Good morning, welcome to the Restaurant Brands International second quarter 2016 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 touchtone phone. To withdraw your question, please press star, then two. We do ask that you limit yourself to one question. Please note this event is being recorded. I would now like to turn the conference over to Andrea John, Senior Director of Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, welcome to Restaurant Brands International's earnings call for the second quarter ended June 30th, 2016. A live broadcast of this call may be accessed through the investor relations page on our website at investor.rbi.com, and a recording will be available for replay. Joining me on the call today are Restaurant Brands International CEO Daniel Schwartz and CFO Josh Kobza. The team will be available to answer questions during the Q&A portion of today's call. Today's earnings call and presentation contain forward-looking statements, which are subject to various risks set forth in the press release issued this morning. This earnings call and presentation include non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the earnings presentation and press release available on our website. Let's start with the agenda for today's call on slide two.
Daniel will discuss highlights for the second quarter at Restaurant Brands International. He will then review performance at Tim Hortons and Burger King. Josh will provide an update on development and discuss consolidated financial results for the quarter. Daniel will share some concluding remarks before opening the call up for Q&A. I'll now turn the call over to Daniel.
Thanks, Andrea, good morning, everyone. Thanks for joining us today on the call. I'm pleased to update you on our performance during the second quarter at RBI. Our focus on providing a great guest experience for our guests and growing the global restaurant footprint at our two iconic brands, Tim Hortons and Burger King, has enabled us to achieve strong profitability growth in the period. This quarter, we reported adjusted EBITDA of CAD 479 million and adjusted diluted EPS of CAD 0.41 per share. Let's start on slide four. We achieved comparable sales growth at both brands this quarter, growing 2.7% at Tim's and 0.6% at BK, despite a more challenging QSR environment. On the development front, we announced two development agreements in recent months at Tim Hortons, one in the Philippines and one in Minneapolis.
We continue to be very excited about the prospects of bringing Tim Hortons restaurants to guests all around the world and look forward to opening our first restaurants in each of these exciting new markets. Compared to the prior year, our restaurant count across both brands grew by 3.8%, and we added 118 net new restaurants during the quarter. Going into the second half of the year, we're working closely with our franchise partners to execute on a strong development pipeline and accelerate net restaurant growth compared to the prior year. Our comparable sales growth and net restaurant growth resulted in system-wide sales growth of 4.8% at Tim Hortons and 5.9% at Burger King. Our continued growth in system sales, along with cost discipline, led to adjusted EBITDA of CAD 479 million, which was up 16.2% organically compared to the prior year.
We also achieved strong earnings growth with adjusted diluted EPS of CAD 0.41 per share, up 38.3% versus the prior year. On slide six, we highlight the results for Tim Hortons. During the quarter, same-store sales grew by 2.7%, and we increased our restaurant count by 3.3% year over year, adding 26 net new restaurants in the second quarter. While the pace of net restaurant growth has been fairly constant as we transition to a franchisee-led development model, we are very pleased with the new partnerships that we've begun to form across each of our markets and the outlook for our growth for the brand going forward. Favorable comparable sales growth and unit growth led to system-wide sales growth of 4.8% in constant currency, leading to adjusted EBITDA for Tim's of CAD 279 million, which grew by 24.1% organically versus the prior year period.
Turning to slide seven, we discuss Tim's results in Canada for the quarter. While we did see some increased competitive activity during the quarter, successful product launches such as the Chicken Bacon Ranch Wrap, the Potato Wedges, and the Farmer's Breakfast Wrap drove same-store sales growth of 2.3%. We were particularly pleased to have launched our new savory Potato Wedges and salads this quarter, offering our guests new side options for lunch. We believe this is a critical step toward further building our lunch business, which we view as one of our medium-term opportunities for our Tim Hortons brand in Canada. On the development front, we grew restaurant count by 2.6% in the second quarter, adding 25 net new restaurants. We increased our presence in our core urban areas, as well as the rest of Canada, and expanded our footprint through growth in both standard and non-traditional restaurant formats.
Moving to slide eight. Tim's comparable sales in the U.S. grew by 5.9%, with particular strength in coffee and cold beverages, including our new Iced Capp flavors, Oreo and Mocha. We also continue to grow sales during breakfast with our Croissant Breakfast Sandwich. We're pleased with the continued strength in our Tim's business in the U.S., with growth in our core products and categories, giving us further confidence in our focus on the market and our expansion strategy. This quarter, we announced the signing of our largest Tim's U.S. development agreement to date in Minneapolis. This marks the fourth area development agreement announced since the merger, along with agreements in Columbus, Cincinnati, and Indianapolis. We're excited to be working with such great partners to expand Tim Hortons in the world's largest QSR market.
Through these agreements, we'll continue to accelerate the pace of development and bring Tim's to more places in the U.S. than ever before. Turning to slide nine, we experienced some softness in the Tim's International comparable sales, primarily due to the impact of the timing of Ramadan versus the prior year period. We're pleased with our new product launches, such as the steak panini, the steak wrap, and the steak breakfast sandwich. On the development front, we're excited to announce our first Tim's master franchise joint venture agreement in the Philippines, which Josh will outline in greater detail on the call. Let's now turn to slide 11 to discuss the results at Burger King. We achieved comparable sales growth of 0.6% and increased our restaurant count by 3.9% versus the prior year, adding 92 net new restaurants.
System-wide sales grew by 5.9% in constant currency. Adjusted EBITDA of CAD 200 million grew by 6.5% year-over-year on an organic basis. Turning to slide 12, second quarter results for the U.S. and Canada were softer during the quarter as we saw increased competitive activity and broader U.S. QSR industry softness. We continue to launch fewer and more impactful products and maintain a balanced approach on menu and marketing. We achieved strong sales from Grilled Dogs and new product launches like the Mac n' Cheetos, which we launched late in June, as well as from promotions such as the two for CAD 10 Whopper meal. Mac n' Cheetos actually became one of the most covered product launches in Burger King's history, with 3.2 billion earned impressions, surpassing the previous record set by our launch of Grilled Dogs this past spring.
Guests were also highly engaged with our Mac n' Cheetos Snapchat filter and shared their tasting experiences thousands of times across Instagram and other social media channels. While our sales results were slower for the quarter, we're very confident that we have the right strategy in place to grow the U.S. business for the long run. On slide 13, comparable sales in EMEA grew by 0.8% in the quarter, led by strength in Russia and in Germany, and offset by some softness in the U.K. and Italy. Net restaurant growth of 51 contributed to year-on-year restaurant growth of 6%. Russia was a significant driver of restaurant growth in the quarter and now has more than 350 restaurants in the market.
We also made good progress in Spain, where our new master franchise joint venture continues to develop from a very strong position in the market, and in France, where we're opening very successful restaurants across the country. Going into the second half of the year, restaurant growth from our master franchise joint ventures as well as the conversions of Quick restaurants to BK stores in France give us confidence in our outlook for NRG and EMEA. Moving to slide 14, we had a strong quarter in APAC with comparable sales growth of 5.3%. Comparable sales growth was mainly driven by China as well as by strength in Korea and Japan. We were also pleased with the pace of development in the region, with restaurant count up by 17% year-over-year and net restaurant growth of 46 for the quarter, led by expansion in China and India.
We believe there's a tremendous opportunity for BK to continue to grow its restaurant footprint in China and India and more broadly in the region and are pleased by the progress that our teams are making against this opportunity. Turning to slide 15, LAC recorded same-store sales growth of 4.9%, led by Brazil and Argentina, where our new product launches and promotions such as King Ofertas in Brazil and Grandes Propuestas in Argentina resonated well with our guests. We grew our restaurant count by 5% in LAC during the quarter, led by development in Brazil, the relaunch of Burger King in Costa Rica, and offset by some softness in Mexico. I'll now turn it over to Josh to take us through the development updates and financial results for the quarter.
Thank you, Daniel. Let's move to slide 17, where we'll review updates on development. Back in 2011, we introduced the master franchise joint venture model to Burger King. Under this franchisee-led development model, we partnered with excellent operators to grow our restaurants in a region or country, enabling us to accelerate international growth. We signed our first master franchise joint venture agreement for Brazil, and we now have more than 500 restaurants there. To date, we have signed 12 master franchise joint venture agreements at Burger King, with notable growth in places like China and Russia. At Tim Hortons, I am very pleased to announce the closing of our first master franchise joint venture agreement, which will bring Tim Hortons restaurants to the Philippines, a country with an attractive and growing QSR market that has an affinity for coffee and donuts.
We view the Philippines as a natural gateway as we look to expand into Asia. As such, we see it as an excellent entry point for the region. Additionally, we are pleased to announce the sale of the Quick restaurants in Belgium and Luxembourg by our master franchise joint venture, Burger King France. The transaction is expected to close in the third quarter. Over time, our new partner will convert Quick restaurants in Belgium to Burger King units as we enter into another compelling market in Europe. We look forward to providing you with more development updates soon. Turning to slide 19, we discuss RBI financial results for the quarter. I'm pleased to report that we achieved another quarter of double-digit organic growth in adjusted EBITDA and adjusted diluted EPS.
Our overall growth in system-wide sales at both Tim Hortons and Burger King, combined with discipline on costs, resulted in adjusted EBITDA of CAD 479 million for the quarter, representing growth of 16.2% on an organic basis versus prior year results. Adjusted net income for the quarter of CAD 192 million was up 36.5% versus prior year results, reflecting adjusted EBITDA growth, a CAD 2 million reduction in depreciation and amortization versus the prior year, Interest expense savings due to our refinancing in May of last year. Our adjusted diluted EPS for the quarter was CAD 0.41 per share, representing growth of 38.3% versus the prior year. Turning to slide 20, we achieved strong free cash flow of CAD 517 million year to date, primarily as a result of adjusted EBITDA growth Reduction in capital expenditures versus the prior year.
During the first half, we paid CAD 260 million in preferred and common dividends and paid down CAD 35 million of debt, ending the period with a cash balance of CAD 998 million. Moving to slide 21, we review our capital structure. As of June 30th, 2016, our total debt was CAD 8.9 billion, and our net leverage was 4.5 times LTM adjusted EBITDA, down approximately 0.7 turns year-over-year. Moving now to slide 22. On August 3rd, 2016, the RBI Board of Directors declared a dividend of CAD 0.16 per common share and partnership exchangeable unit of RBILP, payable on October 4th, 2016. Finally, we also announced a five-year, CAD 300 million share repurchase authorization. Along with debt repayment, reinvesting in the business, and paying dividends, share repurchases are one of the ways in which we return value to our shareholders and are a part of our balanced approach to capital allocation.
I'll now hand it back to Daniel before moving to the Q&A part of our presentation.
Thanks, Josh. We made good progress this quarter in expanding the presence of both of our brands around the world and increasing the quality of each guest experience in our restaurants. Our commitment to our guests and communities and to building value for our franchisees has resulted in continued growth in earnings for Restaurant Brands International. Sales have slowed a bit compared to earlier in the year, we believe that we have the right plans in place to deliver great results for the long term for all of our key stakeholders, our franchisees, our employees, and our shareholders. Thanks to everybody for joining us this morning. We'll now open up the call for Q&A. Operator?
We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Once again, we do ask that you limit yourself to one question. At this time, we will pause momentarily to assemble our roster. Our first question comes from Nicole Miller of Piper Jaffray. Please go ahead.
Thanks. Good morning. When you talk about the softer trends across QSR or limited service domestically in the U.S., do you see that as a shorter-term attitudinal shift on behalf of the consumer or a longer-term situation that you have to take into account when you're really looking at your overall strategy? Just wondering with under that context, how do you then talk about comps being negative at BK and positive at Tim Hortons? Trying to understand what that is a function of.
Hey, Nicole. It's Daniel. I think I can address your question. Yeah, look, you're right. We did see some softness in the industry in the second quarter. We feel like we made the right adjustments kind of short term, but we've been doing this now almost six years, and the industry changes from time to time. We try not to get too focused on macroeconomic changes. The industry's moved over time. What I'd say is we're very confident in our strategy. If you take a step back for a minute, we've had the same strategy in place the last now almost six years despite some of the macro fluctuations during that time period. We took sales per restaurant from around CAD 1.1 million to CAD 1.3 million. We significantly increased the profitability of our franchisees.
We re-imaged half of the system, had some great new innovation, despite some ups and downs in the industry over that time period, our strategy has remained constant, and it will remain constant. When I look forward into the future, I'd say looking at the strategy that we have in place, the strategy we're going to have in place, the strong innovation pipeline we have, I'm excited. I feel good. I'm confident in the long-term outlook for the Burger King brand in the U.S. Then on the Canada side, on our Tim Hortons brand, we did post some positive same-store sales of 2.3%. We saw things slow down a little bit as well in Canada, I'd say that again, there we're quite confident in the strategy. We saw growth across breakfast and lunch day parts.
Toward the end of the quarter, we actually made some pretty good additions to the lunch menu. We launched the potato wedges, the savory wedges, and we'd also launched salads to give our guests something nice to complement their lunch sandwich. We really view this further building an already strong lunch day part at Tim Hortons is a big opportunity for us in the long term. Then we did some other things with cold beverages. We expanded the already successful line of Iced Capps. We feel good overall about, again, the long-term outlook and strategy for Tims. I really can't emphasize enough, and I know we've talked to you about this in the past.
We try not to get too caught up, too focused on the macro kind of swings, positive or negative, and we just stick to our strategy of delivering that great guest experience and driving continued sales and profitability growth for our franchisees.
Our next question comes from Joe Buckley of Bank of America Merrill Lynch. Please go ahead.
Yes. Question, Daniel, in the actual release, you mentioned a solid same-store sales growth by the end of the quarter for both brands. Could you elaborate a little bit on that? Did you see a strengthening in June? If you choose, could you comment on how July fared?
Yeah. Hey, Joe. It's Daniel. We didn't comment on intra-quarter trends, we don't give forward guidance as we haven't in the past. What I can say, though, again, probably with both brands, particularly with Burger King, we did make some changes to the strategy. Again, while we don't give forward-looking guidance, what I can say is when I look at the strategy we have in place, the pipeline of new products and some good innovation, we're confident in the outlook for the business. Tims, we did make some big launches toward the end of the quarter, where we launched our Potato Wedges in the month of June and expanded the line of Iced Capp beverages that we're offering guests to add both light as an option and mocha.
We were pleased with the performance of our Potato Wedges and the cold beverage businesses at Tims. Again, we don't get too caught up in macro. We don't really give month-to-month guidance, we're confident in the outlook for both of our brands for the long run.
Our next question comes from Brian Bittner of Oppenheimer and Company. Please go ahead.
Great. Thanks. This is Michael Tamas on for Brian. You sort of touched on it a little bit, can you talk about maybe the performance versus the peers? It seemed as though your business slowed a little bit more than others. I know it was the first negative comp for Burger King in a couple of years. Can you just talk about maybe is it value? Is it something else that didn't perform quite as well? Maybe some more details on what was going on. Thanks.
Yeah, I don't have much to add beyond what I said. We did see the business slow down a bit. We don't comment on our competitors. We feel like we have a good balance of value and premium. We had some good offers, like our two for 10 Whopper meal offer. We had some good full price or premium products, like the Chicken Fries Rings, the Mac n' Cheetos, some limited time offerings around our Grilled Dogs. I wouldn't really point to anything that kind of worked or didn't work, per se. We did see things slow down a little bit, the same strategy that we've had in place for the past five years is going to continue regardless of if things slow down or accelerate within a quarter.
I think when you look at what drives our business in the long run, it's more than value or premium or one or two things. There's no silver bullet. It's about delivering great guest experience. We feel like we made really good progress in the re-imaging front. At the end of last year, we crossed that 50% milestone, and that's obviously helped our restaurant performance in the US market, and it's something we're going to continue investing in as well to continue delivering that great guest experience. I can't emphasize this enough, there's not really one silver bullet or something that worked or didn't work.
We saw things slow down a little bit, that's not going to result in any change to the strategy, we still feel really good about our ability to drive sustainable long-term growth in franchise profitability and further improvements in our guest experience in the US.
Our next question comes from Will Slabaugh of Stephens Inc. Please go ahead.
Yeah, thanks guys. I want to stick on the value theme domestically, if I could. I was wondering if the consumer, in your view, is behaving, either here actually or in EMEA, as if there's somewhat of a fatigue around the aggressive value messages that are out there in the near term around maybe the QSR meal deal, which became virtually universal over the last nine months or so, either at the meal deal side or at the lower end of the value spectrum. Curious at your view on how the consumer views that.
Yeah. I wouldn't say we have a strong view or have seen any kind of major shift in behavior across our consumers or our guests across our menu. QSR is a competitive industry. There has always been a strong presence of value amongst ourselves, our competitors, at least for as long as we've been in this business. We've always believed in having a balanced approach between value and premium or value and core. That really hasn't changed at all for us this quarter, and I wouldn't expect it to really change going forward.
Our next question comes from Andrew Charles of Cowen. Please go ahead.
Great. Thank you. Daniel, taking a step back and looking at what's driven your success at BK U.S. over the last three years, you guys have adopted a fewer, more impactful sales strategy, but the pace of new menu intros has significantly accelerated in 2016. You've also indicated a robust pipeline later this year. When we think about the reason you've implemented the fewer, more impactful strategy in the first place, do you get the sense that 2016 introductions are spreading operations and the marketing message too thin? Also just to follow up, or separately I should say, can you talk a little bit further about the dynamics that drove the net unit closures at Tim Hortons International this quarter?
Yeah. On the U.S., the way I think about it, we believe in innovating around platforms. To the extent that we have a platform and we rotate some new or exciting flavors around it, that's okay.
What we don't want to see is kind of a variety of new small products. To the extent we have an existing platform, innovating around that platform and making small tweaks here to there, that's okay. We haven't seen any impact on our operations on that front. When I look at some of the product launches that we've had this year, they've been big, and they've been impactful, like the Grilled Dogs or the Mac n' Cheetos. Some are here to stay, some are limited times. When I look at the innovation pipeline coming down the road, I do feel good that the platforms that we're looking at are going to be few and obviously we're planning on them to be impactful.
It's Josh, on your question on Tim's International, I would just say that it's still early in the year, and I wouldn't really read too much into it. I think the really exciting thing on Tim Hortons International is the announcement that we came out recently on the Philippines. I think if you put my remarks a little bit ago, if you step back a bit, the biggest thing that we've talked about for a while now is how excited we are about taking Tim's all around the world. I think it was a huge quarter for us in that sense, in that we announced our biggest deal yet in the U.S. to bring Tim's to Minneapolis.
We also announced our first master franchise joint venture in the Philippines, which is our first step in replicating the success that we've had all around the world with Burger King. Now we're going to apply that model to take Tim's all around the world, starting with the Philippines. We're really pleased to take our first step there, and we look forward to sharing more similar stories on that front with everyone in the near future.
Our next question comes from David Palmer of RBC Capital Markets. Please go ahead.
Hey, guys. It's Eric Gonzalez in for Dave Palmer. Just wondering, is there an opportunity to pay down debt given that your cash balance is approaching CAD 1 billion? Beyond that, what is your thinking about usage of free cash flow for debt pay down versus maybe opportunistic buyback, M&A, or possibly even taking your payout ratio higher?
Hey, Eric. It's Josh. I think if you look back in history, we've had a fairly balanced capital allocation policy, and that's included a few different things, including reinvesting in the business, paying down debt, paying dividends, and repurchasing shares. I think we've done some of all of those things. You probably also saw that this morning we have a new authorization for share repurchase. I expect that you'll continue to see that same capital allocation policy going forward.
Our next question comes from John Glass of Morgan Stanley. Please go ahead.
Thanks very much. I wanted to ask about your changing investment policy at Tim's. It looks like your CapEx for the second quarter in a row has stepped down meaningfully, so I suspect this is a larger change at work. I understand now you're not investing as often or as much in the buildings for franchisees up in Canada. Are you still able to capture the lease revenue going forward just at a lower flow through because you've got to pay the sublease? How does that play out, I guess, if that's true, and how does that play out over time? Do you have a lower revenue growth because rent's been a big piece of the revenue in Canada historically? Lower revenue at a higher margin, or do you capture some of that sandwich lease? Any kind of detail around that going forward would be helpful.
Hi, John. It's Daniel. I guess the way to think about the kind of historical and future investment in our Tim's Canada business. Historically, the development of new restaurants was a kind of a joint effort between the company and the franchisees. We're moving to more of a franchise-led development strategy where our franchisees will get to have the ownership of the real estate, and you're right, we won't capture a rent spread on that. We're pleased, though, to say we feel confident in our ability to even accelerate the pace of growth in Canada relative to where we've been historically based on kind of what we see in our pipeline of franchise-led development today in Canada.
We're not changing, though, the investment policy with respect to reimaging and renovating restaurants, where historically the corporation has contributed a percentage of the remodel cost, and we continue to do that, and we plan to continue to do that into the future.
Our next question comes from Dennis Geiger of UBS. Please go ahead.
Great. Thanks. Wondering if you could talk a little bit more about the three drivers of the strong cost of sales results that you put up during one Q and how they performed during two Q. I guess specifically, if you could share the number of VIEs converted during the quarter, and then any additional detail on the supply chain efficiencies you might have realized during the quarter. Thanks.
Hi, Dennis. It's Josh. As you mentioned, we did have a further improvement in the profitability in that segment in the quarter and compared to the prior year. I think you can look at it in terms of a few different drivers as I've described a bit in some of the prior quarters. If you break those down, there's VIE deconsolidation, which we continue to do, although quarter-on-quarter, that was probably a smaller contributor this quarter. In terms of retail, that continued to be a growth driver. More so year-on-year, that business has continued to be a very large growth driver year-on-year.
Also, we continue to see improvements in efficiency through the broader supply chain and the cost levels in that segment as well, which was a driver as well quarter-over-quarter.
Our next question comes from Mark Petrie of CIBC. Please go ahead.
Yeah, good morning. I just wanted to follow up on your comments with regards to the Tims International business and specifically the MFJV in the Philippines. You'd previously spoken about wanting to innovate or feeling like you needed to innovate in the menu before entering new markets. I wonder if you could just update us on where you're at in terms of that menu innovation, and should we look at this deal as an indication that you feel comfortable with where you're at, or was this more of a market-specific deal because of the local taste there?
Hi, it's Daniel. I'd say, when we look at taking the Tims brand internationally, there will be some element of localization, just like we have in our Tims business that we already have in the Middle East today. Just as has been this kind of a similar case with the Burger King brand as we take it internationally. What you're going to see, and this is something we're going to obviously work with our new partners in the Philippines, is that there'll be a mix of the core products that we all know and love and localized products. I assure you'll still be able to get a Double Double and as many Timbits as you want wherever our Tims are going to be popping up around the world.
As far as the Philippines versus other markets, we view it as a great kind of gateway to enter Asia. There's really no limit to how far the Tims brand can travel, and as Josh alluded to earlier, we're working hard to launch more of these master franchise joint ventures in other markets all around the world.
Our next question comes from Karen Holthouse of Goldman Sachs. Please go ahead.
Hi. Thanks for taking the question. Just if you could sort of give us an update on franchisee economics, sort of trailing 12 months with puts and takes around labor inflation versus pricing, or labor inflation versus commodity inflation, how they're feeling about things, and then just sort of as you get into the back half of this year, a number of franchise companies have sort of talked about working with their franchisees through sort of pricing, making sure they're managing to some extent the gap versus food at home inflation and how those conversations are going. Thanks.
Yeah, sure, Karen, it's Daniel. I'd say if you kind of look at the two biggest markets that we have, the Tims Canada market and the Burger King U.S. market, we've seen good growth in franchise profitability trailing 12 months. We've seen good growth in franchise profitability year to date. As you know, there are various drivers of profitability and various cost drivers, and sometimes labor inflates a bit more, sometimes COGS inflate a bit more. Right now, as you mentioned, we've seen a bit of deflation on the commodities. Yeah, we do work to make sure that we're offering our guests great value for their money, and that's working with our franchisees on product launches, on promotions, on pricing, and that's something, no changes versus kind of anything we've done historically.
What I'd say is our focus on making sure that we deliver a great guest experience, value for money being one of the components of that, and franchise profitability hasn't changed and won't change regardless of kind of the environment that we're in with respect to input costs.
Our next question comes from David Hartley of Credit Suisse. Please go ahead.
Yeah, thanks. Good morning. Just a couple of questions. Of your new franchisees, just curious, when you enter a market like the Philippines announcement, how long does it take before you start seeing new stores opening? Maybe you can give me some commentary on how many stores have opened of existing new franchisee agreements in the U.S. Finally, if you can just tell us a little bit about the tax rate, seems a little lower this quarter than previous. Just wondering what the run rate should be on that. Thank you.
Hi, David. It's Josh. Anytime we're entering a new market, we're going to work with the franchisee in that market to open up as quickly as we can. We want to make sure that we do the work to make sure that we open up really well and bring the right guest experience and the right product offering to that market. It varies a lot between a market that we're already in, like the U.S., and a new market that we're going to like the Philippines. We don't have a date to share yet, but you can trust that our teams are working very hard to open the first stores as soon as possible. We'll let you know as soon as we do.
In terms of the tax rate, I think if you look at the adjusted tax rate for the second quarter, it's actually pretty much in line. It's not very far off of where we were for the first quarter. No real big change, I think, compared to where we were last time we talked.
This concludes our question and answer session. I would now like to turn the conference back over to Daniel Schwartz for any closing remarks.
Thanks, operator. I just want to thank all the participants for joining us today. Again, we're really excited about the long-term outlook for our company, excited about the continued expansion of the Burger King brand, the new expansion of the Tim Hortons brand, in ways that we think will benefit all of our stakeholders all around the world. We look forward to updating everybody next quarter. Thanks.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.