Pershing Square Holdings, Ltd. (PSH.L) Earnings Call Transcript & Summary

[Operator Instructions] Today's call is being recorded. It is now my pleasure to turn the call over to your host, Mr. William Ackman, CEO and Portfolio Manager.

Thank you, Robin. So welcome to the call. And just to give you an update on -- of course, we report our performance on a regular basis. But year-to-date, the funds are in a range of mid-8s to low 9% negative return, which is about a 600 basis points in excess of the S&P 500 year-to-date. So I think we feel good about our relative performance. Obviously, we care more about absolute performance. I always would love to deliver profitable outcomes for our investors and certainly over time. But we don't promise nor do we can guarantee that we always generate positive performance. But I would say we feel quite good about the year, very challenging year in the capital markets, lots of extrinsic risks and political risk, geopolitical risks interest rate risk, economic risks and the companies we own have just continued to report really remarkable results. We feel very good about the businesses that we've chosen to own, and we feel great about the management teams that are running those companies, and we're a beneficiary. Now despite that, if you look at our results year-to-date, year-to-date, we've actually lost approximately 2,700 basis points on our equity portfolio. 400 basis points of that is a permanent loss, our Netflix loss. But 22 percentage points of that is mark-to-market losses on our current portfolio. So despite or companies reporting excellent results, their stock prices have declined. A lot of that has to do with kind of a re-rating in the market generally. But we don't really mind mark-to-market losses in our businesses as long as we continue to believe in the long-term performance of the companies we own. And in fact, actually a nurse to our benefit in companies we own that are aggressive buyers of their shares, i.e., of course, they pay a lower price when they're repurchasing shares. And we'll comment on some of those share repurchase programs in our specific company discussion. The offset to the losses on our stock portfolio has been hedging gains that we've earned this year, which are the neighborhood of 1,100 to 1,300 basis points depending upon funds. So net-net, our hedges have been a very meaningful contributor to performance. And for that reason, I thought I'd talk a little bit more about our hedging program. First of all, I'd just like to mention that hedging has always been something we've done at Pershing Square. And it's been periodically quite material. So the '07, '08, '09 context, we made large profits on our hedges that we purchased to protect against our concerns about the credit markets and what we believe would be a likely deterioration in the credit markets. And what we like about hedging is it does, of course, buffer our mark-to-market losses for the year. But more importantly, it gives us liquidity at a time where liquidity is particularly valuable when stock prices are cheap. And so really it's not just so much the hedging benefit, but the available liquidity at a time when there's a disruption in the market. That allows us -- having a hedging program allows us to be more fully invested in the ordinary course and less sensitive to mark-to-market losses on the rest of the portfolio. Just to give you an order of magnitude, 2020, we had $2.473 billion of hedging gains. 2021, that number was $688 million and year-to-date, that number is just shy of $2 billion in terms of P&L from our hedging program. So if you look at the last 3 years, $5.2 billion of our P&L has come from hedging. And if you think about our capital base, our equity capital base today, it's something in order of $11.5 billion, it's a very meaningful -- has been a very meaningful contributor. So just to give you a few thoughts on how we think about hedging. So first of all, we -- other than with respect to if we -- one of the things we generally do is for companies we own that have interest rate exposure -- I'm sorry, currency exposure, for example, universal large euro exposure by virtue of the scale of their business in Europe, we tend to hedge those kinds of currency risks in the ordinary course with forward contracts. And those are, of course, have bilateral risk. There's no asymmetry to them. But where we have a known exposure, and we don't have a particular view about currency being particularly strong or particularly weak. We tend to use forward contracts in the case of restaurant brands on Canadian exposure or Canadian CP similar. So we don't think -- we think of that as not a asymmetric hedge, but just a way for us to at least put aside any concern we have about depreciation and the currency and the effect on the company's profitability. The balance of our hedges are asymmetric that we use often in our letters. And what that means, of course, is we're risking a relatively small amount of capital -- and if we're right or if -- about the concern of being realized, those hedges should become a lot more valuable. And that's really where the bulk of our gains have come from. So for example, the total P&L this year on a forward contract, it's $218 million out of a total of -- I'm sorry, it's $208 million out of a total of $1 billion -- almost $2 billion of hedging gains. The balance of those gains have come from principally interest rate-related hedging gains as well as in one case, commodity-related hedging gains. In terms of categories of hedges, we look -- we focus on things that we're concerned about. What events in the world, what Black swan risks could impact the value of a business that we own. And our focus, circa 2020, of course, was coronavirus, and we chose to use credit default swaps to hedge that risk. Our focus beginning late 2020, early 2021 was the very low level of interest rates and our expectation that inflation would arise by virtue of a combination of very aggressive fiscal monetary stimulus plus the stimulus associated with people being unleashed if you will, from the virus and being able to participate in ordinary course activities and we hedge that through interest rate swap options. And those options, if you look at the trajectory here of what we've done, it gives you a sense of how we think about asymmetry. So we bought interest rate options for about $180 million that by Q1 of this year, we're worth $1.450 billion. We sold them. We replaced them with a very similar bet, if you will. We extended the maturity. We -- the strike price was out of the money, whereas the ones we owned the strike price has gone into the money. So again, once again, it became symmetric about 6 months later, we sold that hedge for about 3,300-odd million. We repurchased another interest rate hedge that we own today. And we spent a similar amount of money. And today, it's worth looking at my sheet here. We've got about a $240 million investment in interest rate swaptions that are today worth about $446 million. Had we kept on the original investment, we would have made a much larger multiple of our capital, and we would have made actually probably more gross dollars that we sold at the all-time at the end of the life of that instrument, we held at the entire period. We didn't do so because as these investments pay off, they no longer represent asymetrobeds. In fact, the risks are to become a very large percentage of the portfolio, and the opportunity to make multiples where capital basically disappears. And so our approach is to kind of roll them as they become significantly valuable. And that has, I think, a meaningful risk reduction effect. It's unlikely that we find ourselves in a place where we have a massive loss because we have a hedge that became enormously valuable and then the next day, lost half its value. So we give up some potential for profit but we mitigate the risk of loss because when a hedge becomes very large, we think of it like a large investment. And oftentimes, when a hedge becomes very valuable, it's usually a time where we can find a better use of that capital, perhaps buying more of a stock we own or a new investment. So this is -- you should expect this to be part of our thinking going forward, but there's no guarantee that in any one period of time that we'll have any hedge exposure at all. We have to -- again, we have to find instruments where we think the risk-reward is compelling. And if you look at the period from the financial crisis really until early 2020. So we had a period of practically a decade where there was -- we had no meaningful hedges in place other than forward contracts where we were concerned about some risk of moves in currencies. -- or as the last several year period of time, we've been extremely active. I will say, however, that we are dedicating more time and kind of resources internally to this area as I think we develop kind of broader competencies and in a volatile world, these kinds of opportunities tend to present themselves. So why don't I call that the sort of general overview, but the categories of hedges that we have today, biggest categories remains in terms of market value, interest rate swaptions, the difference between our earlier bets we were betting the Federal Reserve and have to move aggressively today are -- in terms of where the bet is, if you will, that long-term interest rates are meaningfully below where they're going to go. And we think that is, of course, a risk for equities. And part of our thesis here is that we think inflation is going to be structurally higher going forward than it has been historically. We do not believe that is likely the Federal Reserve is going to be able to get inflation back to a kind of consistent 2% level. We'll have to ultimately accept a higher level of inflation. That has to do with deglobalization, sort of business. We were -- we had the benefit for many, many years of the sort of outsourcing of production to very low-cost labor markets and economies and sort of geopolitical considerations and actually, everything -- the growing middle class in China and just rising wages sort of globally and the supply chain risks that people have become extremely experienced with in the last particular year or so has made really every U.S. CEO, maybe even global CEO, to rethink outsourced or distant supply chains. And so we're a big believer in the thesis that a lot more of that business is going to come closer to home, and it is more expensive to do business. Here, we're no longer going to have the same sort of subsidy going forward. Also, the transition to alternative energy is going to be an expensive transition. So we think there are a number of structural reasons why inflation is going to be more persistent than expected and that locking in a less than 4% fixed rate contract for 30 years is going to be a difficult thing to do for any kind of instrument even U.S. treasury security. So we think that -- and there is some asymmetry available in instruments. -- you can make that bet. And that -- we care more about long-term rates when we're an owner of businesses because those ultimately -- when you're discounting the cash flows for a perpetual life asset or a very elongated asset, that's relevant is really the longer-term rates, and that's why we think that kind of hedge is appropriate. We have some concern also about energy prices and the impact on businesses we own. So we have some energy-related hedges in place. And then currencies, we have exposures various -- we do have a very U.S. dollar-centric portfolio. Most of our businesses earn a majority in some cases, substantially all of their profits and even revenues in U.S. dollars, but we do have meaningful exposures for some of our businesses, and we do our best to hedge earnings that are earned in currencies other than the U.S. dollar. So let's call that the overview. And with that, why don't we actually update everyone on the portfolio. Why don't we start with Ryan and Universal.

Sure. So as Will had mentioned, we spent a lot of time increasingly on the hedges, but we've also had a very strong investment in terms of Universal being one of our largest position by far. And the company continues to do very well as the company just recently reported earnings. And the company laid out at a Capital Markets Day earlier that they thought, over time, they could have a high single-digit revenue growth rate organically and then they would have significant margin expansion over the medium term. And the company's results are very consistent with that. in most recent quarter, they continue to outperform that algorithm and having double-digit revenue growth. Now part of that relates to the fact that some areas of their business, such as touring and merchandising were hit very hard during COVID and have significantly rebounded. And those areas are lower margin. And so as a result, the margin progression that the company has talked about over the longer term hasn't really shown through this year. But in aggregate, the revenue has outperformed and the company's earnings are holding true to that algorithm and doing quite well. But I think one of the broader issues about Universal that's really exciting to us is the pricing opportunity. Our view at Universal and structurally why we're very excited about the business we first made the investment was we thought this is a very high-quality royalty stream business where the growth of music over time would be significant in increasing their volumes as more people around the world had smartphones and use those smartphones to do digital music streaming. But at the same time, we thought the service was very undervalued. And as effectively a royalty business model, both the volume, the increase in the amount of people subscribing to Spotify and Amazon and Apple Music around the world, combined with the increase in the price of those services, Universal would proportionately benefit from both. And we've seen a lot of the volume growth over time, but really just in the last month or 2, we're now starting to see kind of the first increases from the digital service providers in terms of price. So we've had YouTube increase its price for its music subscription by some cases, nearly 20%. We've also had Apple increasing its price and in a smaller way, Amazon has increased price. And Spotify has given some indications that they're very likely to increase their price. And we think that this kind of first round of price increases for a service that is incredibly cheap. -- music is the cheapest form of high-value entertainment. -- could be less than $0.10 per hour of listening. We think it has a long way to go and Universal will be a very large beneficiary. And one of the great aspects of the business model is when Universal obtains more revenue in this format, it will increase the amount of pace to artists, but there are no additional fixed costs that universal has to incur. And so, therefore, we think that it will be not just a strong benefit to revenue, but over time can be strong bent operating profits as well. So we think this is a really big positive that is actually something that's happened in the relatively near term, and we think that over time makes a lot of sense to have this music service, which is very high value and incredibly low priced, be something that over time can get the value that it deserves. And we think the company is also very attuned to this as all the competitors in the industry. We think this could be kind of a tailwind that lifts the profitability of all the companies who provide this very valuable service. So remain very excited about Universal and are happy with the execution in the near term, and we continue to think that the business has a very strong longer-term outlook as well.

Ryan. Just to emphasize a point, when we speak about Universal or really any company in the portfolio, including, in particular, companies where we're on the board, we're giving Pershing Square's view of results or prospects for the business should not think of our point of view as representing management or the company's point of view. Just other -- in the ordinary course, we will -- we do receive questions from shareholders just I forgot my initial introduction, which is we did receive many questions this quarter. Each member of the team with respect to particular companies in the portfolio, we're going to do our best to address the questions as they -- in their kind of general commentary and if there's time at the end, I'll get to any questions that we haven't yet covered. So with that, let's go to Lowe's. Charles, why don't you -- they just announced results yesterday and had a great quarter. Go ahead, Tell us.

Sure. Thanks, Will. So maybe first, I'd like to at least provide some context on the current macro environment, which is obviously very tangential to our Lowe's investment and is kind of at the heart of the debate on the stock to some extent. So 2022 has obviously been a very volatile year from a macroeconomic standpoint, which Phil has alluded to with the confluence of challenging variables coming together, including overconsumption or pull forward in certain consumer retail categories, which happened during COVID-19, high-end persistent inflation, a hawkish Federal Reserve, which has contributed to a rapid rise in mortgage rates to approximately 7%. And pressuring new home affordability. This has kind of created a sharp deceleration in housing turnover and a deceleration in new home construction. So these variables have exerted significant share price pressure on everything from REITs to homebuilders, public brokerages, mortgage originators, et cetera. And yet, as we look at it from an operational standpoint, home improvement industry as a whole has been comparatively insulated despite these negative externalities. But on yesterday's earnings call, Lowe's addressed this head-on and kind of details what they view as the 3 most important variables they believe most highly correlate with home improvement engagement and all of which they believe continue to be supportive of the medium-term outlook. These include strong home price appreciation and high home equity values. Now even if sequentially cooling month-over-month, which we're beginning to see in the data, home equity values are still very high relative to 2019. Two, a historically old housing stock. So the average home in the United States is older than 40 years old, and there's a large cohort of homes that were built in the run-up to the great financial crisis, which are turning 20 in the coming few years, that becomes a notable inflection point for big-ticket repair activity. For instance, a roof has to be replaced roughly every 20 years. So this cohort is aging into kind of a prime spending block. And then three is high disposable income and strong consumer balance sheet. So that fiscal and monetary stimulus that Will alluded to and the forced high savings rate during COVID-19 contributed to a run-up in strong consumer balance sheet of homeowners in particular, who are sitting on both high cash balances and high home equity values. So this kind of variables combined to manifest themselves in positive same-store sales growth for the industry -- and what they're seeing in the data is that DIY, the do-it-yourself consumers are actually trading up in their purchase behavior right now, which is kind of the opposite of what one would expect if you were about to enter a recession and strong Pro-related project backlogs, which continue to work through projects, which maybe were put off or were the desire to start that project originated in COVID-19, and that backlog will persist for a number of quarters. And so based on all the data available to them, Lowe's continues to believe that demand is likely to remain resilient over the medium term. Turning specifically to their Q3 results, which they reported yesterday. They reported positive same-store sales growth of 3%, which was led by 19% growth in the Pro customer base. Notably, same-store sales growth accelerated throughout the quarter, rising from 34% on a 3-year stack basis to an exit growth rate of 42% and on a stock basis, as the Pro-consumer remains strong and the DIY customer accelerated their engagement with the category after Labor Day.

Sure. So when we reference and we'll do this for many of our retail or consumer companies stack, same-store sales, it's looking at the index level of sales on the current basis relative to a historical period that could be a few years ago. Here, our references are generally to 2019 or the pre-COVID period. And particularly, when you see companies that are growing at a fast rate, it's the multiplicative impact becomes pretty compelling over time because it compounds upon itself. So our references are usually the compounded multiyear stacks. Thank you. No problem.

So the positive same-store sales growth that I referenced was also met for Lowe's with rising gross profit margin and strong SG&A leverage, which reflected broad-based expense control, but also very significant labor productivity initiative. So taken together, they had 3% same-store sales growth, which contributed to 7% EBIT growth, and earnings per share actually grew 20% this quarter, which was aided by a 10% reduction in their share count. Lowe's once again bought back $4 billion of stock this quarter and is trending towards in excess of $13 billion of buybacks for the year, which is really quite impressive. And so for the full year for 2022, the company is poised to achieve roughly 14% to 15% earnings per share growth, which is essentially all driven by margin expansion and share buybacks. And as we look to 2023, our belief that Lowe's will once again achieve strong positive earnings per share growth. And as such, as we look at it, the stock is currently trading at 14x roughly forward earnings, which is a historically low multiple and a discount to its direct competitor. And so while the stock is down meaningfully this year, 18% to be precise. And again, this relates to some of the variables I described at the start of my remarks, this is entirely due to Lowe's earnings multiple compression with earnings expectations actually sequentially rising over the course of the year. Longer term, the only thing I'd add to is we obviously continue to see line of sight for them to grow earnings off the current base as an accelerated rate as they close our revenue productivity and margin gap with their closest competitor. And we note that the company is hosting an Analyst Day in a few weeks, and we anticipate they'll describe there are many ongoing productivity initiatives and establish new medium-term targets at that event, which more appropriately reflect Lowe's long-term structural potential.

Charles. Just like to say here, Lowe's is a really an incredible example of the difference new leadership and great leadership can bring to a company. I mean Lowe's was a consistent underperformer relative to Home Depot. Up until Marvin Ellison became CEO of the company, recruited a new senior team. The vast majority of the employees didn't change, and the business has performed incredibly well through obviously very challenging, volatile, and difficult times, and they've made really dramatic progress in catching up to a competitor that was really far ahead of them. And what's interesting is the stock is still -- the market hasn't yet given recognition to the progress that he and Lowe's have made by rewarding it with a meaningfully lower multiple. Now for us, it's actually beneficial because if you're a long-term holder, one of the most aggressive share repurchase programs that we've seen is happening at 14p instead of a 17 or an ATP and that is ultimately quite valuable to us. And so we're happy to sacrifice short-term mark-to-market performance for long-term intrinsic value performance. So with that, let's go to Anthony. Chipotle, we're going, obviously, an order of size of investments. But go ahead.

Great. It's actually a great segue because Chipotle, like Lowe's had a new CEO arrives in early 2018 and similar to Lowe's, the track record of excellence under the new leadership team here just continues every quarter.

And actually, just fairly remarkable. The stock, I remember the day was $265 a share when he joined and today is $1,300.

Yes. -- but they just reported earnings a few weeks ago. They delivered same-store sales of about 7.5%, which represents 3-year stacked or a 3-year cumulative growth since -- before the pandemic began of 34%. And that's the best result that they delivered this year. Every quarter this year has been above 30%. And then the guidance for this quarter, Q4 is similar to Q3 for mid-to high single-digit increase, which implies that the cumulative growth will continue around that 30% level. And there's really 4 drivers of this amazing top line momentum that I'd call out. The first is price increases to cover inflation that Chipotle is seeing, especially in commodities this year, but also in labor -- there's really been limited customer resistance to that to date. So the Q3 comp of 7.6% was driven by 13% price, a 1% transaction decline, and a 4.5% headwind from mix, which is basically a shift from digital group orders back to individual in-person orders as people resume their work in school routines. And Chipotle's management has taken several nationwide price increases this year, but they recently shifted to a more targeted approach. So in October, they took a 2% to 3% price increase in 700 stores, about 23% of the store base to cover outsized wage inflation that those locations we're seeing. So I believe that we'll see a little bit more of that going forward and a little bit less of the big price increases, but we will see. And I'll come back to the topic of pricing in a bit. The second driver of top-line that I'd call out is the return of in-restaurant sales. So as I mentioned, people are coming back to the office, back to school. So in restaurant sales were up 22% in Q3 and digital sales where the company made tremendous inroads during the pandemic only declined 1%. So you see the digital business is really a new layer of business that the company has earned and has largely kept even as the in-store business comes back. The third lever is successful menu innovation. So this quarter, we have garlic Guaio stake, which if you haven't tried it, I'd encourage you to go out there and try it before it runs out at the end of the year. This will be a comp tailwind in the second half of this quarter since last year's limited-time offering, Brisket, ran out actually around this time mid-November. And then the fourth lever -- oh, I'm sorry, and on menu innovation, important to note they have a spicy chicken, chicken Alpastore that's currently in test. I'm personally very excited about that one. I think the millennial and Gen Z preference for spicy foods is quite robust, and you see it across the food industry.

And you're speaking from the perspective of millennial Gen Z?

That's right. The millennial definitely not Ten, fortunately. But yes, no, look, I think spicy food innovations have resonated tremendously over recent years, and I expect this one will be no different. So that looks like it's on deck for next year. The fourth lever of top line, I'll call out is on the new store side. So they're on track to deliver net new unit growth of about 8%, both this year and next year, and management believes they can get that up to 10% once current headwinds around permitting and construction and equipment availability delays, that are kind of still with us coming out of COVID once those abate. Chipotle is one of the few businesses that we've seen in any sector that's still delivering robust margin expansion even in the current environment. So margins in Q3 were up 2.7 percentage points on an operating profit level, and that allowed operating profits to grow 37%, while revenue growth grew at 14%. So that's tremendous, tremendous operating leverage. And then for Q4, impressively, management is guiding for restaurant margins and operating profit margins to remain largely consistent with Q3, which is impressive because Q4 is typically a seasonally slower quarter. And the guidance for Q4 implies that both of those margins will expand by 5 percentage points from 2021 levels, which is just showcases the tremendous power of Chipotle's economic model. Two key focus areas I'd call out going forward. One is consumer resistance to pricing. That's really the biggest debate on the stock right now. We believe that, that resistance will continue to be limited as there are many indications that Chipotle's value proposition remains really strong. The most popular menu item, the Chicken Burrito or bold that accounts for about 50% of orders, and that still costs less than $9 on average across the country. And we think that's tremendous value when you compare it to other food offerings and kind of not their quality and portion size. Chipotle's pricing is still kind of 10% to 30% below their fast-casual competitors. So still a big pricing gap to be sort of core competitive set, putting aside QSR. -- the grocery store inflation this year remains above any restaurant inflation. So the relative value of grocery is not as compelling as it typically is in these times, although clearly, it can be cheaper to cook at home, so that's something we're watching. The new unit openings remain really strong. So they're opening at about 80% to 85% of the volumes of existing restaurants. So they're not seeing any evidence kind of a slowdown there. And Chipotle also gets great data through their loyalty program and they can look at things for individual customers and to assess trade down, for example, as someone who used to order block, are they skipping the block or they skipping extra meat and they're not seeing any of that right now, which is quite encouraging. -- the lower-income consumer has pulled back a bit, which accounts for that 1% transaction decline I mentioned earlier. But it's important to note that Chipotle's business really skews towards a higher income consumer, and we're talking about on a national basis. That means $75,000 or more in income annually, and they're seeing actually higher frequency amongst those consumers, which is a great thing. Another focus area for management is improving throughput and operational execution. This is something that's a focus across the restaurant industry, given the level of turnover that's happened during COVID. Restaurants performed much better when general managers in particular in their position for a long period of time and are able to create a culture of excellence within the restaurant and the culture of stability. And management at Chipotle is really focused on that. So a tangible metric they're measuring is how fast can they process transactions when they're busy. So a number of transactions per busy as 15 minutes each day. That metric is currently in the low 20s and management has line of sight to get that up to the high 20s, which is currently being achieved by the highest volume locations which have the long-tenure managers that I mentioned. They rolled out an updated training program at the end of the quarter called Project Square One, and we believe that will start to bear fruit in the coming quarters. And improving staff retention is really kind of the biggest lever to make progress on this operational execution side of things. So it continues to perform really well, and we have confidence that management will continue to deliver what they've done since over the last close to 4 years going forward.

And maybe you could just comment on where we are in terms of U.S. penetration of stores. They've changed over time their view where they can build stores, the results of rural locations, et cetera?

Yes, definitely. So we are at around just under 3,100 stores nationally now, and management believes they can grow that number to 7,000. So less than 50% penetrated. And that number used to be closer to 5,000 years ago. But what they found is with new formats, they're able to expand into trade areas that they didn't think were viable before, small towns, rural locations. There's less competition there, which is interesting. And Chipotle's offering is -- there's a lot of newness in those locations versus Manhattan, for example, where that type of using has gotten really competitive. And they also -- the current management team has invented the Chipotlane drive-thru format, which is a digital drive-through. So you kind of place the order for order ahead, pick up, you go to the drive-through window, you just pick it up, which is different from a traditional drive-through where you actually order at the window of weight -- so it's much faster, and that's in 500 stores today, and that has certainly also expanded the addressable market nationally. Canada, they management believe they can have a few hundred stores there, and they only have a few dozen today. So that's another growth opportunity for the brand. And then finally, internationally, they haven't even started that yet. They have just a handful of stores in Europe. And we think this brand can have tremendous international residents in the years to come. So that's a longer-term growth opportunity that we think it's exciting.

Thank you. And one of the reasons why we like restaurant companies, and we've been a big beneficiary of some very successful investments in restaurants over time is once you get the model right and the economics of the box are attractive and you built a real brand, as long as management maintains focus and consistency and you mitigate the traditional risks of that business, it's sort of a compounding exercise, the opening of stores, the progression of sales over time. And as long as the economics of store opening is compelling and the returns here are 50%, 60%, 70% on new store openings. It's really a remarkable business that you can lay out over time and actually global consumption of -- there's a lot of consistency in the kind of food people like globally, and that presents very large long-term opportunities, which is a good segue to Ferro's if you could speak to restaurant brands. We had an interesting announcement yesterday, which I'm sure you'll touch on. But let's go first to how the business is doing and Vent yesterday's announcement.

Sure. So on the business front, the recent results showcased another increasing quarter momentum. So Tim Hortons in Canada, same-store sales improved to about 500 basis points above pre-COVID levels, driven by really improvement in all dayparts and store types. In particular, we're seeing the results of the company's initiatives under its back basic plan with extensions and its average program as well as extending its afternoon foods program. Despite this, some of the super urban locations, so think downtown Toronto stores, those are still below pre-Covid levels. And so there's plenty of opportunity in terms of a tailwind from reopening. So we believe the company will actually deliver same-store sales for the full year that are actually above the guidance they gave a couple of months ago at their Analyst Day. At Burger King in the U.S., the company recently unveiled its reclaim the flame program to reinvigorate growth. The plan includes about $400 million from the company to invest in its advertising as well as refreshing its store base. And while it's still early days, we believe the franchisees themselves are actually very excited to refresh their stores. And we think there's no reason Burger King can't grow in line with its peers. And the 2 proof points for that are really Burger King U.S. performance prior to COVID and the best-in-class performance really in its international business. Burger King's International business actually presents -- represents the majority of their profits today, and they reported same-store sales relative to pre-covid levels above 20%. And that is, again, as I mentioned, best-in-class when you look at large restaurant companies. Elsewhere, Popeyes is continuing to grow well, and we are very excited for their long-term prospects. And then what's really interesting about restaurant brands in specific in this particular uncertain macro environment is that we think they're really well positioned both for sustained inflationary period as well as potentially a recession. So as input costs and wages have increased, really all restaurant companies have been increasing menu prices at a fairly robust pace. And so as the franchisor in this equation, restaurant brands benefit from these price increases, while its cost structure isn't nearly subject to the same inflationary pressures. Importantly, as Anthony alluded to, despite these price increases, food away from home inflation is still below food at home inflation, making restaurant meals, in particular, in the quick service restaurant category, a better relative deal. So in a recession, we think each of the brands would also benefit from consumers trading down. And then as you alluded to, Will, we just heard from 2 of our portfolio companies that Anthony and Charles spoke about, but a single change agent in the leadership team can do, not to be left behind, Restaurant Brands announced the recent appointment of Patrick Doyle as its Executive Chairman. For those of who don't know, Patrick was the legendary CEO of Domino's for about 8 years, where under his tenure, the company doubled system-wide sales, doubled franchisee profitability and really became the #1 pizza company. As a result, the share price increased over 23x under his tenure. And so we think Patrick can help do some of the same at restaurant brands, help it accelerate its digital journey, and also help achieve its full potential.

So over the next 8 years, we can expect 23-fold I'd take 10. I'd be okay with that.