Operator: Hello, and welcome to the FEMSA Q3 2026 conference call. My name is Caroline, and I will be your moderator for today's event. Please note that this conference is being recorded. For the duration of the call, all participants will be in listen-only mode. You will have the opportunity to ask questions at the end of the presentation. To do so, please use the raise hand feature in Zoom and we will open your line. If you experience any technical issues during the call, please use the chat function to request assistance. I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead.
Juan Fonseca: Good morning, everyone. Welcome to FEMSA's Q3 2026 results conference call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA CEO, Martin Arias, our CFO, and Pamela Ortiz, who heads the investor relations team at Coca-Cola FEMSA. The plan is for Jose Antonio to open the conversation with some high-level comments on the quarter's performance and trends, zooming in on OXXO Mexico's results, followed by Martin, who will provide more granular details on the results across our business units. Finally, we will open the call for your questions. Jose Antonio, please go ahead.
José Antonio Fernández Garza: Thank you, Juan. Good morning, everyone. The Q3 was a strong one, during which our two main engines, OXXO Mexico and Coca-Cola FEMSA, delivered strong results, showing an improvement in many of the variables we are trying to impact, and thus reinforcing our confidence in our strategy and its effectiveness. At OXXO Mexico, our year-long effort to drive customer traffic while protecting our profitability produced solid results. While Coca-Cola FEMSA continued to improve results in Mexico and had a very strong set of numbers in South America. Beyond the two big engines, exciting things are happening across our other business units. In particular, during the quarter, we saw Bara sustaining its pace of store base expansion and improving its maturation curve. While OXXO Latam continued to deliver promising results across South America, with Colombia leading the charge.
José Antonio Fernández Garza: However, this morning, I would like to focus my remarks on OXXO Mexico by covering two topics. First, the continued recovery in sales and traffic, which gained further traction during Q3. Second, OXXO's profitability, including how we are balancing the different levels of our value proposition and the strategic framework and operating discipline that are helping us to address the challenges we face. After that, Martin will elaborate on the developments at other business units in his remarks. Let me begin with sales and traffic. On our last call, and in many of our conversations with you since then, a recurring question was how much of our performance was structural and how much was driven by the World Cup? Q3 gives us a good read on that issue.
José Antonio Fernández Garza: With very little benefit from the tournament, with only one Mexico match in early July, same-store sales grew 9.2% in the quarter, driven by an increase of 5.5% in the average ticket and 3.5% in average traffic. Given that ticket growth is nominal and includes the impact from excise tax increases on soft drinks and cigarettes, the highlight of the quarter is traffic, coming in 150 basis points above the level reported in Q2, despite having only a small benefit from the World Cup. While warmer weather provided some support, our data suggests it explains only part of the results.
José Antonio Fernández Garza: More importantly, the performance reflects a solid response from our customers to the strategy we described on our last call. Putting the customer at the center of everything we do at OXXO, and executing against our four strategic pillars of impulse, food service, daily and replenishment, and beyond trade services. Furthermore, this positive customer response is also translating into market share gains. According to the market data available through August, OXXO continues to gain share against all relevant trade channels in the categories in which we compete. Year to date, our market share in the categories in which we compete is now above 2024 levels, with most of the gains concentrated in our core impulse categories, precisely where these adjustments have advanced the most. So far, this is a promising performance.
José Antonio Fernández Garza: Beyond the impulse occasions, food service is another area where we have seen progress, with traffic growing at a low double-digit rate, driven mainly by coffee. This has been the result of improved execution across our stores and tactical pricing, which helps us drive incremental cups per day. For its part, daily and replenishment is at a very early stage of testing, but its initial results are already modestly accreted to traffic. Together with services, which is also growing in traffic terms, we see meaningful opportunities as we continue to develop all these categories. We are still fine-tuning our approach, and there is room to further refine our value proposition across the different strategic pillars.
José Antonio Fernández Garza: We continue to test and learn from many initiatives, including structured price experiments across categories in selected regions, revamping our store's coffee area and value proposition, and testing the Canasta OXXO, our offer of everyday essentials at accessible price points, among others. These experiments are focused on gaining a better understanding of the right mix of assortment, price, and promotions to accelerate traffic and sales. In those cases where we have adjusted the price packaging architecture, we monitor very carefully whether the resulting increase in volume is enough to offset the margin impact from the price reduction, or switch from higher price points to lower price point SKUs. We know that not every test will work, but this process will allow us to scale only those that prove their overall positive value contribution. Now, let me turn to profitability. We manage our value proposition from an integral perspective.
José Antonio Fernández Garza: This includes price, gross margin, assortment, and in-store execution, including promotions and commercial income, all of which play an important role in enhancing value for our customers. Behind these levers are changes in our price and packaging architecture and in our overall mix, as well as in the commercial income we generate working with our supplier partners, which is quite dynamic. What we were able to achieve this quarter is a better balance across all these levers to drive traffic while protecting our profitability. While the reported gross margin contracted by 120 basis points, this contraction reflects in part a demanding comparison base as Q3 2025 included a particularly high concentration of commercial income. Normalizing for this effect, OXXO Mexico's gross margin would have declined in line with the 70 basis point contraction of Q2 2026.
José Antonio Fernández Garza: In addition to this timing of commercial income issue, the gross margin result reflects the mix effect coming from affordability initiatives being offset by higher commercial income and by solid growth in higher margin services. This is an important point, as it shows that we are managing our affordability strategy in a rational and disciplined way, always leveraging OXXO's relevance as a commercial channel for our supplier partners, rather than trading gross margin for market share. In absolute terms, gross profit grew 7.4%. Operating income grew 5.8% during the quarter, and operating margin contracted by 40 basis points. This includes an impact of approximately 20 basis points from the closing of 140 older, underperforming stores. Excluding these closures, operating income would have grown 8%.
José Antonio Fernández Garza: The closures are part of a broader pruning exercise involving approximately 250 stores, and we expect a similar impact in Q4 as we complete the process. While this measure affects near-term results, we believe it is healthy to periodically review our store base and prioritize the long-term profitability of the business. The quarter's results also reflect the team's focus on operating discipline, which has been just as relevant as the commercial strategy. In the context of increasing wages well above inflation and the upcoming labor reform relating to the reduced workweek, expense efficiency continues to be a central part of how we run OXXO, and we are in a permanent effort to find new ways to optimize spending. Summing up, I believe Q3 is a good example of how our strategy is meant to work.
José Antonio Fernández Garza: We balance the different levers of our value proposition to bring incremental traffic to our stores, and we translated that volume into growth in gross profit, and ultimately in operating income in absolute terms. That is, in essence, the algorithm behind our strategy, and it is how we manage the business, with a focus on growing the absolute profit pool over time. Having said that, we are not complacent. The consumer environment in Mexico remains soft and our comparison base will gradually become more demanding as we move forward. We are confident that we have the right strategy, the right team, and a clear view of the levers at our disposal to keep executing and delivering on that strategy. With that, let me turn it over to Martin to go over the numbers in more detail. Thank you.
Martín Arias: Thank you, Jose Antonio. Good morning, everyone, and thank you for joining us today. Let me begin with FEMSA's consolidated financial results for Q3 2026. Total revenues increased 9.8% year-over-year, while operating income grew 9.9%, reflecting a solid performance at OXXO Mexico and Coca-Cola FEMSA, and also reflecting the benefits of our cost containment and restructuring initiatives, partially offset by the bad debt provisioning in Colombia, the effect of the above-trend store closures at OXXO Mexico that Jose Antonio just described, and the consolidation of losses at OXXO Brasil. On a comparable currency-neutral basis, total revenues and operating income grew 9.4% and 13.4% respectively. Net consolidated income amounted to MXN 10.6 billion, representing an increase of 81%.
Martín Arias: This was mainly explained by the operating income performance I just described, as well as by, one, an under-demanding comparison base, which included a MXN 3.1 billion loss from discontinued operations last year, reflecting the divestiture of FEMSA's logistics operations, and two, a non-cash foreign exchange gain of MXN 1.1 billion compared to a MXN 1.2 billion loss in the comparable quarter, mainly reflecting a non-cash gain from the valuation of our investment in ImperialBrady and the net effect of foreign exchange rate movements on FEMSA's US dollar-denominated cash and debt positions. These were partially offset by three items. One, a decrease in interest income, mainly driven by lower cash balances and interest rates. Two, a MXN 312 million loss from other financial income, mainly reflecting a loss on financial instruments at Coca-Cola FEMSA Brazil.
Martín Arias: And three, a higher income tax provision of MXN 5.1 billion compared to MXN 3.8 billion in Q3 2025 due to our improved results. The effective income tax rate was 32.5% in Q3. As you know, our effective tax rate is subject to short-term volatility driven by a series of factors discussed in the last quarter's call. Turning to our operating results. I will keep my comments on OXXO Mexico brief, as Jose Antonio has already covered the quarter in detail. Total revenues grew 10.3%, operating income grew 5.8%, and operating margin contracted by 40 basis points. After normalizing for the impact of the above-trend store closures that Jose Antonio described, operating income increased 8% and operating margin contracted 20 basis points. In terms of year-to-date expansion, we have added 734 stores and closed 272 stores in Mexico for a net increase of 462 new stores.
Martín Arias: While this means we will probably come up a bit short of our annual run rate of 1,000 net new stores this year, this is an exception and our annual target remains at the net 1,000 store level for the next year and beyond. The Americas & Mobility segment delivered total revenues of MXN 29.5 billion, increasing 18.1% or 10.9% on a comparable and currency-neutral basis. Excluding the impact of consolidating OXXO Brasil, the segment's top line benefited from a solid performance at OXXO Gas, driven by healthy volume growth and a strong performance across OXXO Latam, especially in Colombia, where we continue to see encouraging four-wall dynamics, with mature store traffic growing at a high single-digit pace during the quarter. For its part, OXXO Brasil continued to deliver encouraging performance, with same-store sales increasing 5.1% on a currency-neutral basis.
Martín Arias: Regarding merchandise gross margin, during Q3 2025, we reclassified certain expenses from cost of sales to expenses for the first nine months of that year, which had a disproportionate positive impact on the margin for that quarter. Americas & Mobility, excluding OXXO Gas, was reported together with OXXO Mexico back then, so the impact was small for that segment. The objective of these reclassifications was to improve our disclosure by aligning the classification of costs and expenses across our retail businesses and to make the results of each of these operations as comparable as possible. This was similar, although for different reasons, to what we have done in the Europe and Health divisions. There is no impact on operating income, and we do not expect this to affect in future quarters as the entire effect of this reclassification was performed during that period.
Martín Arias: Given that change during Q3 of this year, the gross margin of merchandise decreased approximately 620 basis points to 33.5% of revenues. On the same accounting presentation basis, which is excluding the effect of this reclassification, gross margins for merchandise expanded by 10 basis points, reflecting solid gross margin expansions at OXXO Colombia and Peru, partially offset by a negative mix effect in OXXO Chile. Gross margin for the fuel operations decreased 50 basis points to 11.6%, reflecting the voluntary fuel price commitments at OXXO Gas, partially offset by solid fuel margins in Oxxo USA. Operating income was MXN 170 million, with an operating margin of 0.6%, representing a decrease of 76% and 29.9% on a comparable basis, excluding currency translation effects and the operating losses from the consolidation of Oxxo Brazil.
Martín Arias: The operating margin reflects narrowing losses across OXXO Latam, excluding Brazil, offset by the impact of the fuel price commitments in Mexico. Our operations in Europe reported total revenues of MXN 14.1 billion, down 5.2% year over year, but up 4% on a currency neutral basis, reflecting solid performance in Swiss retail, partially offset by weaker results in German retail and food service, where train route closures and extreme weather affected traffic, particularly at train stations. This was offset by weak performance at Valora's B2B business in the US, driven by the loss of relevant key accounts. Regarding Valora's gross profit, as you know, since Q1, we have been reclassifying certain distribution expenses from SG&A to cost of goods sales, and that will remain the case for the rest of the year.
Martín Arias: As I mentioned, this change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense, and there is no impact on our operating income. However, as a mechanical effect of this change, gross margin was impacted by MXN 232 million in the Q3. Gross profit decreased by 10.8% with a gross margin of 39.3%. On the same accounting presentation basis, gross margin contracted by approximately 90 basis points and gross profit decreased by 7%, driven by lower food and tobacco margins. Operating income was MXN 531 million, a decrease of 24.8% and 17.5% on a comparable basis with an operating margin of 3.8%. This mainly reflects the gross margin decrease I just described and the soft performance of Valora's B2B business in the USA, driven by lower sales volume, combined with increased production costs and expenses.
Martín Arias: For its part, the Health division delivered total revenues of MXN 22.9 billion, growing 7% year-over-year or 3.4% on a currency neutral basis. Local currency same-store sales were positive in Colombia, Ecuador, and in Mexico, where the business continues to stabilize. While Chile same-store sales decreased slightly, reflecting a more competitive environment. As was the case with Valora, in Health we are reclassifying certain distribution expenses from SG&A to cost of sales, mechanically reducing gross margin by approximately MXN 621 million and reflecting the proportional shift of these expenses into cost of sales. Gross profit decreased by 7.4%, with a gross margin of 26%, a contraction of approximately 410 basis points.
Martín Arias: On the same accounting presentation basis, gross margin in the Q3 contracted by approximately 80 basis points, with gross profit increasing 1.4% in currency neutral terms, mainly reflecting commercial initiatives to protect our competitive environment in Chile, including our expansion to match that of our competitors. Competing with new channels in health and beauty products, developing new categories, and focusing on the needs of chronic patients. As we discussed on previous calls, as part of our strategy to reduce exposure to the institutional business in Colombia, at the beginning of April, we notified EPS Sanitas, our largest counterparty in this channel by a significant margin, that we would not renew the agreement upon its expiration in September. This has now been extended until the end of October for part of the business.
Martín Arias: Given the continued uncertainty in Colombia's healthcare system, during the quarter, we reported an additional non-cash credit risk provision of approximately MXN 430 million. That said, we maintain a constructive view on the outlook for our retail Health business in Colombia, and we will continue to actively manage this exposure, remain disciplined in our capital allocation, and keep the market informed of any relevant developments. Operating income reached MXN 319 million, a decrease of 63.2%, and a decrease of 63.8% on a comparable basis with an operating margin up 1.4%. Excluding this non-cash credit risk provision, operating income reached MXN 749 million, a 14% decrease driven mainly by Chile, where we saw profitability pressured by initiatives to maintain our market position in a highly competitive environment, partially offset by solid growth in Colombia retail and Ecuador. Mexico continued stabilizing its operation, reducing its losses significantly versus last year.
Martín Arias: Bara delivered another quarter of strong growth with same-store sales up 10.3% and 112 net new stores, sustaining the rapid expansion pace of Q2. We are encouraged by our newer store cohorts, which are maturing faster than our legacy stores in the Bajío, a sign that the model concept continues to evolve favorably and is earning an increasingly positive response from customers. Coca-Cola FEMSA delivered revenue growth of 10.9% and an increase in operating income of 15.4%, which included a one-time benefit from an insurance claim, without which the operating income would have grown 7.4%. In Mexico, volumes performed well, reflecting the resiliency of the business, even after the effect of the excise tax increase, which allowed Coca-Cola FEMSA to strengthen its overall pricing, supported by agile and disciplined commercial execution.
Martín Arias: South America delivered another strong quarter, with robust volume growth in Colombia and Brazil, translating into double-digit operating income growth. As always, we encourage you to listen to their earnings call hosted last Monday. Before closing, let me briefly update you on capital allocation. During Q3, we deployed MXN 9.4 billion in CapEx, representing approximately 4% of total revenues and a decrease of 28.3% compared with last year, primarily driven by lower capital expenditures at Coca-Cola FEMSA, driven by a demanding comparison base last year when they invested to expand their capacity to fit volume demand in key markets. Given the expected impact of the excise tax in Mexico, Coca-Cola FEMSA was able to delay certain CapEx this year. With respect to shareholder returns, during the quarter, we announced a new share buyback program.
Martín Arias: This is incremental to the approximately MXN 41 billion in ordinary and extraordinary dividends expected for the cycle from March of 2026 to March of 2027, of which we have distributed MXN 30 billion to date, roughly two-thirds of the committed amount. The remaining MXN 11 billion are expected to be distributed early next year. Regarding leverage, our net debt to EBITDA ratio, excluding Coca-Cola FEMSA, stood at 1.19x at the end of the quarter, compared with 1.15x in the prior quarter. On 15 October, we paid the third installment of our 2026 ordinary and extraordinary dividend. Adjusting our quarter-end cash balances for this payment, net of the dividends received from Coca-Cola FEMSA on 13 October, our pro forma net debt to EBITDA ratio, excluding Coca-Cola FEMSA, would have been approximately 1.3x. Our leverage objective of approximately 2x net debt to adjusted EBITDA ex-KOF remains unchanged.
Martín Arias: The buyback we announced this quarter, together with our dividend program, reflects our commitment to continue allocating capital and moving forward our stated objective in a disciplined manner while preserving the flexibility to fund our organic growth and to pursue potential opportunities that meet our return thresholds. As we look ahead to the final quarter of the year, we are encouraged by the momentum across most of our business units, and particularly by the consistency of the recovery at OXXO Mexico. We remain mindful of a soft consumer environment in Mexico, recent volatility in Brazil, and a comparison base that will gradually become more demanding. We are confident in our strategy and in the levers at our disposal, and we look forward to sharing more details about our plans for 2027 on our next call.
Martín Arias: Before we open the call for your questions, a reminder to please limit yourself to one question at a time, as has become our practice. With that, we are ready to open the call. Operator, please go ahead.
Operator: At this time, we are going to open it up for question and answers. If you have a question, please click on Raise Hand for audio questions or write it down in the Q&A section for reading questions. Please remember that your company's name should be visible for your questions to be taken. Please limit yourself to one question at a time. If you have a second question, please get back on the queue. We do ask that when you pose your questions that you pick up your handset to provide optimum sound quality. Please hold while we poll for questions. Our first question comes from Henrique Brustolin with Bradesco BBI.
Henrique Brustolin: Hello, Jose Antonio, Martin, Juan. Thank you for taking my question. Mine is about the traffic recovery in OXXO Mexico. Traffic has been recovering now for two consecutive quarters. There are several initiatives that you are implementing, but most of the improvement, based on your initial remarks, appears to be coming from the core impulse categories. This is interesting, considering the soft consumer environment overall in Mexico. The question is: How do you see the elements of OXXO's value proposition relative to the other retail channels that are allowing you to capture this much share over the recent quarters?
Martín Arias: Hola, Henrique. Thank you for your question. It is hard for me to talk about other retailers. I think it is obvious that some of them are maybe underperforming.
José Antonio Fernández Garza: We are very much focused in what we need to do. It is true that by far the biggest high traffic growth has come from what we do good, we become much better at doing, especially with adding some value assortment presentations into our core categories, even energy drinks, soft drinks, beer, cigarettes, et cetera. To be honest, we are seeing a very good positive traffic growth across geographic regions. All of our regions are growing traffic on Q3, which is a very positive sign. Not all of them at the same rate, but all of them grew. That tells you that, I think we had either very favorable weather throughout the country or we are becoming better at our job. In the other three strategic pillars, we are seeing also traffic growth. It is just being driven much more by impulse.
José Antonio Fernández Garza: We are seeing traffic growth in services, financial and non-financial. We are seeing traffic growth in food service, mainly driven by coffee. We are seeing some traffic growth, although not yet same-store sales growth, but still, we do see traffic growth in what we call essentials or daily replenishment. Very encouraging what we are seeing. We would much rather be in an industry with a much stronger consumer sentiment, so everyone growing and we growing more than the rest is a better place to be. We are very much encouraged by our market share gains and how we are seeing a much more enthusiastic consumer coming into OXXO for their daily needs, for their weekend parties, et cetera. Very encouraging figures for us. We hope the Mexican consumer sentiment begins to improve.
Henrique Brustolin: Very clear. Thank you very much.
José Antonio Fernández Garza: Thank you, Enrique.
Operator: The next question comes from Ben Theurer with Barclays.
Ben Theurer: Hey, good morning.
José Antonio Fernández Garza: Hola, Ben.
Ben Theurer: Jose Antonio, good morning. Wendy, Jose Antonio, Martin, Juan, thanks for taking my question. Just maybe picking up on that first question Enrique just had, thinking a little bit forward as we have seen all these changes. As we think with the improvements that you are doing, assortment, et cetera, but also the asset pruning, clearly we are still at a, call it, relatively easy base of comparison, hence obviously with the acceleration in traffic growth.
Ben Theurer: But if you put these things aside shorter term and you think more medium term, where do you see the opportunities and the structural traffic opportunities for you guys in OXXO Mexico in particular, once you have cleaned up the asset base, done the pruning, you have your stores, you have the services and so on, what is a normalized traffic assumption you would target for internally and what we should basically think about it going forward?
José Antonio Fernández Garza: Thank you, Ben. I wish I had a crystal ball to tell you where we are going to be in terms of traffic. Obviously, we are not yet satisfied with our results. Even though we are encouraged by seeing progress on all of our initiatives and our levers, we are not satisfied. We think we can do much more. I am hopeful that what is going to help us and carry us forward in the next few months is that some of our initiatives in food service are going to get better, bolder. Our execution is getting better at understanding what really drives coffee traffic and other food items. We are hopeful, although on still very early stages of our Canasta OXXO proposal, and we are still seeing some interesting traffic drives from our financial services and non-financial cash out, et cetera. We are still very cautious on giving you a guidance on next year.
José Antonio Fernández Garza: It is going to be a tough year. I think we have had favorable weather this year. We may expect a rainier and colder Q4. October, although it is coming, it is looking like it is going to be positive on traffic, did experience much more rain than September nationally. So we are cautious. The consumer remains very cautious and looking for affordability. That should help us on our VADDA proposal, and it should help us in some of our initiatives in OXXO. But I think we should remain cautious and also planning for the worst in terms of maintaining our operating costs as lean as possible. That is my read so far for the rest of the year.
Juan Fonseca: Yeah, I think I would just add, hey, Ben, this is Juan. The way I think about it is the impulse part of it, in some ways, it is like the path of least resistance. It is where we were already very good, and it was really more about improving certain things and kind of getting back to the top of our game, but that is more immediate, and that is why we are beginning to see it already. If you think about some of the other pillars, especially if I think about food service and I think about the daily replenishment opportunity, those could be driving incremental traffic for a while. And by that I mean years. If we succeed in either of those could be very material in the medium term. Right? So we are still testing different menus. We are still beginning to tinker with the daily opportunity.
Juan Fonseca: But, I guess chronologically, it was always going to be impulse first, and then the others materializing, I would say, from next year forward. So at least as you think about modeling, that's how I would think about it.
Ben Theurer: Thank you very much, and congrats on the results.
José Antonio Fernández Garza: Thank you, Ben.
Operator: The next question comes from Lucas Mussi with Morgan Stanley.
Lucas Mussi: Jose Antonio, Martin, thank you for taking my question. Still on OXXO same store sales and the new initiatives regarding the value proposition. I wanted to go back a little bit on the food service and the replenishment part of it, on your commentaries, Jose Antonio. Just wanted to better understand what is the goal, what is it that you are targeting over the medium to long term in terms of how you are thinking about an OXXO store, let us call it 5 years from now? Are you aiming at something closer to what a traditional convenience store looks like in the US with more food service? Are you targeting a better margin coming from the food service initiative, replenishment, although you could argue it is a lower profitability category. Are you seeing that driving a significant amount of volumes over the medium to long term?
Lucas Mussi: Just thinking about how would you envision the OXXO store 5 years from now in terms of the breakdown in your portfolio between the food service, the still on initial stages replenishment, and also the impulse category, which is your core today. Just trying to get a little bit more perspective on that. Thank you.
José Antonio Fernández Garza: Thank you, Luca. It is a good question. Look, we obviously are inspired by many of the things we see developing in food service in the US. I think the convenience store industry is doing a tremendous job in certain regions and certain players. But obviously the Mexican consumer is very different. We still believe in our food service approach, we have a long way to go just by comparing ourselves with other offerings within Mexico and what the Mexican consumer is seeking in their everyday quick morning breakfast ritual, in their snacking options, et cetera. We see that our relevance in the impulse categories, and in the everyday lives of the Mexican consumer deserves a better percentage of that in the food service.
José Antonio Fernández Garza: I hope that we can triple our percentage of food service dependency in OXXO, like we already have demonstrated in markets that are much more similar in consumer trends, like Peru, Chile and Colombia, where our numbers are almost triple, in terms of the percentage that we sell with similar same store sales revenue per store. So, I foresee, I am encouraging and getting the team rallying behind an ambition of tripling our percentage of food service. That would be huge, and it is margin accretive, and it will become much more relevant for the lives We will become much more relevant than we already are for the lives of the Mexican consumer, and that excites us. In terms of daily replenishment, I think we have two big levers to pull.
José Antonio Fernández Garza: One is obvious, to give very low prices and low per gram prices and also low disbursement options and SKUs for our consumers. To be frank, we already give them a huge advantage that many of the players that compete in that space do not give, which is we save them time. We are everywhere, and people are sick and tired of going to the big box retailer to buy their big basket items, and we have an advantage to serve them there. We are seeing an opportunity there to save them money, save them time, give them peace of mind. We are very encouraged by the very early testing that we are seeing in some of the stores that we are tinkering in Chihuahua and Tijuana. I also think that is going to be obviously much more traffic accretive than margin accretive.
José Antonio Fernández Garza: We are becoming more and more relevant in the lives of the Mexican consumer, and that is how we see it. It is hard for me to give you a number, but I do see an evolution of the store that becomes much more savory in terms of food service options, and gives peace of mind for your daily replenishment needs in weekly assortment, et cetera. We have a lot to copy or learn from other retailers in the US, but also from what we are seeing in Mexico with some of the discount players that we can leverage our footprint. Hope it is helpful.
Lucas Mussi: Very helpful indeed. Thank you, Jose Antonio.
Operator: The next question comes from Thiago Bortoluci with Goldman Sachs.
Thiago Bortoluci: Hey, guys. Good morning, everyone. Congrats on the results, and thanks for the space to ask questions. I would like to continue in OXXO Mexico, but now targeting more the SG&A line, where I think you delivered remarkable results in this quarter. Obviously, we understand the pressures on the gross margin and the adjustments on the underlying basis, but it seems that adjusting for the calendar of commercial income, SG&A has more than compensated the lower gross margin, right? This has been a trend throughout the year. I know, and I think it was two conference calls ago, we commented about the restructuring on headcount and the corporate structure, merging Health and Proximity. I would just like to understand how much of this is already being captured in the numbers in Q3?
Thiago Bortoluci: How should we think about SG&A going forward, particularly in the scenario that you mentioned that labor could be more of a concern next year? Thank you very much.
Martín Arias: Generally, I do think that we have captured a significant portion by this point of some of the initiatives around the corporate overhead and operating overhead that we had. Maybe there is one, maximum two quarters of tailwinds there to continue to see flowing through. Remember, we also did an important restructuring at the Proximity and Health division, with significant savings there that were collapsed together with our corporate teams. Next year, the government has announced a 13% increase in minimum wage, accompanied by a reduction in the work week. So you will certainly see the effects of that in our selling expenses. Again, because we pay higher than the minimum wage, the reality is not all of that gets translated exactly percentage point for percentage point.
Martín Arias: But you will continue to see labor expenses as a percentage of revenues increase probably more in the short term as we continue to focus on our affordability initiatives. However, again, we are constantly reviewing operating model, how we can bring technology to bear at the store to make our colleagues in the store more efficient. All the initiatives around dynamic shifts, use of technology, continue to be implemented. Just the other day, I was sending Carlos Arroyo some pictures they sent me of a robot that measures the inventory in the shelves.
José Antonio Fernández Garza: Yeah.
Martín Arias: And you can just see the inventory in the shelves going through, giving you quick data. When that will become economically and technologically viable in Mexico, I cannot really tell you. Can we have small robots doing part of the cleaning inside the store? Now, since we are leaving the stores open 24 hours, maybe we can dedicate an hour or 2 of that time to running this with robots while the person who is in the store is doing other things in the store. But the pressure will continue. This is a stated policy of the government, and we will need to react as all retailers and all consumer companies, we will need to react accordingly, finding the balance between those costs and ticket.
José Antonio Fernández Garza: Thank you, Thiago.
Thiago Bortoluci: It is helpful. Thank you very much, guys.
Operator: The next question comes from Alejandro Fuchs with Itaú BBA.
Alejandro Fuchs: Thank you, operator. Thank you, Martín, Juan, Jose. Thank you for the space for questions, and congratulations in the results. Just one very quick regarding expansion growth of the business. I think also, Jose, you listed in your initial remarks about OXXO.
José Antonio Fernández Garza: Hola, Alejandro. We are listening you a little bit.
Alejandro Fuchs: Broken up.
José Antonio Fernández Garza: Broken up. Can you either get closer to the microphone or?
Martín Arias: Every third word, we don't hear every third word.
José Antonio Fernández Garza: Yeah. Can you try again?
Alejandro Fuchs: Yeah. Sorry. Is this better?
José Antonio Fernández Garza: Yes. It looks better.
Alejandro Fuchs: Okay. Thank you. My question is on growth. It seems that, I think you alluded, Jose Antonio, to OXXO in Mexico growing a little bit slower this year, right, because of the closings. But outside of Mexico, I would say also a little bit slower than in the past, while Bara continues to grow and open stores at a very fast pace. So I wanted to see if maybe, if anything has changed in terms of priorities, will Bara be maybe a little bit higher on the list, maybe relative to OXXO Brasil? I wanted to see if anything has changed on how you see maybe the growth of OXXO outside of Mexico. Thank you.
José Antonio Fernández Garza: No. Good question, Alejandro. Thank you. Look, I think there are different things explaining each of these seemingly looking slowdowns. On the Mexico side, I think we had a calendar delay as we made sure we increased the productivity or what we call the batting average of our stores. We started our expansion maybe a little bit late than what we usually do in other years. That, compounded with a pruning of stores, but we remain committed to opening 1,000 stores minus the closings of this year. Looking forward, as we are seeing the evolution of the maturation of our new stores, and as we see them bringing significant profit and paying their cost of capital significantly, we remain committed to opening about 1,000 net new stores for the foreseeable future in OXXO Mexico. For OXXO International, we are incredibly excited for Colombia.
José Antonio Fernández Garza: I think Colombia is already where we need it to be, and we need to accelerate expansion as much as we can possibly do without damaging the quality of the stores, which you know that is a number that you have to monitor carefully. Because if you overstimulate the production factory of stores with incentives, you can get bad quality outcomes. So you really have to measure very well how you expand and make sure you are developing processes and capabilities, and that takes time. But Colombia is ready for acceleration. Brazil is still not there, and we have been very upfront. We see the opportunity in Brazil, tremendous. I think it is huge, the opportunity that we can achieve. We are very excited for the São Paulo region.
José Antonio Fernández Garza: We are confident that it will grow, but we still need to take into account, as all the other retailers in Brazil, that we are going to have a 40-hour work week with two days off. As we learn to navigate those operational constraints, we are being much more prudent in how we expand. But we are still planning to expand about a store a week or more, maybe 70 stores next year for Brazil, net new stores. That leads me to the Bara question. With Bara, we are very happy with the maturity of the stores and the expansion in the north of Mexico. We are seeing an evolution that is very positive, and with still a lot of depth in value propositions to increase. We are still needing to simplify some of the portfolio. We still need to cover certain categories that Bara does not, that some of our competitors cover.
José Antonio Fernández Garza: We are very excited by the enthusiastic attitude that we see in our consumer going into a Bara. The repeat customer is there, and they are beginning to see more and more all of their fulfillment needs for their house satisfied. We still need to add some value propositions. That is why we are not so worried about same-store sale expansion for Bara. We see that as a marathon. We need to keep getting the stores better and better to supply the needs of our customers. As those value propositions get added into the store, we hope we are going to see several iterations and years of same-store sale expansion in Bara. We are much more focused in accelerating expansion, and we plan to even open more stores next year than what we are opening this year.
José Antonio Fernández Garza: We promised a store a day, and we are going to probably over-deliver on that. We are happy with that.
Alejandro Fuchs: Super clear.
Alejandro Fuchs: I hope that answers. Thank you.
Operator: The next question comes from Isabella Lamas with UBS.
Isabella Lamas: Hi, good morning, Jose Antonio, Martin, Juan. Thank you for taking my question. We would like to get a view on capital allocation. If you could mention how you see opportunities to divest some core asset sales now? What about M&A, for instance, what is your upside? Last but not least, how should we think about dividends? How do you see overall shareholders' returns evolving from now on? Get your thoughts on all these aspects of capital allocation here. Thanks.
José Antonio Fernández Garza: Thank you, Isabella. I will let Martin answer this one.
Martín Arias: Thank you for your question. Again, we tend to try to focus any announcements about what the next stage of capital allocation, to do it in our conference call, first conference call of the year, when we have visibility about our budgets, the final year results, cash flow generation during the year. It is pretty clear, by the end of this year, Q1 of next year, we will not have reached our 2x net debt to EBITDA target. I suspect we will be somewhere in the 1.5, 1.6 net debt to EBITDA. So we will have some flexibility, then we will have to decide whether that flexibility is returned in terms of, again, some sort of extraordinary dividend or additional buybacks. We will be announcing that in February, March.
Martín Arias: But clearly, there will be some space that we have available to us to announce an extraordinary dividend and again, be opportunistic with regards to buybacks and saving a little bit of gunpowder in case we see a good opportunity to buy our own shares like we did now, less than a few months ago. I do not know if that answers your question.
José Antonio Fernández Garza: I was just going to add, in terms of the kind of M&A versus shareholder remuneration, as everybody knows, we have talked in the past about how, in the vast majority of our markets, our growth is really organic. There are not really assets to acquire in Mexico or in Brazil or in Colombia. We have talked about the US as a place where there are some assets, some of which we have looked at, but obviously, we are being very disciplined in terms of valuation and expected returns. And so, we continue to reserve that flexibility. But if you notice, Martin did not mention M&A, and that should tell you a thing or two about where our minds are.
Martín Arias: Yeah.
Isabella Lamas: Yeah, that is pretty clear. Thank you so much.
José Antonio Fernández Garza: Thank you.
Operator: The next question comes from Bobby Ford with Bank of America.
Bobby Ford: Hey, good morning, everyone. Jose, can you talk a little bit about the magnitude and timeline of logistics investments you need to win in Mexican grocery, right? How should we think about the assortment and the price points needed to build principality in the category versus the Canasta OXXO that is being tested today? You are also accelerating some growth in Caffenio, and I want to get a sense of how you are thinking about Caffenio.
José Antonio Fernández Garza: In terms of investments in capabilities or CapEx or even training, that is much more heavy towards our food service capability. That comes with investment from our supplier source, and it is very granular, and it varies greatly from type of SKU. A lot of training and capability building in our stores. In the middle of that, all of our distribution, we need cold storage distribution, cold capabilities. That requires much more investment. In terms of our Canasta OXXO, most of our investment is in a lot of discussions with our supplier partners to target presentations that currently are not available. Many are, but we still need to develop a lot of them with our supplier partners that match the gram that our customer demands, the price per gram that our customer demands, the type of packaging that is convenient to carry for our customers.
José Antonio Fernández Garza: That requires a lot from our commercial guys and ladies to really develop this offering in our stores. But once we have that, it is very easy to develop the store, and it is not a lot of SKUs, frankly, and it is not a lot of price changes. Inventory. So there is not a lot of capability building to develop them. We have done it before with Los Básicos del Ahorro. I think we lost the aisles or the focus for many years, and we are coming back, and we are very excited for the results, but it is not going to be so heavily in terms of capability building. Caffenio, we have 2 businesses with Caffenio. The Caffenio infrastructure that powers our stores, and we are seeing tremendous growth in terms of not only coffee offering, but cappuccinos and all these mixes.
José Antonio Fernández Garza: We see huge potential to increase our offering. We are way above what we were selling in coffee per store last year, but way below our potential and below our target, so we have a long way to go. Our other business, which is growing relevant but still is tiny. We operate about 300 Caffenio drive stores. They are becoming almost like a cult following wherever we open. We see big, long lines, and we see huge potential. We compete against guys that have to pay a lot of franchisees, and we are very happy with that competition, and we are going to keep opening Caffenio drives.
Martín Arias: Just a compliment on Caffenio. We were able to buy out our partner in that business that had accompanied us for many years and was a great partner. That has given us the opportunity, now that we own 100%, to find significant amount of efficiencies around overhead. Number two, align much better the two organizations of Caffenio and OXXO. For example, now we give them incentives on the basis of a completely combined P&L. Everybody, both the Caffenio and the OXXO, responds for all the total cups sold, for the price of the coffee that we buy, the maintenance of the machines. That, I think, has added a whole new discipline to the business. In the Caffenio drive, it is really a source of very good and interesting innovation.
Martín Arias: They are a much smaller business, much more almost venture capital-like in the way they test and try out new things. The other day they had a pistachio flavored frappé. To be honest, it was selling, and it was selling very well. Their ability to move, and so I think it will also be a source for very interesting innovation to take things to OXXO Mexico and to take things to South America around everything related to coffee beverages and even some food, because they do have a very interesting food service offering.
Bobby Ford: Very helpful. Thank you so much.
Martín Arias: Thank you. Thank you both.
Operator: The next question comes from Alvaro Garcia with BTG Pactual.
Martín Arias: Hola, Alvaro.
Alvaro Garcia: Hey, Jose, how are you, Martin, Juan? Thanks for the space for questions. I think we've indirectly spoken about the gross margin investment, in the context of OXXO traffic, but we haven't really spoken about it directly. My question's on gross margin specifically, and I appreciate the commentary on the tough comp on commercial income, and the 70 basis point run rate of investment. On things that you can control, I guess the questions would be, how do you feel about leaning in even further into next year? It would be very helpful to get some color on breaking down that 70 basis points. How much is coffee? How much is affordability in other categories? We can think about modeling that going forward. Thank you.
Martín Arias: I would have to get back to you to get into the granular detail of by category where we are seeing it. I know that people, I have repeated this in various forums. We do not manage the business for gross margin. We manage the business for even, and it is a little bit trial and error. In other words, what I can give you in assurance is we are relentless in measuring when we initiate affordability initiatives to clearly identify what is the total margin breakeven point. So what do we have to gain in terms of traffic and volume to compensate for any adjustments that we make, either pricing or to package price, package architecture. There have been instances where the math did not work out, so we took it back. Number 2, we are changing the nature of the relationship, commercial negotiation relationship we have with our suppliers.
Martín Arias: It used to be significantly more driven by shelf space and whatever SKU they were, quote unquote, "trying to push" in any given quarter. Now we have added a new layer, very focused on what is the value proposition to the consumer. We will not, we are being more disciplined in not selling shelf space just for the commercial income if we do not have a very strong conviction that this is what our consumer needs and wants. You know what? The suppliers, I have been surprised. I thought that this was going to create greater tension with suppliers, but the suppliers are also seeing it themselves.
Alvaro Garcia: Yeah.
Martín Arias: They are not particularly interested also in having a slow-moving SKU because they know eventually we just will not be buying and we will not be growing. Many of the suppliers have adapted very quickly to our concerns, therefore allowing us to put in lower priced brands in categories that historically they would have never seen OXXO as a natural channel for some of these lower priced brands. They have agreed to allowing us to remove some of the SKUs and refocusing that space, therefore allowing us to keep that money on products that our consumer wants and needs and makes us more competitive.
Martín Arias: Very focused on innovation with suppliers as being the go-to place where new interesting products can be launched in a very efficient manner and where it can provide that sort of wow factor of very interesting and attractive offers made to the consumer, which obviously in a traditional trade it is a little bit harder to do because it is hundreds of thousands of stores with very differentiated execution and so on. I would tell you on the gross margin, we are going to continue to test and try, and sometimes we will get it right, sometimes we will get it wrong. Trust me, at the end of the day, we are very focused on growing our operating income in absolute terms, significant as much above inflation as we can, by finding the right things. Jose said it in the script.
Martín Arias: If you go back and you take out some of these quotes, it is many different levers that we have to manage at any given time, but we have a lot of them, and we use them all.
Alvaro Garcia: That is great. That is awesome. Thank you very much.
Martín Arias: Thank you, Alvaro.
Operator: The next question comes from Carlos Laboy with HSBC.
Martín Arias: Hola, Carlos.
Operator: Carlos, you can open your microphone now, please.
Carlos Laboy: Sorry about that. Thank you very much. Jose Antonio, we all know how disciplined you are in terms of avoiding or wanting to avoid dilutive deals. If we can put that aside just for a moment, when you think about growth opportunities in the highly fragmented US and European C-store markets, what do you think are the biggest attributes that you would bring into this market, and the biggest constraints that you are facing? Is it really cost of capital and access to capital as constraints, or are there other factors? I am asking because these are very underdeveloped markets. They are so highly fragmented still, and yet the skill sets that you are building, keep growing, and the capabilities that you have that fit into these markets look attractive.
José Antonio Fernández Garza: Thank you, Carlos. Obviously, we give a lot of thought and vigor of debate in our leadership team and frankly in our board about what are the real crux and essence of what we bring to the table when we go into the US or developed markets like Europe. In Europe, it is lost in the numbers of Valora, but if you look at Swiss retail, what we have been able to extract on value in terms of food service, bread, and all these things out of Valora into our Latin American operations, and then in terms of commercial income and thinking about commercial income into our Swiss retail has been tremendous. It frankly pays most of the value that we have been able to bring in and bring out of Valora.
José Antonio Fernández Garza: We see a very similar opportunity for North America. Frankly, if you get out the gas part of the business where we probably bring the least, what we are seeing in our stores in West Texas, where we have converted it into OXXO, and we developed the food service and the Mex-Mex with Doña Tota, we are seeing very interesting results. We see a lot of upfront investment from Arca, from Coca-Cola, from Red Bull, from the tobacco guys. We are very encouraged by what we are being able to develop. That has to be carried into attractive multiples to acquire. Frankly, we have not been able to find opportunity. We have looked at very interesting things in Europe that have gone to other players that have been more willing to pay more. We have seen the same thing happen in the US.
José Antonio Fernández Garza: Again, that balance of how much do we believe we can bring value, I am very optimistic that we can, but we still need to be cautious about not overpaying. We would rather be seen as overly cautious than as overly reckless.
Martín Arias: I think the other part of that has to do with the choice between acquisition and new to industry development, the organic part of it. Clearly, we have not really done too much on either of those, but it is also part of the internal discussion of how, even as we look at assets, could we accelerate organic growth in a place like Texas, as Jose was saying.
José Antonio Fernández Garza: We are pushing the team to begin developing the NTI opportunity in Texas, where we are seeing favorable demographics in the US. It is still going to come, it is still be less than a single-digit expansion for next year. As you know, their investments north of $5 million or $6 million per store. It is a different animal than what we built in Latin America.
Martín Arias: And one additional comment. If we were to find the right asset, again, given the target size of what we are finding, what we are looking for, the reality is, if we had a very strong conviction that it provided us with very special capabilities, particularly around having a value proposition, an NTI value proposition, that was particularly well-poised for rollout, I think we would be willing to be more aggressive in the price that we paid. The problem is when you really get to see these assets and you scratch under the surface, you will find that many people who claim to be doing extraordinarily well in the United States, when you strip out goodwill and you look at the value that is being generated by, let us just say, the organic operating business, the reality is the returns are not that attractive.
Martín Arias: Then you are paying for the expectation that what they have not been able to achieve, you will be able to achieve over time. If you were to ask what I think OXXO can bring to the US, you would be shocked if you look at the next numbers of the number of convenience stores in the United States that do not make money inside the store. I mean, the number is like over 90%.
José Antonio Fernández Garza: Yeah.
Martín Arias: The people who are making money, without a doubt, are the ones that have a very high focus on convenience. And everybody else is basically subsidizing the inside store with gasoline. I do think OXXO can bring a lot of innovation around pricing, promotions. I think we are quickly learning around food, and we will emulate and copy many other players, and we will bring that profit component to the inside store sales, which, to be very honest, today, I think a lot of people have not managed to figure out.
Carlos Laboy: Thank you.
José Antonio Fernández Garza: Thank you, Carlos.
Operator: The next question comes from Luis Felipe with Citi.
José Antonio Fernández Garza: Hola, Luis.
Luis Felipe: Hola. Thank you so much for the space here. Just a quick one on Bara here. If we look at the beginning of the year, your initial outlook for the format was opening close to 200 stores, if my math is not wrong here, and now you are already past this threshold. I wanted to understand what has changed in the format. How has it evolved to a point that you have been accelerating so fast the format? Is it store maturation or do you see any other things influencing here? Thank you.
José Antonio Fernández Garza: So if I remember correctly, one of you told me if I open a store there, they would toast with champagne. I do not remember who it was, but I was expecting my champagne bottles delivered. Look, obviously, we come from the convenience store, the proximity store side, and we have been learning a lot by looking at others, by visiting operations all over the world and by bringing talent that have succeeded in this. We have to unlearn a lot of things from OXXO to develop our discount, and that takes a lot of time. What does not take a lot of time is building stores that pay their cost of capital. We have tailored that. We have a very small. Anyway, we have a very good body coverage in our stores.
José Antonio Fernández Garza: They are paying their cost of capital, and we have a very slow, slight standard deviation. That gives us enough that when you see that even though the stores lag some of the value propositions that you see, as long as you are adding value layers every year, and we are seeing a lot of progress building in our private label infrastructure, building in our supply chain infrastructure, and building in getting out all the SKUs that just bring noise to the system, making a very lean, efficient machine. We are happy with the growth we are seeing in terms of same-store sales. We like the traffic. Most of that is traffic, even in some of the quarters, it has been negative in terms of ticket. We are very excited for what is coming for Bara. We have a long way to go.
José Antonio Fernández Garza: It is obviously super competitive market, but it is also a huge market. There is room for a lot of people. The traditional trade still plays a very significant role, and we see many years of expansion and accelerated expansion. We play a different game in terms of our positioning of what Bara stands for in the consumer than other players. We plan to keep playing that game and staying relevant to our consumers. We love the complementarity to OXXO. If you come to Monterrey, you will see a lot of Baras next to OXXO, and while they both sell beer or both sell tobacco, Bara sells much more toilet paper, house cleaning goods, shampoos, and other things that the OXXO does not excel. So, we love this multi-format evolution, and we are very excited for the future of Bara going forward.
Martín Arias: Let me compliment there, Jose. Jose, while he was in charge of P&H, put together a very good team at Bara, a team that for the first time was completely outside the company. Bara used to be a place where very successful executives at OXXO were sent, very successful executives from OXXO were sent, and the reality is realized that the chip is a completely different chip. It is a completely different mindset. The team that is there now, the focus that they have brought to cost, the focus that they have brought to private label, the focus they have brought to how that operating model works is really amazing. Every other week, somebody brings me a new product that they have developed and are rolling out in private label in cookies, in ice creams, in potato chips.
Martín Arias: You will be surprised some of the things that over the next few months and years we will be rolling out that you would have thought would have been unmentionable for a FEMSA. Number 2, what tends to kill the returns of these businesses and get you into trouble is for how long you have to sustain the operating losses as the store matures.
Martín Arias: Even if you haven't reached the point where a mature store within 12, 18, 24 months is making its cost of capital, if it's already break even at an EBIT level, so that at least you're not continuing to fund losses, that gives you a lot more flexibility to roll it out quicker and then rely on your conviction with regards to new waves of value that you're going to be developing over time because you're not sustaining enormous amounts of operating losses, which again, flow through the P&L and you sort of don't see them, but they weigh on the amount of money that you've had to put into the business.
Martín Arias: In Bara, the speed at which the stores, for example, in Nuevo León ramped up without alcohol licenses, because in the north of Mexico, it can take you 12 months to 18 months to get your licenses. We see that in OXXO as well. We were surprised. We were very surprised how well it was received. That has given us the confidence that we can roll this out, they can get to breakeven very quickly, and then as we roll out the new waves of value, particularly around private label and things of that nature, that we're going to give it a try.
Juan Fonseca: I would just add, Luis, I think, again, the question came up earlier about the different growth rates for the different OXXOs in different countries or Bara, and part of your question touches on the same. We'll give you more granular numbers in the next call in February in terms of some of the things that we expect will happen during the year. But in terms of the opening of stores, I would think about 4 data points. OXXO Mexico, if we open 1,000 stores from a base of basically 25,000 stores, that's 4% growth in net new stores. Think about Brazil. Brazil should be in the high single digits. Maybe if all goes well, we can crack 10%, but let's think about high single digits for Brazil. Then you go to Colombia, where you will definitely plan to be in the double digits.
Juan Fonseca: And then the fourth one is Bara, where it will not only be in the double digits, but probably north of 30%. So those four give you an idea of either the current scale in the case of OXXO Mexico, which is already very large, but in the case of the other three, where they are in their development curve, that gives us the comfort to step on the gas with more conviction. And then of those three, without question, I think Bara is number one.
Luis Felipe: Thank you.
Luis Felipe: Thank you so much, that was very comprehensive.
Operator: This concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Fonseca for any closing remarks.
Juan Fonseca: Thanks, everyone. Just as always, make our team available for follow-ups. Thank you for joining today, and have a great rest of the week.
Martín Arias: Thank you, everyone.
Operator: This does conclude today's presentation. You may disconnect now, and have a nice day.
