Q3 2021 Arcos Dorados Holdings Inc Earnings Call
Yeah.
We also operated our supply chain with no material interruptions, keeping costs under control with highly localized sourcing and a simplified menu of guest favorites.
We are now harvesting the benefits of these competitive advantages as.
As well as efficiencies, we built into the business over the last 18 months.
Let's turn now to the third quarter results.
Total revenue surpassed seven countries and $23 million shop, three 2% below the total from the third quarter of 2019.
Despite the significant currency depreciations of the last two years and a very different sales channel mix.
This was backed up by 16, 5% increase in two year system wide comparable sales, including positive results in all divisions.
And above the previous blended inflation in three divisions.
Importantly, this momentum has continued into the fourth quarter with consolidated two year comparable sales growth in the high <unk> in October.
Adjusted EBITDA reached almost $90 million with a margin of 12, 4%.
This was more than three times the year ago EBITDA in U S dollars.
And up 17, 7% versus the third quarter of 2019.
The result included a tax credit of $6 $5 million in Brazil.
Excluding the tax credit the consolidated margin was 11, 5%.
Up 130 basis points versus the third quarter of 2019.
Almost 40% of the quarter's EBITDA before corporate expenses was generated in countries that operate in.
Relatively stable currencies.
Another 48% came from Brazil.
Why it's less than 8% of the quarter's EBITDA was generated in Argentina.
Off premise sales through the drive thru and delivery sales segments remain sticky.
Yes, also local juicy and their favorite Mcdonald's menu items through the mobile App and.
And are now coming back to the modernized experience of the future restaurants that will support future digital innovation.
I will now turn it over to Luis for a closer look at our divisional performance.
Thanks, Marcio all article Sorel divisions generated positive two year comparable sales growth in the third quarter and the three exceeded the blended inflation for the period.
This is a testament to the structural competitive advantages that Marcelo just described.
We surpassed pre pandemic sales levels in local currency by leveraging the flexibility of our restaurant portfolio to offset the temporary decline in mall stores and the on premise sales channels.
Importantly, we delivered another quarter of increased market share across all munitions.
Building on the games from 2020.
Brazil's two year comparable sales growth turned positive at the end of the quarter growing mid single digits in September.
Digital sales channels of delivery mobile App and self order kiosks are very strong in Brazil.
<unk> generated 45% of system wide sales.
On premise channels are recovering gradually as mobility improves in the country.
Eating both mall based locations and restaurant from counters to see improved traffic.
In fact October two year comparable sales growth was already very close to double digits in Brazil.
Marketing activities in Brazil, including a new line of mud chicken sandwiches take.
Take home vitals of a popular tasty sauce elimination of all artificial colors and flavors from our kids menu and the first ever 100% plus free happy meal toy collection.
As has been the case in each of the last five quarters know that delivered a sequential improvement in top line growth.
Total revenue in U S dollars grew by three 7% versus the third quarter of 2019 back by five 1% growth in comparable sales on a two year basis, and a relatively stable currency environment.
Mexico is the main story here benefiting from the strength of the brand and the restaurant portfolio and it received and consumption environment.
Panama and Costa Rica are also returning to normal after experiencing a more prolonged period of government post operating restrictions despite high vaccination rates.
In Mexico, we executed a quarter pounder numbers campaign, driving 70% unit growth.
Drive through continued to perform well.
Good delivery in the family business achieved sales records in the quarter.
Topline growth has been very strong in slack and was higher than the division's blended inflation rate over the last two years.
Total revenue in U S dollars was three 8% higher than the third quarter of 2019, despite a 48% devaluation of the Argentine peso over the last two years.
In Chile guests have adapted quickly to digital sales channels.
Delivery volume per restaurant has tripled since the beginning of the pandemic.
We also operate Chinas largest street facing restaurant footprint supporting strong drivers of sales growth even at the on premise sales segments begin to recover.
Argentina has also performed well this year compare with its softer results we saw in the country in recent years.
Marketing activities in flat included the launch of the premium brands tasty sandwiches in Argentina, and Chile, which already took double digit share of total meal sold in both countries.
He said category sales grew double digits boosted by a new flavor in Chile.
Results in the three DS we're also promising.
The drive thru VIP loyalty program, which is executed exclusively through the mobile app drove increased frequency among the one 3 million registered users and flat and more than $3 2 million registered users across all markets.
As we have mentioned in the past the Caribbean today operates at a different level of revenue and profitability.
Two year system wide sales growth was almost 28% versus the third quarter of 2018.
Significantly higher and the blended inflation for the period.
Columbia, Puerto Rico, and the French was indeed, one of the standouts.
Once again, we are benefiting from structural competitive advantages and Colombia with a market leading number of street facing restaurants, and the growing popularity of both the drive thru.
And delivery channels.
Puerto Rico maintained the momentum we have been building in the beginning of last year.
Marketing activities in the Caribbean included the launch of the <unk> chicken sandwich spicy desktop in Colombia.
Two months after the launch.
<unk> remained above expectations as we continue on the journey to grow the chicken category.
All divisions benefitted from our exclusive access to Disney licenses for the family basis.
To drive traffic, while strengthening the brands bond with families.
Finally, the Caribbean already enjoys the company's highest penetration of <unk> restaurants, and we accelerated delivery sales with special promotions to support home delivery channel in Colombia.
The off premise channels continue to grow in the quarter. Despite the gradual recovery in mall stores and on premise sales.
In fact, the split between on and off premise was still nearly 50 50 in the third quarter.
Drive thru sales rose about 12% in constant currency versus the third quarter of 2020 on top of 54% last year.
Driving the volumes per restaurant proved to be resilient, even a strong calendar and dessert center volumes continued recovering month after month during the quarter.
Delivery was up 43% on top of 180% growth last year on a constant currency basis boosted by very strong growth in volume per restaurant.
This included 52% growth in Brazil in local currency on top of 147% growth in the prior year period in that market.
We believe the structure our competitive advantage of our restaurant portfolio together with our <unk> strategy will continue to support total sales growth in both drive thru and delivery looking forward.
We also expected contribution to total sales from these two channels to be unit, rather than cannibalize by growth in on premise sales.
Digital sales have been boosted by the strength of the Mcdonald from mobile App, which offers the most comprehensive functionality in the <unk> industry.
In fact total digital sales grew 54% in U S dollars during the third quarter 2021 versus the prior year period.
The digital platform generated 36% of total sales in the quarter and the industry's highest rated app reached cumulative downloads of $56 million.
With strong customer engagement evident in the active user numbers.
This momentum continued into the fourth quarter with October capturing the highest number of active users for the year and there is still much more to come.
The evolution of the performance of the <unk> gives us great confidence and optimism for the medium to long term prospects of the Mcdonalds brand in our region.
Mariano opportunity.
Thanks Luis.
We are very pleased with adjusted EBITDA generation in the third quarter.
This result was underscored by improved profitability.
With all divisions generating restaurant level, EBITDA margins equal to or higher than the pre pandemic period.
Although we thought we would have a better second semester vis recovering profitability in sooner and stronger than we expected.
Three divisions generated higher adjusted EBITDA results in U S dollars compared with the third quarter of 2019.
Boosted by the fact that almost 40% of the quarter's EBITDA came from markets that operate in heart or more stable currencies.
Keep in mind that in addition to Argentina's relatively small contribution to consolidated EBITDA, having our corporate back office based and we're excited for.
<unk> provides a natural hedge against currency risk.
In other words, when the Argentine peso devaluate corporate expenses declined more or less in line with the decline in Argentina EBITDA in U S dollars.
Once again <unk>.
For our paper costs and payroll expenses were lower as a percentage of revenue versus two years ago.
For the vapor improved by 30 basis points versus the prior year and was 50 basis points better versus the third quarter of 2019.
Payroll expenses were also lower versus the third quarter of 2019, improving by 180 basis points as a percentage of revenue.
<unk> you.
So the higher contribution from the more efficient off premise sales segments.
These margin improvements more than offset the margin impact of higher aggregates or payments.
Associated with the growth in delivery sales.
Brazil's adjusted EBITDA margin reached 19% in the second quarter or 16, 6%, excluding the tax credit, which matched its third quarter 2019 margin.
For our paper costs remain in line with 2020 levels, despite commodity price and the input cost increases.
No. That's EBITDA margin improved by 50 basis points versus 2019 with strong performances in both Mexico, and Panama, where dry front delivery sales continue to grow keeping.
Keep in mind that Nolette too.
2019, EBITDA margin included a 150 basis point boost from the Refranchising of some restaurants in Mexico.
Excluding refranchising from the 2019 result.
The division's EBITDA margin expanded by about 200 basis points in the last two years.
Flat.
<unk> third quarter 2019, adjusted EBITDA margin by 80 basis points.
As rich mentioned.
Momentum in the Chilean business remains robust and Argentina has been relatively strong after challenging results.
In recent years.
Finally, the Caribbean Division built on the sequential improvements it has been delivering since last year.
Adjusted EBITDA grew almost 38% versus the prior year and excluding one off the 12, 4% margin was the highest for the divisions since at least 27.
Puerto Rico, and Colombia were the main drivers of the results.
Compared with two years ago restaurant margins improved by 130 basis points.
Increased occupancy and other operating expenses as a percentage of sales were.
Were more than offset by efficiencies in food and paper and payroll as well as slightly lower royalties, reflecting higher growth support this year.
Total cash G&A expenses declined by 60 basis points as a percentage of revenue with a recovery in top line and still lower travel and other expenses.
The third quarter's total G&A includes expenses related to the reorganization of vehicles, but others into three divisions.
This reorganization.
Which became effective as of October 1st will make for a more agile company.
Able to adapt even more quickly to local consumer trends and guest preferences.
Excluding these nonrecurring expenses total.
Total G&A declined by almost 10% in U S dollars versus the third quarter of 2019.
Putting it all together consolidated adjusted EBITDA margin expanded by 220 basis points compared with the third quarter of 2019.
And our bottom line.
Also rebounded.
$225 $2 million or 12 cents per share.
Cash flow from operations has been strong this year.
As a result net debt was at its lowest level since the end of 2018.
Despite the modest increase in total debt last year.
This combined with the strong EBITDA performance over the last few quarters.
The net debt to adjusted EBITDA leverage ratio to the low end of our 2% to two five times comfort range.
Is well ahead of the guidance we provided for this year.
If you remember we originally expected to be closer to the high end of the comfort range and only by year end.
Capital expenditures were $25 $6 million in the third quarter.
We opened 12, new restaurants of which 11 are freestanding units, including all tenant openings and proceed.
For the year to date through September we opened 41, new restaurants, including 34 in Brazil.
We should remain within the guidance range of 40 to 50 openings.
More than 90% of these will be in Brazil, with 90% freestanding units.
In other words this year, we already returned to 2019 levels of freestanding restaurant openings and we increased total new restaurant openings in 2022 and beyond.
Total capital expenditures for the year should be within the guidance range of $110 million to $130 million.
Finally <unk>.
Look for a save the date in the next several weeks for an Investor update event early next year if possible in person in Brazil.
No later than the end of February 2022.
We expect to be able to provide you with openings and capex guidance for 2022 and beyond.
Marcelo back to you.
Thanks Mariano.
As I mentioned earlier ESG is part of <unk> DNA.
The recipe for the future ESG platform focuses on the areas of opportunity are cashing on recycling sustainable sourcing climate change commitment to families and diversity and inclusion.
Starting with youth opportunity on our last call, we announced a new program.
Through our award winning Hamburger University.
Free online certificate courses available to all young people in Latin America and the Caribbean.
This introductory level courses cover five areas of instruction.
Signed to help young people enter the workforce and build successful careers.
We are very pleased to report that more than 20000 young people enrolled in the courses in the last three months.
We also launched its very interesting pilot program in Colombia.
Within the packaging and recycling pillar.
Of our ESG platform.
We have partnered with Amazon Echo.
And mgo dedicated to promoting recycling in the country.
And with that I'd put our exclusive delivery aggregators in Colombia.
The program provides customers with a kid to call. It a return recyclable waste from their delivery orders by returning it to Idaho drivers supporting a more circular economy.
In Argentina, we took another step to support our climate change commitments by signing an agreement with bumper and adhere to start using sustainable energy sources to power our restaurants in the country.
Within commitment to families together with Mcdonald's last month, we announced the happy meal points will be made from 100% sustainable materials by 2025.
As you heard today from Louise we introduced the first 100% sustainable type collection this year working towards the 2025 commitments.
Finally in Brazil, we were ranked in the top 10, among the country's largest companies by great place to work.
We are the only restaurant company ranked by this respected organization in Brazil.
And just last week, we were.
We're recognized by the CTO absorb Pablo receiving their municipal seal of human rights and diversity.
The work, we do to generate job opportunities for differently abled people.
We are very proud of the work, we do a back of house to promote diversity and inclusion in the workplace.
You can now learn more about the main elements of our recipe for the future in English and download the audited social impact on sustainable development report for 2020 by following the link at the bottom of the slide.
The long term strategic investments, we made over the last several years as.
As well as the efficiencies we build into the business in the last 18 months.
Made it possible for us generate one of the best third quarters result in the Companys history.
Guests are coming back to mcdonalds.
They trust us to deliver the region's best and safest restaurant experience.
Heading into 2022, we are closely monitoring and adjusting to headwinds in our region.
Nonetheless, we are pleased with the current trends of the business and we believe we have built significant is structural competitive advantages that cannot be easily replicated.
We operate the regions largest freestanding restaurant portfolio.
Which we built over the course of decades to ensure our ability to adapt to changes in guest needs and preferences.
We also feel confident that the previous strategy of drive thru delivery and digital will continue to accelerate sales and profitability performance for many years to come.
I will now turn the call back to you to start the Q&A session.
Sure Mark.
In order to get started please minimize the presentation slides. So that you can access the chat function on the left hand side of the webcast platform.
Please limit yourself to one or two questions. So I can read understand and converted them to our speakers.
We will now pause briefly to part of your questions.
Okay. Our first question comes from Marcella Recchia of credit Suisse.
Thanks, and congrats on the results as that with our net debt to EBITDA ratio already below the target of two five times what can we expect in terms of expansion plans for 2022.
I think thats over for you Marcello yes. Thank you good morning, everyone I'm sufficiently marcela. Thank you for the question. Yes. As you mentioned, we are already within our comfort range in terms of net debt to EBITDA ratio, which is two to two five times revenue in the low end of that ratio.
The excellent results we have.
<unk>.
As you know under the MFA every three years, we are going to eat in our restaurant.
Operating plan and our reinvestment plan with Mcdonalds.
Particularly for 2020 and present in tier one we suspended the three year agreement mechanism.
The uncertainty and the original related with.
The impact.
The impact of the copier issue so as.
As of today, we feel comfortable enough with the trends of the business and the visibility we doubled the markets, where we operate in order to assume the three year planning.
And in this case the cycle.
For 2022, and 2020 before and we are in the final stages of the discussions of the process with Mcdonalds I think that we are.
Youre going to have a very strong plan for this three year cycle.
We expect to announce the new plan early next year as we always do in the past.
At this time is to do that during our investor updates, but hopefully we will have we will show in person in Brazil.
During the first couple of months of 2022 what I can tell you is that.
But we are seeing is that we will be able to accelerate both openings.
<unk> reimbursements.
The deployment of <unk>.
Restaurants.
Thank you and the fact that we are seeing.
The potential for both.
Yes.
Investments if you recall our pre pandemic.
For the video of 2022 2022 included somehow around any one company restaurant openings per year.
Important to mention that the mall based restaurant pipeline embedded in that plan.
Has been drafted are reduced.
<unk> on our current view of the market opportunity in the malls on the other hand, the pipeline of freestanding units remains remains strong and we are working to capture additional growth opportunities over the next several years.
We also expect to Reaccelerate, the more implementation of our restaurant base.
Given the excellent results, we are seeing in our experience of the future restaurants.
But once we leave this.
This year and of course, we will continue to invest.
Our industry, leading digital platform.
Regarding that in order to expand capabilities and enhance the customer experience both on and off premise.
We still see we still think that the long term unit growth potential remains very robust in all of our main markets.
Given the under penetration of them across brands. So.
Both our capex.
Spend will be correlated forward cash generation.
Remember that we typically sell fund.
Our gross investments.
We are in an excellent position given the fact that we have the best development team in the industry and in the region.
We know the power of the Mcdonald's brand that was tier than ever during the.
And when it comes to winning new restaurant type contracts, we have been very good.
Power to negotiate so that's our view around Capex capex going forward again during our investor update.
Much more detail and more color around this for the next three years.
Great. Thanks Marcell. The next question comes from ideas velocity of Blackrock investment he says that as our balance sheet and cash flow continues to improve where we are the board consider buying back shares if the price doesn't reflect the value of arcos and does management or the board regularly compare the IRR of buying back shares versus opening new restaurants.
I think I'll turn it over to you.
Thank you Dan and thank you.
For the question and hi to everybody.
We continuously evaluate the rate of returns to make our capital allocation decisions and as you know my dancing in recent years, we have implemented.
I bought shares program.
And for going forward and looking forward, we will continue to.
Do exactly the same.
We will continue to evaluate all different options that we have available in drilling of course restaurant openings modernization of succeed in stores digital investment and followed the investments we have been doing so far.
On top of other alternatives like buying back shares and we will find that of course looking at best tradeoff returns of each of them.
Great. Thanks Marianna.
The next question comes from Leonardo <unk> from Morgan, Yes, if.
Coupons or discounts are included in the mobile App sales.
Or is it only the takeaway functionality in other words mobile order and pay or Mexico, and Brazil, I think that's that's pretty routes.
Alright.
Thank you for the question.
Hello.
I mean.
The answer is yes. The digital offers are included in the mobile App sales and.
And a Y a wider content would be that.
Everything is continuing to digital sales. This is MLP digital offers delivery to appeals on delivery and self ordering kiosks.
And one thing that I wanted to highlight is that these are very worthwhile, because we deliver them by segmenting, our customer base and personalization.
And just a quick heads up I think the operator may have heard that as well we got some background noise. If you guys could pick that up that would be great. Thank you.
The next question. Thank you. The next question is from Jaguar for Lucielle Goldman Sachs. He says Hi, Marcella Bennett team good morning, everyone and congrats on the results and thanks for taking our questions.
Gross margin has positively contributed to overall profitability printing higher than 2019, despite the persistently high cost inflation given the macro backdrop in the region Shouldnt get improved anytime soon how are you framing that equation between growth pass through mix and profitability going forward and on a relative.
What are the markets in which you believe pricing and profitability could be more challenging over the next 12 months. That's the first part of Charles' question in August we'll start with Mariano and then we will take the second part.
Perfect. Thank you Thiago for the question and.
In fact, all of the work that we did.
During the pandemic with with cost management initiatives.
Our paying off during this full recovery phase.
Sales are returning to pre pandemic levels, and we are gaining market share.
So we think that the best way to contribute to our to our margins is by increasing sales and by increasing traffic, having more customers visiting our stores.
And from there we have built in all the cost management.
Reductions initiatives that are showing in this third quarter.
We are doing everything possible to maintain and to have all these <unk>.
<unk> ability gains going forward.
What what I, what I can tell the lease.
As already mentioned a bit about this sales recovery and this is what is allowing us to leverage on all our cost lines all segments from down 30%. The sub centers strikes on delivery are showing very good results and from there is that where we have a bill.
For example for our paper in the gross margin, which as you know it's the most important cost line.
In our P&L I mean, the food and paper costs.
And we are effectively improving our our gross margin. Despite the food cost pressures that we are facing in.
Many of our markets by managing pricing through revenue management.
Dynamic.
I think pricing and.
As well.
Bye bye working on on the product mix with segmentation with all the effort we are doing in digital in the digital era.
Area, where we are investing and we are.
Doing a lot of.
Of things like with the digital App and all the Mark of a marketing segmentation, which are giving US. The result that we are we are we are seeing in our E&S and on top of that of course, all the cost negotiations with our main suppliers.
We can know given our size and the long term relationship that we have with with our main <unk>.
Suppliers, so I think that.
What's.
What you're asking about that mix between.
Focusing on <unk>.
<unk> market share of sales I think we're doing a bit of all of them.
We are improving sales we are improving traffic we are working our costs. We are working on the product mix. We are working on our dynamic pricing and all of them are the ones that are showing in our our final results for the quarter.
And maybe we can go to the second part.
Great. Thanks, Mike.
The second part of Charles' question relates to market share and you asked as it also is it possible to share more details around market share evolution, specifically in Brazil.
So I'll turn it over to words alright.
Hum.
Hello, Thank you for your question.
In Brazil, According to Craig.
I remind you to syndicated customer study.
That is conducted by <unk> Research Agency MPD group and is used in major countries around the world.
According to them the key sub segment grew about one five percentage points of market share.
We got two thirds of that sure is comparing to 2021 versus training teams.
<unk> numbers and no other player again more than 20 basis points of share in that period.
And.
When I wanted to thank VSAT, we experienced market share gains in all divisions and in every corner.
These gains are seen at both traffic share and value share.
It's also important to note that not only we are gaining share, but we're doing it faster than any of our closest competitors and we think this is a bone of <unk>.
Contributions from our customers and this is nothing we solve a silver bullet.
These market gains are a product of our unique restaurant footprint.
Strong focus on operational excellence.
This allows us to operate through drive thru delivery centers now cafes.
From counters and out we have the industry, leading digital strategy and we have to a set of marketing initiatives that have consolidated brands in the region.
Yes.
The next question is from quarterly leg of it out we.
He congratulated us on our results audits for having been disconnected for a period, but ask what was the rationale of the operations' reorganization and what kind of G&A savings kind of generate and by the way.
<unk> asked this and then I have another question from leases Agua from Jpmorgan.
A similar question, so rather than repeat it.
I'll turn it over to Mike to you Marcello.
To answer the question about walking on Oasis to US. Okay. Thank you. Thank you both of them for the question.
We have been always.
These are some nuclear power industry in our region.
Latin America and the Caribbean.
Thanks to the way the strategic and long term vision.
Vision of that we have in order to take the decision for the company. So.
We have been given.
Careful that issue.
<unk>.
Two how reorganization should be managed.
Going forward.
And we believe we premium we believe that our teams are ready for this new organization and this is next.
It's important for me too.
For you to know that this is not a cost cutting decision.
Instead. This reorganization is intended to give us more and more agile company.
Given our local teams more ownership and at the same time more resources to support the daily decision, making on the markets.
At the same time.
We are allocating additional resources to maximize the initiatives that are providing.
The greatest contribution has the greatest potential to generate future growth.
Perfect.
We firmly believe that this is the right organizational and structural.
Advantage of the full revival face in our markets in the U S.
Took out overtime.
Overtime on in recent years are we starting to a decentralized decision making.
Given you do visible markets more freedom to operate within our strategic trademark.
During the pandemic for example, local management teams were crucial for successful response to the rapidly changing conditions in each market each market was different than the other and so our people in the markets did a tremendous job on the kind of results we are reporting to date.
Can assure you that those are a consequence of all the great big Black oil cuts across the region.
The right decision everyday so.
We've seen that this new structure will allow us to apply the learnings from the pandemic.
And we will build on the excellent results, we delivered in the third quarter of 2021.
The divisional teams will continue to provide the guidance.
And share best practices and these will ensure that each market works within the established trend.
Corporate names will develop and deploy new capabilities and will manage the company strategic direction.
Direction.
Established by our board. So that's the rationale behind the changes we made on for sure we will talk a little bit more around lease on our investor updates.
First quarter, they're not next year.
Great. Thanks Marcello.
The next question is from when you started about the group had you've already answered the second part of his question reduces from JP Morgan.
So it's low everyone hope all is well and congrats on the results and his first question is related to EBITDA margin outlook as we mentioned on the call margins across the regions are trending in line with or above 2019 levels. So if you wanted to get our thoughts on the sustainability of these trends and the main drivers for further margin expansion.
I think that question is for your model.
Perfect. Thanks, Lisa for the question and I will answer the question.
Keeping in mind that part of that I already answered when when Gameloft asked about.
And gross margin.
How we are seeing the business.
On the EBITDA margin outlook.
The result is that in this third quarter EBITDA margin improved by 220 basis points compared with 2019.
130 basis points, if we exclude the tax credit.
I mentioned in the previous question.
Uh huh.
The main driver is that sales are recovering.
And that we are in this full recovery phase now.
And customers are returning to our stores.
Okay.
I already mentioned, how we are improving the gross margin working on pricing working on product mix and working on costs and we believe that with the new device outward or how the business is evolving with the new segments with a girl.
So we are seeing in drive thru and delivery and how the front counter and dessert centers are recovering we still have.
We have the possibility to maintain and to improve our.
Gross margin in that respect.
Regarding payroll, which is our second cost line, we are seeing improvements compared to 2019.
Also improvements are coming mainly from productivity gains.
Remember that when we sell off premises our productivity.
<unk>.
And also we have received some government support in the last six months.
That probably will not replicate going forward regarding rent we are keeping.
Rents under under control and this has been the result of all the work regarding rent and all the other fixed costs that we have in the occupancy and other cost line.
The work that we have been doing since the pandemic started but that we are very confident that these gains in in in margins in negotiations.
We will keep them and maintaining maintain them going.
Going forward, so regarding food and paper regarding payroll and regarding to the occupancy and other cost lines, we see that the new gains at the margins that we are seeing in this third quarter.
Could be replicated going forward then of course, we have delivery fees delivery is a segment that is growing month after month and as you know we pay a fee to the to the <unk> that also you can see on the occupancy and other cost line, but all the benefits.
And of course, I always mentioned lease by lease is worth.
This again delivering into highly accretive at segment to our business and all.
All the gains that we've seen the Liberty Youll see of course, the top line, but in other cost lines, where we see other.
Other gains.
No.
And also to end with the EBITDA margin outlook. We are also leveraging in the G&A.
We have faster with one we are seeing faster sales growth and <unk>.
This new norm alone that also allows us to get some leverage on it.
On the G&A. So as a result of all these trends we believe that our historically highest EBITDA launches of 2019, you'll remember it was 10% at the base off of which we can continue expanding margins in the years to come.
Great. Thanks Mariano.
Our next question is from John follow on there.
Rajiv at their school.
You Congratulates on our results in Texas for taking this question.
And he asks what was the penetration of delivery in the quarter, if we could share.
I guess the question is for us.
Hello, Joe Thank you for the question yes.
Yes.
So far each year.
We have generated around 17% of sales year to date and up around 15.
Sandy in Q3 despite.
Despite the gradual recovery in the on premise segments.
Sales were up 83%.
Year to date and 43% in Q in the <unk> 'twenty 'twenty. One this is versus 2020 and like we said before growth of 42% is on top of 180% growth.
Last year.
Our operational focus today, we feel tap opportunity is to improve accuracy service time, and the customer satisfaction and we are benefiting from our sustained customer.
Demand because even though we have seen a strong recuperation of the on premise channels I'll remind you that on premise channels are you sort of centers from counters or more stores.
Even though the these channels are recuperating delivery and a slower pace keeps on growing and we're being able to to sustain the beat base gain during the pandemic, we strongly believe that on premise sales.
Rather than cannibalize if sales of this segment.
Perfect. Thanks, Louis and actually I should have mentioned drop also had a second part to this question, which I think we've already addressed which is his question has to do with a remarkable ability to having maintained food and paper costs flat. Despite inflationary pressure in Brazil. I also asked how should we expect that line to perform.
Moving forward given protein export embargo to China, and so on I think Mariano you've already addressed that so.
That being the case, it's actually the last question that we received wanted to thank everyone for joining us today and for your interest in the company with the C&I are more than happy to get on the phone with any of you are following.
Today's call on extra days to go through our results in more detail.
Until then we look forward to speaking with you again on our next earnings call, which will be sometime in March of 2022 actually before that we'll have our investor events.
No later than February of next year, and until then have a safe day.
And we'll talk to you soon thanks, so much.
Right.
Okay.
Okay.
Yeah.
Sure.
Okay.
No.
Sure.
Sure.
Okay.
Yeah.