Operator: [], ladies and gentlemen. Welcome to the Q3 2026 earnings call of Alamar Foods. Today, we have with us the senior management of the company led by the CEO, the CFO, and the Chief Growth Officer. The meeting will comprise 60 minutes, starting with a quick presentation followed by the Q&A. For the Q&A, participants can either raise their hands or type in their questions in the chat. Without any further delay, I would hand over the mic to the Investor Relations Manager, Mr. Arno. Over to Arno.
[Company Representative] (Alamar Foods): Hi, everyone, and welcome to Alamar's Q3 2026 earnings call. First of all, thank you for joining us today. We really appreciate your time and your continued interest in the company. Before we begin, let me just quickly remind you that today's discussion may include forward-looking statements, and these involve risks and uncertainties that could cause actual results to differ. For today's agenda, Filippo and Hatem will be giving you an overview of the key messages for the quarter. After that, Eugeniu will walk you through the financial performance, and finally, we will be happy to open the floor for your questions. Now, I leave the floor to Filippo.
Filippo Sgattoni: Hello. Good afternoon, everyone. We have achieved another quarter of strong growth and increased profitability. These are thanks to the double-digit revenue growth across all the regions and the brands.
Operator: Apologies, Filippo, but your voice is echoing a lot.
Filippo Sgattoni: Okay. Let me try to mute some of the channels.
Operator: Filippo, you need to unmute yourself locally. Mr. Filippo, you need to unmute yourself locally. Apologies, I believe you are having some difficulty. Arno, should we continue with the rest of the presentation, and maybe Mr. Filippo can come back to his part?
[Company Representative] (Alamar Foods): Yeah, I will skip Filippo one more minute, okay?
Operator: Okay
[Company Representative] (Alamar Foods): I think we can continue. It will be solved shortly.
Filippo Sgattoni: Can you hear me now?
Operator: Yes. Yes, we can hear you now.
Filippo Sgattoni: Okay. Thanks a lot. Alamar, we have been able to have another important quarter of strong growth and increased profitability. We have closed the quarter with a 24% year-on-year revenue growth, reaching almost SAR 294 million. This will be 12% increase without the franchise. We have been able to improve further our EBITDA margin. We are now +33% year-on-year, more than our sales growth, reaching SAR 39.4 million. Margin up almost 100 basis points, reaching 13.4%. An adjusted net profit that is +49% year-on-year. SAR 24 million in absolute value, up 140 basis points year-on-year. We are now at 8.2% net profit margin adjusted. This thanks to the double-digit revenue growth that we are seeing across all the region and our brands.
Filippo Sgattoni: There is an important acceleration on the like-for-like growth in Saudi Arabia, and a very strong full quarter, first full quarter with Five Guys in Saudi Arabia. Our EBITDA flow-through and also net profit flow-through is supported by our operating leverage and discipline and execution. All of these give us a guide and confidence on the outlook that we shared with you for the full year 2026. If you remember, in terms of sales without Five Guys, we have been talking about 10% to 14% sales growth. After 9 months, we are at 11%. When it comes to the earnings per shares growth, we were forecasting 30% to 50% for the full year. So far, after 9 months, we are at +37%.
Filippo Sgattoni: The key drivers for the revenues growth is coming from the new product launch and the seasonal campaign, important brand partnership and collaboration, tailored offer, and again, working more and more on our value perception, also thanks to marketing initiatives. When it comes to the profitability, the operating leverage from higher revenues, and then if you remember, we have been always working more and more on the gross margin per order, things with target menu and bundle price adjustment. Then we have been able to improve the economics of every channel, including delivery channel, and this is another contribution to our omnichannel business strategies. In this slide, there is a recap on our priorities for 2026 and how these priorities are delivering so far. When it comes to expansion, we have been talking also about relocation of existing stores.
Filippo Sgattoni: When we talk about the real estate strategy, it is not only new stores, but also relocation of existing stores. So far in Saudi Arabia, we have been able to relocate 10 stores, and these 10 stores are registering, recording improved sales in the range of 10% to 40%. Then the integration of the new brands and the acquisition that we have done in the past few months, and this is mainly with Five Guys, that is recording a sales growth in the range of 20% compared with the same period last year, that was not with us, but with the buyer. Then continuous improvement in terms of new product and digitalization.
Filippo Sgattoni: We have been focusing a lot on the solo meal, and again, for us, this was a strategic move to target a new audience, to increase the frequency of the existing customers, and also to improve the daytime during the lunchtime. So far, the solo meals, if we do the total orders, 40% of the total orders are coming from new customers. That means that these solo meals is also helping us to acquire new customers. Then the operational excellence, that is not only about NPS, brand track, delivery time, but especially in this moment, there is a disruption on logistics. We have not seen any disruption on logistics due to the geopolitical situation. Then, if you remember, always this attention to the brand, to connect the brands in our portfolio to the audience and to generate feeling and emotion.
Filippo Sgattoni: This is there, and it is generating important sales, so there is also important sales conversion that we have seen for example during the recent Saudi National Day, and also with the launch of some specific product, like the date pizza in Saudi Arabia, and the date menu, not only pizza, in Saudi Arabia. All this, again, without forgetting our stores. As I mentioned before, when we talk about the real estate strategy, it is not only new stores, but basically there is also the relocation, but also having a new store format and refreshing the image of existing stores.
Filippo Sgattoni: Here you can see some examples we have done with the three brands in our portfolio, Dunkin', Domino's, and Five Guys. Year to date, the net new stores, excluding Five Guys, is 14 stores. We have still 19 stores in our pipeline to be built. We have done 13 relocations in 2026 and 17 refurbishments in 2026. Those are, again, those last two, the relocation and the refurbishment, are very important to support the like-for-like growth. When it comes to the new product, again, we have been able to develop a new category that goes behind our blockbuster for the three brands.
Filippo Sgattoni: So when it comes to Domino's, it is not only pizza, but also pasta. To pizza, we have been able to develop also new taste profiles, introducing the Mike's Hot Honey pizza, also in collaboration with the Mike's Hot Honey, that is the most important brand in hot honey from US. When we talk about the Five Guys, it is not only a burger, but also milkshake, and we are now improving the taste and the fragrance of the milkshake, introducing a new profile, a new product. When it comes to Dunkin', it is not only coffee, but again, great attention to develop new donuts, also changing the size of the new donuts with the Loaded Minis, and also attention to the hot, the cold beverages, either frappe or dirty sodas.
Filippo Sgattoni: As I mentioned, important also to the brand, to make the brand more and more relevant to our audience, and this means connection with the esport and the video gamers audience, supporting the event, but also sponsoring a team. Presence in annual exhibition, sporting events, community events, this across all the markets where we are operating. Then always attention to our engagement with the local society, and this is a partnership with the Ehsan platform in Saudi Arabia, where our customers are able to donate to Ehsan by doing purchasing in Domino's Saudi Arabia. Then attention also to the environment, to the sustainability.
Filippo Sgattoni: We have a close partnership with Oil5, where again, the surplus product goes to organic compost. This is also a way to support the local agriculture, organic local agriculture. We are now 10 years since the start of the Vision 2030 that started on 2016. For us, the Vision 2030 is an important tool that we are using more and more for our growth. When we say growth, it is growth as a ecosystem. So we are talking about the human capital. All our leaders today in Saudi Arabia are Saudi, and we are very proud for this important achievement. The local taste, so that is why, again, to localize more and more, not only the taste, but also using the local ingredients and also developing local suppliers.
Filippo Sgattoni: This goes not to the local partners, also including Saudi brand and institution. Again, following the local trends, everything that is available today in Saudi Arabia would be events like the Riyadh Season, exhibition, and so on. We are now operating specifically in Saudi Arabia in 74 stores, 74 cities. That means that the company has been able to go behind the three main cities in the kingdom, and we have been able to grow the food business in Saudi Arabia by 120% in the last 10 years. This, again, is thanks to the contribution from the Vision 2030. I leave now the floor to Hatem.
Hatem AlHamrani: Thank you, Filippo. Assalamualaikum and good afternoon, ladies and gentlemen. We wanted to take a look at Alamar today in the current different market dynamics. We are proud to say that Alamar today is a bigger and more profitable company than 2 years ago. Looking at our revenue, we have grown the revenue by more than 20% since 2 years ago. Our adjusted net income has almost doubled for the same period. We were able to add nearly 80 stores in the last 2 years, with 25 relocations. Two acquisitions, Alhamdulillah, were completed and fully integrated with the Alamar ecosystem.
Hatem AlHamrani: Those are Makkah and Taif acquisition with 29 Domino's stores, and Five Guys in KSA with 13 stores. All of that was possible, Alhamdulillah, with the help of a strong operating platform, a platform that we have been investing in for the last few years. Here are some indications and some indicators that shows the reflection of this investment. Looking at the service reliability, the average delivery time in KSA has gone down by 44%, which means faster delivery and better experience for our customers.
Hatem AlHamrani: We have also invested in the supply chain resilience to reduce the dependency on imports. Today, almost nearly all or 96% of the non-core items are sourced locally, with almost two-thirds of the core items are being produced locally, which shows more resilience and dependency on local produce. From a customer perspective, we have seen, Alhamdulillah, an increase in customer satisfaction seen in the NPS, or Net Promoter Score, with a 93% increase in KSA and 64% increase in UAE data, showing more happy customers and recommending our brands to others. Last but not least, the customer care is at the heart of our operation. We have been able to reduce the resolution time significantly since 2 years ago.
Hatem AlHamrani: That was achieved through different investments in human capital and also technology, reducing the resolution time by 95%. That is all about the operating platform that we have done over the last couple of years, alongside the integration of Makkah and Taif and Five Guys as well. What we will be focusing on in the next quarter is to deliver on the full year 2026 outlook while continuing and assessing the selective acquisition opportunities in the top 10 F&B categories, be it in a larger category or a high-growth category. All of that puts us in to be very eager for the next chapter of growth, which, inshallah, we will share with the investor community our updated strategy and midterm guidance when we share the full year 2026 results.
Hatem AlHamrani: This strategy will not only show our focus areas, but will also shed the light on the revenue growth, margin and profit outlooks, what our investment needs will be, and our capital allocation, the role of Five Guys, and also the role of new acquisitions, be it to shift Alamar from royalty paying to royalty receiving, and so on and so forth. That all puts us in an exciting time to go for the growth, inshallah, but that is for a discussion for the next inshallah call. From now on, as we always do, we always share Alamar at a glance. So in the next section, we share what Alamar today in Q3 has been doing. We are proud to be a leading QSR player in the MENA region.
Hatem AlHamrani: Our brands, from a revenue perspective, 82% contribution came from Domino's, 7% from Dunkin', and this is our first quarter to consolidate, full quarter to consolidate Five Guys with 10%. Our network has reached 773 stores, 80% of which are corporate stores, and the majority being in Domino's with 686 stores. Dunkin' sits at 74 stores, while Five Guys is at 13 stores in KSA. If we look at the revenue per region, Saudi Arabia remains to be our main market, with over two-thirds of our revenue comes from Saudi Arabia. The rest of GCC and Levant area contributes to about 20% of the revenue, and North Africa in 12%. All of that is possible with the advanced digital capabilities and light CapEx model that we have.
Hatem AlHamrani: Through the different channels and different service models, we have recognized that the digital revenue is an important stream to Alamar. 71% of our revenue in 2026, over the nine months of 2026, has come from digital channel, 40% of which is our own omni-channel. As you can see in the graph, more and more customers are relying on digital channel as they become more digital native customers. Last but not least, this helps us put a light CapEx model that maintains our payback period to be less than 3%. With that, I would like to leave the floor to our CFO, Eugeniu, to take us through the financials.
Eugeniu Comarnitchi: Thank you, Hatem, and very good afternoon, everyone. Let me start with the headline numbers for the quarter. Revenue reached SAR 294 million, up 25% year on year. Gross profit grew 26% to SAR 87 million, so we grew profit faster than sales. Adjusted EBITDA rose 33% to SAR 39 million, and the net profit to shareholders was SAR 21 million, up 34%. On an adjusted basis, net profit reached SAR 24 million, up 49%. From a cash generation point of view, the cash generation followed earnings, so what we have is operating cash flow was SAR 43 million, up 10%, and free cash flow was SAR 31 million, up 30%.
Eugeniu Comarnitchi: Finally, net debt is at SAR 73 million compared with the net cash of SAR 36 million at the end of 2025. That change reflects one thing, the acquisition of Five Guys and the Makkah and Taif stores. Our underlying leverage remains low, and I will come back to it on the cash flow slide. Our network reached 773 restaurants at the end of September, 40 more than a year ago, an increase of 5.5%. By brand, Domino's added 25 stores to reach 686, Dunkin' grew to 74, and Five Guys added 13 restaurants to the group.
Eugeniu Comarnitchi: The more important shift is in the mix. So we can see that the corporate stores grew by 61 to 622, and sub-franchise stores fell by 21, mainly because we took the 29 Makkah and Taif stores into direct operation. By region, corporate KSA added 46 stores to 344, of which four are organic and the rest come from Makkah and Taif and Five Guys. Corporate GCC and Levant added nine stores, and North Africa added six.
Eugeniu Comarnitchi: In Q3 alone, we opened 8 new corporate restaurants, and 19 more are in the pipeline. If we then look at the revenue growth, what we can see more in detail is, revenue grew 24% to SAR 294 million, our highest quarter to date. Excluding Five Guys, the group grew 12%. All three regions delivered double-digit growth. In Saudi Arabia, revenue rose 29%, and excluding the Five Guys, it grew over 10%. Excluding both Five Guys and the Makkah and Taif, it grew 5.3%. The organic growth was supported by improving the same store sales. Other GCC and Levant grew 10%, helped by our pricing architecture in UAE and successful marketing campaigns. North Africa grew 23% with momentum in both Egypt and Morocco, and it was mainly led by Dunkin'.
Eugeniu Comarnitchi: If we look then from a profitability point of view, that revenue growth translated into higher margins. Our adjusted EBITDA grew by 33% to SAR 39.4 million. The margin reached 13.4%, up 0.9 points year-on-year, driven by operating leverage. Five Guys contributing as well with the Five Guys contribution and disciplined execution. Gross margin expanded by half a point to 29.7% for product mix pricing and lower costs per order. Selling and distribution expenses rose faster than sales, reflecting growth in the aggregator channel, and aggregator remains a profitable channel for us, and we manage the economics closely. G&A rose slightly in absolute terms, but fell as a share of revenue.
Eugeniu Comarnitchi: Operating profit grew 35% to SAR 27.3 million. From a non-recurring items point of view, they were SAR 3.1 million, and they were mainly related to M&A activities, expenses related to 2025, and accounting reclassifications. Moving down the P&L to net profit, net profit to shareholders rose 34% to SAR 20.9 million. Adjusted net profit grew by 49% to SAR 24 million.
Eugeniu Comarnitchi: Below operating profit, finance costs rose to SAR 5.8 million from SAR 3.8 million, mainly due to the acquisition financing raised in Q2 for the Five Guys. Finance income was SAR 0.3 million, and the Zakat and income tax were stable at SAR 1.6 million. On the right, you see how the reconciliation to the adjusted EBITDA. Reported EBITDA under IFRS 16 was SAR 57.4 million. If we deduct the SAR 21 million of rent to present the EBITDA on a pre-IFRS 16 basis and add back the SAR 3.1 million of the non-recurring items, that gives the adjusted EBITDA of SAR 39.4 million or 13.4%.
Eugeniu Comarnitchi: Finally, from a cash flow point of view on the balance sheet, what we are seeing is that the operating cash flow for the first 9 months reached SAR 124 million, up from SAR 89 million prior year, thanks to higher profitability and higher sales. We invested SAR 130 million. Most of it went on acquisitions, so SAR 76.5 million for Five Guys, net of acquired cash, and SAR 21 million to settle Mac & Cheese consideration. The CapEx was SAR 32.5 million. Financing outflows were only SAR 3 million, the SAR 85 million acquisition facility and other borrowings broadly offset SAR 62 million of lease payments and SAR 40.5 million of dividends.
Eugeniu Comarnitchi: We closed September with SAR 29.6 million cash and a net debt of SAR 73.3 million. We continue to reward shareholders. The board approved Q3 dividends of SAR 0.6 Saudi riyal per share, or SAR 15.2 million. With this, our presentation is closed, so we can go ahead with the Q&A session.
Operator: Thank you, management. Attendees can now either raise their hand or type in the question in the chat. Our first question comes from the line of Ankur. I am unmuting you. Please introduce yourself and ask your questions.
[Analyst]: Couple of questions to start off. The first question is on this aggregator mix being 43% recently, has continuously inched up. Do you see this uptrend continuing in the coming year as well? Can you explain how it impacts. It is capital light, but how it impacts your margins really, is the key point I want to understand there. Have you fine-tuned the unit economics in terms of dealing with the aggregator? That is my first question. My second question is, what is going to drive growth? This was a good quarter, including Five Guys. Going forward, should we build in, is this how much more can we grow with the current number of stores? Are we up to our earnings potential, or there is a lot more to go?
[Analyst]: Because there were a lot of macro factors which have led to the situation where we are in terms of revenue per store and everything else. If you look at the current business, what is the mid-term earnings potential of this business? Those two questions.
Filippo Sgattoni: Thanks a lot, Ankur. On the first question, if you see, there has been an important growth between last year and this year on aggregators, almost 10%. Now is more or less reaching the maturity level. We believe that probably in the future, aggregators will represent 40% to 45% of our total sales. This, as also explained by Eugeniu and Hatem, we made sure that all the channels today are profitable, more or less with the same level of profitability. This is important for us. In general, today from aggregators, we are always seeing incremental orders. We are not seeing any cannibalization from our channels to the aggregators, because when we look to the total percentage, you need also to understand that the total order count is also increasing.
Filippo Sgattoni: For sure, the aggregators are contributing as incremental orders more than our own channel, but this is a trend in the sector. For us, what is very important is that all the channel has the same level of profitability. This, you can see that somehow in a moment where there is also inflation and where we as a company, we decide not to pass inflation to our customers since 2021, to keep improving also the profitability means that as a company, we have been able to address the EBITDA flow-through of all the channel. In terms of growth, there is still an important space. There is still an important space because, again, in the key markets, in the core markets for us that are Saudi Arabia, UAE, and Egypt as a corporate market, there is still an important space.
Filippo Sgattoni: What we are doing is also through the store format and the store design, to be able to penetrate successfully also area where today probably a standard Domino's stores would not make sense. That is why for us, we are also testing a sample-specific model for the second-tier city and the third-tier cities in Saudi Arabia. The same we are doing also in UAE. So more and more, we have been able also to, thanks to Domino's specifically, to develop a different format that help us to penetrate and to reach an audience that with a standard format is not feasible. This always now keep an eye to the payback period that for us is very, very important to continue to generate free cash flow for our inorganic growth, but also for our dividends to the shareholders.
Operator: Thank you. Our next question comes from the line of Sultan. I am unmuting you. Please unmute yourself locally. Introduce yourself and-
Sultan Al-Shaalan: Yes, hi. This is Sultan Al-Shaalan from Jadwa Investment. Thank you for the call, and congratulations on a strong set of results. Maybe two questions from my end. First, on the Saudi growth, you mentioned excluding Makkah as well as Five Guys, the growth was around 5.2%. What was the like-for-like growth for Q3, and how was it driven? Was it on transactions, on average check, or on pricing? Have you done any price adjustments recently, specifically through aggregators or any of the other channels? The second question would be on the Five Guys. Obviously, you guys have done a good job in improving the business. Is there additional improvement you expected through the business? Is there any potential for additional M&As in the future?
Filippo Sgattoni: Sure. Thanks, Sultan. I will reply to the first two questions, and then I leave the floor to Hatem for Five Guys and the future inorganic growth. Basically, now, if you consider that in Saudi Arabia, we have, let me say, opened very few restaurants in the first nine months, I would say that almost 5% is the like-for-like growth, driven by a combination of order growth and a different basket. Remember that more and more, we are also encouraging our customers to add additional items to the basket, because again, for us, it is very, very important to grow the gross margin per order in absolute value. This is what is contributing. When it comes to the pricing, yes, basically, every channel has a different audience, every channel has a different cost.
Filippo Sgattoni: Therefore, in every channel, we do apply a different value proposition. This is also an important element for us to keep all the channels profitable. Therefore, there is a gap between the price in our own channels and the price on aggregators, because on aggregators, there is also an additional cost. This again goes back to the omnichannel business strategy, where our idea is to give to the customers the freedom to decide from which channel to place the order, being sure that in each channel, really, there is a different audience, there is a different level of weight that the people give to product, to price, to service, and so on. This is what we are doing. I leave the floor to Hatem for Five Guys and future inorganic growth.
Hatem AlHamrani: Thank you, Filippo. For Five Guys improvement, Alhamdulillah, we have seen a good quarter for Five Guys, and I think we will continue the same improvements, inshallah, moving forward. So, with also, inshallah, hopefully starting next year, we see additional Five Guys stores as well. On the M&A section, the short answer is always yes. We are always in the look for new M&A opportunities. We have shared this previously that Alamar focuses primarily on local brands. We look at not only leading categories, but also high-growth categories in which we believe there will be high growth in certain categories. So the short answer is yes, and it is an ongoing effort that we do in assessing the M&A opportunities.
Sultan Al-Shaalan: Maybe one more question, if I may. You usually provide the graph where it shows the ADS on a monthly basis. I do not see it in this presentation. I am not sure if it is going to be in the presentation once you post it. Maybe just an idea of how the current market is. Are you seeing similar growth to Q3? Are the guidance still in line with what you are expecting for Q4?
Filippo Sgattoni: Yeah, basically, we are not showing anymore the graph because the graph, the main was a sort of a tool to show up how the company was recovering from the boycott. Now, thanks God and thanks also to the good actions we are doing, we are behind the boycott. And more and more, we will keep also adding stores. And somehow, it is a KPI that you can recalculate by doing total sales Domino's that we share, divide the number of stores. This can keep doing you the proxy. What is important, and someone answered to this point, is always the like-for-like growth, because for us, the average sales per store remain an important indicator, because by increasing the average sales per store or the like-for-like, this will generate an important flow-through to our profitability.
Filippo Sgattoni: That is why, again, we are not disregarding the KPI, simply the information do not generate anymore the value that was there before, I mean, the former data. And that is it. There was another question, Sultan, I do not remember.
Sultan Al-Shaalan: Yes, on the Q4 expected performance.
Filippo Sgattoni: Fourth quarter, so far, you can imagine, especially with the situation in Saudi Arabia, there are some change in the trends. We are seeing, for example, a decrease in carryout. This also driven by some specific location that are close to captive market or, for example, the location that we have in the airport in Riyadh. But there is an important compensation and offset from delivery. That is why in these specific days, we are seeing a trend similar to COVID, where delivery somehow is picking up and the carryout somehow is declining.
Filippo Sgattoni: Not in all the kingdom, but let's say that we have probably 3% or 4% of our network that because of the location is suffering from the current situation. But so far, we have been able to offset. In all the other markets, no, we are not seeing a different trend.
Sultan Al-Shaalan: Thank you so much, Filippo.
Filippo Sgattoni: My pleasure.
Operator: Thank you, management. There is a question from the chat. I am reading out the question. It reads, "Five Guys revenue was declining before the acquisition, and now it is growing. What initiatives did you do to that resulted in this growth?
Hatem AlHamrani: It is a multiple of initiatives. At the heart of everything is the operational discipline. Number 1, we have hired local leadership that understands the local market. We have been now looking at the new products and how can we communicate the value to the customer and what they are getting out of buying a good burger from Five Guys. You have seen in the presentation, and probably if you order the milkshake, I encourage you to order the new flavor, peach flavor. It is a mix of operational discipline and local talent that understands the market very well, with innovation and making sure that the brand reaches its potential.
Operator: Thank you. Our next question comes from Khaled. Khaled, I am unmuting you. Please introduce yourself and ask your question.
[Analyst] (SNB Capital): Assalamu alaykum. Am I audible?
Operator: Yes.
[Analyst] (SNB Capital): This is Khaled from SNB Capital. I have 2 questions. My first one is related to the receivables. Can you please quantify how much is coming from the non-corporate stores?
Hatem AlHamrani: Sorry, could you please repeat again how much is coming from the corporate stores?
[Analyst] (SNB Capital): Non-corporate stores or operators.
Eugeniu Comarnitchi: If I understood correctly, what you are asking for, it is out of the whole receivables, how much it is increasing due to the current network?
[Analyst] (SNB Capital): The sub-franchised model.
Eugeniu Comarnitchi: Oh, okay. So, it is a majority of it is due to the sub-franchise model.
[Analyst] (SNB Capital): Okay. My second question is related to Five Guys. Can you please explain the lease terms? Is it a long term or short term? Because I believe that the location, current location of the network is not ideal, and there is a big potential if we can turn over the locations fast. Thank you so much.
Hatem AlHamrani: Thank you for the question, Khaled. This is one of the points that we've shared with the investors when we started or when we announced the acquisition a few months ago. Definitely the real estate strategy in Five Guys is being looked at, and we're working on it to have not only good locations for the new store, but also relocation and resizing from the current network. Five Guys, like any other brand, the leases are what the normal commercial terms are. Nothing so specific about. Inshallah, the next few years, you will start seeing more Five Guys in better locations, inshallah.
[Analyst] (SNB Capital): Clear, Hatem. I imagine that since Five Guys is, it's like a full-service restaurant rather than a QSR, maybe the lease term has higher duration. Correct me if I'm wrong.
Hatem AlHamrani: We look at Five Guys as a more or less as a fast casual, because we don't serve to the tables. That's usually the metric. It's not different from what we see in market practices. Some locations are annual, some locations are a few number of years. Nothing too specific here for Five Guys or that's different from what you see in the normal market.
[Analyst] (SNB Capital): Very clear, Hatem. يعطيكم العافية.
Operator: Thank you, management. Ladies and gentlemen, you can either raise your hand or type in your question in the chat. I have a question from the line of Mohammed. Please introduce yourself and go ahead with the question. Hello, Mohammed, I've unmuted you. Please unmute yourself locally, introduce yourself and go ahead with your question. I believe there's some technical difficulty. There's another question from the line of Praveena. I'm unmuting you. Please unmute yourself and introduce yourself and go ahead with your question.
[Analyst] (United Securities): Hello, am I audible?
Operator: Yes.
[Analyst] (United Securities): Thank you. My name is Praveena. I am from United Securities in Oman. Just a couple of questions on the Five Guys acquisition, if I may. Would you be able to shed some light on the revenue per store and the cost or the CapEx of a new store in the future?
Hatem AlHamrani: More details about Five Guys will be included in our updated strategy and midterm guidance. I would wait until that, which is what we plan to share next year, inshallah.
[Analyst] (United Securities): Great. Thank you. Also, would you be able to shed some light on the implication of the salary increases in KSA? How are you expecting that to affect your margins and your bottom line as well?
Hatem AlHamrani: Eugeniu, do you want to take this?
Eugeniu Comarnitchi: Yeah. May I ask you to repeat again the question?
[Analyst] (United Securities): I just like to know the implication that you are expecting on your margin from the salary increases that are set to come in in KSA, and the utility increases as well. What sort of a margin implication are you looking at?
Eugeniu Comarnitchi: That is very good. Regarding the electricity and water, as we announced, it is not a material impact for us. The impact will start from Q1 next year, and that will be maybe around 0.4% on the cost of revenue. We think that we will be able also to mitigate with different actions that the management will be putting them in place.
[Analyst] (United Securities): Thanks. On the salary increases?
Eugeniu Comarnitchi: Yeah, the salary increases, that has an impact that is even less material because it is starting from the second half of the year. Also, by having the mix where we do not have that much percentage of Saudis on the minimum wage, I would consider that impact almost half compared to the electricity and the water.
[Analyst] (United Securities): Great. Thank you so much.
Operator: Thank you. I see Mohammed's hand raised. Mohammed, I have unmuted you. You can unmute yourself locally, introduce yourself, and go ahead with the question.
[Analyst] (Ashmore): Hi. Do you hear me?
Operator: Yes, we can hear you.
[Analyst] (Ashmore): Hi, this is Mohammed from Ashmore. I just have a question on the acquisitions and the capital allocation. I noticed that the free cash flow post-acquisition and post-IFRS 16 was negative 9 months 2025, and the deficit widened in 2026. But I see dividends is increasing, which is a bit very weird given that the dividends is paid out of borrowing, not out of free cash flow. What is the company's capital allocation framework on this?
Eugeniu Comarnitchi: Okay. Overall, none of our borrowings funded the dividends. The SAR 85 million facility financed the Five Guys acquisition. It is also the dividends, and it is seasonal. If we are looking at the 2026 free cash flow full year, it will fully cover the dividends payout. The dividends payout would be covered. With the next year, early next year guidance, we will set our capital allocation framework, including the dividend policy.
[Analyst] (Ashmore): Okay, thank you. Can you highlight how much of the earning growth is due to consolidation and how much of it is organic?
Eugeniu Comarnitchi: The growth in what exactly, sorry?
[Analyst] (Ashmore): The profits.
Eugeniu Comarnitchi: In terms of percentage, let's say that the acquisition did not dilute our profits.
[Analyst] (Ashmore): The growth excluding the acquisition is how much?
Eugeniu Comarnitchi: So-
Filippo Sgattoni: We are not sharing.
Eugeniu Comarnitchi: proportion-
Filippo Sgattoni: Oh, no, we are not sharing this breakdown, because I mean, it is still too early to share the breakdown. Even we do not see other companies sharing the profitability by brand. What we are sharing is the total growth in Five Guys that is in the range of 20% versus the previous year in terms of sales. Our margins are improving with or without the Five Guys. That means that we have done an acquisition that is accretive, is not diluting our marginality. Back to the point on our capital or borrowing allocation, we do like many other companies. We analyze the cash flow of the potential target, and we do allocate the loan to the target. in this specific situation, we have allocated the loan to buy Five Guys, to Five Guys itself.
Filippo Sgattoni: The brand would be more than able to repay its loan, especially with the current performance, and also looking to the future CapEx that would be required by the footprint expansion. That is why again, we are not mixing our cash or loan. Simply, we are allocating the loan to each specific target or to each specific inorganic growth, making sure that every one of them can repay the loan.
Operator: Thank you, management. Since we do not have any further questions or any follow-up questions, I would request Filippo to give his concluding remarks.
Filippo Sgattoni: No, first of all, thanks to all of us for attending our call. Thanks to my team and our people and our customers to help us on delivering such important results. As I mentioned before by Hatem, now our focus is on delivering the outlook, keeping always a very transparent engagement with all of you. Feel free to reach out to us or to meet with us between Riyadh and UAE specifically. Then again, our attention toward the end of the year will be also to the balance sheet.
Filippo Sgattoni: We want to strengthen our balance sheet and our cash flow performance to accommodate an additional inorganic growth that we hope very soon we will be able to announce. This is our commitment, and this is our direction. It is about outlook, it is about transparency, and have a strong balance sheet and cash flow for the future. Thanks, everyone. Thanks, Rajeev, for hosting us.
Operator: Thank you, management. Thank you, attendees. Have a great day. The meeting should now come to an end.
