good morning everyone and welcome to the restaurant brands international third quarter 2021 earnings conference call all participants will be in a listen-only mode should you need assistance please say no 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 and then one using your telephone keypads you will hear a tone to confirm that you are in the question queue. To exit the question queue, you may press star and then two. Please note that all callers will be limited to one question. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Stephen Lichner, 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 30th, 2021. As a reminder, a live broadcast of this call may be accessed through the Investor Relations webpage at investor.rbi.com, and a recording will be available for replay. Joining me on the call today are Restaurant Brands International's CEO, Jose Sill, 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. Throughout the call today, we will be referencing two-year comparisons for system-wide sales growth and comparable sales to provide a cleaner indication of how the business is trending versus a more normalized period. These two-year comparisons are calculated on a geometric stacked basis by using the 2020 and 2021 disclosed growth metrics. And now, I'll turn the call over

to Jose. Good morning, everyone. Thank you for joining us on today's call to discuss our third quarter of 2021. I hope everyone is doing well. Before I dive into our results for the quarter, I'd like to highlight an important milestone for our company. In 2020, we launched our Restaurant Brands for Good sustainability framework to address our food, the planet, and the people and communities we serve. During the quarter, we announced our goal to achieve a 50% reduction in greenhouse gases by 2030, which was approved by the Science-Based Targets Initiative, and reached net zero emissions by 2050 or sooner. These targets are a good example of the action-oriented approach we're taking to do our part to tackle climate change. The moment for action is now, and I'm personally extremely proud of the team's efforts so far, getting us started on this important journey. Beyond doing right by the planet, we believe we're doing right by our guests, employees, and shareholders, who we know increasingly value brands that take sustainability seriously. And this progress is really important because our value proposition starts with our brands, Tim Hortons, Burger King, and Popeyes, all of which generate resilient, growing, high margin revenue streams through comparable sales growth and restaurant development allowing us to reinvest in our business while also returning capital to shareholders. During the third quarter we once again group global comparable sales year over year driven by worldwide growth at Tim Hortons and strong results from Burger King and Popeye's international business which offset softer performance from Burger King and Popeye's home markets. As compared to 2019 our system-wide sales growth accelerated to 5% versus 4% in Q2, driven by positive overall comparable sales growth and continued progress in our development pipelines, with 264 net new restaurants delivered during the quarter, keeping us on track to return to 2018-2019 levels of growth this year. And looking ahead to 2022, based on our current pipeline, we believe we're well-positioned to accelerate our net unit growth across all three brands and continue on our path to 40,000 restaurants. Our efficient operating model helps convert the system-wide sales growth to the bottom line, contributing to robust recash flow generation that provides significant optionality, allowing us to reinvest in the business and return capital to shareholders through both dividends and open market share repurchases. We're making investments in key areas of the business, such as building in-house technology and digital teams that we believe position us to add value directly to our guests and improve restaurant operations, investing behind our marketing plan at Tim Hortons in Canada, accelerating the rollout of outdoor digital menu boards, and investing in our people, especially in areas like technology, operations, and marketing. We also returned roughly $240 million to our shareholders on October 5th in the form of a 53-cent-per-share quarterly dividend, once again maintaining the highest payout ratio in our industry. In addition, since announcing our expanded $1 billion buyback program at the end of July, we've repurchased and retired approximately 2.8 million shares in open market transactions, totaling just over $180 million. These robust capital returns reflect the confidence we have in our brands, our view of our underlying intrinsic value, and our outlook for the business. Before I turn to our brand level performance, I'd like to hand it over to Josh to provide you with a more detailed update on our development framework, a key driver of our long-term growth prospects, then also share an update on technology. Josh?

Thanks, Jose, and good morning, everyone. As Jose mentioned, we have big aspirations to grow our restaurant base towards our long-term goal of 40,000 locations, and we are confident we are well-positioned to execute. We are fortunate to operate three iconic brands in some of the most attractive QSR categories, and within this landscape, we view ourselves as uniquely positioned to drive outsized growth. When we look at the unit count of our leading peers by category in key international regions, we see notable opportunities with the most compelling in Asia-Pacific, where, taken together, our leading competitors have nearly 10 times the number of restaurants as we do. In addition, across EMEA, the leading peers have over three times the number of stores as us, and in Latin America and the Caribbean, they have more than double our footprint. And while this international runway is especially compelling, we also see growth opportunities closer to home in the U.S. and Canada. Developing new restaurant business around the world is a key foundational strength of our team, and we are joined in our efforts by an exceptional network of master franchise partners who have the experience, local expertise, track record, and capital to invest. And while we do not take a one-size-fits-all approach with our partners, working with local entrepreneurs, established restaurant operators, as well as strategic and financial partners, we do look for a few common threads across all of them. We seek out partners who share our vision for building out our brands to their full potential in their markets, have the capital resources to do so, and have talented local management teams to execute on that vision. The success of our global development playbook is readily apparent when looking at Burger King's international growth, which includes a doubling of the brand's international store count since 2012 to nearly 12,000 locations and roughly 60% of the brand's worldwide system-wide sales. In multiple markets, China, France, Russia, the team effectively started from scratch, identified a strong local partner, entered into a long-term master franchise and development agreement, and created a robust business with a lasting presence and continued runway for growth. In fact, in these three markets alone, since 2012, we have built nearly 2,400 restaurants and created nearly $3 billion of annual system-wide sales. In Russia, for example, through a partnership with both a financial partner and a local entrepreneur, we've grown Burger King's store count from just a handful of restaurants in 2011 to nearly 800 today, almost matching the market leader. Despite this robust international development, Burger King still has only half the number of restaurants globally versus the leading competitor, including only a third of the number of restaurants in Asia Pacific, where we are building a strong foothold. As a result, we continue to see Burger King as a significant growth engine, and based on our current pipeline, we expect it to be the largest contributor to our net restaurant growth for the foreseeable future. We also expect the overall pace of our restaurant growth to benefit as we ramp up contributions from exciting master franchise relationships we've recently established for both Tim Hortons and Popeyes. At Tim Hortons, we are the undisputed leader in Canada. However, the brand remains significantly underpenetrated throughout the rest of the For example, we have just over 325 restaurants in Asia-Pacific, which is a fraction of the leading competitors of approximately 10,500 stores. We've only just started scratching the surface with master franchise agreements in China, the UK, the Middle East, Mexico, and others contributing to our year-to-date unit growth of 188 restaurants, which includes by far the fastest pace of international growth the brand has ever achieved. And we are actively working towards development projects and new markets to add to our existing pipeline and accelerate growth for years to come. We feel confident that Tim Hortons brand can translate to markets all around the world, as has been demonstrated by our fast-paced growth in China, where, as many of you know, we only started in January 2019 and already expect to have over 350 locations by the end of this year. And this growth is only expected to accelerate, with our partners driving a strong vision for the brand and aiming to propel Tim's China to over 2,700 restaurants by 2026. Finally, we see opportunities at Popeyes to grow all around the world, and this year alone have signed commitments to develop some of the most important QSR markets, such as the United Kingdom, India, Mexico, and Saudi Arabia, as well as expand our footprint in the U.S. and Canada. data, further enhancing our visibility into achieving our long-term unit growth aspirations. The opportunity in the U.S. is especially compelling for Popeyes. Our guest insights work shows the number one barrier to trial for the brand is convenience, and with 50% of guests driving more than 10 miles to reach one of our restaurants, we see adding new locations closer to our guests as a significant long-term opportunity. We are excited about the roadmap for Popeyes. with the brand on track to achieve record unit growth this year, driven by contributions from key markets including the U.S., Canada, Spain, and the Philippines, and expected to further accelerate in 2022. Before handing it back to Jose, I also wanted to share some thoughts on our digital progress, and in particular, a few insights from key international markets. We've discussed how building out and investing behind our technology platforms is a key priority, and when we look at our most advanced digital markets internationally, which also happen to be some of our largest and fastest growing markets, we see just how important this is to driving digital sales. Our businesses in China and South Korea generate the vast majority of sales from digital channels, nearly 90%, with China in particular driving over 50% of sales from known diners. And in France, Spain, and Russia, over half of sales already come from digital channels. There are a few notable common threads across these markets. One, each has a strong loyalty program in place with easy in-store authentication capabilities. Two, each recognizes the merits of an omni-channel approach utilizing kiosk, mobile order and pay, delivery, and third-party partners to make it easy for guests to interact with the brand in their own way. Third, all quickly integrate new and emerging channels, including third-party delivery and social commerce, like WeChat and Kakao, to grow their customer base by ensuring the brand is present and has open communication channels wherever our guests are present. And finally, each has developed a simple and effective back-end infrastructure to scale quickly without creating complexity. These are just some of the learnings we're able to apply to our home markets, which we expect will follow the path of our more digital international markets over time. That's why we've been focused on ramping up enrollment in our loyalty programs, creating better digital experiences across service modes, including digitizing our drive-thrus, integrating with a growing number of platforms, and continuing to improve our back-end infrastructure. We've already seen some early success with the Tim Hortons app, which now counts over 10% of Canadians as monthly active users and has the highest usage among restaurant or food delivery apps in the market. While these initiatives take time and investment especially in our large home markets they're critical to the future of the business and will continue to be a key priority. With that I'll hand it back to Jose. Thanks Josh. Turning down to our

brand performance. At Tim Hortons we're encouraged by the progress we've seen in Canada including generating five points of sequential quarter-over-quarter improvement in two-year comparable sales as government restrictions eased throughout July and August, and we continue to execute against our back-to-basics plan. This improvement has come from all provinces, with Quebec, Western, and Atlantic Canada showing low-to-mid single-digit declines versus 2019 compared to mid and high single digits in the second quarter, and Ontario improving to high single-digit declines versus low-team last quarter. When we look at both restaurant format and urbanity it's clear where the decline is concentrated from an urbanity perspective all urbanities outside of super urban which represents roughly 10 percent of our footprint improved to single digit declines versus 2019 with rural down low single digits and suburban and urban down mid single digits and while super urban restaurants declined nearly 30 percent they did see a seven point improvement versus the last quarter and from a format perspective, drive-thru restaurants are nearly flat versus 2019, while non-drive-thrus are still declining in the 20% zip code. That said, non-drive-thru locations did see about a 10-point improvement this quarter versus the second quarter. Despite this positive momentum across regions, formats, and urbanities, with reopening plans paused across the vast majority of the country and workplace mobility still significantly behind pre-pandemic levels, we know we're not out the woods yet and neither our teams nor our restaurant owners are standing still we're highly focused on continuing to execute our multi-year back to basics plan which is centered around elevating core quality innovating for growth and modernizing the brand the progress we've seen so far from our work has been encouraging with the exception of hot beverages all of our product categories are back to pre-pandemic levels or better and it's also worth mentioning that despite the continued workplace mobility impacts on hot beverage occasions and sales, year to date, our brewed coffee market share is slightly above pre-pandemic levels. We believe this reflects benefits from the fundamental core quality work we've focused on around fresh brewers, water filtration, and our improved dark roast blend. The benefits of this focus on core quality also extend to breakfast, with breakfast foods outperforming pre-pandemic levels despite lapping 2019's very successful two-for-five hot breakfast sandwich promotion. This outperformance has been driven by a boost from the latest addition to our fresh cracked eggs platform improved breakfast wraps. The team's dedication to innovating for growth is also paying off. As you know last quarter we introduced new lines of cold beverages including our cold brew and real fruit quenchers and we saw them once again contribute positively to two year comparable sales. We're also pleased to see these items along with our fresh cracked eggs platform and improved baked goods helped drive the morning day part close to 2019 levels as you know the morning day part has historically been a significant percentage of our overall business so it's encouraging to see progress here even despite workplace mobility constraints that said as i mentioned earlier we're not standing still waiting for mobility to return we're pushing forward with a strong innovation pipeline to improve our presence in food-driven day parts like lunch and dinner we've experienced promising results to date in our efforts with Craveables and our new and improved artisan sandwiches helping drive lunch ahead of pre-pandemic levels this quarter. And as we move forward in Q4 and into 2022, you'll see us continue to build off the credibility we've been establishing and drive further long-term growth opportunities in food-led day parts. We're also focused on our commitment to modernization, including building off our strong base of digital known diners and driving guest engagement through our Tim's Rewards loyalty program. This quarter, we kicked off our second Roll Up to Win campaign, which helped drive overall monthly known diners to an all-time high. We're particularly excited about this growth as it positions a team to learn more about our guests' wants and provide them with even more compelling offers and experiences to drive increases in check, traffic, and brand closeness. We're actively working together to further integrate Tim's Rewards into our drive-throughs as well, which cover approximately 70% of our system, in addition to equipping our drive-through with outdoor digital menu boards we remain on track to complete substantially all of Tim Hortons North American outdoor digital menu board rollout by the end of this year and finally we remain committed to supporting our communities through important efforts like Camp Day and our smile cookie campaign this quarter we celebrated the 30th anniversary of Camp Day one of the most exciting days of the year for our team and restaurant owners who raised the record-breaking 12 million Canadian dollars for the Tim Hortons Foundation Camp And in September, franchisees broke another record, this time for the 25th anniversary of our Smile Cookie campaign, raising another $12 million Canadian dollars for over 600 charities. I'm incredibly grateful to each and every one of our restaurant owners for their contributions, year in and year out. And I'd like to give a particular shout out to our Dunville, Ontario restaurant, which sold the most smile cookies for the fourth year in a row, selling roughly eight cookies for every resident in Dunville. We believe our investments in the Back to Basics Plan and our community engagement are having a positive impact not only on our business, but also on our brand health. In fact, we once again saw a year-over-year improvement in brand health metrics across most categories, including food and coffee quality and taste, as well as overall brand connection. We're confident that the work we're doing together with our restaurant owners across our core platforms, product and day part innovation, brand modernization, and community outreach will position Tim's well to not only recapture routines as mobility constraints subside, but also drive new guests, new occasions, and new opportunities for the brand in any environment. Turning now to Burger King, starting with the U.S. It's clear we're navigating a transition in the U.S., and this quarter's results reflect that. During the quarter, we saw a 1.6% decline in comparable sales at Burger King U.S., driven primarily by one, the underperformance of value offerings, and two, our intentional shift away from paper coupons on value offerings this quarter's core offers of BOGO plus one dollar and two for six yielded a considerable year-over-year gap against last year's two for five while also facing head wins from competitor core discount offerings and on paper coupons we made a conscious decision to reduce our investment in this declining promotional channel that we've historically over indexed relative to our peers we know this decision will impact our results in the near term but believe it's the right one as we focus on building more sustainable long-term sales through our digital platforms and by maximizing media firepower behind growing channels with increasingly tailored offerings for our guests taken together these items contributed to our third quarter comparable sales decline and with two of our big campaigns during the quarter checking and real meals unable to offset these headwinds we saw a continued gap relative to our peers we're keenly aware of this gap and are actively building an actionable, long-term plan to address. We know we have an iconic brand with well-tenured, focused franchise operators, but we also see clear opportunities across operations, digital, menu, and image that can work together to reclaim market share and drive long-term sustainable growth. Executing on these opportunities starts with having the right people and right team in As you know, we appointed Tom Curtis as President of Burger King U.S. and Canada in August, a proven QSR operator with 35 years experience as both a franchisee and senior executive. Tom has now spent most of the last two months visiting with franchisees across the U.S. and zeroing in on our biggest operations opportunities in addition to gathering feedback on our menu, digital, and image programs. What's clear from his initial observations is that we have a great brand and assets to build from, but we need to double down on putting the guest experience at the center of all of our efforts. Tom and the team have been hard at work, in partnership with our franchisees, to build a focused plan to reclaim our market share and put us on track for long-term sustainable growth. While I'm not going to get into all the detail today, I'll share a few directional highlights on where we're headed. We know that the foundation of any restaurant business is exceptional, repeatable precision in operations. There are upstream impacts on great operations, like having a focused menu and creating platforms that can be executed consistently by our team in well-designed kitchens with modern, efficient equipment. There are also important downstream indicators of great operations, including competitive drive-through times, order accuracy, and product and guest satisfaction scores. Our biggest areas of addressable opportunity are clear, and we're already at work on our plans to streamline our operations and drive superior guest service levels. An equally important component is creating an easy and seamless experience for both our team members and guests through digital platforms. We hit an important milestone this quarter with the nationwide in-store rollout of our Royal Perks Loyalty Program in September, and we've been pleased with the early results with nearly 80% of registered digital guests now having converted to Royal Perks. We're also actively working to integrate loyalty offers into our outdoor digital menu boards, which we continue to install across North America. We now have over 50% of Burger King drive-thru restaurants equipped with outdoor digital menu boards and expect to exit 2021 with about 75% complete, nearing the 100% milestone by mid-2022. With nearly 80% of Burger King sales coming from drive-thru, we believe this important initiative will drive significant long-term benefits for the overall business. Turning to our menu, we know we have the most loved USR hamburger in America. All our data shows our flame-grilled Whopper outperforms the hero product of our competitors, yet many of our burger promotions for the last few years have focused on sub-brands or extensions to our core rather than doubling down on our flagship hero product. More to come in our burger category strategy, but there's no doubt that the Whopper is very important to our long-term plans. On Chicken, despite the modest initial performance of Chicken, we continue to believe in the platform. It's a great chicken sandwich and an important part of our core menu, but there's work to be done to build a platform to its full potential, including improving our communications, market positioning, and pricing. We also view breakfast as one of the most incremental menu and day part opportunities for the brand. We have a sizable existing breakfast business driven by Crissandwich, but we see runway to expand by developing the menu offering at various price points, serving a good cup of coffee, leveraging our technology to nail speed of service and accuracy, and deliver a more consistent and reliable experience and having a more thoughtful, consistent marketing and media investment plan. On value, you've heard me talk about the importance of everyday value and getting the mechanics right. For years, we've been spreading ourselves too thin across too many messages with mixed results. In fact, historically, we've consistently had the most value constructs in the market, three times as many as our lead competitors, which diluted our marketing firepower and added to operational complexity. It also confused guests. Our ongoing investments in data and analytics have given us a much clearer view of the media weight required to have both promotional and everyday value offers drive guest visits, and we're already working to address by focusing our efforts behind fewer, more impactful offers and value platforms. We're also thoughtfully developing our roadmap for image transformation of our restaurant portfolio. Our digital initiatives go hand-in-hand with this priority. We're closely examining ways to optimize the sales potential of our portfolio while maximizing the ROI for each franchisee. For example, in certain markets, the highest return on investment for a franchisee may be investing in our double drive-thrus rather than an extensive in-store dining room redesign. Each market, each store, and each partner is unique, and to that end, we're working with our franchisees to align on a more ambitious image transformation plan for the future. And finally, this brings us to the most important piece of driving long-term success. Franchisee profitability, trust, and engagement. We can have a great strategy in place, but at the end of the day, the key to success will be how well we work together with our franchisees to execute the plan in their restaurants. Fortunately, Tom's candor and humility, his intense focus on simplification, guest experience, and profitability, and his track record of success as a former franchisee, in addition to the time he and the Burger King team have spent with franchisees on the road so far, has resulted in early support from our franchisees. As we look ahead, Q4 is all about finalizing and engaging the franchise system on the multi-year plan, and 2022 will be focused on implementing year one of that plan. We recognize that important long-term value-creating change does not happen overnight. We're confident in our Burger King leadership, our brand, our team, and our incredible franchisees and their teams, and we look forward to sharing more with you in the coming quarters. Turning for a moment to international, a bright spot for the Burger King brand and a key driver of our long-term growth. As Josh highlighted, Burger King has a strong and growing presence internationally, generating about 60 percent of the brand's system-wide sales, up from roughly 45 percent in 2012. The brand has incredible global awareness and is improving its market positioning, including in Spain, which generates over a billion dollars in system-wide sales and recently hit an exciting milestone of becoming the most preferred QSR brand in the country. During the third quarter, Burger King's international business grew system-wide sales over 10% versus 2019, an acceleration from last quarter's 3% growth. This performance included sequential two-year comparable sales improvements in some of our largest markets, France, Spain, Germany, and Brazil, with France notably returning to pre-pandemic levels during the quarter and Germany generating nearly double-digit comparable sales growth versus 2019. And we saw double-digit comparable sales versus 2019 in key markets, including Australia, the UK, Russia, South Korea, and Japan. Given the diversity of our international business, it's difficult to pinpoint one or two key drivers of the overall comparable sales growth in the quarter. That said, we've noted a few highlights that we believe are contributing to growth in certain markets. For example, our plant-based products have proved to be an important sales driver in the UK, Germany, and the Netherlands, and continue to grow as we launch new products. Our digital sales have also notably improved, with the international business now generating roughly 50% of sales from digital channels. We're pleased with the progress we continue to make internationally at Burger King, and as restrictions continue to ease, we're optimistic we'll continue to see a rebound in sales that, coupled with a robust development pipeline, we expect will drive long-term sustainable growth to the brand for years to come. Let's now turn to Popeyes. As Josh highlighted, we see a significant long-term growth opportunity for the Popeyes brand. This quarter, we grew two-year comparable sales nearly 15%, even despite lapping the August 2019 launch of our game-changing chicken sandwich. That said, on a year-over-year basis, U.S. comparable sales declined 4.5%, primarily driven by traffic declines and, to a lesser extent, less effective impacts from the offers we had in the market. On traffic, ongoing labor challenges led to reduced service modes and operating hours, particularly in late night, as well as a temporary distribution center interruption in the Northeast. We're focused on working with our franchisees to alleviate the impact of these challenges in the future. And while in-restaurant staffing may take time to improve, we're well into the process of further diversifying our distribution network in the region to mitigate the impact of any future distribution center disruptions on our supply chain. Despite these headwinds, which drove the majority of the year-over-year decline, the brand continues to generate over $1.8 million in annualized sales per restaurant in the U.S. And Popeye's U.S. once again grew system-wide sales as success from the team's focus on strong development offset the decline in comparable sales. The team also remains committed to making progress across menu innovation and during the third quarter focused on two areas, nuggets and premium beverages. We launched Nuggets in July, adding a new long-term category to our menu and a convenient way to enjoy a delicious hand-breaded Louisiana chicken. While the launch of Nuggets has proved to be incremental to our business, attracting new guests and driving check, it was unable to offset the traffic headwinds we experienced during the quarter, and we know there is more we can do to enhance the performance of this important new category for us. For example, we know every great nugget deserves a great sauce pairing, so we're focused on innovating in this key area, introducing creative and delicious new sauces like our recently launched Hadi sauce. Yes, you heard it right, in collaboration with Megan DeSalian. We're particularly excited about this collaboration as it not only introduces a new dipping sauce for our nuggets, but also innovates on our iconic chicken sandwich platform for the first time. On premium beverages, our recently launched Lemonade platform drove beverage incidents to their highest levels since 2017. Beverages are a great driver of traffic and franchise profitability, and we think there's even more we can do here and are excited to keep building on the momentum that we've seen. We remain confident in the long-term outlook for the Popeyes brand as we continue to innovate across our menu and day parts, enhance the guest experience, and bring Popeyes to more guests around the U.S. and the world with our robust development pipeline. With that, I'd like to hand it over to Matt to take you through our financial and

cash flow results for the quarter. Matt? Thanks, Jose, and good morning, everyone. This quarter, we made solid progress against many of our key priorities, and our results once again demonstrate the benefit of having a diversified and resilient business model. For the third quarter, our global system-wide sales grew 11% to $9.4 billion, and our adjusted EBITDA was up about 5% organically year-over-year to $607 million. While historically our growth in adjusted EBITDA year-over-year has been closer to our system-wide sales growth, there were a couple of factors that contributed to the difference in our consolidated growth rates this quarter. First, as we've highlighted on past calls, our continued proactive investments in people, digital, and technology has led to a sizable year-over-year increase in segment G&A. We expect that our core segment G&A will sequentially increase roughly $5 to $10 million in the fourth quarter, with fourth quarter levels establishing a reasonable baseline as we head into 2022. Additionally, our year-over-year growth this quarter reflects the fact that advertising expenses exceeded revenues by approximately $12 million more than they did in the third quarter of last year, resulting in an impact of negative two points to our EBITDA growth. This mostly reflects spending from our $80 million Canadian commitment behind the Tim Hortons Canada Ad Fund, supporting our Back to Basics initiatives. And as of the end of Q3, we have deployed nearly 75% of these funds and expect to spend the remainder during Q4. Before turning to EPS, I'd like to quickly discuss two items that we know are top of First, our supply chain business at Tim's in light of the current macroeconomic environment. And second, how to think about the impact of our robust international growth on our business. On supply chain, as you've heard from our peers and others outside our industry, we're seeing increased levels of inflation on the commodities and labor front. So we thought it would be helpful to include a brief update on our supply chain business at TIMSS. With sales beginning to recover this year in Canada, we've seen margins bounce back relative to 2020 and hold a pretty consistent level on a year-to-date basis. We've been very encouraged to see this improvement. However, given the most recent market trends, we do expect margins to moderate slightly over the next couple of quarters as we navigate through this elevated volatility, monitor and adjust our pricing as appropriate, and ensure strong operations and service levels. All while keeping both our guests and our franchisees in mind, as always. On our international growth, you heard Jose and Josh mention the strong progress we've made restarting our global growth engine this year and the exciting opportunities we have to accelerate toward our 40,000 restaurant target. We see significant runway to continue scaling our international businesses, which are already strong contributors to our results, generating over 40% of our consolidated global system-wide sales. As a reminder, our international franchise partners typically localize supply chains and control their own real estate portfolios. Therefore, as we continue to rapidly expand in international markets, our primary source of incremental income will come from high-quality franchising revenues, with royalties tied to system-wide sales growth. Now turning to EPS, our third-quarter adjusted earnings per share was $0.76 compared to $0.68 last year, representing a nominal increase of approximately 12%. included in this increase is an fx tailwind of about three percent the higher growth compared to our consolidated adjusted ebitda growth of five percent year-over-year was mainly driven by lower net interest expense and a reduced share count from our repurchase activity partially offset by higher adjusted effective tax rate and higher equity-based compensation it's worth highlighting that equity-based compensation increased quarter over quarter to $25 million in Q3. Given the continued investments we have been making in our people throughout the year, we do expect this to ramp up a bit more in Q4. Turning to our capital structure, we manage a highly efficient and scalable business model with recurring and diversified income streams and strong conversion to cash flow. During the quarter, we generated nearly $490 million of free cash flow, enabling us to reinvest in our business while also following through on our commitment to return capital to shareholders through both dividends and share repurchases. As Jose mentioned, we've been actively buying back shares, utilizing our enhanced capital allocation flexibility from our $1 billion open market share repurchase authorization. During Q3, we repurchased and retired approximately 2.8 million shares of our common stock for over $180 million, leaving us with over $800 million still available under our current On October 5th, we also returned approximately $245 million to our shareholders through a $0.53 per share quarterly dividend, and we recently declared an additional dividend of $0.53 per common share and unit payable on January 5th, 2022, consistent with our previously announced target of $2.12 per share for 2021. Even with combined capital returns of over $425 million in the quarter, we also saw our net leverage declined further to 5.2 times. In addition, from liquidity perspective, we continue to maintain very strong flexibility. Between our nearly $1.8 billion of cash and our $1 billion revolver, we have about $2.8 billion available to us. Looking ahead, our capital allocation priorities remain very consistent. Prudently maintain an efficient capital structure, invest back in the business through high-impact organic opportunities, continue returning significant capital to shareholders through dividends and our expanded open market authorization, and evaluate accretive strategic opportunities. With that, I'd like to thank everyone again for your support and for joining us this morning, and we'll now open the

line for questions. Operator? Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touchstone telephone. If you are using a speaker phone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Once again, that is star and then one to ask a question. And as a reminder, we do ask that you please limit yourselves to a single question. Our first question today comes from Chris Carroll from RBC. Please go ahead with your question.

Hi, good morning, and thanks for the question. So on Tim's Canada, I appreciate all the commentary around regional and urban trends. Can you talk a little bit more about some of the other factors driving performance in Canada? You know, perhaps any insights on what the competitive environment has been like as mobility has improved? And curious about drive-thru trends. I think you noted that drive-thrus were flat in the quarter. If I did hear that correctly, what do you see pushing drive-thru trends into positive territory?

Hey, Chris. thanks so much for the for the question yeah if I may I'm going to go into a little bit here because you asked a number of different components of Tim's Canada performance so as you probably recall last time we were together was in late July and as of end of July reopening was well underway in Canada you know and there was a lot of there was some momentum in the market in terms of reopening big banks and other large employers in Toronto were expected to to return to the offices in Q4, and this was the beginning of when we started to see some impact from the Delta variant, just making some noise. When you fast forward to the end of the summer, cases started to rise pretty significantly throughout August, and reopening was paused, and we saw vaccine mandates implemented and and mask mandates reintroduced, which put further pressure on mobility and reopening, which as we all know has lagged in Canada versus the US. And we've seen urban centers continue to take cautionary approaches. And downtown Toronto, as an example, still not back to work in urbanity, remains the biggest drag in our business in Canada. Many of the large employers have pushed back returns to office to sometime in 2022. In the quarter, we saw a nice improvement in July and maintained that in August and September. And we exited September similar to July. And there's been no real material shift in trends to call out in October versus where we were in Q3. So really, that's where we stand today. There's a clear concentrated drag from urban and super urban locations in our business there. and this is where lagging workplace mobility most impacts our business where we have high frequency relatively low check guests the guest that buys that coffee or two coffees on the way to work all that said despite these pressures from a mobility standpoint we're improving quarter to quarter and getting back to where we were in 2019 for example even with the drag in workplace mobility we've gotten morning day part to close to flat driven by our emphasis on quality enhancements in our breakfast foods and and we're seeing sequential improvement in hot beverage in other words we're reducing the drag that that we've seen over the last 18 months and we see a really strong opportunity to continue to grow even if mobility doesn't come back fully and as I mentioned in my prepared remarks we're not waiting around we're protecting and enhancing the core offering while pursuing new opportunities in food-led day parts like lunch and dinner, important day parts that obviously are critical to the industry. In Canada, as an example, 60% of overall industry sales are in those day parts and we're about 35%. So we under-index there and we think it's a unique opportunity to increase share as we We continue to develop offerings and build off strong performers like Craveables and we're encouraged by these early results in lunch which is why we're continuing to push on that and we build on it during the fall with our freshly grilled wraps. Probably the day part that has the biggest opportunity is dinner which is still behind pre-pandemic levels down a bit there. But as we look at the offerings that we're developing with artisan sandwiches and wraps and others, we think there's a path to getting back to pre-pandemic levels and then growing from there, which is an exciting long-term opportunity for the business. Where we think we need to focus on, as I mentioned, is to succeed in lunch and dinner. We need to drive food and beverage offerings that make sense and pair well with food during those day parts, which is what led to some of the innovation in cold beverage, supporting our new food platforms as well all year long. So kind of summarizing where we are from a day part perspective, two-year sales outside of dinner and late night are roughly flat to above where we were in 2019. And one of the important data points is, you know, given the pandemic and the impact on the business, we had been working with our franchise partners and owners in Canada reducing and in some cases closing late night in order to address the reduced mobility in the market throughout the pandemic. And we're now just in Q4 beginning to reopen later night hours for a big component of the Tim Canada system. I think as it relates to drive-thru you mentioned that we saw obviously a pretty significant growth in drive-thru during COVID. Drive-thru is an important channel we have about 2,600 plus locations in Canada which is more than a thousand than any of our closest competitor and and we've seen morning day part roughly flat as I mentioned to 2019 levels at drive-thru enabled locations morning is outperforming pre-pandemic levels on average which shows the overall long-term value of drive-throughs which is one of the reasons why we've invested significantly in our drive-throughs to modernize that experience with with outdoor digital menu boards and loyalty integrations which are taking place as as we speak I think investments the other piece I'd highlight here is that investments in our digital capabilities are really continuing to add to the experience and to the sales in the business in Canada. We've got the number one QSR app in Canada. Tim's Rewards is driving traffic check and beginning to contribute to sales and that strong relationship with our guests is allowing us to engage them and drive more frequency and check as well. And then the final comment I'd make is on the the ad fund contributions that I mentioned back at the beginning of the year. We had mentioned 80 million Canadian contribution. We're probably about three-quarters of the way through that contribution in 2021. And just as a reminder, franchisees will on an ongoing basis increase their contributions to the advertising fund by 50 basis points. We're confident in the plan that we have. We're encouraged by the progress we're making so far. We've seen improvements in addition to the sales and day part and format improvements that I mentioned. We've also seen improvements in our brand health metrics, including brand connection. So obviously lots of work to do, but we're encouraged by the progress we're making and look forward to keeping you posted on how we evolve. Thanks so much. Thank you. Our next

question comes from Dennis Geiger from UBS. Please go ahead with your question.

Great. Thanks for the question. Jose, I wanted to ask a bit about some of the key pressures impacting franchisees and really the industry in particular in recent months, I guess across brands, be it staffing issues, labor pressures, commodity pressures, et cetera. What kind of impact are the franchisees and the system broadly seeing from these pressures? How's the system managing these pressures and kind of thinking about managing them going forward i know you spoke to some of this with the popeyes dc issue and this important supply chain but but even more broadly curious the the impacts and then just as it relates to potential implications that you could speak to maybe from these impacts be it you know demand new open demand in any way uh potential franchise or investment support anything just on on the go forward as we think about

the environment right now thank you all right thanks Dennis I'll take the the labor impacts I think the broad broadly speaking and I'll pass it over to Matt to touch a little bit more on kind of you know broadly speaking inflation impacts in the business and then I'll wrap it up on your three-part one question I'll wrap it up on the on the development front and what impact we're seeing on that end. As I mentioned in the prepared remarks, obviously labor challenges are impacting the entire industry and not just the restaurant industry but broadly speaking through retail and other businesses as well, shipping, etc. We called out the impact specifically at Popeyes because it was where we felt it most acutely. We saw it in the context of reduced operating hours and service modes especially around late night and we also saw some impacts in our distribution centers in particular in the Northeast on operating hours we saw about an average of one hour reduction in operating hours at Popeyes during this quarter relative to pre-pandemic levels which obviously has an impact and that that was disproportionately impacting or late-night business, which historically over-indexes in family and which comes along with a pretty high check. Outside of late-night, we saw daily sales improving either flat or improving modestly throughout the quarter. So the real drag and the real impact from a labor standpoint was in the late-night day part. And on service modes, we're seeing nearly 40% of the system operating with reduced service modes, either drive-through delivery and takeout only or drive-through and delivery only, which means our dining rooms generally have been closed in many cases because of some of these staffing challenges that we're facing that are kind of near-term challenges for the system. And then on the D.C. side, you know, we saw an impact to roughly 10% of the stores with this Northeast Distribution Center disruption. And one of the things that our team, alongside our purchasing cooperative for Popeyes, has been doing, purchasing and distribution cooperative, they've been working on diversifying the distribution network, and we expect to complete that transition later this quarter. I think this is a challenge that all brands here in North America are facing but as I mentioned at the beginning of my response here, it's a challenge that's been felt most acutely with the Popeyes business in the U.S. and something we're working closely with our franchise partners to address. We've created working teams to address, to share best practices. There's some really good operators that have done amazing work already in creating job fairs and pipelines of folks coming into their restaurants and staffing up well. So we're sharing those practices and we're also leveraging technology and streamlining operations wherever possible to make this transition and this challenging moment be more kind of be friendlier to operations to allow for staffing levels to get to the places we need them to get to to drive growth in the business. And with that, I'll pass it over to Matt to touch on some of the other impacts that we're seeing in the near term. Yeah, thanks, Jose. Hey, Dennis, good morning.

Thanks for the question. Yeah, I think, you know, as it relates to inflation, you know, I think we're fortunate to have come out of 2020, generally speaking, across our brands with strong profitability. That said, as Jose touched on, I think there's headwinds for us to work through in staffing and wages and general inflation. And so the approach we've taken is to work side-by-side with our franchisees to address as best we can and manage through this tougher cost environment. I'd say pricing is definitely in the conversation. We've taken pricing this year generally in line with inflation in the U.S., and we'll continue to take a really hard look at where we go from here moving forward. On mix, we can and have looked at low margin, low traffic items with franchisees. In addition to that, on the commodity front, I think I would say that procurement is a really big focus for us. We think that scale is an important advantage when you consider sourcing of different products around the world, across the brands, and we think our system benefits from that in terms of our scale with each of the three brands. And on the labor front, we're looking at ways we can simplify life in the restaurants, looking at processes, looking at simplifying the menu. And so we think there's a number of things that we're working on here to address the pressure that we're seeing with our franchisees. But overall, the number one thing we can do, we think, is to drive traffic and address our guests' needs and drive sales. Just really quickly, the other point I would touch on is the comments I made about the Tim Horton supply chain. I'd say that we are encouraged by the progress that we've seen in the Tim's Canada business in terms of our sales recovery, in terms of our margin improvements year-over-year versus 2020. Historically, we haven't given guidance on margins. However, given the recent volatility around inflation that we've seen, we thought some directional color would be helpful. So as I mentioned, the prepared remarks, we expect margins to moderate slightly from where we were in Q3. We have some time to go here in Q4, but based on what we see currently, we think the margin impact directionally could look like approximately 50 basis points versus the Q3 levels. And of course, we'll be managing very closely across all fronts over the next few months to navigate through the environment here. So I'll pass it back to Jose on development.

Yeah, and thanks, Matt. On development, obviously there's constraints in certain markets related to labor and supply chain, but we've got a really strong network of equipment suppliers. Our teams are working closely with them. Our franchisees are as well. and we expect, as we've said several times over the last quarters, we're excited about the pipeline. We're encouraged by the progress we're making. We think we're going to be at, you know, at or near levels of 2018, 2019 unit growth in 2021, and we're confident we can accelerate in the years to come with the quality of the partners that we have, the amazing white space that exists around the world and even here in the U.S. and Canada, and look forward to updating you on that progress in the coming quarters. Thanks so much. Thank you very much.

Our next question comes from John Glass from Morgan Stanley.

Please go ahead with your question. Thank you, and good morning. Jose, on Burger King U.S., two questions. One specifically, what's the impact of removing the paper coupons if there's a way to sort of isolate that so we understand that impact? And then more broadly, you outlined a number of pieces that you want to work on and had to do with menu and the brand and maybe even some equipment. What are the couple of things that we should watch for the next couple of quarters? What are the immediate action steps that might be able to bend the trend? Or should we think about this as a longer-term project such that none of these probably impact near-term but are all good longer-term? Thanks.

Thanks, John. On paper coupons, as I mentioned in my prepared remarks, we tend historically Burger King in the US over indexes in paper coupons relative to peers something in the neighborhood of three times the number of coupons compared to most of our peers it's been traditionally an important channel but the effectiveness has eroded a bit over time especially with younger consumers and so what we felt and we do feel it makes sense to transition media allocation and kind of the focus to other consumer facing channels that we believe over time will generate higher return, ideally compensating by finding new long-term sustainable platforms, especially as it relates to digital. This is what Royal Perks is designed to do, shifting our digital media or digital offers to known diners, helping us engage them better and drive guest behavior and ultimately build a strong base with the younger generation. As it relates to the impact, we haven't kind of communicated the details of that, but we believe we'll be able to shift very quickly with the growing Royal Perks platform that we have and some of our digital offers that are available, we believe we'll be able to shift to a much more accretive digital coupon and digital engagement program over time. Now, as it relates to the Burger King plan overall, as I mentioned last quarter and mentioned in my prepared remarks, the key was focus, pace, and building our team. We saw that. We had done some good work with Burger King in the U.S. from time to time, but we hadn't been consistent. And so we tapped Tom, and I mentioned that in recent communications, we tapped Tom to lead the BK U.S. business, working with franchisees now and building his team and bringing a more disciplined analytical rigor and focus to the business. The focus now is working through the details of the framework and the plan, which I laid out with some broad headlines, operations, digital, menu, work, and image. I think they're all big areas to work on, and these are plans and initiatives that we're developing in partnership with our franchise system in the U.S. We don't have a timeline on this. The most important thing is that we do the right work with our franchisees. I think a big element of the plan for the U.S. is around execution and being much more consistent on that front. I think we've been working on it and Tom has brought a lot of discipline around simplification of the menu, building standardization bringing some equipment changes in the back of house to help with accuracy we've also started to throughout the year we've been making investments in our field organization which we believe will be a key part to to drive the business forward in partnership with our franchisees digital remains a big opportunity for the BK system we've already started to put in in place, obviously the apps have been in place for a while, Royal Perks on loyalty, the ability to personalize offers and drive behavior with our CRM and outdoor digital menu boards making the experience in the drive-through much more digital and much more personalized. On the menu front, being able to focus on some of these core platforms in burger, chicken and value as I touched on in my prepared remarks and really moving away from promotional in and out and kind of which dilutes the message and dilutes our advertising firepower, allowing us to really drive growth in kind of the core of our business. I mentioned before and touched on briefly that the importance of breakfast and that being a long-term driver of growth in that day part. and then finally on the image front being able to continue the work we're doing on drive-through and enhancing that experience and then also working with our partners our franchise partners to to drive an acceleration of renovations where the opportunity to drive growth and good returns exists best Q3 was a transition Q4 is where we're launching our multi-year plan and and 2022 is year one of execution, and we're excited about the work we're doing, and we're excited about the engagement we have with the franchise system, and we'll keep you posted on our progress there.

Thank you.

Thanks so much. Next question comes from John Tower from Wells Fargo. Please go ahead with your question. I think you answered much of it in the last question, but just in terms of following up on the BKUS,

would you pull a similar lever potentially as you did with Tim Hortons in Canada and use some of the restaurant brands' capital to pour into the marketing programs of BKUS,

assuming the franchisees are aligned with that sort of message?

John, thanks for the question. Look, I think the first level of investment that we've been making is building out a strong leadership team, and we've been doing that now at Burger King, similar to what we did at Tim Hortons. We've added – obviously, Tom's been named to run the business. We've bolstered a team with an industry veteran in data science and analytics. We've brought in a culinary lead as well, a chef, to drive the BK innovation. These are critical roles to ensure we have the interest of our guests front and center as well as those of our franchisees. And as I mentioned in response to the earlier question, we've increased presence and coverage in the field, which we think is critical. Here on the capital front, we already invest in the business from a remodel standpoint here in the U.S. and we obviously are working in the early days on how we can accelerate that in partnership with the franchise system. And as it relates to the ad fund, we're early days here on building out the DKUS plan and the most important thing is to have a solid plan that our franchisees support and can drive traffic and sales, and we'll continue to use the same discipline that we've had from a capital allocation standpoint to drive the most significant impact on the business and ultimately the biggest impact long-term on shareholder returns. Thanks so much for the question.

Our next question comes from Brian Mullen from Deutsche Bank. Please go ahead with your question.

Thank you. A question on Tim's. You shared a stat that 10% of Canadians are now monthly active users in the loyalty program. That's encouraging to hear. Just a big picture, do you think you're now at a place with the program where it's ready to be a meaningful transaction sales driver when the Canadian economy is truly and fully reopened? And if yes, is there a scenario where the benefits could prove to be multi-year in nature? Just any thoughts on your degree of optimism here as the country emerges from COVID would be helpful to hear.

Yeah, Brian, it's Josh, and thanks for the question. As we mentioned a little bit earlier, and I think you mentioned a moment ago, we've been really pleased with the work that the TIMSS team has done on the mobile app and more broadly on the TIMSS Rewards program. We launched it a couple of years ago, and it's evolved in a really positive way that I think has led so many of our guests and so many Canadians to want to engage with it. I think we're really excited about how many monthly active users we have, but also about the frequency with which people engage with the app. It's not just that they use it once a month, but they use it in most cases many times a week. And I think that level of engagement in a mobile app is something that's really special kind of anywhere in the restaurant world. So we think we have something really great there. I think the team has built that by creating a really seamless experience at the restaurant, but also through creating other exciting avenues for engagement by making things like contests such as roll up to win, fully digital, taking really bold steps and executing them really well and making those experiences really positive. So we're really pleased with it. We think it is an exciting avenue to be able to drive greater engagement with the brand and ultimately drive sales over the medium to long term. And we see it as a big asset for the business and something that we're very excited about the prospects for over the long term.

thank you next question comes from lauren silverman from credit swiss please go ahead with your

question thank you for the question appreciate all the commentary on development tim hortons international another nice quarter of unit growth you've talked about the significant opportunity in china what have you learned about expanding internationally with tim hortons china that you can leverage to expand in other international markets and then how are you thinking about the development opportunities for Tim Hortons in Canada?

Lauren, thanks for the question. Yeah, we've given some color over the last few quarters on Tim's China, which we're excited about. I think the most important piece is the great work that the team there has done to build a business and a brand and a product offering that really connects and engages with the consumers in China. The digital offering is pretty exciting and has done a great job of engaging consumers in-store and also from a pre-order and payment standpoint. What gives us confidence in the opportunity in China and more broadly globally outside of Canada is the fact that our beverages connect well and really travel well across many markets. We've seen that the expanded beverage offering, including cold beverages and specialty beverages work really well. And then we've worked closely with our partners to localize the food offering to make it relevant for consumers there. We've seen some progress, actually I'm heading out to Mexico later today to go visit our Tim Hortons business in Monterrey, Mexico, which is growing and performing well. We've got a great business for Tim's in the UK with a very different offering than what we see in China. It's drive-thrus. It's very similar in terms of scale at the restaurant and offering to what we see in our Canadian business. So there's a lot of exciting opportunities there. And we believe that we're just at the beginning of the journey internationally for Tim's. Coffee is a fast-growing segment internationally, especially in Asia, but also in Europe and other markets around the globe. We've got a great coffee offering. We've got a strong heritage with Tim Hortons, and our price points are really accessible, and our digital capabilities are growing and really helping engage our consumers there. So we're excited about the growth prospects there. As it relates to TEMS in Canada, we obviously have a strong presence all around. There are certain parts of the country where we think we have quite a bit of room for growth. We think continuing to expand our drive-through capabilities in certain areas is a good opportunity for development. And we'll continue to infill and optimize the portfolio where we think we can provide better service and better accessibility to our guests using our digital platforms, our drive-through platform, and other off-premise and kind of convenient ways to connect with a brand. Thanks so much for the question. I think Josh has one more comment on this.

Yeah, Lauren, if I can just add one or two things to what Jose said on the international side. I think one of the great things that David and the international team have done with Tim Horton's business across the globe is they've figured out how to adapt the business to each of the markets in a unique way, whether that's formats that are a little bit larger format drive-through in places like the UK or some smaller format but very drive-through oriented in Mexico or the formats that we have in China or the Middle East for that matter. The thing that's common across those is that we've been able to achieve some really remarkable payback periods across all of those geographies. And I think that's what has our international team getting more and more excited about Tim Hortons and our ability to adapt it and create a really compelling investment proposition for franchisees all across the globe with the brand. So I think our team has done a really wonderful job with that, and we're all pretty pleased

Great. Thank you, guys.

And ladies and gentlemen, our final question for this morning comes from David Palmer from Evercore ISI please go ahead with your question thanks thanks for squeezing me

in in great detail on the call two quick ones could you touch on the percentage of dining rooms closed or hours of operation reduction that you're seeing for Burger King US and Tim's Canada any numbers would be helpful obviously those will hopefully get reopened in those hours restored and then It was good to see the two-year acceleration for Burger King International. Where was the greatest improvement as you look around the world?

Thanks, David. On the dining rooms closed and hours of operation, it's been volatile, especially with Popeyes. We've seen a little bit of that happening as well with Burger King and Thames. So, the numbers in terms of dining rooms closed kind of fluctuates a bit given the circumstances. In certain markets, we've seen vaccination requirements take hold and so that's impacted as well our dining room business. But overall, as I mentioned with Popeyes, we've seen some impacts, some significant impacts in late night mostly and dinner day parts from the labor shortages and some of the staffing challenges that we face. And as it relates to Burger King International we're very excited about the progress we made especially in this quarter relative to last year and to 2019 where we've seen that the progress is pretty widespread and that's what's exciting about the opportunity in our business there and the work that the team is doing with our master franchisees. Thanks again for the question, David, and for everyone else. And thanks for joining us this morning. We've made quite a bit of progress executing on a number of our key priorities, including accelerating our development pipeline. And we also know there's more work to be done to accelerate our growth and drive our brand to their full potential. I'm incredibly grateful to our team and our franchisees for their hard work day in and day out they remain focused on elevating the guest experience accelerating our restaurant development and driving long-term sustainable growth for our business and our shareholders thank you again for joining us

and have a great day ladies and gentlemen with that we'll conclude today's conference call we do thank you for attending you may now disconnect your lines