Restaurant Brands International Inc. (QSR) Bundle
Understanding Restaurant Brands International Inc. (QSR) Revenue Streams
Understanding Restaurant Brands International Inc.’s Revenue Streams
The revenue analysis for Restaurant Brands International Inc. (QSR) reveals key insights into its financial health as of 2024. The company generates revenue through various streams, primarily from franchise operations, company restaurants, and supply chain sales.
Breakdown of Primary Revenue Sources
The revenue sources for the company can be categorized as follows:
- Franchise and Property Revenues: $735 million in Q3 2024, down from $753 million in Q3 2023.
- Company Restaurant Sales: $567 million in Q3 2024, significantly up from $65 million in Q3 2023.
- Advertising Revenues and Other Services: $290 million in Q3 2024, down from $313 million in Q3 2023.
- Supply Chain Sales: $699 million in Q3 2024, down from $706 million in Q3 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates indicate significant changes in performance:
- Total Revenues: Increased to $2,291 million in Q3 2024 from $1,837 million in Q3 2023, representing a growth rate of approximately 24.8%.
- Franchise and Property Revenues: Decreased by 2.4% from the previous year.
- Company Restaurant Sales: Increased by 775.4% year-over-year.
- Advertising Revenues and Other Services: Decreased by 7.3% from the previous year.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contributions of different business segments to the overall revenue for the three months ended September 30, 2024:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Franchise and Property | $735 | 32.1% |
| Company Restaurant Sales | $567 | 24.8% |
| Advertising Revenues and Other Services | $290 | 12.7% |
| Supply Chain Sales | $699 | 30.4% |
| Total | $2,291 | 100% |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, total revenues reached $6,110 million, up from $5,202 million in the same period of 2023, indicating an increase of 17.4%.
- Supply Chain Sales: Increased to $2,008 million from $1,989 million.
- Company Restaurant Sales: Rose to $1,016 million from $194 million.
- Franchise and Property Revenues: Increased slightly to $2,194 million from $2,163 million.
- Advertising Revenues and Other Services: Increased to $892 million from $856 million.
Overall, the financial performance in 2024 demonstrates robust growth in company restaurant sales, a critical driver of the total revenue increase.
A Deep Dive into Restaurant Brands International Inc. (QSR) Profitability
A Deep Dive into Restaurant Brands International Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was calculated as:
| Period | Total Revenues (in millions) | Cost of Sales (in millions) | Gross Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $2,291 | $559 | 75.5% |
| Q3 2023 | $1,837 | $572 | 68.9% |
Operating Profit Margin: Operating profit for the three months ended September 30, 2024 was:
| Period | Operating Income (in millions) | Total Revenues (in millions) | Operating Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $577 | $2,291 | 25.2% |
| Q3 2023 | $582 | $1,837 | 31.7% |
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was:
| Period | Net Income (in millions) | Total Revenues (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $357 | $2,291 | 15.6% |
| Q3 2023 | $364 | $1,837 | 19.8% |
Trends in Profitability Over Time: The following table highlights the trends in profitability metrics over the nine months ended September 30:
| Metric | 2024 | 2023 |
|---|---|---|
| Gross Profit Margin (%) | 75.5% | 68.9% |
| Operating Profit Margin (%) | 25.2% | 31.7% |
| Net Profit Margin (%) | 15.6% | 19.8% |
Comparison of Profitability Ratios with Industry Averages: As of 2024, the average profitability ratios in the restaurant industry are as follows:
| Metric | Company Value (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 75.5% | 65.0% |
| Operating Profit Margin | 25.2% | 20.5% |
| Net Profit Margin | 15.6% | 10.0% |
Analysis of Operational Efficiency: The company has shown significant improvements in cost management:
| Cost Category | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Supply Chain Cost of Sales | $559 | $572 | -2.3% |
| Company Restaurant Expenses | $473 | $58 | +715.5% |
| Franchise and Property Expenses | $134 | $119 | +12.6% |
Debt vs. Equity: How Restaurant Brands International Inc. (QSR) Finances Its Growth
Debt vs. Equity: How Restaurant Brands International Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported a total long-term debt of $13,571 million and short-term debt of $126 million. The total outstanding debt net of current maturities was $13,659 million.
Debt-to-Equity Ratio
The debt-to-equity ratio was calculated at 4.23 based on total liabilities of $20,032 million and total shareholders' equity of $5,039 million. This ratio indicates a higher reliance on debt compared to equity financing.
Comparison to Industry Standards
Industry standards suggest a typical debt-to-equity ratio for the restaurant sector ranges from 1.0 to 2.5. The company's ratio significantly exceeds this range, reflecting a more aggressive financing strategy.
Recent Debt Issuances and Refinancing Activity
In May 2024, the company increased its Term Loan B by $750 million to fund the Carrols Acquisition. Additionally, on June 17, 2024, it completed a repricing of the Term Loan B, lowering the interest rate from 2.25% to 1.75%.
Credit Ratings
The company maintained a credit rating of B1 from Moody's and B+ from S&P, reflecting its solid financial position despite high leverage.
Balancing Debt Financing and Equity Funding
To finance its growth, the company utilizes a mix of debt and equity. In 2024, it raised $2,450 million from long-term debt while repaying $2,164 million. The board declared a cash dividend of $0.58 per common share, indicating a commitment to returning value to shareholders.
| Financial Metric | Value |
|---|---|
| Total Long-term Debt | $13,571 million |
| Short-term Debt | $126 million |
| Total Debt | $13,659 million |
| Debt-to-Equity Ratio | 4.23 |
| Debt-to-Equity Industry Standard | 1.0 - 2.5 |
| Recent Debt Issuance (May 2024) | $750 million |
| Interest Rate on Term Loan B (after repricing) | 1.75% |
| Credit Rating (Moody's) | B1 |
| Credit Rating (S&P) | B+ |
| Dividend per Common Share | $0.58 |
Assessing Restaurant Brands International Inc. (QSR) Liquidity
Assessing Restaurant Brands International Inc.'s Liquidity
Current and Quick Ratios
The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, is calculated as follows:
| Current Assets (in millions) | Current Liabilities (in millions) | Current Ratio |
|---|---|---|
| $1,176 | $1,247 | 0.94 |
The quick ratio, which excludes inventories from current assets, is also critical in assessing liquidity:
| Quick Assets (in millions) | Current Liabilities (in millions) | Quick Ratio |
|---|---|---|
| $1,176 | $1,247 | 0.94 |
Analysis of Working Capital Trends
As of September 30, 2024, the working capital position reflects:
| Working Capital (in millions) | Change from Previous Year (in millions) |
|---|---|
| $-71 | -15% |
Cash Flow Statements Overview
Operating Cash Flow
Operating cash flows for the nine months ended September 30, 2024, were:
| Cash Flow from Operating Activities (in millions) |
|---|
| $1,022 |
Investing Cash Flow
Investing cash flows for the same period were:
| Cash Flow from Investing Activities (in millions) |
|---|
| ($616) |
Financing Cash Flow
The financing cash flows showed:
| Cash Flow from Financing Activities (in millions) |
|---|
| ($365) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled:
| Cash and Cash Equivalents (in millions) | Borrowing Availability (in millions) |
|---|---|
| $1,176 | $1,247 |
The company’s liquidity position is supported by:
- $1,176 million in cash and cash equivalents.
- $1,247 million in borrowing availability under the Revolving Credit Facility.
However, with a current ratio of 0.94, the company is slightly below the ideal threshold of 1.0, indicating potential liquidity concerns in meeting short-term obligations without additional financing.
Is Restaurant Brands International Inc. (QSR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months P/E ratio is 18.5. The forward P/E ratio, based on expected earnings, is 16.8.
Price-to-Book (P/B) Ratio
The current P/B ratio is 2.5, with book value per share at $25.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 12.0, indicating a moderate valuation compared to industry peers.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $50.00 and a high of $68.00. As of the latest trading session, the stock is priced at $62.00.
Dividend Yield and Payout Ratios
The current dividend yield is 3.7%, with an annual dividend of $2.28 per share. The payout ratio stands at 56%.
Analyst Consensus on Stock Valuation
Analysts have a consensus rating of Hold, with 32% rating it as a Buy and 68% as a Hold.
| Metric | Value |
|---|---|
| P/E Ratio | 18.5 |
| Forward P/E Ratio | 16.8 |
| P/B Ratio | 2.5 |
| EV/EBITDA Ratio | 12.0 |
| 52-Week Low | $50.00 |
| 52-Week High | $68.00 |
| Current Stock Price | $62.00 |
| Dividend Yield | 3.7% |
| Annual Dividend | $2.28 |
| Payout Ratio | 56% |
| Analyst Consensus | Hold (32% Buy, 68% Hold) |
Key Risks Facing Restaurant Brands International Inc. (QSR)
Key Risks Facing Restaurant Brands International Inc. (QSR)
Industry Competition: The competitive landscape in the fast-food and quick-service restaurant sector remains intense. As of September 30, 2024, the net restaurant growth rates were as follows:
| Brand | Net Restaurant Growth (%) |
|---|---|
| Tim Hortons | 0.0% |
| Burger King | (1.5%) |
| Popeyes | 4.1% |
| Firehouse Subs | 3.9% |
| International | 7.6% |
| Consolidated | 3.8% |
Additionally, comparable sales for Burger King showed a decrease of (0.7%) for the three months ended September 30, 2024, indicating challenges in maintaining market share.
Regulatory Changes: The company faces risks associated with changes in regulations that could impact its operations, including food safety laws and labor regulations. The effective tax rate increased to 16.7% for the three months ended September 30, 2024, up from 14.0% in the prior year, reflecting changes in tax legislation and operational impacts from acquisitions.
Market Conditions: Economic fluctuations, including inflation and changes in consumer spending, can significantly affect revenue. For instance, system-wide sales for Burger King showed a decline of (1.5%) for the quarter, reflecting broader economic pressures.
Operational Risks: The company has faced operational challenges, particularly concerning restaurant acquisitions. The Carrols Acquisition involved a total cash purchase price of $543 million, with the assumption of approximately $431 million in debt. This strategic move, while aimed at expansion, also poses integration risks.
Financial Risks: The company reported a net income of $357 million for the three months ended September 30, 2024, compared to $364 million in the same period the previous year, highlighting potential profitability pressures. Interest expense increased to $147 million from $143 million year-over-year.
Strategic Risks: The long-term growth strategy includes significant investments, such as the planned $400 million investment in the “Reclaim the Flame” initiative, which includes $150 million in advertising. The success of these strategic initiatives is critical to mitigating competitive pressures.
Mitigation Strategies: The company has initiated various strategies to address these risks. For example, it has enhanced its digital marketing capabilities and is investing in restaurant remodels to drive customer engagement and increase sales. Additionally, the company is focusing on maintaining liquidity, with cash and cash equivalents amounting to $1,176 million as of September 30, 2024.
Future Growth Prospects for Restaurant Brands International Inc. (QSR)
Future Growth Prospects for Restaurant Brands International Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including product innovations, market expansions, and acquisitions. In 2024, the acquisition of Carrols for a total cash purchase price of $543 million significantly bolstered its portfolio, enhancing market presence and operational capacity.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, total revenues increased to $2,291 million, up from $1,837 million in the same period of 2023. This marks a 25% growth year-over-year. The nine months ended September 30, 2024, saw total revenues reach $6,110 million, compared to $5,202 million in 2023, representing a 17% increase.
The net income for the three months ended September 30, 2024 was $357 million, slightly down from $364 million in 2023. However, for the nine months, net income rose to $1,084 million, compared to $992 million in the previous year.
Strategic Initiatives and Partnerships for Growth
Strategically, the company is investing $400 million in its "Reclaim the Flame" plan, which includes $150 million in advertising and digital investments and $250 million in renovations and technology. Additionally, plans to remodel over 600 Burger King restaurants acquired as part of the Carrols acquisition will require an additional $500 million investment.
Competitive Advantages Positioning for Growth
With approximately 95% of its restaurants being franchised, the company benefits from a robust franchise model that drives profitability and market penetration. As of September 30, 2024, the company had a total of 31,525 restaurants globally, with a net restaurant growth of 3.8%.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Revenues (in millions) | $2,291 | $1,837 | $6,110 | $5,202 |
| Net Income (in millions) | $357 | $364 | $1,084 | $992 |
| Restaurant Count | 31,525 | 30,375 | 31,525 | 30,375 |
| Net Restaurant Growth (%) | 3.8% | 4.2% | 3.8% | 4.2% |
Overall, the combination of strategic acquisitions, substantial investments in branding and infrastructure, and a strong franchise model positions the company for continued growth in the competitive restaurant landscape.
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Updated on 16 Nov 2024
Resources:
- Restaurant Brands International Inc. (QSR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Restaurant Brands International Inc. (QSR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Restaurant Brands International Inc. (QSR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.