Welcome to the Restaurant Brands International First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. You will hear a tone to confirm that you are in the queue. To exit the question queue, you may press star, then two. All callers will be limited to one question. Please note this event is being recorded. I will now hand over to the conference host, 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 first quarter ended March 31st, 2022. 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 CEO, Jose Sill, COO, Josh Cobza, 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. Please note that growth metrics discussed during the prepared remarks, including consolidated system-wide sales growth, net restaurant growth, and organic adjusted EBITDA growth exclude results from firehouse subs, which we acquired on December 15, 2021, to reflect comparable year-over-year growth figures. And now I'll turn the call over to Jose. Good morning, everyone, and thank you

for joining us on today's call to discuss our first quarter of 2022. We started the year off strong with progress in key focus areas, including Tim Hortons Canada and Burger King U.S., and continued momentum in our international business, while also seeing digital traction across all brands, with home market digital sales reaching their highest levels ever as a percentage of system-wide sales. During the first quarter, we once again grew year-over-year comparable sales driven by just over 10% comparable sales at Tim Hortons in Canada, exceeding our own high single-digit expectations that we shared in March, and 20% comparable sales growth in our Burger King international business. We also made further progress chipping away at the gap to our competition in Burger King U.S., but have important work ahead of us and are focused on establishing a strong growth plan in collaboration with our franchisees. Meanwhile, Firehouse Subs continued to drive comparable sales on top of its double-digit growth last year. We also continued to make progress on digital initiatives. We saw a sequential improvement in the contribution of digital sales to overall sales across all brands in their home markets, including Tim Horton's Canada, reaching over 36% of system-wide sales. Our development results in the first quarter kicked off another exciting year, and we're still expecting to accelerate overall net restaurant growth despite our decision to cease restaurant development in Russia and a recent surge in COVID cases across China. In fact, we opened a record number of restaurants during the first quarter, led by all of our brands internationally and by Popeyes in the U.S. We also announced another exciting new development partnership with Tim Hortons in India, a priority market for us in our long-term international expansion plans. Additionally, I'm happy to report that we've resolved all disputes with our Popeyes and Burger King franchise partners in China, unlocking long-term growth for both brands in this important market. The combination of comparable sales and net restaurant growth helped drive year-over-year system-wide sales growth of 14%, an increase of nearly $1 billion year-over-year, and organic adjusted EBITDA growth of 9%, which included a negative 2.6% impact on adjusted EBITDA growth related to Russia. And finally, during the quarter, we continued our commitment to shareholder returns, delivering over $400 million through a combination of dividends and open market share repurchases. We remain committed to our overall capital allocation philosophy, which benefits from the free cash flow profile of our business, allowing us to execute across each of our priorities, reinvesting in our business, returning significant returns to shareholders, and remaining flexible to pursue other strategic opportunities over time. Turning to brand performance, we'll start with Tim Hortons Canada. You can expect to hear much more from the Tim Hortons Canada leadership team on the brand's recent progress and long-term growth strategy at our Investor Day later this morning, so I'll keep my comments brief and focused on our Q1 results. For the first quarter, we were pleased to report a 10% year-over-year increase in comparable sales, an excellent result reflecting the hard work of our restaurant owners and team over the past couple of years. These positive results were driven by strength in our underlying core business that we've worked so hard to reinforce and improve over the past years, continued traction from our digital initiatives, strong promotional performance, and measured pricing tied to inflation. We also saw accelerating underlying sales trends throughout the quarter as restrictions eased across the country and mobility increased. In fact, comparable sales at our super urban locations grew nearly 30 percent year-over-year during the quarter, with each month growing faster than the prior. We were encouraged to see especially strong results in March, with comparable sales improving weekly, and exited the month with momentum. I'm pleased to share that all product categories and day parts contributed to our sales performance and strengthened throughout the quarter, with lunch, foods, and baked goods as notable standouts on the product side, and morning and lunch standing out on the day part side. The team's quality improvement work through back-to-basics on breakfast and coffee offerings is paying dividends, strengthening our competitive positioning and market share in our flagship categories of breakfast food and coffee. In fact, our freshly cracked eggs platform helped drive breakfast food market share to its highest level in over five years. Successful calendar initiatives during the quarter included the launch of Team Canada hockey cards ahead of the Winter Olympics and the relaunch of two of Canada's favorite donuts and one of mine, the improved apple fritter and Boston cream, either paired with our fresh brewed coffee. Our continued commitment to improving the quality of our offerings resulted in a notable boost in product satisfaction and guests coming back for more of our delicious baked goods. We also ran our annual Roll Up to Win contest, our most successful to date, driving even higher incremental sales in last spring's campaign and lifting digital sales to over 36% of system-wide sales for the first quarter with over 40% digital sales sustained during the month of March. The success of this core foundational work has paved the way for our expansion into high-growth food and beverage categories, less penetrated day parts, and doing even more exciting things with the sizable digital business we've created. You'll hear more on our exciting plans for the long term later this morning from Tim Horton's Canada Leadership Team, which will be webcast live on our website. Turning now to Burger King U.S., 2022 marks the starting point for Burger King's multi-year plan to reclaim the flame. Last quarter, Tom walked us through some of the critical near-term initiatives the team has focused on to enhance the overall guest experience, advance the brand's growth, and drive long-term sustainable sales. Though the benefits of many of these initiatives are targeted to start taking effect in the back half of the year, we're encouraged to see some progress this quarter and want to share some highlights. First, we've made good progress in our efforts to modernize and reposition the brand. Earlier this year, we announced our decision to put our creative account into review to improve the effectiveness of our messaging strategy, increase the returns on our advertising investments, and modernize the home of the Whopper. We recently announced our decision to join forces with a new creative agency and look forward to accelerating our creativity and innovation in a way that is distinct and relevant for today's guest. This quarter, we demonstrated our balanced approach to menu innovation and value for money while keeping our core equity, the Whopper, top of mind. We kicked off the year with a new $5 Have It Your Way meal featuring a double Whopper junior. In addition, in order to treat the Whopper as the powerful, multi-billion dollar brand that it is, we removed the legendary burger from our core discount offerings and added some fan favorite variety, the big king and quarter pound king, to our new two-for-five offer. This shift resulted in a win-win, a more profitable lineup for our franchisees, and a more compelling offer for our guests, with a shift from two for six to two for five. In addition, we leveraged Guest Insights to create an item that offered more portability at a price point between our Whopper Junior and Whopper, the Whopper Melt. We launched with three delicious flavors and added the product to our flame-grilled selection for a limited time. Results demonstrate that the offering had strong messaging with high-quality ads, performed well on our digital platforms, and proved to be incremental to our burger platform at a healthy price point. On operations, we built off our first round of menu simplification and launched a late-night specific menu in early February. The streamlined menu provides an opportunity for our franchisees to stay open later by minimizing complexity while balancing the sales impact. Simplification remains an ongoing process as we investigate the most thoughtful way to create efficiencies in the restaurant, improve guest experience, and drive profitable sales. We're cognizant that our franchisees continue to see profitability pressures due to the significant volatility in the current environment, and we're continuing to research and explore ways to assist franchisees on an ongoing basis. Team member engagement and retention remains an opportunity across the industry and an important initiative for our expanded field team to improve productivity at the restaurant level. This quarter, we shared our employee value proposition framework with franchisees. This framework was the result of countless hours of research and sharing of best practices and has received positive feedback thus far as we work together to create a culture of operational excellence. The good news is our guest satisfaction has sequentially improved over the past three quarters. As we continue to roll out the employee value proposition and our simplification efforts, we're confident we can continue to engage team members and improve guest satisfaction, which is an integral part of our growth strategy. On Image, 33% of our system features the latest Burger King of Tomorrow image and technology elements. As Tom shared last quarter, we're working with franchisees across the system on the right investment approach for the balance of the system and will share a more substantial update later in the year. Similar to investments that we've made at Tim Hortons Canada, the team is working closely with franchisees to assess how best to support our image and advertising efforts to drive the highest return for us and for franchisees. Now to touch on results for the quarter. We saw a 0.5% decline in comparable sales driven by the lapping of last year's stimulus benefit, macro headwinds in March, and a modest impact from reduced operating hours. These impacts were partially offset by a net benefit from our focus on core offers this year versus a bigger focus on core discount in 2021, the introduction of the $5 Have It Your Way meal and Whopper melts. I'm pleased to see that our efforts helped narrow the gap to our peers by a few hundred basis points this quarter. This is no victory lap, but we're encouraged by this continued sign of progress, but know we still have a long way to go to recapture market share and set the BK brand up for the future. The team has worked hard to make a difference in a short amount of time, and I look forward to sharing more updates in the back half of this year as we reclaim the flame. Now turning to our Burger King International business, which has been a consistent growth engine for the brand as it contributes nearly 60% of the brand's global system-wide sales and continues to get stronger every year. We achieved an impressive system-wide sales growth of 31%, reflecting an even stronger than expected resurgence in sales, showcased through strong comparable sales growth in key international markets, and continued momentum on net restaurant growth. During the quarter, five of our largest international markets, France, Spain, Germany, Korea, and Brazil, generated double-digit growth that offset softer performance in China related to a recent resurgence in COVID cases and associated restrictions. On top of positive macro tailwinds, brand positioning, calendar work, and digital initiatives we've executed have helped drive incremental sales. We made good progress finding the right way to localize the Burger King experience. In some cases, that could mean developing products that lean on local culture, such as meats and cheeses specific to an area, while in other cases, it could mean highlighting imported food and beverage products, if that's what our guests are asking us for. This formula is something that recently worked well in France and surrounding countries, each with small modifications that resonated well with guests. In addition, our largest and fastest growing markets have increasingly strong digital capabilities that help us deliver a modern and convenient guest experience. This has ultimately strengthened our positioning as leaders in the market and enables us to create best practices for future application. We shared a detailed update in March on the growth of our international markets in recent years and touched on many of these key trends and examples by markets that are driving the business forward. Our strong foundation, brand awareness, local expertise, product innovation, and digital capabilities have contributed to a resilient international business that is well positioned for growth. And we're optimistic of the long-term opportunity to expand this highly scalable business in new and existing markets around the world. Turning now to Popeyes, which is celebrating 50 years this June. We closed the quarter with our global Popeyes convention hosted in New Orleans honoring the brand's rich Louisiana history rooted in delivering home-cooked Cajun flavors and an authentic Southern experience for our guests alongside our amazing franchisees and team members. The energy was electric with strong attendance from home and abroad all focused on how we can work together to take the brand to new heights in the coming years. In March we also celebrated the fifth anniversary of our acquisition of this iconic brand. It's pretty remarkable to see how far Popeyes has come with system-wide sales growing from 3.2 billion in 2016 to just north of 5.5 billion in 2021, and adjusted EBITDA more than doubling from 95 million to over 225 million in the same period. And it's been amazing to see the reception to the Popeyes brand both at home and around the world as we've expanded into new markets while growing in existing markets, adding over 1,000 restaurants globally since Popeye's joined the RBI family. And 2022 has kicked off with continued development momentum after a milestone year in 2021. Popeye's posted record first-quarter unit growth with the highest number of first-quarter net openings since we acquired the brand. Our existing international markets, notably Spain, Philippines, Turkey, Mexico, and Brazil, grew significantly year over year, reinforcing our excitement around future growth as we expand our offerings to more guests around the world. We expect to continue to see this growth trajectory unfold as the year progresses and are on track to deliver record net unit growth in 2022, including opening over 200 new locations in North America this year while launching in new markets like Romania and France. Importantly, we're opening high-quality restaurants with over half of our locations in North America featuring double drive-thrus, which will increase throughput and foster a better guest experience. Despite strong net restaurant growth of 8%, including 6% in the U.S., softer home market comparable sales resulted in system-wide sales increase of 4.1%. Continued staffing challenges resulting in lower year-over-year store hours, competitive pressures specifically around last year's chicken sandwich launches, and the lapping of 2021 stimulus release benefits resulted in a 4.6% year-over-year decline in home market comparable sales. That said, we saw positive contribution from our menu initiatives, including the launch of our $6 big box. And we're excited to announce the arrival of our new Buffalo Ranch Chicken Sandwich, which builds on our chicken sandwich platform and adds some fun flavor for guests with our fan favorite Buffalo Ranch sauce. Improvements in operations and service levels remain key focus areas and represent a real sales growth opportunity. I'm happy to say we've seen early signs of progress from recent efforts with our guests and operations metrics improving year over year. This progress reflects a larger supporting field team and enhanced operations framework that celebrates wins and adds additional transparency into relative performance and areas of opportunity. I'm optimistic that together with our franchisees and their restaurant team members, we will continue to improve operations and foster the warm, positive guest experience the brand was founded on 50 years ago and drive top-line growth for the next 50 years to come. And finally, I'd like to touch on Firehouse Subs. The brand's commitment to community, coupled with its hearty subs and compelling value proposition, drove impressive results this quarter. Firehouse Subs U.S. retained its recent momentum building average unit volumes to an all-time high of nearly $920,000 on a trailing 12-month basis, growing year-over-year comparable sales 4.5% on top of 24% comparable sales last year, increasing system-wide sales 7%, and generating over 30% of sales through digital channels. I'm also pleased to share that Firehouse Subs continues to be recognized as a philanthropic leader in the industry and was named the number one brand in the restaurant industry that supports communities for the fourth consecutive year based on recent Technomic Insight consumer data. The brand's strong community connection is in large part tied to the success of the Firehouse Subs Public Safety Foundation, which, in partnership with the hard work of restaurant owners and team members, has granted over $67 million in contributions since its inception, helping provide first responders with life-saving equipment to be better prepared to save lives in the communities they serve. As the Firehouse Subs team likes to say, sell more subs, save more lives. I'm also delighted to see the brand integrating smoothly into RBI. In just a short amount of time, we've made good initial progress towards accelerating development in many geographies around the world and have begun to assess where we can help enhance the brand's already strong digital capabilities. We remain confident in this brand's pace of growth and look forward to sharing more updates as the year progresses. With that, I'd like to hand it over to Josh to take you through a quick update on our digital initiatives. Josh?

Thanks, Jose, and good morning, everyone. As you know, across our brands, we view digital as an important tool to create a more convenient, seamless guest experience, increase engagement and brand affinity, and ultimately drive sales. In the first quarter, we were pleased to deliver favorable momentum across all of our brands. At Tim Hortons in Canada, we saw continued sequential improvement in digital sales, with the market reaching over 36% during the quarter. Meanwhile, Burger King, Popeyes, and Firehouse Subs generated 9%, 18%, and 30% of sales through digital channels and their respective home markets, sequential improvements from Q4 results. We attribute this improvement to a combination of factors, including growth in delivery, an increase in mobile order and pay, continued traction from loyalty, and well-executed digital campaigns. The most notable campaign this quarter was our Tim Horton's Roll Up to Win contest, an iconic part of the brand's history that has now been brought into the digital age. Traditionally, Roll Up to Win was a fun brand-building opportunity and traffic initiative, which we have now transformed into an incredible driver of digital engagement and sales. We ran two roll-up contests last year that collectively added approximately 3 million new registered members to TIMS Rewards, expanding our already strong loyalty program in Canada. In 2022, we sought to further engage those users, embedding them more deeply into our digital ecosystem by building in points-based incentives to use mobile order and pay, introducing an unprecedented number of guests to this service mode. We also built upon strong brand partnerships to offer Canadians our largest prize pool ever, worth more than $100 million Canadian dollars. These partner-funded prizes allowed us to reduce the required owner investment and level of product cannibalization, meaningfully increasing same-store sales contribution year-on-year. This is just the tip of the iceberg in terms of what we can do with the digital assets we've built at Tim Hortons. And I encourage anyone listening to tune into our Tim Hortons Canada Investor Day in just a few hours to hear from the team on our digital journey. As we scale our digital platforms at Burger King and Popeyes, we believe we can leverage the wins we've seen at Tim Hortons. While earlier days, promotional initiatives did help drive digital engagement at both Burger King and Popeyes this quarter. At Burger King, Whopper Melts performed well on digital channels and marked the first time we offered exclusive builds and meals through our digital platform. Popeyes also made progress during the quarter, largely driven by a renewed focus on delivery, including enhancing service levels and the delivery experience on both first- and third-party platforms, in addition to marketing investments supporting delivery. In the drive-thru, we've discussed completing the rollout and effective utilization of our outdoor digital menu boards, and I'm pleased that we are making consistent progress on our goal to equip 100% of our drive-thrus in the U.S. and Canada across Burger King and Popeyes. As we have mentioned in the past, our Tim Hortons system is substantially complete, and it is exciting to see the significant experience improvement these menu boards offer our guests and the efficiencies they bring to our restaurants. With that, I'll hand it over to Matt to take you through our financials for the quarter.

Thanks, Josh, and good morning, everyone. Before walking through our results, I'd like to share a bit more detail on the impact of the actions we announced as it relates to Russia. We had 820 fully-franchised Burger King restaurants at the end of 2021 that represented about 2% of our system-wide sales and 1.7% of our EBITDA in 2021. During the first quarter, Russia had a roughly $12 million impact on our year-over-year adjusted EBITDA, and we anticipate a fairly even impact across the year. In addition, from a development standpoint, over the last five years, Russia has averaged about 80 net new restaurants a year. Despite the loss of this contribution, the strength and diversification of our global partners across many growth markets keeps us well-positioned to accelerate overall net restaurant growth in 2022. Shifting to the first quarter overall, our global system-wide sales grew 14% to $8.8 billion, up nearly $1 billion year-over-year, and our adjusted EBITDA was $530 million, up 9% organically, excluding Firehouse. As I mentioned, Russia had a negative $12 million dollar impact on our results, which was a negative 2.6 percent headwind to our adjusted EBITDA growth rate. The remaining gap between our system-wide sales growth and organic EBITDA growth was related to our 2021 G&A and technology investments, partially offset by positive timing in our ad funds. This quarter, we also made a slight change to the way we report revenues and expenses supporting certain technology initiatives to provide consistency across our brands as well as with industry peers. We had previously included revenue at Burger King from technology fees which are paid by the system as a function of digital sales levels in franchise and property revenues, while the associated technology expenses were included in BK Segment G&A. Going forward, we will report these technology revenues and expenses under advertising and other services on our P&L. We do expect to spend more on technology expenses than we collect in revenues this year at BK as we build and enhance our capabilities with the intention of ramping our digital sales and the associated fees to fully fund these initiatives longer term. During the first quarter, the net impact of $9 million of technology expenses and offsetting revenues was about negative $6 million to adjusted EBITDA, or a negative 1% impact on our organic growth rate. Related to this change, we have included a quarterly reconciliation of the movements for 2021 in our press release this morning. Our first quarter segment G&A, after adjusting for this shift and excluding Firehouse, was $89 million, which was lower than the fourth quarter comparable level of $94 million that we mentioned would be a reasonable baseline for 2022, due to some timing that we expect to reverse later this year. On a year-over-year basis, growth in segment G&A had a negative 3.5% impact on our organic adjusted EBITDA growth rate. As it relates to ad fund timing, our year-over-year growth this quarter reflects the fact that advertising expenses exceeded revenues by approximately $17 million less than they did in the first quarter of last year, resulting in an organic-adjusted EBITDA tailwind of about positive 3%. Before turning to EPS, I'd like to briefly discuss our sales cost-to-sales margin within our Tim Hortons segment. As we've mentioned in the past few quarters, and similar to what others across the industry have noted, we are seeing a significant increase in commodity volatility, leading to elevated levels of inflation. As mentioned last quarter, given the fact that we generally take a pass-through approach, inflation has increased both our revenues and expenses, which in turn results in dilution of our percentage margin. We will continue to manage through the volatility that has extended into this year. However, we are encouraged by the underlying volume growth we are seeing as we execute on our sales plan and the business in Canada continues to improve. Shifting to EPS, our first quarter adjusted earnings per share was $0.64 compared to $0.55 last year, representing an increase of approximately 17%, including an FX headwind of about negative 2%. The higher growth compared to our organic adjusted EBITDA growth of 9% was mainly driven by contribution from firehouse subs and a reduced share count from our repurchase activity, partially offset by a higher adjusted effective tax rate. Turning to our cash flow and capital structure, during the quarter, we generated $224 million in free cash flow, enabling us to continue investing in our business and follow through on our commitment to return capital to shareholders through both our industry-leading dividend and open market share repurchases, against which we have been actively buying back shares and during the first quarter repurchased and retired approximately 2.9 million shares of our common stock for nearly $161 million. In addition, we returned approximately $241 million to our shareholders through a $0.54 per share dividend, and we recently declared an additional dividend of $0.54 per common share and unit payable on July 6th, consistent with our previously announced target of $2.16 for 2022. And even with combined capital returns of over $400 million, dollars, our net leverage remains stable at five and a half times. As Jose mentioned, we are excited by the underlying growth in the business we're seeing, and also with the capital allocation flexibility this creates over time, given our high rates of cash flow conversion and over two billion dollars of existing liquidity. As we progress through 2022, we see clear opportunities to enhance our growth by building on our momentum at TIMSS, which you'll hear more about shortly, executing on our near-term priorities at BKUS, accelerating digital across all brands, and delivering on our big global development opportunities. With that, I'd like to thank everyone again for supporting us and joining the call this morning, and we'll now open the line

for questions. Operator? If you would like to ask a question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure you are unmuted locally. If you change your mind, please press star followed by two. Our first question is from Dennis Geiger of UBS. Your line is now open. Please go ahead. Great morning. Thanks for the

question. I was wondering if, Jose, maybe you could talk a little bit more about what you're seeing from your customers across maybe the key home markets in the US and Canada in particular. Have behaviors changed much in how the consumers are using the brand? And maybe most importantly, if you could just kind of tie how the BK and the Tim's brands are positioned in a more challenged consumer spending environment, recognizing that both brands arguably have more idiosyncratic drivers to improve market share. But just wondering if you could kind of talk about that positioning

looking ahead as it relates to your plans. Thank you. Good morning, and thanks for the question, Dennis. Look, we've seen consumer confidence tested surely by the pandemic, and obviously in more recent months by the volatility that we're seeing across North America. For the consumer, the inflationary environment is certainly something that's top of mind. We've seen food at home inflation being under a little bit more pressure over the last six months than food away from home, which creates, for the restaurant space, a more positive environment. Other things that we've seen in terms of consumer behavior is that the trends that were accelerated throughout the pandemic, things like, you know, off-premise service modes, whether it's digital rewards, drive-through delivery, these continue to be sticky. And we're also seeing dine-in come back a bit as restrictions have eased, especially here in Canada, but really throughout North America and our home markets. We've seen dine-in come back a bit. All of this to say that we're very cognizant of the sensitivities that the guest has, and we're taking a thoughtful approach. I think the brands, both brands, Tim's and DK in North America, in Canada for Tim's and U.S. for Burger King, both brands have strong kind of balanced approaches to the menu and how we address consumer needs, And our teams have been spending a lot of time thinking about that, surely addressing and being thoughtful about the guest perception and what the competition is doing and our franchisee's profitability as we think about addressing the commodity headwinds with pricing initiatives that we've seen throughout the last six to 12 months. Our focus is always on the franchisee, on our guest, and making sure we keep in line and understand what's happening with the competition, and we're going to take a balanced approach throughout and be long-term in our view on how to address the immediate pressures that the consumer is feeling. Thanks for the question.

Our next question is from Brian Mullen of Deutsche Bank. Your line is now open. Please go ahead.

Hey, thank you. Just a question on Tim's in Canada. I'm just wondering if you're able to see a measurable impact from the ad fund contribution increases that took place. Is that something that's helping already or is it a little bit too early? I'm just wondering if that could be a tailwind over the course of this year. And then just related to that, I hope that you shared some encouraging commentary about March in particular. Is it fair to think that March is back to maybe positive, verse 19, kind of how you talked about in December, if you're willing to comment?

Yeah, Brian, thanks for the question. We were encouraged by the positive momentum in Q1, in the second half of Q1. And heading into the second quarter, we're seeing strong, as I mentioned in my prepared remarks, strong underlying core performance of the business with coffee, with breakfast, and continued improvement in other day parts as well. Obviously, the ease of restrictions and the increase in mobility has helped as well. And we've been measured in our pricing in Canada, making sure we don't get too far ahead of our skis and get too far ahead of the consumer as well. I think some of the positive indicators in the first quarter that I mentioned, things like the super urban business and kind of the urbanity there has improved significantly. it's one of the better performing areas of the business. It was the same in Q4, so that I think that's a testament to the improvement in mobility. We also saw that Ontario was one of the stronger performing regions, which is one that had some of the stronger restrictions over the last 24 months. We're going to share quite a bit more at the Tim Hortons Investor Day, the first ever Investor Day a little bit later this morning. I think it's at 11 o'clock. We have a lot of confidence in the long-term and the full-year plan that we have here for TIMS. I think on the ad fund, just coming back to that question, which is your first one, that was a contribution that we made to the advertising fund here in Canada in 2021, and we feel that the investments we made there alongside our franchise owners were really important to to continue to double down on brand-related messages as well as some of the improvements in coffee quality as well as some of the innovation on beverage and some of the improvements in breakfast. And we're encouraged by the progress there, and we'll continue to work closely with the owners to make sure we drive that part of the business long term. Thanks so much.

Our next question is from David Palmer of Evercore. Your line is now open. Please go ahead.

Thanks. A question on Burger King, rest of world. same-store sales growth versus pre-COVID levels accelerated despite Omicron, which was pretty good. Which regions fueled growth in the quarter? And generally, do you expect growth to accelerate except for, I would imagine, you're going to have more Russia negative impact. I think you're including Russia in the comp base there. And I would imagine China will be a bigger headwind into 2q as well but i'm wondering how we should be thinking about uh what markets are really fueling the growth and and you know maybe some gives and takes in terms of markets going forward

thanks very much hey dave thanks for the question as i mentioned in my preparative marks that we're excited uh by the work that's happening internationally and the progress we're making it's really broad based um across regions with the exception of russia and uh and china that i mentioned with some headwinds given the more recent restrictions there due to their zero COVID policy. Across regions and some of the key markets that we have, larger markets, Spain, Korea, and several others, we've seen a combination of good work on the menu side, continued growth on the digital front. Off-premise continues to be a strong part of our growth with delivery as well as some curbside and digital rewards type of programs. And then macro improvements with restrictions easing and mobility picking up has helped us drive growth as well in those markets. And what we're seeing is in-store dining in many of those markets, which is such a big part of the business, is snapping back. So the combination of good plans, good digital, and good kind of macro environment has been positive for that business, and we feel confident in the long term there. The teams are working closely with our master franchisees in all the markets to continue to drive innovation and drive good brand messaging and continue to push on the digital platforms that are so important for growth in these markets. Thanks so much for the question.

Our next question is from Brian Bittner of Oppenheimer & Co. Your line is now open. Please go ahead.

Thank you very much. Just two questions. One, could you help us understand the level of year-over-year pricing, both at Tim Hortons Canada and Burger King U.S.? That's the first question. And second one, just going back to David Palmer's question on the Burger King International business, I appreciate all the color that you just gave, But can you maybe summarize why you believe your comps are now trending so far above pre-COVID? Do you believe you took a lot of market share during COVID outside the U.S. with the Burger King brand? So naturally, these international markets are, as they storm out of COVID, you're just ending up with a better sales model? Or is it that digital has taken off? Just any more color on why these levels or comps are so much higher than pre-COVID?

Yeah, thanks, Brian, for the two questions. I'll start with the last one, which continues on the prior one from Dave. I think, simply put, the off-premise business that grew quite significantly through the pandemic has stuck, or at least so far remains quite sticky, and on-premise is coming back. And digital has been a big part of both of those, right? So internationally, we have a strong digital business through kiosks as well, and where we have, as an example, in Western markets in Europe where we have really strong lunch and dinner pushes, the kiosks help quite a bit to alleviate some of the order point pressure that some of the restaurants will feel. So the digital business has been quite strong and on-premises is getting back to levels that we've seen before. which I think the combination of stickiness of off-premise and that on-premise growth is what's driving some significant growth and is what we saw in the first quarter. And we feel confident long-term in our plans for those markets in the quarters to come. On your first question, on year-over-year pricing, as I said in one of the earlier comments and responses, You know, we've been very measured and we're staying close to the consumer, obviously staying close to our franchisees and their P&Ls and staying close to the competition to make sure we take the right steps on pricing. We're facing, as everyone knows, pretty meaningful pressure from a commodity standpoint. And so we're responding as appropriate. And we've stayed relatively in line with inflation and CPI, both in the U.S. as well as in Canada. In Canada, inflation is kind of lagging about 2% behind where we see it in the U.S. And so our pricing across the board is roughly in line with those two measures. Thanks so much for the question.

Our next question is from John Glass of Morgan Stanley. Your line is now open. Please go ahead.

Thanks very much. Back on Tim's, is there a way to index or talk about absolute traffic levels at Tim's in Canada versus 19 to understand what the opportunity is to recapture that? And maybe inside of that, can you talk about traffic levels at breakfast? Understanding that comp store sales are up, but there's pricing, there's mix. There's a lot of dynamics in there. So just looking at three-year comps may not be the entire story on transactions specifically.

Yeah, John, thanks so much for the question. We haven't separated traffic and check historically and not planning to do so today. But we have seen improvements quarter over quarter in terms of traffic flows into the restaurants. part of this, as I shared earlier, I think is a function of the good work that the team is doing on menu innovation as well as kind of core quality improvements. Some of it is a function of the messaging. Some of it is a function of mobility improving. And at the same time, some of it is a function of the measured approach that we're taking on pricing. We're always focused on making sure we don't lose traffic when we take pricing, especially in an environment like we're facing today. But broadly speaking, we are seeing improvements in inflows of customers through the drive-thrus as well as in-store and through our apps in Tim's Canada. And it's for those reasons I just laid out. Thanks so much.

Our next question is from Jeffrey Bernstein of Barclays. Your line is now open. Please go ahead.

Thank you very much. I just had a question on recently Burger King's ad fund contribution that you guys helped with last year, so maybe along those lines. And I know, Jose, you mentioned something about looking at ways to assist franchisees at burrowing on an ongoing basis. So I'm just wondering, what are maybe the options that would be considered on your end as you would define, I guess, helping us in franchisees in this scenario? Any color you could provide would be great.

Thanks for the question, Jeff. Yeah, look, we've historically, as we've talked about our capital allocation approach. We, you know, investing in the business has been kind of the top priority. And we've done it with Tim's. We've done it with BK. We've contributed capital to remodels and other programs. We're investing in G&A in our business as well. I think last quarter we shared investments we've made at Burger King to add, to grow the field teams by 50% in order to be able to support, provide better training and and and just get closer to the business with our franchisees to be able to help them work through all the plans that we have in place long term for the business and I think as it relates to your specific question on DK and any contributions or partner or approaches we can take to be able to help the business the focus is on on being able to drive growth in the BK US business and we're looking at that and I've mentioned this in my prepared remarks in last quarter as well with Tom that we're looking at and working through plans with the franchisees, long-term plans around marketing, around the advertising fund to drive more media firepower there in addition to work to accelerate and have a meaningful impact on our real estate and our restaurant's image to be able to drive growth there. And so we continue to work through that. There's a number of options on the table, both in terms of advertising and in terms of image contributions. And we'll share more in the back half of the year as we finalize those plans. And you guys will be the first, or after a franchisee, the first to know. Thanks so

much. Our next question is from Jared Garda of Corbin Sachs. Your line is now open. Please go

ahead. Hi, thanks for taking the question. It's on Tim Hortons, and certainly appreciate the positive results there and that 30 plus i think you noted in the in the urban locations is there any way to frame maybe those non-urban locations and what the comp looks like there um just as we get a sense of maybe the improving mobility trends um you know having a boost to those

urban locations versus the non-urban hi jerry yeah thanks for the question we've seen the good news is we've seen growth um on a year-over-year basis in in uh in all urbanities so rural suburban, urban, and super urban. We've also seen growth in same-store sales year-over-year or comparable sales year-over-year in all regions, Ontario, Quebec, Western, and Atlantic. We've seen growth in different formats as well and in different day parts as well. So the growth that we saw in the quarter and the improvement sequentially, Q1 versus Q4, was pretty broad-based, and I think it's a testament to what I mentioned earlier around the good work the team is doing, the good plans, the excellent operational work that the franchisees and the owners are doing in their restaurants, and the continued easing of restrictions and improvement in mobility

throughout the country. Thanks so much. Our next question is from Nicole Miller of Piper Sandler. Your line is now open. Please go ahead. Thank you. Good morning. I wanted to ask

a question about tim hortons and the 36 percent of sales or transactions that are digital could you speak a little bit more to the cohorts that you can now break that group into and their behavior especially behind frequency and spend thanks yeah nicole uh good morning and uh thanks

for the questions josh i would say first of all we've been really pleased with with the work that the team has done here in canada on all our all of our digital programs particularly on on tim's Rewards. I think you'll get a chance to hear a lot more about it a little bit later today when the team shares some more information during the investor day. But I think a couple of the things that are kind of most interesting to me at least are that we've seen in some of that consumer behavior that our TIMS Rewards members tend to be the most loyal members of TIMS and the highest frequency. I think the frequency is, I guess, to put it clearly astounding, it's really incredible how often our Tim's Rewards members are using our app, how often they come and visit us and go to the stores. And I think one of the other things that we've seen that's been really interesting to our teams here is that we see as we deploy new features in the app, things like our hockey challenge, things like roll-up, we see those guests start to interact with our app even more frequently. So that's driving a lot of our thinking about how we can evolve the Tim's Rewards program and how we can evolve the app over time to drive even further engagement with such a large and loyal portion of our consumer base. So I think a lot of great things going on. The team's doing really, I'd say, groundbreaking work within our system. And hopefully we'll get even more insights into that here in just a few hours.

Our next question is from Jake Bartlett of Tourist Securities. Your line is now open. Please go ahead.

Thanks for taking the question. Mine was on the Burger King U.S. business. You shared that some customer satisfaction scores were improving. I'm hoping you can give some more detail around that, maybe some context of where satisfaction levels are now versus a couple of years ago, how fast or how steep the trajectory of improvement is. And then through the rest of the year here, you mentioned your confidence that these efforts are going to start to drive market share gains or improvement in sales in the back half of the year. Could you just help us understand some of the catalysts along the way, specifically marketing? You have a new agency you're using. Is there a new marketing campaign that you can tell us when that might start? Any catalysts along the way in addition to the metrics of customer satisfaction would be helpful.

Yeah, Jake, thanks for the question. We have seen improvement, as I mentioned in my preparatory remarks, on operations overall satisfaction at Burger King in the U.S. and the improvements have been quarter over quarter the last three quarters, which are encouraging. I think it's great work from the franchisees as well as great work from the field teams that Tom has put in place. The benefit there is that it's an outcome of a number of different initiatives, including simplification efforts that we started to make in the final quarter of 2021. It's a function also of some of the additional support we're providing in the field. It's just the beginning. I wouldn't consider it a victory lap or a big celebration, other than confirmation that we're on the right track and we're putting resources and efforts behind the right things, which is all about guest experience and guest satisfaction, and that's where we think we have a tremendous opportunity with BK in the U.S. I think more broadly, as we think about growing the business in the U.S., obviously marketing, our menu plans as well as our communication plans are really important. On the media front and on the advertising front, we've made changes over the last – or we announced changes last week, which we think are important. As we look at driving better messaging, more targeted messaging, with a clear brand positioning for Burger King in the U.S. and being able to punch at or above our weight from a media standpoint. So these are all parts of our game plan. In addition to that, we've talked about digital being a big unlock for the U.S. business, continuing to accelerate our plans on the digital front, and doing so not just kind of in-store, but also driving growth in digital through our relatively ubiquitous drive-through platform. And then I think beyond that, there's a lot of work to do as well on image. I commented on having about 33% or 30-plus percent of our restaurants in the U.S. with the Burger King of Tomorrow image. We're working closely with the franchisees and our teams to find ways to have even more impact on the guest experience through investments in the restaurants, which we think are one of the key unlocks as well for the business. So there's a lot to do, but we've got a great team that's working hard alongside our franchisees to build a plan and start executing it. So we'll keep you posted on all those details as we come to kind of frame up those plans alongside our franchisees in the coming months and quarters.

Our next question is from Andrew Charles of Cohen. Your line is now open. Please go ahead.

I have a two-part question. Jose, to follow up on an earlier question, as part of plans to assist BKUS franchisees, are you guys exploring ad fund or royalty relief? Just the last two years, you guys called out that store-level profits were flat, and obviously the industry is seeing quite a bit of commodity pressure in 2022, particularly with beef. And then just my second question, Matt, you highlighted that Burger King saw bad debt expense in 1Q primarily in Russia. But if I recall correctly, bad debt expense is recorded 60 days after royalties are due. And the conflict in Russia didn't escalate really until the middle to end of February. So if you just help quantify that total bad debt expense in 1Q for Burger King and how much of that was Russia versus the U.S., I think investors would really appreciate that.

Thanks. Thanks, Andrew. Now, on your first question, I'd say that the investments we're looking at and the work we're doing is to figure out how best to drive overall top-line growth and profitability for the business. And advertising, image, these are areas where we think there's tremendous opportunity, as we've seen with TIMS as an example. So those are areas we're looking We're not considering royalty relief as one of the areas to look at.

Yeah, I think related to the second part of your question on bad debt, I think the impact from Russia in the quarter, I think we quantified in the prepared remarks as about $12 million. That was a combination of bad debt plus shifting to cash recognition in the quarter. as we talked about sort of our move away from the operations in Russia. And so it was a combination of those two things that amounted to the overall impact on the quarter, which is a pretty good proxy for sort of the overall level of impact from the loss of business there during the quarter to look at going forward. And then outside of Russia, I would say there's no material, significant bad debt activity to call out.

thanks for the question. Our next question is from Lauren Silverman of Credit Suisse. Your line

is now open. Please go ahead. Thank you for the question. I wanted to follow up on the comments on the U.S. consumer. Are you seeing any signs of trade down in any regions or markets? And then specific to delivery, are you seeing any shift in trends there? Or I guess, how are you thinking about the willingness of consumers to pay the premium for delivery in a more challenging

and consumer backdrop? Thank you. Hi, Lauren. Thanks for the question. On the consumer, the U.S. consumer, I think that the behavior has been relatively consistent over the last six months. We haven't seen any material trade down. I think there's always balance in how the consumers interact with our brands, with Core being a strong part of Core as an example of Burger King being Whopper and other core items. So we're seeing strong performance in our core offerings as well as, in some cases, premium, and value continues to be a part of our business that we always provide, we think, exceptional everyday value to our customers. So we haven't seen anything material shifting there, and we continue to provide a balanced approach to our customers. Thanks so much for the question.

Lauren, maybe I'll take the question on delivery. Particularly for our U.S. businesses, Burger King and Pompey's delivery businesses are probably the most relevant and largest for us. I would say we haven't seen any big departure in trend there. We continue to see growth in both of those businesses. We're really focused on making sure that we're working really well together with our third-party delivery providers to make sure that we bring the best possible experience to our guests, whether they order directly from us in the restaurant or through the delivery platforms. We're very focused on improving, enhancing guest experience, things like driver experience, and the operations in the restaurant. So those are our big focus areas, and that's where we've been working to make sure that we continue to drive growth there.

Thanks to everyone for your questions and for joining us this morning. We've made notable progress this quarter against key priorities, including driving double-digit comparable sales growth at Tim Hortons Canada and Burger King International and further narrowing the gap to peers at Burger King in the U.S., reaching our highest levels of digital engagement ever in our home markets and opening a record number of new restaurants in the quarter and returning over $400 million of capital to shareholders. Our results this quarter reflect a continued effort in the hard work of our team, our franchise owners, and their team members, and we believe we're well positioned to continue to build off our momentum in the year ahead. Thank you again for joining us, and we look forward to connecting with all of you again later this morning at our Tim Hortons Canada Investor Day. Thanks so much.

This concludes today's call. Thank you for joining. You may now disconnect your line.