Q3 2022 Arcos Dorados Holdings Inc Earnings Call

November 16, 2022

Yung.

In our discussion of our third quarter results you will see that we were able to maintain the strong trends of the last several quarters.

Build on what we told you was a better than expected month of July .

This means business momentum was very strong as we headed into the year as most important quarter and Thats why we finalized our plans for next year as well.

Total revenue in the third quarter reached $916 million.

Comparable sales grew more than 34% versus the prior year.

<unk> by higher gas volumes and market share gains throughout the <unk> footprint.

We leveraged our structural competitive advantages with a continued focus on our winning strategy.

Digital sales contributed 42% of the quarter system wide sales, reaching almost $500 million.

This new three month record included all time highs in mobile App self order kiosk and mobile order and pay sales.

Delivery and drive through sales grew 34% and 11% in constant currency respectively.

These increases came from gains in both volume and average check.

And outperformed many other restaurant chains, even as on premise sales continued normalizing.

We have been able to sustained growth on these channels things to the structural competitive advantage offered by our freestanding restaurant portfolio and disciplined operational execution.

Luis will take a closer look at these results in a few minutes.

Although were facing a comparison with last year's record third quarter result, adjusted EBITDA in U S dollars rose another 15% this year.

By focusing on sustainable sales growth, we generated operating leverage to help offset some of the headwinds we knew we would face in the quarter.

Last year's reported result was hit by a tax credit in Brazil, as well as government federal support programs in the lab.

This year food and paper costs remain elevated and we also have the final step up in our royalty rate.

Despite all of these factors EBITDA margin remained solidly in double digits.

Our net income almost doubled versus last year.

Now, let's dig into the results by division, starting with risk who will run through the divisional sales performance.

Thanks Marcelo.

<unk> sales growth remained strong in the third quarter, increasing at a rate of about two times blended inflation for the period.

This is about execution.

Here, we say that its not real unless it's real in the restaurants.

We attract guests through marketing and digital initiatives, but guests keep coming back because they have a great experience each time, they interact with the Mcdonald's brand.

It doesn't matter, if it's a physical visit or a digital interaction.

<unk> experience must be great.

Brazil's comparable sales rose 21, 8% in the quarter.

About two five times in place during the period.

Digital sales penetration rate in Brazil is the highest of all our core markets.

<unk>, 52% of system wide sales in the quarter.

As Marcelo already mentioned off premise sales growth was strong in the quarter.

As on premise sales normalized.

This sustained the recent trend of industry, leading market share gains as <unk> took additional share from informal players in the countries restaurant industry.

Brazil's marketing activities in the quarter focused on programs and investments designed to reinforce the brand's core strengths.

For example, leveraging its cultural relevance by partnering with <unk>, one of Brazil's hottest pop artist for the latest installment of the successful <unk> campaign.

To drive further digital adoption, we invested in a 360 degree campaign to promote the mobile order and pay feature of the App.

This omnichannel approach to the digital strategy is strengthening brand perception related to convenience and generating significant sales growth in this channel.

After the quarter ended we shifted gears in Brazil to leverage the Mcdonald's global sponsorship of the FIFA World Cup.

We introduced a highly anticipated lineup of eight sandwiches.

Each day of the week features a specific country thin sandwich, including Argentina, France, Germany and Mexico.

The market, Brazil, which was available every day has already sold out.

Clearly the campaign has been a resounding success and we just had our best ever month of October in terms of sales.

No, let's topline continues to be driven by Mexico, Costa Rica and different within this.

Comparable sales grew at two six times, the division's blended inflation rate in the quarter, leading to additional market share gains in all main markets.

Marketing NOLA featured menu innovations such as the introduction of the ultra hyper Mega Tasty campaign that leverages, the signature beef and crispy chicken platforms in Mexico.

But I think I became the first market in the adequate footprint to launch better Burger.

This ambitious global project provides an enhanced flavor profile and improved quality perception among guests, which is already showing strong results.

Digital sales and no net grew around 200% versus the prior year quarter aided by the continuous improvement in niche markets mobile app functionality, including mobile order and pay as well as a greater marketing investments to promote the digital platform.

No that also launched localized World Cup sandwich campaigns in all markets within the last three to four weeks with excellent results so far.

Flat comparable sales growth reflected strong top line performance in all its main markets rising at one eight times blended inflation in the period.

This sales growth helped mcdonalds brand market share expand in the division.

Driven by higher guest traffic, both on and off premise.

Digital sales penetration also growth in the period with 43% of slabs third quarter sales coming from digital channels all.

All of which grew sequentially versus the prior year quarter.

Marketing flat continued building brand love with generation Z guest thanks to a famous orders campaign with the popular Latin artist semi conductor.

During the quarter, we introduced the <unk> sandwich to the menu in Colombia, and Chile, where it received strong guest response.

We also had great news in that is our business with the launch of the Mac plenary talk around more in Colombia.

This locally relevant products generated guest excitement and drug unit sales to the highest level ever in that country.

As in Brazil, a note that fourth quarter marketing flat is now focused on the FIFA World Cup.

Linking one of the region's most culturally important sporting events with the Mcdonald's brand provides us with an exclusive opportunity to connect with guests and drive sales leading into the month long tournament.

Over to Mariano for a look at how strong revenue growth drove record profitability.

Thanks Louise.

<unk> already heard today, we are reporting another quarter of strong adjusted EBITDA growth.

And the performance remains broad based with all three divisions generating solid profitability in the quarter.

Starting with consolidated EBITDA margin, we improved occupancy and other operating expenses, thanks to well above inflation sales growth.

Payroll expenses were only higher versus 2021 because of the government support programs that helped last year's result.

Excluding the support from last year's number.

Payroll expenses were lower this year and our solid below 20% of company operated sales.

As we told you to expect on our last couple of calls we experienced gross margin pressure in the third quarter.

Brazil's gross margin improved but this was offset by higher food and paper costs in the other two divisions, especially Nolan.

We continue to expect full year, 2022, food and paper costs to be about equal to full year 2021, as a percentage of sales.

Finally, G&A expenses remained relatively flat in margin terms.

Turning to the divisions and starting with Brazil ebay.

EBITDA grew more than 20% in constant currency.

Even though last year's result included a non recurring tax credit.

Healthy revenue growth generated an improvement in gross margin and operating leverage in restaurant expenses that more than offset the final step up in the royalty rate.

And no lead EBITDA margin remained at nearly double digits as strong revenue growth generated operating leverage to partially offset a tougher cost environment and the final step up in the royalty rate.

Results were also negatively impacted by hurricane Fiona that hit Puerto Rico in September .

Importantly, however, EBITDA in U S dollars still grew versus last year.

Slot revenue growth successfully generated operating leverage in the quarter offsetting some cost pressures to expand EBITDA margin and deliver strong U S dollar EBITDA growth.

Our strategic focus remains squarely on long term profitable growth.

We expect to sustained comparable sales growth at or above inflation, which can generate additional operating efficiencies.

With that outlook, we expect to accelerate restaurant openings moving forward.

Cash generated from operations exceeded $235 million in the first nine months of this year.

With a stable numerator and improved denominator net leverage was just onex as of September 32022.

Additionally, the average maturity of our debt is now at around six years.

Two more than at the end of the first quarter of 2022.

We are using this premium net financial position to our advantage today and will use it to support our future growth plans as well.

Through the first nine months of 2022, we opened 45 restaurants, including 40 freestanding units.

In Brazil, we opened 30, new restaurants of which 27 are freestanding units.

We also continue strengthening the industry's best digital platform by investing in the development of new capabilities and rolling out existing futures to additional markets.

I am pleased to tell you that as of today, we have already opened 55 restaurants, we guided to for the full year.

And we are on track to open another 10 additional restaurants before the end of the year.

Around 90% of all openings continue to be freestanding locations.

We are generating above average returns thanks to high sales per unit and efficient operations.

Looking ahead, we expect to accelerate our pace of growth.

The development team has increased the size of the already robust pipeline for the next several years.

And recent openings are proving that there is still a lot of growth potential for the mcdonalds brand in our region.

It has become very clear that penetration generates demand and we are working to ensure that we capture that demand with the best return possible for shareholders.

We plan to tell you more about this in early February of 2023, when we expect to hold an in person Investor day in Sao Paulo, Brazil.

As we have done for the last couple of years, we expect to provide you with a preview of fourth quarter of 2022 results as well as our growth outlook for 2023 and beyond.

The IR team will be sending out a save the date in the coming days.

Back to lease for a closer look at the three DS digital delivery and drive thru.

Digital now accounts for 42% of total sales.

And it's not just delivery driving growth in digital.

In the third quarter, we also set new records in self order kiosk sales, which were available in more than 900 <unk> restaurants.

Mobile order and pay sales supported by enhanced functionality and a rollout to a growing number of markets and sales generated through the mobile app, which has been downloaded almost 80 million times and is the main digital communication platform with guests.

In the third quarter identified sales grew by 57% versus the prior year.

As a result, 17% of total sales were identified.

Including 21% in Brazil.

These are sales from guests who have opted in to allow the data to be used in our marketing activities, which enables us to enhance the Mcdonald's experience and maximize profitability.

This is all part of the Omni channel approach, we started telling you about in 2019.

Guests today have never had so many choices in how they interact with us.

Ease of use drives higher frequency, which explains the increasingly high yield revenue per guest within the article totals digital ecosystem.

Among the newest functionalities is what's a bot that takes delivery orders in Colombia and Mexico.

<unk> is fully integrated with our kitchens.

Helping guarantee speed and accuracy.

We plan to roll out to more markets in the coming months to capture the potential of a much larger addressable market seems whatsapp is widely used in Latin America.

On the logistics side, one delivery is operating in almost 600 restaurants in six countries.

Solutions include restaurant crew members delivering orders over very short distances and third party last mile operators executing the delivery.

This will help us further develop and monetize these new consumption occasion in our markets.

The unmatched physical presence of freestanding restaurants in the article tornadoes footprint has undoubtedly been the foundation of the last five consecutive record quarters.

But it should also be a testament to the significant competitive advantage, we have with our digital ecosystem.

The junction of these two platforms into a seamless digital experience is fueling our market share leadership.

Using Brazil as a proxy there has been a permanent shift in volume to off premise channels.

Meanwhile, on premise traffic has improved steadily since 2020, which contributed to a moderation in the drive through traffic growth. This year month delivery volume and total sales are both up this year driving 29% sales growth in Brazil, Despite a relatively flat.

Industry trend.

Our strategy to drive revenue through volume growth is clearly reflected in the quarter's visit share metrics.

Total visa share increased by three one percentage points versus the prior year quarter, when the Libre visa share rose by four percentage points.

Even with the results we are generating there are still so many opportunities to improve operational performance and Thats why I am excited about what is yet to come.

Ausiello up to you.

As you know by now we have a robust ESG platform, we call the recipe for the future.

This is such an important part of our overall strategy that 10% of the variable compensation for every bonus eligible employees is tied to ESG metrics.

Our financing strategy is also linked to surfing ESG objectives.

And we are the only USR operator in the world to publish an annual ESG report that includes oriented content.

We are on a journey to increase the use of renewable energy sources.

<unk> jumped from 4% in 2022% in 2021.

We will be at least 50% by 2025.

This year, we have assigned new renewable energy deals, including with EVP in Brazil.

Here in Colombia.

These agreements are expected to bring millions of dollars in renewable energy infrastructure investments by our partners.

In addition to supporting the development of these critical alternatives to fossil fuels the restaurants, they supply will have reduced energy costs.

The latest bill with Butler in Colombia in box installing solar panels on the roofs of several of our restaurants.

They are also installing elevated solar panels in the parking lots that will generate energy for the restaurants, while also providing shade forget vehicles.

Our commitments are not just about reducing carbon emissions. However.

We are also leveraging the nature of our business to support use of opportunity in the region.

The 65 restaurants, we intent to open this year, we generated 3000 to 3500, new format job opportunities for young people.

They will receive training on practical experience with everything from food safety teamwork and process to customer service leadership skills and sustainability.

Generating jobs is not good enough if the work environment is not attractive.

This is why we are proud of how our workplace has been recognized by others throughout 2022.

In the last few months, we were honored again with great place to work ranking us eight among 150 large companies in Brazil.

First in April over as a great place to work for women.

Among the benefits of our work environment is the training employees receive Hamburger University in Sao Paulo.

Over the last two years <unk> has also developed a series of certificate level courses.

We are available for free to anyone who wants to a role not just employees.

Finally, each year, we choose one day two race donations through the sale of big Macs in several markets.

Proceeds from these sales are being used to support local NGL partners associated with two important recipe for the future pillars.

Youth opportunity and commitment to families.

Thanks to the generosity of our guests I am proud to tell you that we run the most successful campaign in our history. This year.

Racing record donations to support this worthy causes.

Before we open the call for Q&A I will wrap up with the few finance thoughts on the third quarter and a record sequence of results, we are delivering to create shareholder value.

I have no doubt that execution at the restaurant level is the main reason Mcdonalds brand strength has never been higher in Latin America.

Guest experience each and every day is key to driving long term sustainable revenue growth.

That then generates opportunities to capture operational efficiencies and dilute fixed cost to enhance profitability.

Bryant capital structure management, and data driven investment decisions complete the picture of profitable growth all the way down to the bottom line.

Unlike the big months special sauce. This recipe is not a secret.

But to do it well requires an incredible amount of work discipline and dedication from everyone involved.

So I would like to take this moment to congratulate and thank all our employees suppliers and franchisees.

For their contributions to our shared success in Latin America and the Caribbean.

When the year began we told you that we estimated growth potential over about 1000 additional Mcdonald's restaurants over the next 10 years in our footprint.

With higher sales per unit.

Above average ROI and recent openings.

I now believe we may have underestimated that potential.

The pipeline for the next few years is already clear to us and we expect to accelerate unit growth moving forward.

Looking ahead, we will also leverage our growth accelerators to consolidate our leadership position in and out.

<unk> penetrated region that still presents significant untapped growth potential.

Don over to you to start the Q&A session.

Thanks, Mark so 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 that I can read understand and convert them to our speakers.

We will now pause briefly to compile all of your questions.

Okay, Great. Our first question comes from Juggled more dilutive from Goldman Sachs.

Since high Marcello in Arcos, Tim Congrats on the results and thanks for taking my questions.

My first question is on underlying operating performance, how should we think about the net impact from the World Cup to volumes in Brazil.

I'll start with you Marcello.

Thank you good morning Thiago.

All right.

We have taken.

Steps to minimize as much as possible.

The sales team during World Cup games.

Most importantly, we have developed multiple initiatives to maximize sales.

Leading up to the tournament all of these will keep our fourth quarter performance very strong versus last year in fact.

We had the best ever month of October both in terms of sales and profitability.

And sales in the first half of November have also been very strong. So I have been around for more than 30 years in the business I know history demonstrates that our guests enjoy watching against with family and friends often at home.

And in many Latin America countries, all activity almost stopped building in national theme game, but if you go to the details for these coming in World Cup and we did that.

<unk>.

Country by country.

To take the best decision on behalf on a specific plan for every day in every country.

If you take a look at 75% of the games will happen in the first two weeks of the group stage.

Part of the of the tournament.

On in those two weeks there are only two markets or growth markets, which are Argentina and Mexico.

Gains on weakened that's very good news for us because most of the games will be on weekdays.

Since the last work we have made a lot of progress and improvements we have developed new capabilities that for sure.

Enable us to capitalize on our sponsorship of the event for you guys. At all for example delivery only accounted for 2% of sales today is 15% of sales and we have very strong partnerships with <unk>.

Which will allow us to capture.

This before during and after the games through the delivery segment four years ago on top of that our BC.

Platform.

Our digital penetration was much lower was less than 10% today is more than 40% and this platform will allow us to engage at scale with guests again before doing basically after the matches when we expect to see a significant uptick in sales because you have to remember that.

Unlike many other players we're over indexed to malls.

Our less freestanding restaurant portfolio positions Arco grows on the Mcdonald's brand to capitalize on both much activity. So this will be key in these coming weeks.

Overall it will be.

A lot of teamwork teamwork between operations marketing BC.

All the team in the company.

We will be making the difference in a positive way during this global event and I think that all these airports and all this work will allow us to have a very strong fourth quarter to close a record year in terms of sales and profitability.

The year on a high note.

Building momentum on through the beginning of 2023.

Great. Thanks, Marcello <unk> has a follow up which is and to the extent that we can comment.

How are the discussions around the renewal of the MSA agreement with Mcdonald's enrollment.

Okay.

Begin remembering the DMF for Ya joined year contract that started on all of the third 2007.

Goes through August 2nd 2027.

Our renewal option.

Or for 10 additional years pursuant to the MSA, we have already indicated to mcdonalds.

But we would like to renew the agreement.

And Mcdonald's.

Whether to grant us the option to renew by August 2024.

If Mcdonald's grants us the option then we will amend the MFA to reflect any changes to the current terms of the agreement. We are already engaged in conversations with mcdonalds related to this topic.

Detection of the MFA term on it.

To have the process concluded by over 2020 for US It is stipulated in the MSA and the announcements related to these topics.

We made as appropriate in coming months.

Okay. So let's move now to Marcella Recchia from credit Suisse, who says hi, and congratulations on the results and thank you for taking my questions.

What are the main regions in Brazil that management's still sees opportunities for new openings and I'll turn it over to Bruce Okay. Thanks, Darrin Hello Marcelo.

Morning.

Still see opportunities of growth in all the Brazilian region.

<unk> opened recently in Sao Paulo with excellent results, but we see great options of openings all across the country.

Okay.

Greg.

Louis Marcellus has a follow up or a second question and she asked if we could elaborate more about the market share gains across all divisions is it driven more by market consolidation or are we gaining market share from them from any specific player alright.

The <unk> is expanding its share of the total informal eating out industry.

And within <unk> and Mcdonalds brand is gaining share in all three divisions, not just Brazil, and let me give you. Please.

Number two to a better understanding.

Our visit chair roles across the region in the third quarter up three one percentage points.

In Brazil, According to our to our research visits increased by one eight percentage points with an increase in the GAAP to the nearest competitor.

These GAAP growth from $16 eight to 20 percentage points.

In flat visit share gain four six percentage points and almost doubled the gap versus the main competitor from seven to $14 nine percentage points in NOLA visitor increased one six percentage points, increasing the gap versus the main competitor by five percentage points.

I'm from two five to seven five percentage points.

I would say that it's important to say that the revenue growth was driven mostly by higher restaurant volume with modest price increases.

And of course within our.

Restaurant experience that is valued by buyers.

Yes, Dan.

Yeah.

Thanks again.

Our next question.

It comes from Bob Ford.

And <unk>.

Bank of America, and lessors are going through this.

<unk> from Jpmorgan has a similar question.

Congratulations on the quarter can you comment on your food and paper costs and expectations going into next year and similar to that this is who also serves congrats on an amazing results as what is the cost outlook and how should we think about sequential evolution of costs into the last part of the year and early 2023, so let's start.

With that one Mariano.

Perfect. Thank you Dan and thank you Barbara and releases for for the questions.

First on the gross margin side.

We are seeing and we have been saying is that this year, we are expecting gross margin or food and paper cost to be about the same as last year as a percentage of sales keep in mind that in terms of pending proceeds our gross margin.

Increased this year by $120 million compared with last year, So that's really relevant.

For us.

In terms of expectations on gross margin for next year. What we are seeing is that we see an opportunity there we're going to follow and continue with our prudent pricing architecture, we're not going to increase pricing well above inflation. We think that this strategy has yielded.

Incredible results for us so far.

We will continue with digital investments and trying to identify a higher portion of our sales and we are convinced that that will improve.

Our product mix and.

Improve in that way the gross margin and finally, we are also expecting a reduction in cost pressures, we are seeing in many of our markets.

Deceleration of inflation pressures and there. We also see that we have an opportunity. So that's so far above gross margin this year and what we're expecting for next year in terms of overall costs that was part of <unk> question.

We continue to expect full year EBITDA margin from <unk>.

2019 that was remember around 10% in 2021 that was around 10, 4%.

To be the base off of which we will expand margins in the medium to longer term as we already mentioned, we think that continuing increasing sales above inflation will give us.

Leverage or not.

<unk> costs that we have at the restaurant level and also with our DNA.

Structure.

Overall expenses for example are now.

Below 20%.

We think.

This new model, where we have delivery growing in drive thru also growing are giving us benefit on that line occupancy and other expenses that have a high content.

Fixed cost also.

We are obtaining leverage there and we also expect to obtain leverage on the G&A and the fixed part of our our DNA as we continue to focus on increasing sales.

So that's the outlook for the overall cost and EBITDA.

Margin for next year.

Perfect.

Stay with your money.

And also staying with Bob and <unk>, who have a similar overlapping question Bob apps.

A couple of parts here on the increase in the 10 year growth plan, which I think is more of a potential the plan at this point can you comment on Capex and unit growth for 2023, and 2024 as well as future periods to whatever extent, we have some definition yes.

What are we thinking about in terms of models the split between corporate and franchisee and kind of the overall market holding capacity produces a similar question where he says in the release, we mentioned 1000 restaurant opening opportunity and we describe at the start of the year.

Now it seems conservative so can we elaborate more on the markets, where we're seeing the larger opportunity and what could this implying potential number of additional stores. So yes, but our concept there but back to your modem, okay I wouldn't try to summarize.

The other questions in one answer.

When we provided guidance of the current three year growth cycle. We said, we would open at least 200 restaurants in this period.

And that around 90% of those would be freestanding units. We also mention that we will modernize at least 400 restaurants to this.

The <unk> format.

We are not planning to change or to revise that guidance at this point.

We're going to have the Investor day.

Mentioned in the beginning of next year, and we will give more information there.

Uh huh.

<unk>.

Even though we're not planning to revise these guidance.

At least for both items.

Again, we will give you more information for this three year period cycle.

In the Investor.

Update that we will have in 2023.

Now going to the outlook looking forward and to the 1000.

Restaurants that we mentioned that we could we have the potential to open in the next.

10 years.

When we reorganized the company into three divisions instead of four that was in October of last year, We mentioned that we will reallocate our G&A to reinforce the team that will help drive future growth.

We have advanced and all the digital.

Capabilities, but also the development team.

And that's what we have been doing so far this year at the beginning of the year.

We gave guidance for 55 restaurants were going to open 65 about 65.

And with the modernization was the same case, we announced 75 organizations and this year, we're going to and about 100 <unk>.

Mutations.

And we mentioned that the potential openings for Mcdonald's restaurants to be about 1000, new locations over the next 10 years.

But.

Based on the performance that we have seen on the recent openings more sales per unit.

All the segments growing without compensation.

Among them.

Higher than average Rois.

Now if I needed that these 1000, new restaurants are not on the low end of that range.

We're not going to revise at this point again. These 1000, but we think now that to be those 1000 restaurants to be debates.

Regarding bulk question, how many units the market can.

Sustained.

Again for us.

Now at least 1000 Mcdonald's units, we think that the <unk> segment is highly penetrated in.

In Latin America, we believe that around 60% of those.

Could be placed are opened in Brazil, and that we have several opportunities in.

Many of our other markets that also are showing very very good results, such SaaS, Chile, Costa Rica, Panama and posting these past several Atlas Mexico as well.

Being of course, 90% of those.

Freestanding units.

I think I covered.

Let me just some color in terms of the mix between company operated sub franchise restaurants, I do not see the mix changing materially going forward. So we should keep more or less the same mix.

We have today.

With that we cover all the different <unk>.

Thanks.

The two questions coming.

Coming from leases and Bob Yes actually loses.

One more.

<unk> levered different topic Leverages now at one times, how does this fit in the strategy and what our plans going forward can we expect for example, a step up in the dividend so back to you Mike.

Alright, thanks for leases for the second.

Second part of the question.

<unk>.

At this point.

We feel very comfortable with our capital structure.

We have high cash balance, we have lower leverage and that's.

For US is it's a nice problem to that two years ago, we could not have imagined being in this.

Position.

The good news is that all elements are on the table, we just I just.

Walk you through the Capex opportunities that we have and of course that will mean, a deployment of cash our priorities always investing in the business.

Of course as I already mentioned, we have accelerated openings, adding 10 additional openings 2022, and we will have the investor update.

For our guidance of 2023 and 2024, we will continue with the modernization and we are planning to do all of this without issuing new debt for next year, We will fund the.

Investment plan using our own cash plus.

The operating cash flow that of course, we are planning to generate during next year regarding dividends in 2022, we're still to the cash dividend payment with a <unk> 15 per share dividend. We already paid three of them. We are going to pay the fourth installment at the end of the.

December .

Looking forward, we do not have a dividend policy, but our board of directors makes the decision on dividend distributions at the beginning of each year.

So we will communicate the decision with respect to 2023 dividend if and when it is approved by the board.

So I think that covers that last part of the question.

Correct.

A couple of final questions here, one from Antonio Hernandez from Barclays. So good morning.

Are we seeing any type of deceleration or underperformance in recent weeks and any of our different types of restaurants. So a vaccine Marcello okay. Thank you and good morning, I'm, Tony and thanks for the question.

No.

As mentioned before.

The fourth quarter started really to be very strong.

It is important to note that we have we are the only player that have the exclusive rights to use the FIFA World Cup.

Our marketing activities and that's thanks to to Mcdonalds global sponsorship of the event and this is the most important sporting event in Latin America by far.

Among the many marketing activities will be designed.

Related with World Cup.

Where they work at <unk> that we introduced early.

In October in all our markets.

In the past we executed.

Hi success. This initiative only Brazil. This time, we brought this idea and this initiative to build a whole company with incredible success. So behind October on the first two weeks of November sales results is deemed but the positive impact of these units.

On top of that we have also signed local sponsorships.

Portal months for example, with GT, Brazil head coach with.

With the sugar federations of Argentina, and Uruguay, so those.

Agreements are bringing more and more.

A D reduced are being executed in the market related with workup on leveraging this asset in our restaurants.

As we mentioned before it's important to mention that all three divisions are performing.

<unk>.

Mcdonald's brand preference has strengthened over the last few years.

Which demonstrates.

Our opinion that <unk>.

Mcdonald's remains an inspirational experience for our guests on our plan is to continue building revenue through volume growth.

In order to drive profitability by generating operating leverage.

Excellent last question in the queue here from enrollment graduate Bradesco.

And he asks how was the smaller size footprint deployment deployment going in.

And how has it been performing with respect to the <unk> to reduce and to congratulate to some of the very strong results. Okay. Thank you Joe.

Good question.

We continue to look for.

Lots for spaces, where we can offer the full mcdonalds experience. That's why our recent openings are around 90% freestanding units and thats the preferred format.

Going forward, but in some cases, there are some constraints, especially in big cities like So Paulo for example on some times the size of the law is built.

Below the ideal that we need to be.

Rates are down so in those cases, we introduced these optimized layout in order to be able to offer the best possible experience reduced space. For example, the restaurant that we opened with the formats.

In our neighborhood upward.

What Avenue is a boundary is doing extremely well.

In <unk> profitability is operating in a very high note.

To off premise.

Our segments drive through and delivery. So this is again an alternative that we can use when we have some constraints in terms of space, but we still.

Are looking we are still looking for the full.

Restaurant, which is the best experience that we can offer to our customers.

Great.

You have some final thoughts for us, but that's the end of the Q&A session and once again back to your Marcellus. Okay February much done them before before we enter.

The communication I would like to thank everyone for joining us in today's call.

I think that it is worth putting this quarter's results into historical context.

We have clearly.

Turning the page with respect to the repo.

Four months since the industry itself has undergone structural changes in how we bill revenue.

We drove improved profitability.

As we have mentioned several times, we came out of the pandemic with some of our strongest ever brand metrics.

With on our structural competitive advantages.

In all of these have consolidated our leadership in the industry a testament to the superior position are the results we've generated in the third quarter of 2022, when compared with the third quarter of 2019.

Revenues and EBITDA in the quarter are up 22% and 35% in U S dollars respectively.

Despite the significant devaluation of similar local currencies, such as the Brazilian real the Colombian peso the Chilean peso uneven.

Europe .

EBITDA margin is up 100 basis points.

For the same period third quarter 2022, when compared with third quarter 2019, even with the impact of the final step up.

The effective royalty rate. So this performance is the result of disciplined execution of our strategy at the restaurant level, but let me be clear with this there is still a lot of potential to unlock moving forward.

We look forward to speaking with you in the coming weeks or months stay safe.

Have a great day.

[music].

Cool.

Sure.

[music].

Hum.

Yeah.

[music].

Move.

[music].

Yes.

[music].

Hum.

Yeah.

[music].

Okay.

[music].

Yes.

Hum.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Yes.

[music].

Okay.

[music].

<unk>.

Yes.

[music].

Okay.

Yes.

Okay.

Ooh.

Okay.

Yes.

[music].

Okay.

[music].

Yes.

Okay.

[music].

Okay.

[music].

Yes.

Sure.

Okay.

Yes.

[music].

Okay.

[music].

Yes.

[music].

Sure.

Okay.

[music].

Okay.

[music].

Yes.

Okay.

[music].

Yes.

Good morning, everyone and thank you for joining our third quarter 2022 earnings webcast.

With us today are Marcello Roberts, our Chief Executive Officer, Luis <unk>, Our Chief operating Officer, and Mike Amazon Alibaba, Our Chief Financial Officer.

Todays webcast, which is being recorded will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation also available on the investors section of our website www Dot Arco Dorado Dot com slash IR.

As a reminder to better view the presentation on the webcast platform. Please scroll over the upper left hand part of the screen and click on the arrows to maximize the slides.

After we conclude our opening remarks, we will answer your questions, which you can submit using the chat function on the left hand side of the screen.

You will need to minimize the slides to access the chat function.

Today's call will contain forward looking statements and I refer you to the forward looking statements section of our earnings release and recent filings with the SEC.

We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances.

In addition to reporting financial results in accordance with generally accepted accounting principles, We report certain non-GAAP financial results.

Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found on the press release and unaudited financial statements filed today with the SEC on form 6K.

Our discussion today excludes the results of the Venezuelan operation.

At the consolidated level as well as for the slab division for your reference we included a full income statement, excluding Venezuela with today's earnings release.

Marcello over to you.

Thank you Dan Good morning, everyone and thank you for joining us this morning.

Today <unk> will take you through the key highlights of our consolidated and divisional results for the third quarter of 2022.

Mariano will also cover our balance sheet and growth metrics.

And Luis will provide an update on the three this strategy on digital delivery and drive through that.

That has been driving the strongest operating and financial results in our history.

I will wrap up with the recipe for the future and some final thoughts on 2022 and beyond.

In our discussion of our third quarter results you will see that we were able to maintain the strong trends of the last several quarters.

Build on what we told you was a better than expected month of July .

This means business momentum was very strong as we headed into the year as most important quarter and Thats why we finalized our plans for next year as well.

Total revenue in the third quarter reached $916 million.

Comparable sales grew more than 34% versus the prior year.

<unk> by higher gas volumes and market share gains throughout the article hotels footprint.

We leverage our structural competitive advantages with a continued focus on our winning strategy.

Digital sales contributed 42% of the quarter system wide sales, reaching almost $500 million.

These new three months record, including all time highs in mobile up self order kiosks and mobile ordering base sales.

<unk> grew 34% and 11% in constant currency respectively.

These increases came from gains in both volume and average check.

Outperformed many other restaurant chains.

As on premise sales continued normalizing.

We have been able to sustain growth on this China's things to the structural competitive advantage offered by our freestanding restaurant portfolio and disciplined operational execution.

Luis will take a closer look at these results in a few minutes.

Although were facing a comparison with last year's record third quarter result.

Adjusted EBITDA in U S dollars rose another 15% this year.

By focusing on sustainable sales growth, we generated operating leverage to help offset some of the headwinds we knew we would face in the quarter.

Last year's reported result was hit by a tax credit in Brazil, as well as government federal support programs in the lab.

This year food and paper costs remain elevated and we also have the final step up in our royalty rate.

Despite all of these factors EBITDA margin remained solidly in double digits.

Net income almost doubled versus last year.

Now, let's dig into the results by Division.

<unk> with risk, who will run us through the divisional sales performance.

Thanks, a lot I'll say no comparable sales growth remained strong the third quarter, increasing at a rate of about two times blended inflation for the period.

This is about execution here.

Here, we say that its not real unless it's really in the restaurants.

We attract guests the marketing and digital initiatives, but get keep coming back because they have a great experience each time, they interact with the Mcdonald's brand.

It doesn't matter, if it's a physical visit or a digital interaction.

Their experience must be great.

Brazil comparable sales rose 21, 8% in the quarter.

About two five times in place during the period.

Digital sales penetration rate in Brazil is the highest of all iqos markets.

<unk>, 52% of system wide sales in the quarter.

As Marcelo already mentioned off premise sales growth was strong in the quarter.

As on premise sales normalized.

This sustained the recent trend of industry, leading market share gains <unk> took additional share from informal players in the countries restaurant industry.

Brazil's marketing activities in the quarter focused on programs and investments designed to reinforce the brand's core strengths.

For example, leveraging its culture, a great event by partnering with <unk>, one of Brazil's hottest pop artist for the latest installment of the successful famous artist campaign.

To drive further digital adoption.

That in a 360 degree campaign to promote the mobile order and pay feature of the App.

This omnichannel approach to the digital strategy is strengthening brand perception related to convenience and generating significant sales growth in this channel.

After the quarter ended we shifted gears in Brazil to leverage the Mcdonald's global sponsorship of the FIFA World Cup.

We introduced a highly anticipated lineup of eight sandwiches.

Each day of the week features a specific country theme sandwich, including Argentina, France, Germany and Mexico.

The <unk>, Brazil, which was available every day has already sold out.

Clearly the campaign has been a resounding success and we just had our best ever month of October in terms of sales.

No, let's top line continued to be driven by Mexico, Costa Rica and different within this.

Comparable sales grew at two six times, the division's blended inflation rate in the quarter, leading to additional market share gains in all main markets.

Marketing no doubt featured menu innovations such as the introduction of the ultra hyper Mega Tasty campaign that Libre, just a signature beef and crispy chicken platforms in Mexico.

But I think I became the first market in the adequate footprint to launch better Burger.

These ambitious global project for us.

<unk> and enhanced flavor profile and improved quality perception, among guests, which is already showing strong results.

Digital sales in <unk> grew around 200% versus the prior year quarter.

Added by the continuous improvement in niche markets mobile app functionality, including mobile order and pay as well as a greater marketing investments to promote the digital platform.

No that also launched localized World Cup sandwich campaigns in all markets within the last three to four weeks with excellent results so far.

Flat comparable sales growth reflected strong topline performance in all its main markets rising at one eight times blended inflation in the period.

This sales growth helped mcdonalds brand market share expanding the division driven by higher guest traffic both on and off premise.

Digital sales penetration also growth in the period with 43% of slabs third quarter sales coming from digital channels.

All of which grew sequentially versus the prior year quarter.

Marketing flat continued building brand love with generation Z guest thanks to a famous orders campaign with the popular Latin artist semi conductor.

During the quarter, we introduced the <unk> sandwich to the menu in Colombia, and Chile, where it received strong guest response.

We also had great news in the dessert business with the launch of the maxillary chocolate around more in Colombia.

This locally relevant products generated guest excitement and drop unique sales to the highest level ever in that country.

As in Brazil, a note that fourth quarter marketing slot is now focused on the FIFA World Cup.

Over to Martin for a look at how strong revenue growth drove record profitability.

Thanks Louise.

<unk> already heard today, we are reporting another quarter of strong adjusted EBITDA growth.

And the performance remains broad based with all three divisions generating solid profitability in the quarter.

Starting with consolidated EBITDA margin, we improved occupancy and other operating expenses, thanks to well above inflation sales growth.

Payroll expenses were only higher versus 2021 because of the government support programs that helped last year's result.

Excluding the support from last year's number.

Payroll expenses were lower this year and our solid below 20% of company operated sales.

As we told you to expect on our last couple of quarters, we experienced gross margin pressure in the third quarter.

Brazil's gross margin improved but this was offset by higher food and paper costs in the other two divisions, especially knowing that.

We continue to expect full year, 2022, food and paper costs to be about equal to full year 2021, as a percentage of sales.

Finally, G&A expenses remained relatively flat in margin terms.

Turning to the divisions and starting with Brazil ebay.

EBITDA grew more than 20% in constant currency.

Even though last year's result included a nonrecurring tax credits.

Healthy revenue growth generated an improvement in gross margin and operating leverage in restaurant expenses that more than offset the final step up in the royalty rate.

And no lead EBITDA margin remained at nearly double digits as strong revenue growth generated operating leverage to partially offset tougher cost environment and the final step up in the royalty rate.

Results were also negatively impacted by hurricane that hit Puerto Rico in September .

Importantly, however, EBITDA in U S dollars still grew versus last year.

Flat revenue growth.

It's fully generated operating leverage in the quarter offsetting some cost pressures to expand EBITDA margin and deliver strong U S dollar EBITDA growth.

Our strategic focus remains squarely on long term profitable growth.

We expect to sustained comparable sales growth at or above inflation, which can generate additional operating efficiencies.

With that outlook, we expect to accelerate restaurant openings moving forward.

Cash generated from operations exceeded $235 million in the first nine months of this year.

With a stable numerator and improved denominator net leverage was just onex as of September 32022.

Additionally, the average maturity of our debt is now at around six years.

More than at the end of the first quarter of 2022.

We are using this privileged financial position to our advantage today and will use it to support our future growth plans as well.

Through the first nine months of 2022, we opened 45 restaurants, including 40 freestanding units.

In Brazil, we opened 30, new restaurants of which 27 are freestanding units.

We also continue strengthening the industry's best digital platform by investing in the development of new capabilities and rolling out existing futures to additional markets.

I am pleased to tell you that as of today, we have one.

Already opened 55 restaurants, we guided to for the full year.

And we are on track to open another 10 additional restaurants before the end of the year.

Around 90% of all openings continue to be freestanding locations, which are generating above average returns.

Thanks to high sales per unit and efficient operations.

Looking ahead, we expect to accelerate our pace of growth.

The development team has increased the size of the already robust pipeline for the next several years.

And recent openings are proving that there is still a lot of growth potential for the mcdonalds brand in our region.

It has become very clear that penetration generates demand and we are working to ensure that we capture that demand with the best return possible for our shareholders.

We plan to tell you more about this in early February of 2023, when we expect to hold an in person Investor day in Sao Paulo, Brazil.

As we have done for the last couple of years, we expect to provide you with a preview of fourth quarter of 2022 results as well as our growth outlook for 2023 and beyond.

The IR team will be sending out a save the date in the coming days.

But at least for a closer look at the three DS digital delivery and drive thru.

Digital now accounts for 42% of total sales.

Isn't that just delivery driving growth and digital.

In the third quarter, we also set new records in self order kiosk sales, which were available in more than 900 <unk> restaurants.

Mobile order and pay sales supported by enhanced functionality and it rolled out to a growing number of markets.

And sales generated through the mobile App, which has been downloaded almost 80 million times and is the main digital communication platform with guests.

In the third quarter identified sales grew by 57% versus the prior year.

As a result, 17% of total sales were identified.

Including 21% in Brazil.

These are sales from guests who have opted in to allow the data to be used in our marketing activities, which enables us to enhance their mcdonald's experience and maximize profitability.

This is all part of the Omni channel approach, we started telling you about in 2019.

Guests today have never had so many choices in how they interact with us.

Ease of use drives higher frequency, which explains the increasingly high revenue per guest within the <unk> digital ecosystem.

Among the new functionalities.

It's a bot that takes delivery orders in Colombia and Mexico.

But is fully integrated with our kitchens.

Helping guarantee speed and accuracy.

We plan to roll out to more markets in the coming months to capture the potential of a much larger addressable market seems whatsapp is widely used in Latin America.

On the logistics side home delivery is operating in almost 600 restaurants in six countries.

Solutions include restaurant crew members delivering orders over very short distances and third party last mile operators executing the delivery.

This will help us further develop and monetize these new consumption occasion in our market.

The unmatched physical presence of freestanding restaurants in the article tornadoes footprint has undoubtedly been the foundation of the last five consecutive record quarters.

But it should also be a testament to the significant competitive advantage, we have with our digital ecosystem.

The junction of these two platforms into a seamless digital experience is fueling our market share leadership.

Using Brazil as a proxy there hasnt been a permanent shift in volume to off premise channels.

Meanwhile, on premise traffic has improved steadily since 2020, which contributed to a moderation in drive through traffic growth. This year month delivery volume and total sales are both up this year driving 29% sales growth in Brazil, Despite a relatively flat.

Industry trend.

Our strategy to drive revenue through volume growth is clearly reflected in the quarter's visit share metrics.

Total visit chair increased by three one percentage points versus the prior year quarter, when the Libre visa share rose by four percentage points.

Even with the results we are generating there are still so many opportunities to improve operational performance and Thats why I am excited about what is yet to come.

Ausiello up to you.

As you know by now we have a robust ESG platform, we call the recipe for the future.

This is such an important part of our overall strategy that 10% of the variable compensation for every bonus eligible employees is tied to ESG metrics.

Our financing strategy is also linked to surfing ESG objectives.

And we are the only <unk> operator in the world to publish an annual ESG report that includes oriented content.

We are on a journey to increase the use of renewable energy sources.

<unk> jumped from 4% in 2022% in 2021 and will be at least 50% by 2025.

This year, we have assigned new renewable energy deals, including with EVP in Brazil.

Last year in Colombia.

These agreements are expected to bring millions of dollars in renewable energy infrastructure investments by our partners.

In addition to supporting the development of these critical alternatives to fossil fuels the restaurants, they supply will have reduced energy costs.

The latest deal with Butler in Colombia in box installing solar panels on the roofs of several of our restaurants.

They are also installing elevated solar panels in the parking lots that we generate energy for the restaurants, while also providing shape target vehicles.

Our commitments are not just about reducing carbon emissions. However.

We are also labor is in the nature of our business to support use of opportunity in the region.

The 65 restaurants, we intent to open this year, we generated 3000 to 3500, new format job opportunities for young people.

They will receive training and practical experience with everything from food safety teamwork and process to customer service leadership skills and sustainability.

Generating jobs is not good enough if the work environment is not attractive.

This is why we are proud of how our workplace has been recognized by others throughout 2022.

In the last few months, we were honored again with great place to work ranking us eight among.

Among 150 large companies in Brazil.

First in April as a great place to work for women.

Among the benefits of our work environment is the training employees to receive a hamburger University in Sao Paulo.

Over the last two years <unk> has also developed a series of certificate level of courses that are available for free to anyone who wants to enroll knot shop employees.

Finally, each year, we choose one day to race donations through the sale of Big Macs in several end markets.

Proceeds from these sales are then used to support local NGL partners associated with two important recipe for the future pillars.

Youth opportunity and commitment to families.

Thanks to the generosity of our guests I am proud to tell you that we run the most successful campaign our history this year.

Racing record donations to support this worthy causes.

Before we open the call for Q&A I will wrap up with a few final thoughts on the third quarter and a record sequence of results, we are delivering to create shareholder value.

I have no doubt that execution at the restaurant level is the main reason Mcdonalds brand strength has never been higher in Latin America.

Guest experience each and every day is key to driving long term sustainable revenue growth.

That then generates opportunities to capture operational efficiencies and dilute fixed cost to enhance profitability.

Brandon capital structure management, and data driven investment decisions complete the picture of profitable growth all the way down to the bottom line.

Unlike the big Macs special sauce. This recipe is not a secret.

But to do it well requires an incredible amount of work discipline and dedication from everyone involved.

So I would like to take this moment to congratulate and thank all our employees suppliers and franchisees.

For their contributions to our shared success in Latin America and the Caribbean.

When the year began we don't do that we estimated growth potential over above 1000, additional Mcdonald's restaurants over the next 10 years in our footprint.

With higher sales per unit.

Bob address <unk> recent openings.

I now believe we may have underestimated that potential.

The pipeline for the next few years is already clear to us and we expect to accelerate unit growth moving forward.

Looking ahead, we will also liberate us our growth accelerators to consolidate our leadership position in an underpenetrated region that still present significant untapped growth potential.

Don over to you to start the Q&A session.

Thanks, Marcelo in order to get started please minimize the presentation slides. So that you can access the chat function.

Left hand side of the webcast platform.

Please limit yourself to one or two questions. So that I can read understand and converted them to our speakers.

We will now pause briefly to compile all of your questions.

Okay great.

First question comes from Thiago <unk> from Goldman Sachs says.

Since high Marcello in Arcos, Tim Congrats on the results and thanks for taking my questions.

My first question is on underlying operating performance, how should we think about the net impact from the World Cup to volumes in Brazil.

I'll start with you Marcello.

Thank you good morning Thiago.

Paul.

We have taken steps to minimize as much as possible.

Any safety impact during World Cup games.

Most importantly, we have developed multiple initiatives to maximize sales.

Leading up to the tournament all of these will keep our fourth quarter performance very strong versus last year in fact.

We had the best ever month of October both in terms of sales and profitability.

And sales in the first half of November have also been very strong. So I have been around for more than 30 years in the business I know history demonstrates that our guests engie.

Enjoy watching the games with family and friends.

<unk> at home.

And in many Latin America countries, all activity almost stopped building a national team game, but if you go to the details for these coming workup, we lead that.

Country by country.

To take the best decision and to come up on a specific plan for every day in every country.

If you take a look at 75% of the games will have been in the first two weeks at the group stage.

Part of the of the tournament.

In those two weeks there are only two markets are growth markets, which are Argentina, and Mexico that cup games on weekends.

Very good news for us because most of the gains will be on weekdays.

Since the last work we have made a lot of progress and improvements we have developed new capabilities that for sure.

Enable us to capitalize on our sponsorship of the ramp for you guys. At all for example delivery only accounted for 2% of sales today is 15% of sales and we have very strong partnerships with <unk>.

Which will allow us to capture.

This before during and after the games through the delivery segment four years ago on top of that our BC.

Platform.

Our digital penetration was much lower was less than 10% today is more than 40% and this platform will allow us to engage at scale with guests again before during and specially after the matches when we expect to see a significant uptick in sales because you have to remember that.

Unlike many other players we're over indexed to malls.

Our less freestanding restaurant portfolio positions article hurdles on the Mcdonald's brand to capitalize on both much activity. So this will be key in these coming weeks.

Overall it will be.

A lot of teamwork teamwork between operations marketing BC.

All the team in the company that we'll be making the difference in a positive way during this global event and I think that all these airports and all this work will allow us to have a very strong fourth quarter to close a record year in terms of sales and profitability to close the year.

The high notes.

The momentum on through the beginning of 2023.

Great. Thanks, Marcello <unk> has a follow up which is and to the extent that we can comment.

How are the discussions around the renewal of the MSA agreement with Mcdonald's evolving.

Okay.

We begin remembering that the MFA has joined year contract that started on all of the third.

Seven.

Goes through August the second 2027.

Our renewal option of.

For 10 additional years pursuant to the MSA, we have already indicated to mcdonalds.

That we would like to renew the agreement.

And Mcdonald's.

Whether to grant us the option to renew by August 2024.

This section of the MSA term and expect to have the process concluded by over 'twenty 'twenty for US. It is stipulated in the MSA any announcements related to these topic will be made us appropriate in coming months.

Okay. So let's move now to Marcella Recchia from credit Suisse, who says hi, and congratulations on the results and thank you for taking my questions.

What are the main regions in Brazil that management still sees opportunities for new openings and I'll turn it over to you Bruce Okay. Thanks, Darrin Hello Marcelo.

<unk>.

We still see opportunities of growth in all the Brazilian region. We have opened recently in Sao Paulo with excellent results, but we see great options of openings all across the country.

And.

Great.

As Marcel it has a follow up or a second question and she asked if we could elaborate more about the market share gains across all divisions is it driven more by market consolidation or are we gaining market share from any specific player alright.

<unk> is expanding its share of the total informal eating out industry.

And within <unk> and Mcdonalds brand is gaining share in all three divisions, not just Brazil, and let me give you a please.

<unk> to a better understanding.

Our visit here rose across the region in the third quarter up three one percentage points.

In Brazil, According to our to our research visit share increased by one eight percentage points with an increase in the GAAP to the nearest competitor.

These GAAP growth from $16 eight to 20 percentage points.

Since that visit share gain four six percentage points and almost doubled the gap versus the main competitor from seven to 14 nine percentage points in NOLA visitor increased one six percentage point increase in the GAAP versus the main competitor by five percentage points.

I'm from two five to seven five percentage points.

I would say that it's important to say that the revenue growth was driven mostly by higher restaurant volume with modest price increases.

And of course with.

Restaurant experience that is valued by buyers.

Biogas.

Yes.

Thanks again.

Our next question comes from Bob Ford.

And bank.

Bank of America and Elissa.

Our leases are diverted from Jpmorgan has a similar question.

Bob Congratulations on the quarter can you comment on your food and paper costs and expectations going into next year and similar to that what leases who also says congrats on an amazing results as what is the cost outlook and how should we think about sequential evolution of costs into the last part of the year and early 2023, so let's see.

With that one Mariano.

Perfect. Thank you Dan and thank you Bob I know Lisa for the question.

First on the gross margin side.

We are seeing and we have been saying is that this year, we are expecting gross margin.

And paper cost to be about the same as last year as a percentage of sales keep in mind that in terms of any proceeds our gross margin increased this year by $120 million compared with last year. So that's <unk>.

Really relevant.

For us in.

In terms of expectations on gross margin for next year.

We are seeing is that we see an opportunity there we're going to follow and continue with our prudent pricing architecture, we are not going to increase pricing well above inflation. We think that this strategy has yielded incredible results for us so far.

We will continue with digital investments and trying to identify a higher portion of our sales and we are convinced that that will improve.

Our product mix and.

In Peru in that way the gross margin and finally, we are also expecting a reduction in cost pressures, we are seeing in many of our markets.

Deceleration of inflation pressures and there. We also see that we have an opportunity. So that's so far about gross margin this year and what we're expecting for next year in terms of overall costs and that was part of <unk> question.

We continue to expect full year EBITDA margin from <unk>.

2019 that was remember around 10% at 2021 that was around 10, 4%.

To be the base off of we will expand margins in the medium to longer term.

We already mentioned, we think that continuing increasing sales above inflation, we leave us.

Leverage are not fixed.

Fixed costs that we have at the restaurant level and also with our DNA structure.

Payroll expenses for example are now.

Well below 20%.

We think.

This new model, where we have delivery growing in drive thru also growing are giving us benefit on that line occupancy and other expenses that have a high.

A portion of fixed costs also.

We are obtaining leverage there and we also expect to obtain leverage on the G&A and the fixed part of our our DNA as we continue to focus on increasing sales.

That's the outlook for the overall cost and EBITDA margin for next year.

Perfect.

Stay with you Mariano and also stay with Bob and <unk>, who have a similar overlapping question Bob bass.

Or whatever extent, we have some definition, yes, we're thinking about in terms of models the split between corporate and franchisee and kind of the overall market holding capacity.

This is a similar question where he says in the release, we mentioned 1000 restaurant opening opportunity and we describe it at the start of the year.

And now it seems conservative so can we elaborate more on the markets, where we're seeing the larger opportunity and what could this implying potential number of additional stores. So yes, but our concept there but back to your Buddy Okay, I will try to summarize.

Q3 2022 Arcos Dorados Holdings Inc Earnings Call

Request a DemoDemo

ARCO

Arcos Dorados Holdings

Earnings