025, ongoing refranchising, and efforts to simplify the portfolio, the company remains confident in its strategy for long-term value creation for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/qsr/earnings/transcripts]

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