Arcos Dorados Holdings, Inc. Class A Stock

Hey, everyone. We're going to get started here in a minute or so, everybody wants to grab their seats, please. All right. We're all set. Good morning, everyone. Welcome to Arcos Dorados 2026 Investor Day. It's really nice to see so many familiar faces in the room. I'd also like to welcome those of you joining us via webcast. Thanks for taking the time to be with us today.

Before we get started, I need to read the following safe harbor statement. Today's presentation will contain forward-looking statements, and I refer you to the forward-looking statements section of this morning's press release and the recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results.

Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in the appendix section of today's presentation as well as recent filings with the SEC. Woods Staton, our Executive Chairman, will get us started today. He'll talk about reminding us of the keys to success in the QSR industry. Then Luis and the rest of the team will take you through the pillars of focus that he laid out on his first call as CEO last year. We'll close by quantifying how we expect all of this to translate into long-term growth for Arcos Dorados. After that, we'll take your questions. So get ready, get set and let's grow. Woods?

Thank you, Dan. Welcome, everybody. It's nice to see all of you here and some of the familiar faces and familiar names. Thank you all for joining us today. Today, we will take you through various aspects of the business to show you why we believe Arcos Dorados is entering a new phase of growth. But before we do that, I think it's important to remember our journey. This is a year of milestones for us. In April, we completed 15 years as a public company on the New York Stock Exchange. In August, we began the 20th year of operations of the current version of Arcos Dorados. And in November, we will celebrate the 40th anniversary of the original Arcos Dorados that I opened, which was like in Argentina 40 years ago, and it seems like just yesterday.

And in each period, we became an integral part of the communities we serve while facing every economic, political and social change, and there have been many. But I'm happy to say that we have weathered all of these changes very well. Market share for McDonald's in our markets, the brand we represent, has never been as strong as it is today in all the 21 countries we operate in. This is thanks to great brand metrics, strong operating performance and high customer satisfaction scores. The bottom line is we run great restaurants in our markets, be it at the front counter, drive-thru, delivery or with the 3,000 dessert kiosks that we have. And I'd like to take a pause here to tell you what I think I'm most proud of, our people. We have roughly 120,000 employees in our system, and we have been selected by the Great Place to Work as the #1 best place to work in both Argentina and Uruguay. We're #4 in Brazil. And of all the countries in Latin America, we're #4.

In other words, these are not dead-end jobs that we create. One of the main tenets I have always espoused since we opened the first restaurant almost 40 years ago is that we build this company based on meritocracy. Each of the people you will hear from today is here based on merit, whether they began their career somewhere else or as crew members in one of our restaurants. They're here because they have proven themselves. And each one of them has a level of operating experience and local understanding that no other management team in our industry can match. In fact, Luis here started off as a crew member in Cordoba many, many years ago, and he rose to the level where he is right now as CEO, just like his prior successor, Marcelo.

We understand what good friendly service is, what cooking up good hamburgers is all about. For us, value is a combination of great food, good prices and especially great service on which the whole business is built. We understand the importance of running great restaurants. For restaurant guests, we are only as good as their last experience with us. This is why we place so much emphasis on being great operators every day of the week and every hour of the day, on consistently offering the best experience in the industry, bar none. When we began this experience, when we began, the experience was almost entirely inside the 4 walls of our restaurants and mainly at the front counter. Drive-thru was a novel concept with low adoption rates. Delivery was a figment of our imagination and, obviously, digital was way beyond anyone's imagination.

Fast forward a few decades and a great experience extends far beyond the walls of our restaurants. The winning formula in today's QSR industry comes from allowing guests to choose when, where and how to enjoy their favorite McDonald's, their menu items, and this is an omnichannel business. Today, we want to show you what we have been strategic -- how we have been strategic in our approach. We have a business framework that cannot be replicated easily through our portfolio of modern restaurants, the platform of digital capabilities that we have, the high level of brand engagement and data-driven decision-making ability. We've worked extremely hard to capture the brand opportunity while also positioning Arcos Dorados for its next phase of growth.

We've invested a lot of cash flow into expanding our footprint while also modernizing the existing restaurant portfolio. We've taken the best the McDonald's system has to offer in terms of tools and know-how while also developing in-house solutions to meet our specific needs. I don't need to go through a list of convince you that we are living through some challenging times in the world. But fortunately, Latin America is far away from the conflicts and geopolitical events that have impacted other parts of the world. We clearly have our own issues to deal with. We are also a major agricultural producer with robust consumer economies in all of our main markets. So when I think about the 3 aspects of the business I just described, the best management team in the industry, a deep understanding of what it takes to run great restaurants and a region with so much potential, I am convinced we are embarking on a new phase of profitable growth for Arcos Dorados and its shareholders. And thank you. Luis, over to you.

Thank you, Woods. Good morning, everyone. When Woods and the Board trusted me to become the company's next CEO, I accepted the opportunity and told them I had one main goal in mind, creating value for our shareholders. Today, we will show you some of the key initiatives we're implementing to reach that goal. But before that, we should look at where we are today. More importantly, we need to understand that we're here by design. Each step we took over the last 20 years had a strategic purpose to consolidate our position as the best QSR operator in Latin America.

So today, we're operating from a position of strength with more than 2,500 restaurants across 21 markets. We are by far the most digitalized, the most accessible and the most engaged restaurant brand in the region. This scale and market penetration is the door to the new chapter of growth we will share with you today. Let me provide you some perspective on what we mean when we say growth. We are part of a global system that generates ideas and tools that we can benefit from. But let me be clear about something. When we implement those ideas or put those tools to work, it will be because they make sense for our business and our region. Because at the end of the day, it is our job, it is our responsibility to increase sales, earnings and free cash flow as sustainably and as consistently as possible.

That brings me back to our goal, creating value for our shareholders and the three pillars of focus that are guiding us into the future. As you just heard, today's business is about exceeding customer expectations in restaurants, at home and in the digital space. It means no matter where guests choose to have McDonald's, we need to maximize the experience through menu, quality, service and cleanliness. These are foundational elements of Arcos Dorados' next phase of growth. Tomorrow's business is about preparing to meet future guest expectations and ensuring we maintain the leadership position long into the future. You'll hear from both Santiago and Male about how we're deploying artificial intelligence and technology throughout the business to drive sales and support strategic decision-making. This is the opportunity ahead.

Growing the business is about getting from today to tomorrow. Sebastian will tell you about how we are modernizing and improving all aspects of the development process to increase returns on investment and maximize future cash flow generation. Philippe will dive into how supply chain can add value through initiatives designed to capture efficiencies and support free cash flow growth. Each of today's speakers will touch on all three pillars, but I want to emphasize that we're all focused on how we will drive the growth pillar to ensure that we increase the value of the company. And this will happen through more resilient financial performance, better returns on investment and a more sustainable level of free cash flow generation.

At the end of the day, the core of the business hasn't changed that much. We sell hamburgers. We create moments, we deliver experiences. And that is why we are obsessed with running great restaurants. The winning formula in our business starts inside the restaurants. If you operate well, then guest traffic will grow, sales will follow and profitability will improve. And operational excellence is our most important strength. But to generate value from this strength, we need to make sure the entire organization is working towards the same goal. This is where digital, innovation and technology will help us leverage the operational foundation.

Digital as it supports brand strength, sales growth and guest engagement. Innovation as we develop new tools and capabilities to support the business and technology as it impacts the entire company, helping each functional area generate efficiencies and unlock value. Moving forward, we will continue making choices with a strategic purpose to increase the value of Arcos Dorados. These choices will define the things we will do and those we will not do. We plan to follow what Ray Kroc used to say that we don't know what our menu will look like in the future, but it's going to be the best-selling menu in the industry. And I would add that we plan to do it better and more profitably than we do it today.

With that, I'll pass it to Mariano to take us through how we're positioned financially to support our growth ambition. Mariano?

Thanks, Luis. Well, good morning, everybody. It's very nice seeing you here. Thank you all for being here today with us. And over the past several years, we have transformed the scale, capabilities and economics of our business. Today, I will cover three things. First, how much we have grown since 2021. Second, why we believe this growth is structural and more than just a recovery effect. And third, why our financial position gives us the capacity to keep growing.

Operating in Latin America has never been easy. Volatility, inflation and changing economic conditions are part of the reality of doing business in this region. Against that backdrop, Arcos Dorados delivered strong and consistent top line growth. Net revenues increased from $2.7 billion in 2021 to $4.7 billion in 2025. That is 76% growth and a compounded annual growth rate above 15%. This is a genuine business expansion rather than a post-pandemic recovery effect. By 2021, we were already operating at sales and EBITDA levels broadly in line with 2019. From that base, revenue grew in every single year of the period, mainly driven by organic growth and supported by the expansion of our restaurant base.

Sales per restaurant grew 60% with traffic per restaurant up more than 30%. This reflects our ability to attract more guests, drive higher engagement and generate higher revenue per customer across the existing network. In a region marked by recurring economic and political volatility, consistent growth requires disciplined execution and a long-term view. These results reflect the progress we have made in building a stronger and more resilient business. What is behind that growth? We transformed the company across four dimensions. We scaled a new consumption occasion with the growth of the delivery sales channel. Delivery expands our addressable market and leverages our existing restaurant portfolio. It allows us to reach guests at a moment when they would not have visited our restaurants, capturing occasions we were not serving before.

This channel, which gained momentum during the pandemic, rose from less than 5% of sales in 2019 to 16% of system-wide sales in 2021, and it kept growing. By 2025, delivery accounted for around 20% of sales, and this year, it's closer to 22% of system-wide sales. The result is a channel that brings in more than $1 billion of mostly incremental sales to our system and is still growing faster than nearly all other channels. We accelerated digitalization and built an omnichannel digital ecosystem that today represents 65% of system-wide sales, almost twice the level of 2021.

This creates a more convenient and personalized experience for the customer and much more better data for us. Santiago and Male will talk more about that in a few minutes. We increased brand relevance. We gained 4 points of visit share and reinforced our leadership position in the region. And we expanded and modernized our network, adding 440 restaurants. Today, nearly 80% of the footprint is modernized. These four dimensions work together and reinforce each other. They expand our customer reach, strengthen engagement and improve restaurant economics, creating a stronger platform for long-term growth. The business transformation, coupled with disciplined execution, also resulted in strong growth in profitability.

Adjusted EBITDA more than doubled from $272 million in 2021 to $575 million in 2025, a CAGR of about 20%. To be fair, 2025 included a significant tax credit in Brazil. But with that said, based on current analyst consensus for 2026, the CAGR for the period would still be 15% in U.S. dollars. This is an impressive rate of growth given the volatility throughout the period. Importantly, we also expanded EBITDA margin by about 2 percentage points, even excluding one-offs and despite the royalty step-up of almost 1 percentage point, margin expanded by 70 basis points in the period. Our EBITDA growth was driven by more than just a single factor. About 60% of the EBITDA growth came from higher sales per restaurant. Around 30% came from margin expansion and roughly 10% from new restaurants. In other words, we increased sales, improved efficiency and expanded the network at the same time. Again, building a stronger and more resilient business over time.

Let's take a look at two important sources of margin expansion over the last few years. First was payroll, which went from 22.5% in 2015 to 18.9% of company-operated sales in the last 12 months. That is 3.6 points of efficiency and a structural improvement in restaurant economics. This progress came from the way we manage labor and leverage technology to make better decisions every day. Now almost all our markets work with digital labor management solutions, supported by AI forecasting tools that align staffing with projected demand. Indirectly, the modernization of the restaurant portfolio led to labor efficiencies as well, given how popular on-premise digital ordering has become.

These initiatives contributed to higher productivity and a better employee experience. Evidence of this is that we continue to be recognized as a great place to work across the region. This recognition reflects the strength of our culture today and reinforces our commitment to continue fostering a culture that attracts, develops and retains young talent across our business. Technology played an important role in expanding productivity together with new processes, trained teams and daily routines that changed the way we operate. These new capabilities make the improvement structural and not temporary. And this focus on structural productivity extends beyond our restaurants.

The second lever for long-term margin expansion was G&A. Through disciplined cost management, we reduced G&A from 8.3% of revenues in 2015 to 6.4% in the last 12 months, again, reflecting a continuous effort to simplify processes, leverage automation and AI and remove costs permanently. Every year, we review the P&L line by line, challenging how resources are allocated and whether they continue to support the needs of the business. And when necessary, we have the discipline to adjust the size of the organization as we did at the end of last year. The result is a company that is larger and more capable and at the same time, more efficient.

The sales and EBITDA growth since 2021 was supported by significant investments in our restaurants that generated positive results. As of June 2026, we had 2,548 restaurants, 14% more than in 2021. Importantly, much of our expansion came through freestanding units, which are now 55% of the base. We also continued modernizing existing restaurants, raising the share of modernized restaurants from 36% to almost 80% since 2021. As a result, we have built a network that is larger, more modern and better positioned to serve guests across the region. But the transformation is about more than just the numbers of restaurants. Each restaurant generates more value. Sales per restaurant increased by 73%. Guest counts per restaurant are up 33% and EBITDA per restaurant more than doubled over the period. In other words, the restaurant footprint is both bigger and stronger.

The strength of the business is reflected in both our operating results and balance sheet. Our financial strength has been validated by a full investment-grade rating from both Fitch and S&P. In turn, this supports the lowest financing cost in the company's history. Our net debt-to-EBITDA leverage ratio has remained between 1x and 1.2x for the last several years, a very comfortable and healthy capital structure. In other words, we have significant financial flexibility and capacity to continue funding growth without significant increasing financial leverage. The market recognizes this strength. Our 2032 notes trade at a very tight spread of 128 basis points over U.S. treasuries and less than 200 basis points over McDonald's bonds. This reflects the confidence investor place in our business. The balance sheet is another asset to support continued growth, giving us the flexibility to accelerate when we see a good opportunity while maintaining a disciplined capital structure.

Finally, when we look at our adjusted free cash flow since 2021, it shows our investment cycle. Between 2021 and 2023, we tripled our CapEx from $113 million to $360 million per year. That investment allowed us to accelerate openings and modernize the restaurant base. Adjusted free cash flow reflected the investment cycle, reaching almost $190 million in 2021 when investments were lower and bottoming as investments peaked. That was the inflection point. Over the last 12 months, adjusted free cash flow recovered to $143 million. The heaviest part of the modernization cycle is behind us, and we now have a much higher EBITDA base with a stronger structural foundation for cash generation going forward.

Every member of the leadership team understands that the most effective way to increase the value of Arcos Dorados is to generate cash flow growth in a way that is more predictable and more resilient to outside factors. That is our main objective. Looking ahead, we see two complementary paths to continue creating value. One is organic growth. A larger, more capable and modernized omnichannel ecosystem position us to keep growing comparable sales at least in line with inflation. It also creates opportunities to further expand margins through technology, productivity and cost discipline. The other path to creating value is restaurant openings. We see a significant opportunity in the region, supported by a solid pipeline and a disciplined investment process.

Later on, Seba will describe in more detail how these processes have changed and the positive results we are already seeing. The two engines reinforce one another. A larger and more productive network generates higher returns and operational excellence gives us more capacity to reinvest cash generation. Both point to the same objective, maximizing adjusted free cash flow generation. To wrap up, over the last several years, we have demonstrated that we can grow, expand margins, generate cash and allocate capital responsibly in one of the most complex regions in the world. This performance was grounded in a set of competitive advantages that, taken together, are very difficult to replicate.

First, the scale. Our size allows us to leverage fixed costs to negotiate more effectively with our suppliers and to invest in capabilities that a smaller player cannot afford. Second, access to capital. Our investment-grade profile gives us access to financing at terms that very few companies in the region can access. Third, execution. We run 21 markets with the same playbook. This allows us to transfer best practices fast and to implement complex regional projects with consistency. Fourth, our management team. This team brings significant industry and region-specific experience, which helps us successfully operate in a region with dynamic consumer, economic and political environments. And finally, and most importantly, the brand.

McDonald's is the most loved and recognized QSR brand in the region. It gives us relevance with consumers. It helps us attract talent, and it creates opportunities to grow across new channels and formats. Put the five advantages together and you have a company that can grow, adapt and execute in a dynamic region. For us, that complexity is not a constraint. It is a competitive advantage.

I will turn the stage over to Santiago for a closer look at how we have strengthened the brand, gained share and introduced new sales channels and menu items to remain at the top of the QSR industry today and into tomorrow. Santiago?

Thank you, Mariano, and good morning, everyone. I want to start by saying that McDonald's is a unique brand in Latin America because of the value proposition it offers. It represents a set of values customers highly appreciate, clean spaces, delicious, high-quality food, a friendly staff, modern restaurants, just to name a few. It is a perfect place for families to enjoy. Since its arrival in Latin America more than 40 years ago, McDonald's connection with customers goes way beyond food. It's about memories, it's about rituals, it's about a strong cultural fit. It represents consistent quality in all aspects and, most importantly, it is within the reach of everyone.

Being a place for families with high quality and affordable to everyone translates into one word that is crucial for business success in the region. And that word is resilience. When times are good, families go to McDonald's because it's an aspirational brand. When times are not as good, families go to McDonald's because it's affordable for everyone. We see the customer landscape changing at an unprecedented pace. We now compete with more categories than ever before. When families or teenagers choose where to spend their money, they now have plenty of options off and online. We know our customers are looking for personalized experiences. So one-size-fits-all marketing programs are long gone. The ability of companies to use customer data correctly to deliver such experiences is now a defining business success factor.

Finally, there's a new generation powered by AI that interacts with brands in a whole new way. The attention span has been reduced to a few seconds and the amount of information consumed is overwhelming, making it harder for brands to break through. The QSR industry is also changing fast. There are ever-growing number of newcomers and the usual suspects are better organized and more aggressive using price as their key traffic driver. In short, there are more players fighting for the same wallet. This context might seem challenging. However, it also represents a set of opportunities.

Now our business is also changing fast. Here in this slide, the gray bars show how we serve our customers back in 2019. The yellow bars show the current reality. Our digital-first thinking and early investments in digital marketing and technology gave us the leading edge in the digital arena in Latin America, making our business truly omnichannel. We know we must operate flawlessly in each of these channels, adjusting the experience to fit the expectations of each channel. Today, we serve more than 4 million customers per day and about 65% of them do the orders through a screen. The outcome of such interaction is a rich and broad database. More importantly, close to 1/3 of our sales are now identified. This means that we have access to a broad set of customer data, and we have the permission from those customers to interact with them and form a relationship.

We are uniquely positioned in the food service industry in Latin America. On one side, we are the most recognized brand in the world and being a part of the global McDonald's system gives us access to unique marketing tools and assets, such as the global sponsorship of the FIFA World Cup that we experienced a few months ago. On the other side, Arcos is a company single-mindedly focused on one brand, giving us a local touch with menu items and with marketing programs in all countries where we operate. For example, in Brazil, customers have given the brand the nickname of Mequi. We then use that name to bring to life marketing initiatives in that country.

In short, we have the efficiency of a global brand, coupled with the effectiveness of a local player, all with unrivaled scale in the region. Our marketing strategy is clear and holistic. It reaches all customer touch points and amplifies the business through increased frequency and ticket size and attracts new customers, both for the short and the long term. Every one of these five business drivers has a clear job description. Now I will give you more detail about each one of them. So let's get into it.

Brand trust sits at the base of everything we do. After all, trust is what ensures that we have a viable business for the long term. Being a trusted family of restaurants is at the core of the brand proposition. We reinforce this promise through our scale, values and actions. One small example is a book program we executed this year through which we promote that parents read together with their children. This activity creates a strong family bond and promotes reading habits in children early in their lives.

The transparency of our ingredients is another key aspect of building brand trust. Through the Puertas Abiertas program, customers are welcome to take a guided tour of our kitchen in any one of our restaurants and ask any questions they might have. On a yearly basis, more than 1 million guests visit our kitchens, making this a testament of absolute transparency. Finally, Arcos Dorados is one of the largest youth employers in the region. And these are formal first-time jobs in a region where informality is a commonplace. They learn about processes, accounting, teamwork and many other fundamental skills. Like Woods said a few minutes ago, McDonald's is ranked the #1 place to work among large companies in several countries and is among the top 4 in Brazil and in Latin America as a whole.

Now youth employment is also a commitment to diversity and inclusion. Everyone is welcome to work at Arcos Dorados. Please take a look.

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Well, let's move to our second pillar, brand affinity. This business driver is about creating a strong emotional connection with our customers. We do this by reaching out to the things they care about. So when a great operation joins forces with brand affinity, you get the best customer experience in the industry. Our strategy is not to interrupt our customers while they enjoy the things they love, but rather become part of those things.

Formula 1 is a powerful passion point for many of our customers across Latin America. This is why we became sponsors of Formula 1 in Latin America. And here's how we are activating this sponsorship to strengthen brand affinity with families. Please take a look.

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Very well. Our menu continues to bring new customers while enhancing quality and taste perceptions with each one of them. In recent years, we introduced across the region, the new McCrispy Chicken sandwich with strong marketing and operational support. The launch was followed by different extensions, giving guests options to try and repeat this great sandwich. This action, together with our continued support behind our chicken menu icons such as Chicken McNuggets and McChicken has given us a 7-point share gain in recent years in this category. More importantly, McDonald's today is a top player in Latin America's QSR industry in the chicken category.

The beef categories are core. Through the Best Burger program, we have enhanced the preparation of each of our iconic beef menu items such as the Big Mac. This process enhances temperature, taste and juiciness of these hamburgers and has received very positive customer response. Thanks to this program, today, we have a stronger beef portfolio and a stronger perception of taste and quality. Desserts represents a strong business for Arcos Dorados. Our signature ice cream cone is the most affordable way to have a McDonald's experience with amazing taste and quality. While McFlurry is an indulgent proposition for those seeking to try something new or to share with friends. Our innovation pipeline in desserts never stops. This allows us to bring through our doors new customers while increasing frequency of those who already love the brand.

This year, Mundialistas leveraged the global sponsorship of the FIFA World Cup. We created beef and chicken sandwiches, representing some of the countries playing in the tournament, giving customers an opportunity to have a taste of the world through our menu. In summary, it is through our menu that we have -- we are able to increase frequency of those fans of the brand while recruiting new customers with innovative menu items, everything under a unifying message of taste and quality. Speaking of value, we have set our sights in continuing to be the value leader in the region. We want to be recognized as a brand that offers the best value for money to our guests.

And it's more than pricing. It's all about value. To this end, in recent years, we've invested in leading-edge research, technology and revenue management training. Today, we can say we are making better commercial decisions based on data and achieving the right balance among affordability, traffic growth and profitability. Most important of all, we're doing this while delivering the best customer experience in the industry.

The last pillar of our strategy is digital with the McDonald's app as the gateway to a world of personalized offers and experiences. It is the most downloaded and used app in the region and a true competitive advantage. Earning or redeeming points, ordering ahead, getting personalized offers, participating in a promotion to win tickets to go to the World Cup final or placing a delivery order. All of these features and more are available today only in the McDonald's app. It is through the app that we are able to grow identified sales year after year. As I said, close to 30% of all company sales are now identified. This means that we have data of millions of customers and the authorization from everyone to contact them and form a long-term relationship that enhances frequency.

More data means more interaction. More interaction means more personalization. More personalization means more loyal customers. At the heart of driving identified sales is our loyalty program. With more than 36 million members, it is by far the largest loyalty program in the region, and its performance is on par with leading markets inside the McDonald's global system. The key metrics behind our digital platform remain healthy. We are growing the number of identified customers, while at the same time, we are growing their average frequency, plus we are growing customer value over time. Growing in these 3 metrics is very difficult to do it simultaneously, but we have found a way to go through it.

Following this 5-point strategy is delivering measurable impacts. Stronger brand reputation over time. Please take a look at how consumers' opinion has changed for the better. The green section of these bars represents the percentage of consumers with a high overall impression of the brand. Impressively, we have been able to increase the positive overall impression by 10 points since 2024. A stronger brand equity growing across different brand dimensions. One of the brand dimensions that strengthened the most has been having great chicken products, which we see as an important growth opportunity. Value for money is an important foundational dimension of the brand, has also strengthened significantly in the last several years. And when we look at experience and taste and quality, when they come together in a family experience, parents feel good about bringing their kids to McDonald's.

The stronger brand preference among consumers in the last 5 years. Since the second quarter of 2021, we more than doubled the brand preference gap compared with our aggregate main competitor. A stronger market share position on a blended basis across the entire region since 2021. In that period, McDonald's brand market share expanded by more than 4 points on a blended basis. Importantly, this is a region-wide trend with all our main markets gaining significant share over the last 5 years. The most important part to understand is that although we have made good progress as a company, there is still a long way to go and plenty of opportunities to capture.

We believe that the tools and capabilities we have developed to get to where we are today are the ones needed to capture such opportunities. I will show you what I mean. Chicken continues to be the largest and fastest-growing category in the industry. We have achieved a strong position regionally, but there are still plenty of room to grow. And more importantly, there are specific countries where we face fierce competition. Having built a solid base will enable us to play more aggressive in this space. We will do so by continuing to leverage our iconic chicken offerings while introducing new experiences to customers such as the McCrispy Chicken Strips, among others. Higher market share in chicken will translate into higher restaurant traffic and enhance gross margins.

Crafted beverages is the next frontier when it comes to profitable growth. Arcos Dorados has all the right components to win in this space. With a strong operational fit, higher margins and a continuous pipeline of innovation, crafted beverages will help us sustainably play harder in new customer occasions. In short, we will make McDonald's a destination for beverages in front of Gen Z customers. Finally, in the digital arena, where we have built industry-leading capabilities, we are only getting started. Why? Because close to 70% of our sales are still not identified, meaning that there is plenty of room to grow.

Each loyalty member that redeems points has a frequency 5x higher than a nonredeemer. Therefore, the growth potential is very attractive, and we are only scratching the surface here. Powered by AI and our loyalty program, the McDonald's app will accelerate customer engagement and frequency while delivering a seamless digital experience for new generations. In summary, strategy we have set for Latin America has resulted in a McDonald's brand that is stronger than ever. Today, we have a value proposition capable of facing the volatility of this region and with a digital platform that is helping us build frequency and loyalty using customer data. The most important fact is that these achievements position us to capture new growth opportunities such as chicken and crafted beverages. All of this would be impossible to achieve without having a leading edge in technology.

So now Male will show you how technology enhances the customer experience going forward. Now it's time to grow. Male?

Thank you, Santi. Good morning, everyone. It's nice to be with you today. So far, you have seen the results of a business that has changed significantly in the last few years. You have seen a business that has become stronger, more relevant and better positioned for growth. Supporting the customer experience, the operational improvements and many of the opportunities ahead is a transformation that we have been building for many years. Behind all of that, there is an integrated digital ecosystem. I will explain how we built that system, why it is difficult to replicate and how we are using it to accelerate our next phase of growth.

It is a story about competitive advantage, strategic autonomy and value creation. Let me start with the system behind the transformation. We created value by transforming two sides of the business at the same time. On the customer side, we moved toward a digital omnichannel model. Leveraging our in-house capabilities, we developed our own mobile app, expanded our digital channels and created a direct relationship with millions of customers. Every interaction improves convenience, makes the experience more relevant and generates first-party data that helps us understand our customers better. At the same time, we transformed how we operate internally. We standardized core processes, implemented common technologies across markets and created a single source of truth for company data.

This transformation may be less visible to the customer, yet it is what allows us to leverage our scale, improve efficiency and make decisions with greater consistency. The real advantage comes from connecting both fronts. Digital channels create more interactions. Interactions generate more data. Data improves intelligence and intelligence improves customer experience, business decisions and operational execution. This is more than an isolated initiative. It is a self-reinforcing system and because technology, data and operations are connected, the system becomes stronger with every interaction, creating a competitive advantage that is very difficult to replicate.

The scale of our digital ecosystem is significant. Today, our unified technology and data platform supports all 21 markets. As Santiago already showed you, our loyalty program has reached an impressive scale in a very short period of time. Scale is important because of what it allows us to do. We can identify customers, learn from millions of interactions and deploy successful capabilities across the region. AI becomes more powerful when it operates on trusted data, a large customer base and common processes. And because we operate at this scale across 21 countries, every improvement in personalization, forecasting, inventory management or labor planning can create profitable growth for the entire company. Scale is important because it creates value.

This advantage is the result of a long-term commitment that began before digital transformation became an urgent priority. We moved early and invested in capabilities required to lead the change. We digitized the restaurant experience, built own channels through our app and delivery ecosystem and created direct digital relationships with millions of guests. A key milestone was the creation of the Arcos Dorados Digital Factory in 2019. That strategic decision gave us the internal capabilities to accelerate innovation, develop company-specific solutions and scale digital transformation across all markets.

We then connected ordering with restaurant operations, modernized our back-office platform and build a unified data and loyalty foundation. We also launched our Data and AI Academy because technology alone does not create value. Organizations create value when they develop the capabilities to apply technology at scale. Each stage created the foundation for the following phase. Today, these capabilities come together in an AI-enabled operating model already embedded across the business. Our app is at the heart of our digital ecosystem. This is an asset we own that connects engagement, e-commerce, loyalty and data in a single platform.

Today, the app has reached more than 200 million downloads and supports over 200 million transactions every year and continues to deliver high customer satisfaction. Most importantly, it now generates almost 30% of our sales, but its strategic value goes beyond transactions. Through loyalty, Mobile Order & Pay and our own delivery capabilities, the app creates convenience and everyday value for our guests. The app gives us a direct relationship with millions of customers and every interaction helps us better understand their preferences and behaviors. This intelligence allows us to create more relevant experiences and support future growth. That is why the app is much more than a sales channel. It is an engagement platform, a data platform and a growth platform.

Our transformation has gone beyond the customer-facing experience. Behind the scenes, we have also transformed our technology foundation. In 2019, we made the decision to move from fragmentation to integration, different markets with different systems, processes and technologies. Today, we run on a scalable platform across all markets. We integrated restaurant technology, back-office processes, e-commerce solutions and data and AI capabilities into a common foundation. We knew this would be strategic. It allows us to build once, adapt locally and scale across the region. It improves efficiency, consistency and governance. This is more than a technological accomplishment. It is a business capability that enables a unified data and AI strategy across Arcos Dorados.

Our data and AI strategy is built around three value-creating priorities. First, maintaining and strengthening our centralized data foundation. Every AI capability depends on trusted, consistent and reliable data. This is why creating a single source of truth across all markets has been such an important achievement. It allows us to operate from a strong foundation and scale intelligence across the region and is the base on which every other capability depends. Second, turning data into measurable business value. We do not develop technology for its own sake. We apply data and AI where they can increase revenue, improve productivity, strengthen margins or enhance customer experience.

One example is our e-commerce cross-selling engine driven by machine learning. Orders that include AI-powered recommendations generate on average around 30% higher tickets than orders without cross-selling. It is a simple example of how data and AI can translate directly into measurable business impact. The important point is that all of these use cases leverage the same foundation and can scale across the platform we have built. Third, transforming how work gets done through human and AI collaboration. Through operational agents and easier access to insights, we are redesigning workflows and helping teams make better decisions, move faster and create more value. Together, these priorities connect the foundation, the use cases and the future operating model. That is how we turn data into a competitive advantage.

Over the last decade, we have built strategic autonomy. We own critical elements of our technology. We own our data foundation, and we own the capabilities to design, build and scale solutions across our markets. But this is not about owning technology just to own it. It is about deciding where to invest, which opportunities to pursue and how quickly we can act. Proprietary technology enables faster execution. Proprietary data enables better decisions and internal capabilities give us the flexibility to adapt, innovate and scale. Our competitive advantage comes from how quickly we can generate a business impact from the things we build. Together, these capabilities make the business more responsive today and better prepared for tomorrow.

With the foundation in place, innovation becomes the engine for our next phase of growth. Our approach has a dual mandate. First and more importantly, strengthen our core business. We want to sell better, operate better and make better decisions. To sell better, we are using AI to deliver the right offer to the right customer at the right time, moving from mass interactions to more individualized connections. We are also integrating automation into restaurant and back-office processes while expanding AI-powered analytics across the organization. Second, create new source of value. Our scale, our data and our direct customer relationships allow us to explore adjacent opportunities and emerging technologies. Throughout this journey, AI acts as a key multiplier of the platform we have already built.

The foundation we have built allow us to continue evolving and creating new opportunities for growth. Let me show you one example of what that looks like.

[Presentation]

We have come a long way. Over the last decade, we built a self-reinforcing digital ecosystem where digital channels, data and AI continuously strengthen one another. We created strategic autonomy by owning the technology, data and capabilities that matter most to our future. And we are turning innovation into a growth engine that strengthens our core business and creates new source of value. The results are already visible, stronger customer engagement, greater efficiency, better decisions and new opportunities that can scale across the platform we have built. Mariano, Santiago and I have shown you how technology is creating value.

After the break, Sebastian and Philippe will double-click on how development and supply chain are leveraging technology to drive long-term efficiencies and profitable growth. The foundation is in place. The platform is operating at scale, and we are ready for the next phase of growth. Thank you.

Okay. Let's take a 15-minute break before we start the second half of the presentation. Please be back in your seats by 10:25 -- sorry, yes, 10:25. Grab a coffee, and we'll be right back.

[Break]

Welcome back, everyone. I hope you had a chance to refill your coffees and you're ready for the second half of today's program, if you wouldn't mind taking your seats. So for an update on how we're looking to grow the business, I'll invite Sebastian Magnasco, our VP of Development, up to the stage to get us started. Sebas?

Thank you, Dan. Good morning, everyone. It is nice to be with you again. Before the break, Male showed you how innovation and technology are changing the company. Development is where technology stops being software and becomes physical, real restaurants, real corners, real capital. 3 years ago, at our last investor update, I told you we would grow faster across Latin America. Today, I want to show you two things that we delivered and more importantly, that we rebuilt the process to invest better, to open faster and to keep growing. Let me start with the results. In 2025, we opened 102 restaurants in 10 markets, our biggest year since the pandemic.

This is a regional growth engine instead of one country carrying the rest. So far, this year, we have opened 60 restaurants. I know you will do the math, but 60 at the end of September is a typical year. Our opening have historically been concentrated in the last quarter, and we still expect 105 to 115 restaurant openings for the full year. But the count is not the headline. The headline is that every one of those restaurants was picked, sized and approved with better information and a much sharper eye on returns. Before I tell you how we grow, let me size the opportunity. In our markets, we have about 0.4 restaurants for every 100,000 people. In the United States, it is 4.0, which is a 10x gap.

Of course, I am not going to tell you that Latin America will look like the United States someday. Instead, I will use as a benchmark a couple of mature markets we own, Costa Rica and Panama with similar consumers, similar daily realities at about 1.6 restaurants per 100,000 people. Apply that to Brazil, Mexico, Argentina and Chile, and you get more than 6,000 long-term opportunities. But let me be clear, this is not guidance. This is not a calendar. It is the road ahead, and we will take it side by side at the returns we require and expect. So the road is long. The real question is how you travel it with precision and discipline and, of course, less capital.

Coming out of the pandemic, supply was tight. So we grew with one standard format to optimize supply chains, one design, one equipment package, one build. That was the right answer back then. Today, supply is back to normal and the world around it moved. Costs went up. Competition got tougher. Customers got more selective and AI changed how fast and how well we decide. So we no longer need one standard to move fast. Now we can move fast and tailor at the same time. That is what we call precision growth. Now we are able to model demand with AI at each site, and we build a format that the demand really justifies. The idea is simple, standardize the process and the brand standard, tailor the asset to the site. But we know opportunity itself does not create value. We have built a digital development model to convert this opportunity into value.

The model is comprised of four steps. First and most important is site selection. Everything else literally builds from this first step. We have already mapped more than 1,800 opportunities. AI demand gap analysis takes us from somewhere in a corridor to one specific corner. Second is accurate demand estimation. Models built on our own restaurant data give us an answer in minutes instead of days with much better accuracy. Third, we evaluate each business case to ensure we only approve the best investments. Since November 2024, 100% of new restaurant business cases run on the digital platform, no more scattered spreadsheets. Fourth, we design each restaurant for the capacity it will really need.

The value is not generated by a single tool. Opportunity is converted into value because these tools talk to each other from the first decision to the last. The clearest example is design. We no longer design restaurant for an average site. We design them for the demand we expect on that specific corner. It starts with 15-minute forecasts by channel and daypart. Before we draw a single line, we can see where the bottlenecks will be and just as important, where capacity would sit idle. Then we tailor the equipment such as grills or fry stations, the whole kitchen, the footprint and the seating.

Have a look at the average freestanding footprint evolution from 350 square meters in 2024 to 280 square meters projected for this year openings. That is 20% below the 2024 peak and the seat mix is moving the same way. But it is important to understand that this is not just a smaller restaurant. This is the right restaurant for the site, lower CapEx, smaller footprint, same sales capacity. And the same logic is changing how we build. We are moving away from separate 2-dimensional plans to one digital model of the whole restaurant. Designs are ready in days instead of weeks. We are able to catch conflicts on the screen instead of on the site and AI agents are turning our know-how into company knowledge available to our teams the moment they need it, faster with fewer mistakes and much easier to scale.

All of this has to show up in the economics, and it does. For 2026, the average investment per restaurant is projected to be 15% to 20% lower than in 2024. And first year return on investment should improve by 3 to 5 percentage points, more restaurants, less capital per restaurant, a better return on each opening. Those three normally pull against each other. Here, they move together. And these are structural wins that ensures the quality of each site for the foreseeable future. And those savings, they come from five elements of the investment model that we change for good, including rightsizing equipment, smaller footprints and regional sourcing, among others.

A restaurant that costs less and returns more, better returns pay for faster growth and growth pays for the next round of investment. Another way we are managing volatility is through sourcing. We have localized 21 equipment lines, including grills, fryers and refrigerators and four more lines are coming by 2028. This is important when you consider that selected lines have cut unit costs by up to 60%. In Brazil, where import duties are high, 76% of the standard restaurant equipment is already sourced locally, lower CapEx and faster execution. Before I close, let me take you into the engine room.

[Presentation]

We rebuilt how we develop restaurants. Three things changed, and all three are structural. The opportunity is bigger. Our brand, our scale and our technology let us find more sites with much more precision. The cash flow is steadier. We need less capital per restaurant, and we earn more on each one. And the model is ready to scale, invest less per restaurant, open faster, turn every dollar of CapEx into more cash flow. We have the team, we have the tools, and we have more than 6,000 opportunities in front of us. Now is the time to grow. Thank you. Philippe, over to you.

Thank you. So good morning, everybody. I've been with Arcos Dorados for 16 months. My role is to elevate the maturity of supply chain management through its team, its governance, processes and adoption of technology. We have a clear objective of driving growth measured in terms of assured supply, profitable sales, number of restaurants and EBITDA, all that while protecting brand reputation. Supply chain encompasses various disciplines, sourcing goods and services, planning, distribution, logistics and finally, food safety and quality assurance. So my goal today is to show you how supply chain adds value to Arcos Dorados and how critical it is to the company's profitable and resilient growth.

So let's start with a snapshot of the context we work in. The supply chain team manages approximately $2.6 billion worth of spend across various categories. These categories, we have direct, which include food, beverage and paper. We have -- we ship around 60 million cases of food and paper goods sourced from 480 suppliers. They flow to our restaurants through 26 distribution centers managed by our third-party distribution partners. Indirect spend includes restaurant construction services, equipment, IT and numerous other services hired to run the company and/or the restaurants. Now beyond the amount of spend we manage, I think there's a really important number here that you should look at, and that's the amount of products and services that we purchase locally or regionally, and that number stands at 85%.

Now, this gives us flexibility and resilience. It is a critical element of our capacity to sustain growth with our local partners and reduce the influence of macroeconomic and geopolitical risks. Now let's move on to one of the main categories, which is beef. It represents 24% of our food and paper costs. For a total of $1.9 billion of total food and paper cost, beef is 24%. It's the #1 spend item. Not surprisingly, considering it represents about 80% of our protein sales. On the other hand, chicken accounts for only 8% of the spend, while it represents around 20% of the protein sales. So that's the good news. And as Santiago explained to us, we see chicken category as an important sales growth driver in the coming years. So as chicken gains a larger share of sales and the relative difference between chicken and beef prices continues to increase, there's a great opportunity to generate additional profitability.

So if you follow the food industry, you know there's been quite a lot of cost pressure on beef in our markets. And I want to double-click on that. The increase in Latin American beef prices has been significant over the last 24 months. There are structural issues impacting the industry in several geographies, especially in the U.S. and Europe. This leads to reduced supply, while at the same time, we have increased demand coming in from China. Brazilian beef historically has been one of, if not the least expensive in the world, but that gap with beef prices from other regions is slowly closing. And in a couple of minutes, I'll show you how we are reducing the impacts of volatility and prices increases. But before we go there, let's look at how beef cost increases contributed to the evolution of prices of a larger basket of goods.

On this slide, we're comparing the variation of an index representing market inflation on a basket of the main food and paper ingredients we purchase. That's the top line on the graph. The line on the bottom shows how Arcos Dorados' actual inflation varied for the same basket of food and paper ingredients. As you can see over the course of the last 7 years, a period that includes the recent cost pressure on beef, we've been successful in managing our costs well below the accumulated inflation index. Just as importantly, while the inflation index has been relatively volatile over the period, we managed to reduce significantly the volatility of our input costs. We did this through the relationships, agreements and pricing protocols we have in place with our suppliers.

This is the positive impact of the McDonald's System's famous 3-legged stool. However, the market conditions and the business assumptions have changed greatly over the past several years. So this is why we need to take a fresh look at the maturity of our supply chain operations and promote change for growth. So now we've looked at the context we operate in, let me show you how we're working on to generate value and accelerate profitable growth. We've organized our value creation and protection activities in five main pillars. We have growth, resilience, margin improvement, digital transformation; and lastly, sustainability and compliance. It will be critical for supply chain to perform at a very high level if we're to promote growth via sales and restaurant openings.

Product availability, obviously, is a cornerstone of customer satisfaction, and we ensure that availability through innovation, product development and very well-managed supply operations. You'll imagine that getting the same ingredient to more than 2,500 restaurants on the same day of a new product launch in 21 markets requires outstanding planning and execution. So out of those five, I'll drill down on three where we think we have the greatest opportunity to drive incremental growth and profitability. And let's start with resilience. You've probably heard this word resilience quite often for this industry since the COVID pandemic. So supply chains have had to adapt from just-in-time to just-in-case and seeking maximum efficiency in cost to maximum product availability with highly shifting demand patterns.

Resilience is our capacity to withstand headwinds and disruptions. Inflation, currency fluctuations, tariffs, geopolitical tensions disrupt trade and increase sourcing uncertainty. The cost of oil, gas and fertilizers will be impacted for months of a potential recovery once the current conflicts are over. So volatile prices of proteins, packaging and energy inputs do challenge our cost predictability and management. And lastly, climate adds pressure on water availability and soil earth -- health, sorry.

So we focus on what we can control, and our resilience comes from long-term relationships with key partners, as I said before. And importantly, most of these relationships span a strong local and regional network of suppliers and production facilities. This is one of the advantages of operating in Latin America. Given the strength of the region's agricultural production, we're much less subject to global supply bottlenecks and disruptions compared with other regions of the world. Another significant opportunity within supply chain is to contribute to margin improvement. Obviously, reducing the cost of everything we do is at the heart of what supply chain does day in, day out and a very disciplined category management platform, coupled with a very robust supply relationship management program allows us to constantly challenge the assumptions we work with.

So whether it's on raw material, production methods, logistics, packaging and other cost parameters. We have a small group of regional category experts. They identify opportunities and offer a portfolio of initiatives to the market leaders for them to implement locally. Even though we're very proud of the work we've done to manage the cost and volatility of our market -- basket of goods, we believe there's still more opportunities to improve here and where we source our food and paper. This productivity happens in an environment with more ESG requirements and regulations, such as on beef, on farming practices, packaging and energy.

And then finally, we believe the digital transformation will support significant value creation through our supply chain. And together with Male, we're building a technology ecosystem that enhances our capacity to anticipate, give us access to more reliable data and reduce inefficiencies. We've already seen productivity gains by using AI in sourcing events. We will soon deploy a new maintenance, repair and operations platform. We expect it to reduce cost, enhance service levels and provide better oversight practices as well as on supply performance. We anticipate considerable gains in planning accuracy that I'll talk about in the next section.

So now that we've seen the 5 main pillars, I want to give you a taste of some of the core value-adding initiatives for the next 3 to 5 years. We know we have to focus on beef, risk management, planning and last mile distribution to the restaurants. These will deliver savings, cost avoidance, resiliency and ultimately, shareholder value. So I'll address beef and planning and distribution in more detail. So we talked about beef earlier and how it represents about 24% of our total food and paper spend and how its costs have increased over the past 2 years. So this is a category that we focus on constantly to protect sales and the bottom line. We protect raw material availability by constantly developing a sourcing network.

We source mainly within Latin America. This allows us to adapt the routing of both raw material and finished products between the markets based on the most efficient regulatory and foreign trade conditions that we have in the region. We have long-standing pricing protocols and commercial agreements in place with our main vendors. So this, combined with hedging practices on both sides of the relationships, provides predictability and reduces volatility of our input costs. And to do all this, again, we rely on our highly qualified vendors and share best practices with the global McDonald's ecosystem. And I'll address initiatives 3 and 4 as together, they will transform the way we plan and serve the restaurants.

This is probably the largest value creation initiatives in supply chain for the next 3 to 5 years. The planning component is enabled by data and technology, using a demand signal from the restaurant and multiple sales parameters to project future demand. The information will be shared across the whole supply network end-to-end, allowing us to ensure supply with high precision, low inventory levels, lower replenishment costs and improving working capital. Automation allows us to completely eliminate the restaurant ordering process. In parallel, we're piloting several operational improvements to reduce friction during the distribution process.

The goal is to replenish restaurants in a completely transparent way, avoiding disruption to restaurant operations, eliminating the use of restaurant crew to stock the goods and reducing the delivery lead time. Ultimately, all these operational enhancements increase distribution and restaurant productivity and then reduce cost. So as we couple both planning and operational improvements, we will transform the distribution dynamics, increase replenishment accuracy and reduce cost. Now I'll wrap up with some key performance indicators that supply chain tracks that we track internally for value creation and protection, which I think should be particularly interesting to this group. And they bring us back to those 5 pillars of value creation and protection that I talked about before, resiliency, profitability, digital transformation, sustainability and compliance, all that to serve growth.

So number one, obviously, is EBITDA contribution that we funnel by providing margin expansion and cost competitiveness. The second one is inflation mitigation. We protect ourselves against commodity costs, inflation, foreign exchange, labor and logistics volatility. The third one is product availability that delivers revenue protection and customer experience. And number four, working capital efficiency, enhancing cash generation and capital productivity. The last one, resiliency and sustainability. This obviously reduces earnings volatility while operating responsibly with all the stakeholders. So we obviously manage a pretty big slice of the pie, which is why I'm convinced we will be able to balance cost and resilience using technology as an enabler to generate and protect value for Arcos Dorados. Now is the time to grow. Thank you very much.

Before we open the floor for questions, Luis and I want to leave you with some final thoughts. Our value creation framework is built around 4 metrics: comparable sales growth, EBITDA evolution and margin return on investment and adjusted free cash flow. Together, these metrics balance growth, profitability, capital discipline and cash generation. Comparable sales growth keeps us relevant with the customer and supports market share.

EBITDA evolution and margin ensure the growth translates into earnings. Return on investment keeps capital allocation disciplined and adjusted free cash flow keeps the organization focused on converting results into shareholder value. Just as important, they are also the metrics behind our management incentives.

In other words, we measure our performance based on shareholder value creation. Luis?

Thanks, Mariano. Based on these building blocks for value creation, I'll close by putting our long-term ambition into numbers. As you already know, every year, we provide guidance for restaurant openings and total CapEx. To recap 2026 guidance, we expect 105 to 115 restaurant openings and $275 million to $325 million of total CapEx.

Our longer-term ambition from 2027 through 2030 is for 550 to 600 cumulative openings in the period, included in a total CapEx plan of $1.3 billion to $1.5 billion. In other words, we plan to open more restaurants each year without significantly increasing the average total CapEx. We will prioritize the higher return investments to capture maximum benefit from the processes Sebastian presented today. And if needed, we will adjust the course based on market conditions.

Today, we also told you about how we're applying technology and AI across the entire company, which we expect to drive better sales growth and generate more efficiencies that will lead to improved operating margins. With that in mind, we're also introducing a long-term growth algorithm for total revenue and adjusted EBITDA.

This ambition is for an average growth rate trend over the long term and not specific guidance for any single year. We believe we have planned an ambitious but achievable level of growth for the next several years.

So for total revenue, we are targeting growth in the mid- to high single digits, supported by both organic comp sales growth and new restaurant openings. And for adjusted EBITDA, we are targeting some additional margin gains that leverage revenue growth -- I'm sorry, can you go back a little bit. Margin leverage revenue growth to deliver high single to low double-digit growth. As you've heard several times today, now is the time to grow.

I'll turn it over to Dan, so we can take your questions.

So we're going to get started with the Q&A session as soon as we get some chairs set up here in the front. We'll also have a couple of microphones here in the room. For those of you that are with us, please raise your hand, we'll bring you a microphone. Before asking your question, please state your name and the firm you're with.

And for today's webcast participants, you may submit your questions at any time during the presentation or now asking the -- using the Ask a Question box directly below the broadcast screen. Type your question, then click submit. We would also appreciate your feedback on today's event through a brief survey available for the webcast participants by clicking the Resources tab at the top of the screen. And in-person attendees, there should be a QR code on your table that you can scan and we're passing out a printed handout as well.

So the presentation we went through today will be available on the Investor Relations website later today, and bear with us for a second. We'll start up the chairs, and we'll get started with Q&A.

My name is Bob Ford. I'm with Bank of America Merrill Lynch. With respect to the expansion, Luis mentioned there's an ability to adjust. What's the current agreement under the MFA with McDonald's? And how quickly can you adjust if there's an unforeseen deceleration in the economy?

Of course, we do have a commitment and where we have an agreement with them. The relationship is very strong, and we can see at the table and compensate and have the right conversation if we need to adjust. So as we did in the past, we have done that. If you remember, Bob, thank you for the question. That during 2015 to 2017, we sat with them and had the right conversation that they understood, and we have the chance reduce the base of our expansion.

And then we had an agreement with growth support, for example, until 2024. Those are key examples of that can really see with them because the relationship is as partners as business partners.

And then how are you thinking about the geographic balance of new store openings?

As we have done in the past. For us, we have 4 to 5 main markets. 60% of expansion is going to go to Brazil. Then we have Mexico, Argentina and Chile. Colombia is starting to be a good opportunity market for us. But I would say that those are that's going to be the balance.

Froylan Mendez from JPMorgan. Very interesting chart about how chicken can be a game changer on the gross margin and sales. My question is, what needs to happen for chicken to even get a more relevant part of the pie and how does that convey with the overall McDonald's strategy? And is there any specific challenge in the region to have chicken being more important for the belly of the Latin American?

Yes. Thank you, Froylan, for the question. Absolutely chicken is a big growth opportunity for us. We have grown, as you saw, the share in the chicken category significantly over the last 5 years. We have introduced successfully different products that have made a difference in that category.

So we have grown our market share in chicken in particular, more than 5 points. And today, we are one of the market leaders in the region in the chicken category. But we know that the category has been fast because the category is large. So we need to keep innovating and bringing new experiences to customers.

So we are currently focused on continuing to push forward our iconic chicken products, such as McNuggets, such as McChicken. We're introducing new products to complement our current offering. One of them is the chicken strips that help us get into new consumption occasions and into the shareable space, which is very important for the chicken category.

As of challenges, of course, the chicken category behaves in different ways across the region. We have a very, very strong position in the south of the region. In the north, the situation is different. We have very strong competitors I would say one of the challenges is to face strong competitors that have consolidated in the north part of the region like Mexico, Central America, et cetera.

As a follow-up, do you sense like when you listen to McDonald's, part of the challenge on gaining or winning the chicken battle is the fact that many of the specialized chicken players use fresh chicken, right? And that brings the challenge at the equipment, the kitchen and the delivery times and your products traditionally have been more frozen and cooked at the moment.

What's the operational challenge to change that? And on top of that, what's your view that chicken could represent as a percentage of sales, let's say, in the next 5 years?

The good news is that we already have bone-in chicken in some of our markets where it does make sense. So it's not new for us. It's more complex at the kitchen level, but it's doable, and we have bone-in chicken in Peru. We have bone-in Chicken in Costa Rica in Panama and in Trinidad.

So we're going to apply that category of product if it makes sense for the business. So it's going to be part of. Today, we think that the main opportunity in those markets and across the region has to do with the chicken sandwich, McCrispy, strips, nuggets, maybe wraps for example. All right.

[Size] of the chicken that can reach your sales?

The size of the chicken that can reach...

[indiscernible] percent of your sales in the next 5 years. Do you have an ambition for that?

Yes. I mean we are -- the improvement in percentage points was like 8 in the last 8 years from 12% to 20% overall. And we think that we can double down on that. The ambition is to go up to, I don't know, 25 points, all right? That's the ambition due to the profit that can bring in the category.

If I may, but it depends a lot on the country. I mean you have countries like Peru, Ecuador, where it's huge, Mexico as well. Others like Argentina and Brazil, where chicken consumption is a lot lower. And it's also has to do with that and how we can penetrate and how strong our brand is, but it also has to do with bone-in chicken versus the sandwiches. And we're having a lot of traction with our sandwiches as well and bone-in is much more complicated because you have the -- you mentioned the refrigeration thing. So it's a different beast.

This is Thiago from Goldman Sachs. I have 2 questions. The first one, sorry, if I'm trying to be too simplistic, but I think the debate everyone is asking today is how to balance growth with free cash flow generation, right? And the title of your event is about growth. It's time to grow. It's not -- it's time for free cash flow generation, right? And obviously, there are a lot of initiatives to protect that.

And I think Mariano, you mentioned earlier in your comments that so far from your EBITDA growth like 10% is from new openings and then the rest is from organic sales. and margin improvements. But then when I compare your guidance, you are talking about mid- to high single-digit sales, well, mid- to high single-digit sales growth versus 5% store openings, store growth, right?

So it really seems the dynamics and the drivers your future growth are changing. Does it mean we should go through cycles of CapEx investments. And at some point, over the next 10 years, free cash flow could converge back to 0, you think -- how to think about the growth investment plan over the next 10 to 15 years. And then on top of this, if we're focusing that much on free cash flow what are the usages that we should expect from this excess cash.

Of course, I'll start, Thiago. Thank you very much for the question. How I see -- when I mentioned how Arcos numbers were in the last 5 years. We can -- what we can see for the next years, and this was part of the message I tried to give is that in terms of EBITDA, we are doing, of course, everything possible to grow our EBITDA. It will grow because our sales will grow because our margins grow.

I didn't mention in the presentation, but also part of the increase and the enhancement in free cash flow comes from a lot of focus in terms of working capital, how we work, how we extend payments with suppliers, how we try to manage inventories in the restaurant and distribution centers how we try to shorten the collection period using as well new technologies.

So we are doing a lot in terms of EBITDA, and here, I'm talking about the organic part of the business. So EBITDA by growing sales, and improving margins. And on top of that, cash flow generated by working capital initiatives. That is bringing cash to the business. In terms of CapEx, we gave the guidance that we are going to -- if you do the math, 550 to 600 in 4 years, we're going to increase slightly the pace of openings in the coming years.

But we are increasing openings, but we also mentioned that we will decrease the investment in modernizations because we did a relevant catch-up in the past. And on top of that, we invested a lot in recent years in technology. So the CapEx allocated to technology also will be lower or we expect it to be lower in the next years.

So if you do all that math, what we are seeing is that the improvements in free cash flow that you have seen since 2023, we expect them to continue in the next year. So the company will generate cash. If you consider -- and that's the second part of the question, if you consider how we allocate our cash, and that's even before free cash flow because we have our EBITDA, we have operational cash flow.

Our first priority is to grow and we think there's a lot of value that we can add to the company by increasing the number of stores. There are many opportunities. And by having good returns, that's a way that we can increase value to shareholders. That's the first way.

Then with the free cash flow, we have been paying dividends and a very solid dividend policy, and the company has a very good dividend yield. Of course, we have debt. Our balance sheet is very strong, but we need to pay our interest that are excluded from the free cash flow figure.

And on top of that, then there are different alternatives to use the free cash flow, either if and only if the possibilities in terms of openings are higher, we can do it. There are other alternatives. You have dividends, you have share buybacks, all the alternatives that are on the table. And eventually, we will decide. We are not there yet. We are building our free cash flow. We are implementing our CapEx growth program, and we are paying dividends.

So right now, we are very comfortable with our capital structure, how we are allocating cash in the company and very excited for the opportunities for growth in the coming years.

Which if I may, a question for you. The controlling shareholder of the company, right, how do you evaluate the different return profiles and payback periods between opening a new store or buying back your own shares of a company that is already established, you don't incur the risk of operating new stores? How do you balance this type of allocation?

That's a very good question. We're looking now -- look, the investment that we've done in real estate and in buildings, has now reached sort of a plateau. So that will increase a little bit, but I don't think it will ever get much higher than it is today because there's a rhythm to site selection. And if you go too fast, you start choosing wrong sites and there's no amount of marketing that will ever fix up. So we want to avoid that. I think you mentioned technology.

We've also done a lot of investment in technology, and there's just so much more than we can do, but there's still a lot of investment necessarily. So there's going to be a lot of free cash flow. And I don't have the answer for you, but I do -- I will say one thing, it will be for the best -- in the best interest of the shareholders and then it will create the best value for you all and for us.

Julia Rizzo from Morgan Stanley, I would like to follow up to 3 things, if that's possible. I went on the McDonald's on the parent company Investor Day, they announced a big support for its brand and franchisees across the board. How that affects Arcos. What can we expect from that relationship coming to Arcos Dorados and its shareholders?

The other thing that I was curious about the voice orders, that's very exciting. When is the plan of launching? Do you have it already available in Portuguese and Spanish? , I hope so, with experience to launch and when.

And on the beverages as well in the menu, if I could -- that's the last one, I promise. We saw a lot of effort across the globe and trying to adapt the menu for the new requirements of GLP-1, looking for macros, proteins. And the dietary that changes everyone. How are you seeing that adaptation to the region, right? How are you guys going to plan the menu? And when is that going to happen?

Do you want to take the first one? But what I can tell you, I can explain, we are an independent development licensee taking the first question regarding that one. So everything that management presented last week is more focused in the U.S. market and IOM markets. Those are International Operated Markets. Those are Italy, Spain, Germany, Australia and Canada.

So we do not apply to the support that McDonald's is offering their franchisees, but it's regarding mainly those markets. They talked about several elements of their plan, hospitality, technology, new designs, and new categories.

Having said that, the good news is that we are already very advanced in many of those elements. You heard from [Magdalena] about technology, for example. You heard from Santiago about chicken and beverage. We already have, as I said, bone-in chicken in several of our markets.

Hospitality, we've had -- always has been an obsession for us service and since 2016, we implemented a program that was called culture of service that is today benchmark in -- for other markets. And today, I would say that it's part of our culture. If you -- we work with the environment, if you have happy crew and managers, you will have a good service for our customers. And then the new designs. We're going to invest in those elements, as I said at the beginning, if they make sense for our business. The second part, I think [indiscernible] that.

Yes. Thank you, Julia, for the question. We are very happy about the development of voice ordering. We really believe going to create more convenience for the customers that use the app and especially if you think about drive-through put order through the app without having to digit the order.

So we are the first market that is the first -- yes, Argentina is deployed already since 2 weeks ago. We have it in English, Spanish and Portuguese. And we are really thinking that this is going to just launch. So I don't have any numbers yet, but I really believe it's going to help customers have more convenience. The idea is once that we -- as we do everything with the technology is we test them, see how it works, find -- address whatever details we need to address after the pilot, and then we'll scale to the rest of the markets because, as I said, we have the same platform. So it's just plug and play for the rest to put it. So that's basically where we are today.

Let me take the question on GLP-1. Yes. Certainly, it is. GLP-1 in Latin America is present. However, there are 2 factors that are unique to the region and to our business. The number one is that the penetration of those products in the region is not as high as in other parts of the world. Part of the reason of that is that the price point compared to the median income. This is still -- it's very high. It's very high price points. Not all households have access to those products as of now, right?

So it's expensive. The penetration is not as high. Second, if we see the frequency of consumption at McDonald's is at a point where customers come to McDonald's for indulgence, for an indulgent experience. And so again, we don't see the impact of those products, at least in the long term. So for those 2 factors, we are not seeing a change behavior and consumption in the short term.

Now at the same time, we are looking at what is happening in other parts of the world. The good news is that we have a very high -- very rich in protein menu. We have beef, we have chicken, we have fish, we have egg. Those products are easily adaptable to a high protein menu. So when the time comes, I'm learning from other parts of the world, we will be able to offer customers such products in a very short period of time. So we can react very quickly. When the time comes, we don't see it in the short term.

I'm Matthew Cullen from American Capital Advisory. Just a fun comment to start. Whenever I listen to you guys or talk to Dan, who's done a great job. I always want to have a hot fudge sundae afterwards. So a hot fudge sundae, just kind of popped into my mind. So you're doing a good job there.

Two questions. The first one, just maybe for Mariano, kind of digging deeper on what you said before. I think a lot of us have probably been very pleased with sort of the growth in free cash flow this year. And at least for myself, I'm somewhat trying to figure out with this greater number of CapEx, can we still continue to grow free cash flow pretty ratably with EBITDA growth.

Working capital in the past, I think you've been negative working capital, that amount has shrunk. Just kind of how does that change with this higher free cash flow? And if you can confirm that we can sort of grow free cash flow in this greater CapEx environment, that would be very helpful for me.

And then secondly, maybe an update just generally on kind of new store returns. What are the kind of returns we expect. I've always sort of thought of a mid-20s type return. If we can talk about that with the lower capital base, hopefully, it's going up. And also how that depends -- how that varies by geography, does hurdle rate go into your kind of CapEx plans, I thought those development videos were extremely helpful on that.

Perfect. Thanks for the question. I'll start. Yes. In regards of how we envision the next years, we envision an EBITDA growth and to continue doing enhancements on operational cash flow by improving our working capital -- we have -- if you check in the last years how the cash conversion from operation -- from EBITDA to operational cash flow has been really great, and we expect that to continue in the following years. We are doing -- and I mentioned that in the last earnings call, a lot of improvements as well on tax payments on our ETR.

And that we expect, plus the one-off that we mentioned last year from Brazil that is going to bring additional cash to the company in the next years. So we are expecting that the operational cash flow will grow sufficiently enough to continue generating free cash flow even though the number of openings will grow in the next years. Also taking into consideration what I mentioned about other parts of our CapEx -- total CapEx going down.

So modernizations and digital investment in digital will probably go down and not only go down but also more efficient. We are doing a lot of work, and Sebas mentioned that in his presentation, in reducing our CapEx, not by reducing the number of initiatives, but making each initiative more efficient, like, for example, localizing purchases in each country for local equipment by doing rightsizing for restaurants.

There are initiatives to improve our operating cash flow, and there are a lot of initiatives to reduce and make more efficient our total CapEx. Between both of them, we envision and we forecast or we expect, let's put it that way, that our free cash flow will continue to be solid in the coming years.

Having said that, remember that in 2027, we have the initial fee that we need to pay according to the MFA as we announced, that would be roughly $30 million that were going to be a one-off, actually not a one-off. It will be the second one, 10 years from now in 2037. And that will be something exceptional for next year. But having said that, even with that number, we expect our free cash flow to be, of course, largely positive and very good number we expect for 2027 as well.

If you let me, Mariano, let me add something because this is strategic for us. Like I said, our main goal is to increase the value of the company. And one of the main drivers is free cash flow, generating free cash flow. And today, the biggest opportunity that we have is returns, okay?

So we have 2 levers. One is we're going to target the sales that you already heard about. And we still have opportunities to gain margins in the organic part of the business. the inorganic part of the business, and this is our biggest obsession is to get the returns that we need to get that cash flow that generates that better to keep on investing or my main responsibility also is to put the free cash flow on the table of the Board so they can take those -- the decisions that we need. But Sebas, can you double-click on the returns and if you can--

Usually, we always said we aim for around 20% of return on investment for the first year and cash on cash. Of course, we work with different -- with adjusted risk returns based on country risk. But at the end, when you add up all the countries and the country mix, we aim for 20%. And so far, we've been able to achieve that number in the last years.

And with the reduced investment which is a huge effort because, as you know, cost and inflation in construction cost has been rising. So the actual savings is much more than what I presented. What I presented is the offset that we've been able to do to those costs. So we expect, as I shared 3 to 5 percentage point of increase in return on investment at an aggregated level, of course.

Before we take the next question in the room, I want to take a couple of questions that came in through the webcast, if you don't mind. One is from Eric Wang of Santander. And Eric asked, over the past few years, the company has been able to optimize significantly its payroll costs.

Given the labor reforms in both Brazil and Mexico over the next few years, how does Arcos expect to offset the potential impacts from lower working hours? And what should be the main levers for profitability going forward when we look into this slide?

Thanks, Eric, for the question. Well, as I explained, we are very pleased with the improvements. We obtained in the payroll line in the last years, more than 3 percentage points. We reduced the payroll cost by more than 3 percentage points with a set of different initiatives, technology and scaling and staffing properly at the restaurant level.

Do we think that we are at the optimal level? No, we can still improve that line by using better technology as AI tools become better and much more accurate. It's amazing that each restaurant has its own demand in terms of sales, and they need to adjust the crew level according to that. And that will depend on many factors like weather.

In some stores, when it rains, the traffic increases in some stores when it rains, traffic decreases. And by having forecasting tools that allow you to predict the weather, to predict different things that are going on around the restaurant will allow us to staff the restaurant properly. And by staffing the restaurant properly, you can have a normal savings because it's as bad to have more people in the restaurant for your sales has to have less people living in the restaurant when a lot of people are coming to the restaurant.

So we are still seeing a lot of opportunities to improve our payroll cost, always keeping in mind what we mentioned about taking care of our employees and making work in an Arcos restaurant in the McDonald's store, something amazing for our people, and that's, I think, and we are very, very proud of having the prizes of Great Place to Work in many of the markets where we operate.

So those are the things that, Eric, we are going to continue doing in order to overcome and try to compensate some of the costs related to labor reforms in our main markets. We already had several labor reforms in other markets and the labor and the line continue to drop, although those.

No, I was just going to add exactly what you were saying, but also there's another element, which is a turnover rate. As turnover rates come down, productivity goes up, we've seen turnover rates of our crew coming down over the years. So that's a way of mitigating these labor laws. You put more people also in because we have flexible hours.

So working 44 hours or 40 hours in a week doesn't really impact us that much for the crew and then just another thing on the returns on real estate, the prior question. The return on new restaurants is 20%. The return on reimaging is a lot lower, 4 or 5. And as you've seen, there's a swing going more toward new restaurants versus doing other. So that's going to help in the return.

There was a second part of the question.

There's another question from another investor. Max Joseph asks that we've highlighted beverages as a significant opportunity for Arcos. And we've been -- we've seen that McCafe growth accelerate meaningfully over the past few years. Could you talk about what you're seeing in the beverage business today? What's driving the acceleration in McCafe? And as you think about expanding further across the existing restaurant base, how are you thinking about the economics and returns of those investments in beverages?

Yes. Thank you. Thank you for the question. Yes, certainly, beverage is a great opportunity for us, number one, because it is a new consumption occasion. So it is incremental, highly incremental for our business. Second, it has a very good operational fit with our current operations at the restaurant. So we can produce them with very high quality and with the service times that customers are expecting. And number three, they have attractive margins. So they are incremental and also, they help us with our margins moving forward. So it is a very, very good opportunity for us.

Lastly, this is a category that faces Gen Z customers, so young customers, younger customers. So this also helps us reach out to these younger generations and get them to come to McDonald's more often. Regarding coffee or McCafe, the new beverages also include coffee-based beverages, so that the coffee category that we have to date has been growing consistently over the last few years will also benefit from a strong move into crafted beverages, which is the category we're talking about.

Great. Thanks, [Santi]. Maybe move back to the room here for a second.

Greg Frank from Guggenheim. I had 2 questions. The first one was, I mean, you guys have gone through a remodel cycle 5 years more recently than McDonald's has in the U.S., but they presented a lot of elements of this next plan. I'm curious and you guys are pushing into chicken and beverages, a lot of things similar to what they're doing there.

What elements of that plan are you trying to incorporate maybe into your new restaurants even if you're not going to go through a remodel cycle that you think might maybe impact the business in Latin America and maybe what aspects are not necessarily relevant to Latin America? And then I have a second question.

You want to go [Sebas].

What McDonald's presented as the place chapter of -- next is a new design, both for the exterior of the building and for the interior as well as a lot of kitchen improvements in terms of layouts and equipment. So if you compare that with the traditional McDonald's building in the U.S., that's a whole reinvestment, almost a rebuild. And that's related to the numbers they presented last week.

When you compare that with what we currently have at Arcos Dorados, we have a much more modern restaurant base because when we received the company back in 2007 I always remember this number, 95%, 97% of the restaurant base was legacy, the old Mansar roof.

So we've been doing a huge catch-up. So our restaurant base is much more modern than the rest of the world, not only in terms of image but also in terms of kitchen equipment. We migrated almost all our stores to the previous platform that was calling probably, you recall Experience of the Future.

So I would say most of our kitchen are already ready for what's coming with NExT. talking about the interior decor, what we've seen so far, and we've been able to have quick plans of the new material and decors at the last convention. It seems to be a smaller investment in comparison to what we are currently doing. Just to give you a quick example. Now we have like 15 different decor packages to use at our restaurants. And now the evolution that McDonald's did with NExT, they have just on the decor package with 4 different color pallets. So that really allows us to lower the investment.

McDonald's is not thinking in a retrofit to the existing restaurant base. It is just to keep with the same reimage cycle that we have in the past, but using the new decor. So just to start, we don't have to do a catch-up because we've been doing it during the last 20 years. And what we still have to evaluate is the exterior image, which is really new. We don't have the numbers yet. I have a couple of questions with McDonald's worldwide design. They are currently bidding those, and they are expecting to get good prices because they will do for the first time, a worldwide bidding process. And their expectation is that, that building model would not cost more than what actually costs now.

So for us, it would not imply any increase in capital expenditures because we will just add to [indiscernible] with the same or lower cost and we don't need to do any big change inside our kitchens.

And then my second question was just this data and digital evolution. And I think 65% of your business is now digital, but you're getting maybe 30 -- around 30%, you're actually able to identify the customer.

How do you get that number higher, that maybe that latter number? And does it need to be higher to really cause a big inflection in terms of your ability to go really personal? Or are we kind of maybe past that threshold where you get a big kind of kick from the ability to kind of process a lot of that data and make big changes with it?

Thank you. Thank you, Greg, for the question. It's a great point. So yes, identified sales is what makes the digital platform work and have greater impact in the business. You are correct. And as you saw from the presentation, we have been growing the percentage of identified sales year-over-year. And actually, this year, you will see that we are increasing the momentum, and we are going to reach practically 30% by the end of this year. But there's still a lot to capture.

We're only getting started here. So there are a few strategies that we are following to increase that and increase the momentum in how we get behind identified sales.

The first one is the loyalty program. The loyalty program is the one that helps us engage with customers, both to get more points into your account and to redeem points for products.

In loyalty, yes, the program has 36 million members, but still has a ton of potential, especially in redemption. So we are going to accelerate that part of the program and a higher activity loyalty program will enhance rapidly identified sales. Another example, I want Male, to jump in, and she should tell us a little bit about agentic promotions which fits right in with this question.

Well, basically, one of the key things about the customers have in the app is that we have their data, specifically what is it that they purchase? What's the frequency. So with that information, as you saw, we have tons of data of the customers that are in that base. We want to hit the opportunity of being much better in what is the offer that we give to a customer, which is going to help us even more increase the usage of the app.

So we are working with an AI development to give each customer the right offer with the right product at the correct time so that this is going to help us catch more customers going forward. So this is going to be hope happening before the year ends in one of our markets. So we are really willing to push forward even more identified sales using data.

Alvaro Garcia from BTG Pactual. You mentioned the strategic autonomy of IT, which I thought was interesting. I have 2 questions on that front. One, how do you think of discounts going forward? You obviously don't want to get caught up in a spiral of discounts. And I think you've done a good job over this past year of trying to wean off of that, but I would be interested in your view on that going forward?

And then how do you think of monetizing the platform? You've obviously gone through this investment cycle. To what degree can you monetize those digital investments with your franchisees. That is your own data, that is your own tech. If you can comment on that, that would be helpful as well.

Yes, of course. So I will touch on the first part of the question about discounting. Discounting is something that we do strategically. Now we have the database that it's important to mention that has taken quite a few years to build. Having a strong and robust database takes a long time to build. We now have it keeps growing, but the data base we have is very, very significant. And how we use discounting is by understanding the behavior of a particular customer and giving it a specific discount that will trigger enhanced frequency.

So for example, if I know that our customer comes to McDonald's twice in 90 days, I know that, that customer is going to come back 4 more times during the next year. So the job for the discount in that particular example is to get that person to come a second time because if it comes a second time, then the frequency will increase. So even though it might seem like a big discount to get that second purchase, a lifetime value of that customer will more than pay for it in that particular example.

So that's how we are working our discount strategy inside our CRM platform. That example imagined millions of times per day.

And if you let me just add a little comment. And one of the margin gains that we think that we have ahead are from that because we think that we can monetize and we can do better pricing, being close to our customers, being rational and about having a compelling value proposition, but we learned over the last 5 years how the intensity of the promotions that we need and we have to have out there, either in the delivery channel and the digital channel, we do have opportunities. Male, if you want to...

Yes. Well, regarding discounting to what Luis and Santi are mentioning, I just mentioned how we are using data. So one of the things we are -- we know it -- what is the willingness to pay of every customer that uses a coupon. So with that data, we're going to be improving what are the discounts we give to each customer, understanding their behavior. So this is going to be, for sure, improving and helping the margins, as Luis is explaining.

Regarding the monetization of the data, I think we have a big opportunity. We have tons of data, if we even sometimes meet with other companies that are really pushing and investing big to get customer data. We have a lot of customer data. We have a lot of internal data. So I sure believe that we have -- I said it, we have a big opportunity going forward. How do we use customer data much better and how do we use internal data to, for example, do things with our suppliers, like Philippe mentioned.

Regarding franchises, we have a very good relationship with our sub-franchisees. We even -- the sub-franchisees are using our tools and they are helping their business with the tools that we are developing like our AI tools.

So this is something we are very close to them, especially Brazil, which is our biggest community. So I think we have done a lot of work so that the things that we do are not only for our own stores. They are also for them, and I think that's going to be -- continue to be that way.

Great. Just one quick follow-up. There's clearly this embedded sort of margin expansion going forward in the longer-term guidance. If you could just break that out maybe by country, there is one country or maybe more -- or one region you're more excited about or if it was broad-based across the board?

Just to set expectations. We're just right out of time. So we'll take that one as the last question.

Alvaro, yes, actually, what we -- the numbers we presented are on a consolidated basis. There are a lot of opportunities to increase margins in some markets that are kind of behind the average of Arcos and one of the good things is -- and we mentioned this is how we can bring the good lessons we learned in some markets to the rest of the company. We are becoming faster in doing this.

All the digital investments we are doing, the beauty of that as opposed to, for example, building a new restaurant when you invest in digital is the tools that you invest in are easily applied all over the company immediately.

So you test it in one market, it works, you have it everywhere like the app. We have the app working in every single market. So we are very excited how the markets there are with margins below the average of Arcos can do the catch-up. I will not mention anyone. You know we exposed our results in 3 divisions. Brazil has the highest margins. We always discuss that.

But we are very confident that NOLAD and SLAD will go in Brazil's directions, even though inside NOLAD and SLAD there are markets which have even higher margins than Brazil. But on a consolidated basis, the division is -- the 2 divisions are lower. So the numbers we presented are on a consolidated basis, and we are very confident that the whole company will move in the right direction.

Thanks, [indiscernible] thanks to all the speakers. That's the end of the webcast Q&A portion of today's program. So for those of you who joined us online, please feel free to reach out to me with any follow-up questions.

And for those of you with us here, please hold on to your seats for just another minute. And we're going to explain the sort of next steps here. And have a great day, everyone, who is online with us. Thank you so much.

Good morning, and thank you for joining Arcos Dorados Second Quarter 2026 Earnings Webcast. With us today are Luis Raganato, our Chief Executive Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation that is also available in the Investors section of our website, ir.arcosdorados.com. [Operator Instructions] After we conclude our opening remarks, we will answer your questions.

Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today's earnings press release and conference call presentation as well as the unaudited financial statements filed today with the SEC on Form 6-K.

I will now turn the call over to Luis.

Thank you, Dan, and good morning. Before getting into the second quarter results, I would like to start with a few words about Venezuela. The earthquake at the end of June impacted the entire country in one way or another, including Arcos Dorados. But I am very proud of the local team's effort to support our people, suppliers, sub-franchisees and the communities they serve. Working with local authorities and medical professionals in the hardest hit part of the country, they quickly converted one restaurant into a medical center and another into a shelter for people who lost their homes. While recovery efforts continue, we are beginning to see signs of progress. People are gradually returning to their daily routines. And other than the 2 locations I just mentioned, all other McDonald's restaurants are open in Venezuela.

As always, we stand with our team and will provide them with the support they need until the situation on the ground normalizes. Just this past Monday, Colombia also experienced a significant earthquake. Our first priority has been the safety and well-being of our people. We are still working closely with the local management team as they assess the full impact of the earthquake on our people and restaurant operations.

Let me now turn to the second quarter. Total revenue, adjusted EBITDA and net income, all grew strongly in U.S. dollars despite challenging consumer dynamics and year-over-year comparisons in certain markets. This demonstrates that we have taken important steps to improve the resilience of the business model and monetize the market share advantage. Total revenue reached $1.3 billion, the highest ever quarterly revenue and up more than 14% [Audio Gap] currencies in several markets. Stronger operating results, better results below the line and a lower effective tax rate delivered record second quarter net income and drove sequential growth in adjusted free cash flow.

The exclusive sponsorship of the FIFA World Cup allowed us to take full advantage of this important passion point for guests across the region. We executed unique marketing campaigns and activations across all sales channels. This helped drive digital sales penetration and identified sales to their highest ever levels, and we measure continued market share gains throughout the region.

In terms of inorganic growth, we opened 16 restaurants in the quarter, bringing the first half total to 35 restaurant openings. The organic growth drivers in the business continued to perform well in the second quarter, including the solid market share, digital sales and U.S. dollar revenue growth I just mentioned. Starting with market share, based on guest traffic, McDonald's restaurants in the Arcos Dorados footprint gained about 0.5 point versus second quarter last year and remained more than 2x as much as our main competitors. Market share gains in the main markets are a testament to the quality of the local leadership teams who have implemented successful strategies in a wide range of consumer environments.

Digital sales grew by more than 25% year-over-year and generated about 66% of total sales. This included very strong growth from self-order kiosks, demonstrating the continued relevance of the on-premise experience and delivery, especially in Brazil, where new aggregators are pushing industry growth.

Identified sales surpassed 28% of total sales in the period with growing loyalty program membership helping us achieve the highest guest identification rate in our history. Active loyalty program members who redeem points tend to visit us 5x as frequently as non-loyalty members. We expect this to turn into an important long-term value driver for the business since it significantly increases the lifetime value of those guests.

The FIFA World Cup was a big success for the McDonald's brand in all of our markets. We took learnings from previous tournaments and began running regional campaigns about 3 months before the World Cup began. We used this period, which included the World Cup-themed Mundialistas sandwiches and Panini sticker books to generate excitement in anticipation of the tournament. The anticipation turned into euphoria once the tournament began as we remained engaged with guests through conversations and special offers on the digital platform.

Regional campaigns, combined with global FIFA World Cup campaigns drove significant traffic and premium sandwich sales growth, especially in Argentina, Brazil, Colombia and Mexico. Brand favorability metrics also reached all-time highs throughout our footprint, which we believe ties directly back to the market share gains we delivered.

At a divisional level, Brazil's comp sales continued the strong rebound that began at the end of the first quarter. On our last call, we mentioned the proactive and assertive steps the Brazilian team took to reverse negative guest volume trends after the end of Carnival. By quickly reconnecting with guests, they set the stage for a successful second quarter, which included an integrated FIFA World Cup campaign, strong delivered sales growth, a compelling value platform and targeted digital campaigns such as [ Mi Fest ].

According to third-party research, the good news is that the QSR segment of the country's restaurant industry resumed volume growth in the first half of 2026, and we began to see that reflected in our numbers during the quarter. Strong comp sales, new restaurants and an appreciated currency combined to drive U.S. dollar sales up more than 25%. [indiscernible] comparable sales performance in the quarter reflects a particularly demanding comparison base, even though we were able to generate modest case volume growth. Three factors explain the year-over-year dynamic.

First, last year's second quarter included the full holy week period compared with this year that included only part of the holiday in the second quarter. Second, the prior year quarter benefited from the Minecraft promotion, which generated exceptional results across several markets. And third, consumer spending remained under pressure across most markets.

SLAD sales growth was solid in the quarter, reflecting guest traffic growth in most markets and inflation-driven comp sales growth in Argentina and Venezuela. Marketing campaigns focused mainly on the FIFA World Cup, driving important market share gains.

Over to you, Mariano.

Thank you, Luis, and good morning, everyone. Similar to revenue, profitability in U.S. dollars as well as profitability margins were resilient in the second quarter of 2026. Adjusted EBITDA totaled $126.8 million. This was more than 20% higher than last year in the second quarter, including a 70 basis point margin expansion when we exclude the transaction with a Mexican sub-franchisee from last year's result. In addition to benefiting from a stronger currency environment, we were very pleased to see continued improvement in both food and paper as well as G&A expenses, which more than offset modest pressure in payroll. Favorable food and paper costs in Brazil and NOLAD drove a 70 basis point margin expansion in the second quarter, extending the positive result we generated in the first quarter.

Payroll expenses were higher as a percentage of revenue in all 3 divisions, but mostly in NOLAD due to hourly wages growing more than the average check. Pressure in Brazilian SLAD was much more modest. Occupancy and other operating expenses were almost flat, while G&A was lower as a percentage of revenue as a result of the restructuring we implemented late last year, and we expect this to continue through year-end.

We were also very pleased to deliver strong net income results this quarter. Earnings per share in the quarter doubled versus last year, supported by solid operating performance, better nonoperating results and a lower effective tax rate. Net interest expense was lower compared to last year, thanks to the continued optimization of our capital structure as well as to income related to last year's tax credit in Brazil. Additionally, the lower effective tax rate reflects the early impact of initiatives designed to lower the company's consolidated effective tax rate over time to be more in line with the region's statutory rates.

Brazil was the standout in terms of profitability in the quarter. Margin improved by 180 basis points, reflecting disciplined cost management, especially in food and paper and G&A. This, combined with solid revenue growth and stronger currencies drove adjusted EBITDA up more than 40% in U.S. dollar terms. NOLAD's margin pressure, excluding the income from last year's restaurant transaction was 110 basis points. This was mainly due to reduced operating leverage, which more than offset better food and paper costs compared to the same period last year. In SLAD, adjusted EBITDA grew in line with revenue. Improvements in G&A were offset by slightly higher food and paper costs as well as occupancy and other operating expenses, leaving margins essentially unchanged versus the prior year-end.

We are working hard to generate value for our shareholders, and the major part of that is maintaining a healthy balance sheet and driving sustainable cash flow generation. In July, we completed the second liability management transaction of the year. As a result, this year, we have completely repaid the 2029 senior notes. We are very proud to have issued the first sustainability-linked bond in the QSR industry, which included ambitious targets associated with greenhouse gas emissions across Scopes 1, 2 and 3. As we announced earlier this year, we are even prouder to have exceeded these commitments by the 2025 measurement date.

Our balance sheet remains strong with healthy liquidity and sufficient cash generation to fund long-term growth while maintaining disciplined leverage. As adjusted EBITDA continued to grow over the trailing 12 months, net leverage improved modestly to a very healthy 1.1x at quarter end. Finally, the adjusted free cash flow generation of the last 12 months improved sequentially with strong net cash provided by operating activities combined with lower capital expenditures in the period. Of course, this is directly tied to our efforts to create more shareholder value.

During the second quarter, we deployed $49.1 million in capital expenditures. This supported 16 restaurant openings and helped bring the modernized restaurant experience to more than 77% of the portfolio. As the numbers show, freestanding units continue to account for the bulk of openings. So far this year, we have opened 35 restaurants and invested almost $86 million in capital expenditures, including openings, modernizations, maintenance and nondevelopment CapEx. We believe we can continue to raise the bar for expected returns on investment by developing and implementing initiatives to improve efficiency in all facets of our capital deployment.

I will close by repeating some of the highlights from the second quarter. We delivered total revenue growth of more than 14% year-over-year. We generated the highest ever adjusted EBITDA, net income and earnings per share for the second quarter. We have a QSR industry in Brazil that looks like it's starting to turn around. We improved our gross margin after a tough 2025, and we benefited from a streamlined G&A structure that is contributing to underlying margin expansion.

Despite a mixed consumer environment across the region, we delivered solid results during the first half of the year. Looking ahead, we expect conditions to remain dynamic through the second half of 2026, but we're confident in the strength of our plans, the agility of our operating model and our continued financial discipline as we work to maximize full year results and strengthen the foundation for future growth.

Luis?

Thanks, Mariano. I will leave you with some final thoughts before opening the call to Q&A. The word we want you to remember today is resilience. As Mariano just mentioned, market conditions have not been ideal so far this year, but the business model is showing an ability to navigate tougher periods while still delivering strong results. We are confident in the plans for the second half of the year and are working on a plan for 2027 to continue building on this solid foundation.

Leading market share and unmatched brand attributes are a testament to the enduring connection we have with QSR customers across the region. We saw both indicators improve in the second quarter, and we intend to continue monetizing the connection with guests to increase the value of Arcos Dorados.

The industry's leading digital platform is beginning to move into a new phase. and we are developing as many customer-facing capabilities as back-of-house tools to drive sales and generate efficiencies. In other words, we're making progress on the 3 pillars of focus I talked about 1 year ago.

Today's business has been built on a foundation made up of a strong brand, combined with the best restaurant experience in the region's QSR industry. Growth goes well beyond openings. We're working to generate growth across all aspects of the business. It can come from physical restaurants, digital channels, loyalty programs, cost efficiencies, improved ROIs or any other source. And tomorrow's business, we expect to unlock significant value from the foundational work we have done so far. In the near future, we believe innovation and technology will further increase the gap between our digital platform and our competitors in the region.

Please join us at the 2026 Arcos Dorados Investor Day on the morning of October 1 in New York, where we will discuss these 3 pillars and some of the specific initiatives we're working on to increase the value of Arcos Dorados. Thank you for joining today's call.

Dan, back to you to open the call for questions.

[Operator Instructions] Okay. We have a number of questions in the queue, and good morning, everyone. Sorry for the technical issue that we have. We're aware that part of the opening remarks were muted at some point. We will post the transcript of the call as quickly as possible so that you can catch anything that you might have missed. We're going to get started with Julia Rizzo from Morgan Stanley. She has a question for you, Luis. And can we comment on the sustainability of Brazil same-store sales so far?

All right. Good morning, everyone. Julia, thank you very much for the question. And yes, during the second quarter, we experienced a rebound in comp sales. And that was mainly a result of the proactive and excellent plan that the local team implemented. That's why we do think that this is sustainable for the near future. They boosted the value platform, EconoMéqui that we've already talked about. You know that for less than $4, you can make your own 4 item combo. And they also targeted specific digital campaigns. So, as you can see, the strategy is based on 3 main levers: the value platform, the digital campaigns and of course, they put in place marketing activities around the World Cup.

So, this generated positive comp sales and volume in the quarter with sales that outperformed the market and that allowed us to increase sales above inflation that, as you know, is one of our main objectives. Of course, this had, as you saw, a positive impact in margins. And as I said, this is sustainable. We are seeing positive trends in the first weeks of this third quarter. And of course, we are optimistic because we have the right management in our markets, and we do have a solid marketing plan, and we are focusing on a competitive advantage that is the operational execution.

Thanks, Luis. I'm going to stay with you. We have a question from Alvaro from BTG. And he's asking if we can comment on the market share dynamics in Brazil?

Okay. Alvaro, market share among the players didn't shift materially for us. The most important takeaway according to CREST is that although the broader restaurant industry remains under pressure, the QSR segment was resumed -- has resumed growth in this quarter, and we outperformed the sector. So for us, that is a very good news.

Great. The next question -- and so I'm doing this a little bit out of order, but just trying to stick to the same topic, so we don't bounce around too much. Thiago Bortoluci from Goldman Sachs. Question on prices in Brazil. He says we're seeing McDonald's significantly more promotional on certain aggregators over the past few weeks. What does it mean in terms of pricing strategy, your assessment of demand elasticity and price relativeness versus peers and substitutes?

All right. Thiago, thank you for the question. It is important to remark that we manage pricing by channel, occasion and customer segments. And we use targeted promotional activities, and you will see more or less intensity depending the moment of the year and depending in our needs. but that is part of a broader revenue management strategy. Our focus is to remain data-driven, using advanced pricing and elasticity, as you mentioned, to balance traffic affordability and, of course, profitability.

Thanks, Luis. Shifting now to Mariano. We have a few questions related to margins, typically Brazil, I'm going to break these up a little bit for you, Mariano. And I'll start with Eric Huang from Santander. And he says, Brazil margin outlook, Brazil delivered another quarter of significant EBITDA margin expansion, benefiting from lower food and paper costs and strong operating leverage. As commodity and FX tailwinds normalized, what do you see as the main drivers of further margin expansion in Brazil over the next few years?

Perfect. Good morning, everybody, and thanks, Eric, for the question. I will start by highlighting a bit the performance of Brazil during this quarter. Of course, we're very pleased Brazil was the standout performer for Arcos during this quarter. EBITDA margin expanded 180 basis points with an EBITDA margin of 14.6%. The EBITDA grew by $23 million or 43% increase. The performance in Brazil was primarily driven by lower food and paper. The good news here is that this is the third quarter where we have seen improvements in food and paper costs after a tough 2025 where beef cost increases affected that line. But this was not the only reason why the margin expanded. First, of course, sales. Sales grew above inflation, and that allowed leverage on fixed costs.

Then the G&A expenses after the restructuring we did by the end of last year, we are seeing now the results and a very disciplined cost management allowed us to have leverage on G&A as well. And all this, of course, supported by the appreciation of the Brazilian Real. So, this is what we have seen, and this is -- these are the trends we are seeing in Brazil so far this year. But looking forward, we will be focused on our long-term strategy, which is strong marketing campaigns, gaining market share, growing sales above inflation, so we can leverage on fixed costs. Of course, returns on investments. You know that Brazil is a market where we are deploying a relevant part of our total CapEx by opening new stores.

And then in terms of food and paper, we -- and well, of course, we don't know what will happen with the FX. But in terms of food and paper, we are -- the majority of the gains were not only related to beef. We have cost gains related to other items such as dairy and potatoes and our supply chain team is very focused on keeping every item under control. And on top of that, all the revenue management work that Luis already mentioned, is bringing, of course, benefits to the gross margin line. So, everything combined, we think that will provide a margin expansion in the future. And we are very -- all the company, as I already mentioned, marketing, supply chain, finance, operations, development, we're all focused on that, and we are confident that we will achieve good results going forward.

Perfect. Let's stick with the theme, and we have a couple of questions related also to Brazil margins, maybe a little more specific to Food and Paper, Mariano. One is from Eric Huang of Santander -- sorry, Eric I already mentioned. One is from Melissa from Bank of America and the other one we have from Froy Mendez of JPMorgan. So, Melissa asks, -- can you describe -- can you discuss the drivers and sustainability of margin expansion in Brazil, particularly given the investments you've made in pricing in the value segment? And Froy asked a related question, can you explain the composition of the margin uplift in Brazil between input costs and operational leverage? So, some of the drivers of the margin expansion and so on.

Perfect. Well, thanks, Melissa, and Froylan, for the questions. Part of them, I already answered on Eric's question. But going specifically to food and paper, we delivered this quarter, the third consecutive quarter of year-over-year food and paper improvement in Brazil. We are very pleased with that. As I mentioned, this is not only that beef costs are -- we are having less pressures on beef costs. We are having improvements in dairy, potatoes. Of course, the FX is supporting the food and paper line on the imported goods. And last but not least, all the revenue management initiatives we are doing in Brazil are bringing benefits to the gross margin line as well.

And we are very focused, even though we are being promotional and we have a very effective promotional platform that Luis already mentioned, EconoMéqui in Brazil is doing extremely well. We are very careful with keeping our margins and at the same time, not being too aggressive with the pricing. And this is something which, of course, is not easy, but we have a solid revenue management team that is focusing on not growing prices above inflation but also keeping the margins on all the offerings that we have on our menu, specifically on the value platforms.

Now going to Froylan question regarding drivers of Brazil improvements. Again, I mentioned some of them, but our food and paper, in terms of costs, I will highlight the G&A efforts that we made. And again, sales growing above inflation with solid comparable sales growth, it's easier to leverage on all the fixed costs that we have in our P&L.

Thanks, Mariano. I'm going to come back to you now, Luis. I have another question from Julia Rizzo of Morgan Stanley. And she asked if we can provide any visibility on NOLAD same-store sales improvement?

Thank you again, Julia, for the question. And even though we had a challenging comparison base during the second quarter of 2025, we had a full impact of Holy Week last year. And we had a very, very positive impact of the license Minecraft that is especially relevant in the Nordic markets and in Mexico also. So, we saw also in the market intense competitive environment and that the macroeconomic situation is challenging. But despite that, the division, as you saw, remained resilient. For this was key, the strength of the brand and the effectiveness of our value proposition. These 2 factors helped us to maintain positive comparable traffic and reinforce our competitive position in key markets of the division. We were able to maintain the gap versus our main competitors in each market.

Giving you a little bit more of color, sales in the division came more from volume than average check. And across channels, sales growth was strongest in delivery and dessert centers. What we are seeing, we do have for the second semester, a solid marketing plan. We are adjusting some operational executions that where we have opportunities. And what we are seeing in the beginning of the third quarter is that the trends are in line with our expectations.

Dan?

Thanks, Luis. And now we have a couple of questions, one from [ Melissa Buno ] of [ Bank of America ] and the other one from Froylan Mendez of JPMorgan and maybe a little bit of a double-click on what you just discussed with respect to NOLAD more broadly. They asked specific questions with respect to Mexico. So, Melissa asks -- can you provide some additional detail on Mexico? How much of the slowdown is attributable to the World Cup or other factors specific to the quarter? And are you seeing any recovery in third quarter to date? How are you thinking about driving traffic in a more challenging consumption environment? That's from Melissa. And Froy asked a somewhat related question, can you share granularity on the same-store sales performance in Mexico for NOLAD and how the trends -- how have the trends evolved into early third quarter?

Okay. All right. Well, I will give you a little bit more details on Mexico. Thank you very much for the question. In Mexico specifically, the economic environment remained pressured by high uncertainty, I would say, and this is driven by external and internal factors. This level of uncertainty has put pressure on the family's disposable income and this has affected several industries. This includes the retail sector as a whole. But despite this, the food service showed resilience in the country, and we managed to outperform the industry with positive comparable volumes that even outperformed the QSR sector. So, the food service was resilient. We -- the QSR outperformed the sector and we -- the industry, and we were able to outperform the QSR sector. That for us is very important because as a consequence, we were able to gain market share.

Some of the main activities were the World Cup sponsorship. This was coupled with our value platform, McBaratos that is very, very successful, and it has been on the market for the last, I would say, year plus the continued growth of our loyalty program, all combined helped us mitigate the environment headwinds, letting us grow the top line, our sales and help the brand perception remain strong and resilient. And we remain optimistic about the performance in the market, given that we do have a solid marketing plan for the rest of the year and because we have a strong operational execution that is demonstrated throughout the first semester. Mexico today has all-time high operational indicators and it's become one of the benchmark markets for some of our other Arcos Dorados markets. So, what we're seeing in the first part of the quarter is that, as I said, for NOLAD in general and for Mexico specifically now, we are -- the trends are in line with our expectations.

Great. Thanks, Luis. I give you a breather, and we'll give one to Mariano now. We have a question from Jeronimo de Guzman, INCA, and he asked, what was the weighted average inflation in SLAD? And assuming your same-store sales was above inflation given positive traffic and sales in line with inflation in Venezuela and Argentina, what limited margin gains? And what's the outlook for margins going forward in the division?

Perfect. Thanks, Jeronimo, for the question. Actually, the inflation in -- weighted average inflation in SLAD was around 46%, 47%. So, our sales were slightly below inflation, I would say, in line with inflation. In SLAD, the EBITDA grew in the quarter around $3 million or 6.6%. The margin remained stable at around 10% during the quarter. In terms of composition of margins, I would say very -- we're very pleased with G&A, which continues to reflect the benefits from the actions we took over the past year. We are encouraged by food and paper trends in Chile, Colombia and Uruguay. I'm talking about, of course, SLAD division. We had some headwinds in Argentina regarding food and paper. Overall, in the company, food & paper was very accretive to the margin expansion we experienced. Argentina, I would say, was the one that had more headwinds, but we are confident that this is something tactical and that happened during the quarter. We are not expecting this to deteriorate further in the coming months.

Of course, in Argentina, as the consumption environment is still tough, we are very prudent with price increases. And in terms of market share, what Luis discussed that, we are very focused on maintaining market share, and we are doing extremely well, but being very conservative in price increases. And that's mainly the reason why we had some headwinds in terms of food and paper. The rest of the lines are more or less in line with what we had last -- in the previous quarter of last year. And we are confident that in the second half of the year, SLAD will continue the growth story.

Thanks, Mariano. Come back to Luis now. A couple of related questions from Alvaro Garcia of BTG and Froylan Mendez of JPMorgan. Alvaro asks if we can comment on traffic trends in Argentina? And Froy similarly asked if we can provide some same-store sales performance granularity on Argentina in SLAD and how it's evolved into the third quarter?

All right. Thanks again for the question, Alvaro and Froy. And – okay, in Argentina, economic conditions were more challenging than what we expected. Consumer spending remained under pressure, contributing to a 3% decline in the overall retail sector. But despite those headwinds, we managed to deliver positive sales growth, and we managed to keep guest counts nearly flat. So that was very important for the country, for the market. In the second quarter, we had the opportunity, as you know, to leverage from the sponsorship of the World Cup. And this was the biggest event of the year for this market. The mechanic was different than other ones that had [ think ] sandwiches by country. In this case, the mechanic was that we partnered with some of the most recognized players of the national team.

And so, the market launched 3 signature burgers. That, combined with a powerful communication strategy and real-time marketing actions became one of the most successful campaigns in our company's history. We had record high sales in May and all-time highs in market share and brand preference. So, it was a very good quarter for the market.

Those burgers were so successful that we are still selling some of them, and we are in the phasing out process. So -- and what we are seeing in the beginning of the third quarter is that we are having similar trends, and we are optimistic for what is going to happen for the rest of the year.

Well, on that topic, Luis, since you've already commented on kind of what we're seeing so far in NOLAD and SLAD in the third quarter, we have a question about that for Brazil from Froy Mendez of JPMorgan. He says have the second quarter same-store sales momentum in Brazil permeated into early third quarter readings?

Okay. As I said before, the result of the second quarter was the -- was a combined situation. It wasn't -- we do not have a silver bullet. We had 3 main levers. The first one had to do with the -- that we were able to boost the value platform, EconoMéqui, that we targeted specific digital campaigns and that we had actions, marketing actions about -- around the World Cup. We saw that the industry remained highly promotional. We focused on a balanced strategy that, as I said, was based on value, innovation and relevant brand experiences. So, what we are seeing is -- and something that was very important was that the local team was very proactive, very assertive and the impact that they had in the second quarter is -- we're starting to see a trend.

We're starting to see a relationship with that and what is happening in the first weeks of the third quarter. So it was that important, the impact that has in the market share according to CREST, we remain the clear leader in market share with more than twice the guest traffic of our nearest competitor. And in addition, we were able to improve brand attributes like brand preference, top-of-mind awareness and value perception. So that was also very, very important. What we've seen in the first weeks is that the consumer disposable income remains limited. But the good news is that from third-party data, we have the numbers that indicate that QSR industry volumes are starting to turn positive. We're maintaining that momentum. And we're going to keep focusing on offering a compelling value proposition.

We're going to be very careful with our pricing. We do need to keep on improving our margins. So, some of the increase in transactions and sales in the near future is going to come from the delivery of a better execution, operational execution in every channel. So having said that and seeing how the evolution in the first weeks of the third quarter are coming, I would say that we are optimistic for what's going to happen by the end of the year.

Great. And I'm going to stick with you, Luis. One more from Alvaro Garcia from BTG Pactual. There's some speculation about McDonald's potentially changing their kitchen structure in the United States so as to increase competitiveness in chicken. Can you comment on whether this would make sense in your markets?

All right. Thank you again, Alvaro, for the question. It's true that there is ongoing conversations about possible innovation in the chicken category, but the idea is to use the already existing kitchen equipment. Having said that, when the time comes, we will evaluate where or how to implement it if it makes sense for our business and for our region.

Dan?

Thanks, Luis. Back to Mariano now, another question from Thiago Bortoluci from Goldman Sachs. One more from us. He says, now on capital allocation, could you give us the split between corporate openings and franchisees and a broad sense on what magnitude of improvement you have been able to capture on the average CapEx per store level?

Perfect. Thanks, Thiago. Company-operated restaurants represented more than 65% of openings in the first half of 2026 versus around 60% on the first half of 2025. Therefore, the lower CapEx is not explained by a change of mix. In terms of cost reductions, I would say that it's between 15% to 20%. The only thing I would like to mention is the cost -- our main focus here is to increase return on investments. We are doing that by reducing costs, but also to improve the income and the sales of the new stores and the profitability of them. So, we're looking at everything together combined, and we are very pleased with the results we have seen so far.

Great. Thanks, Mariano. And then we have one final one from Eric. It's kind of a broad question. I think you may have already touched on some of these points, Luis, but maybe it's a good one to wrap up with here. And -- two questions, he says from his side, traffic and market share sustainability. You highlighted the strongest guest traffic performance of the last 6 quarters and market share gains across the region. How much of the traffic acceleration do you attribute to temporary factors such as FIFA-related campaigns versus structural drivers? And how confident are you that market share gains can be sustained into the second half of 2026? I think it's more of a company-wide question rather than something specific.

Yes. All right. Thank you, Eric, for the question again. The traffic performance is mainly a result of our value platforms, like I already talked about EconoMéqui in Brazil or McBaratos in Mexico or McXMenos in Chile. The main objective of these platforms is to increase traffic and to shield our market share. And even though we saw more promotional activity in the industry and we implemented a more comprehensive plan. And this is where the World Cup activities have a role. They tend to strengthen the engagement with our guests, improving brand attributes, as I just mentioned, and they aim to increase average check and improve or shield our margins, as Mariano was mentioning.

Having said that, during June, for example, we did have a negative impact in volume during the matches, for example. So that's why we started talking about the World Cup and the sponsorship and launching activities 3 months before with the anticipation activities that we put in place. So even though we still see a challenging environment, we are confident that we're going to be able to keep our market shares and the trend that we're having in sales across the region regarding the management that we have in every market because we are going to be prudent with prices because we do have a solid marketing plan, and we are -- even though we do have strong operational indicators, we do know that we have opportunities in some markets that we are addressing. So, so far, as I said, we are seeing a positive trend in the first weeks of the third quarter, and those are in line with our expectations, and we're going to talk more about that in our next call in November.

Thanks, Luis. And with no more questions in the queue, we've reached the end of the Q&A session. Thank you again for your interest in Arcos Dorados and for joining today's webcast. We look forward to seeing you at our Investor Day on October 1, and have a great rest of your day.

Good morning, and thank you for joining Arcos Dorados' First Quarter 2026 Earnings Webcast. With us today are Luis Raganato, Chief Executive Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation that is also available on the Investors section of our website, ir.arcosdorados.com. To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the street. After we conclude our opening remarks, we will answer your questions.

Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to [indiscernible] new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today's earnings press release and conference call presentation as well the unaudited financial statements filed today with the SEC on Form 6-K. I will now turn the call over to Luis.

Thank you, Dan, and good morning, everyone. Over the last several years, we consistently added to our dominant market share position and elevated brand attributes to historical highs across Arocoperado's operating foot. As a result, for the 6 years ended in 2025, total revenue grew almost 60% EBITDA nearly doubled and net income was up more than 2.5x in U.S. dollars. Moving forward, our objective is to build on this incredible foundation and capitalize on the significant competitive advantages we built over the period.

[indiscernible] 2026 is off to a good start. First quarter 2026 highlights included some important milestones within the context of a challenging consumer environment. Total revenue grew about 13% and surpassed $1.2 billion for the first time in the first quarter, overcoming relatively soft consumption in certain markets. This included 16% growth in systemwide comparable sales, which was driven mainly by average check, but we also saw improvements in guest traffic in several markets. Similar to total revenue, we generated the highest adjusted EBITDA for the first quarter in U.S. dollars. The $119 million result was driven mainly by strong top line growth combined with very solid margin expansion, especially in Brazil and SLAD.

We have pursued strategies that capitalize on the brand to monetize the significant market share advantage we hold in the region. These, together with very strong EBITDA growth is adding to cash flow performance as well. along these lines. In a few minutes, Marina will take you through how we measure adjusted free cash flow to drive shareholder value. Marketing campaigns focused on offering value platforms that appeal to lower income consumers and core menu items that drive brand love as well as licenses [indiscernible] that keep McDonald's culturally relevant.

The brand experience continue to expand beyond our restaurants, bolstered by the region's most comprehensive digital platform and loyalty program. As much as digitalization has and will change the business, 55% of sales continue to be generated inside our restaurants. During the quarter, we added 19 new restaurants to the footprint, including 13 freestanding units with a more efficient capital deployment.

[indiscernible] markets are in the same phase of the economic cycle. So our local teams have deployed specific strategies to adapt to their specific operating environment. In Brazil, marketing campaigns during the quarter spanned Carmen, affordability and partnerships. For example, the introduction of Westberg, leveraging limited time offers through economic the first promotions associated with the FIFA World Cup and a strong presence at [indiscernible] Brazil.

In NOLAD, marketing initiatives drove sales performance across the division. Mexico, Panama and Costa Rica continue to leverage affordability platforms and localized offerings. Across markets, family-focused initiatives seasonal venue and license activations such as [indiscernible] menu complemented core and value execution, reinforcing brand affinity and residence. [indiscernible], menu innovation was a key growth driver. For example, in the beef category, we introduced the tasty fit quarto in Chile and Uruguay blending the popular [ [indiscernible] with a core favorite Quarter Pounder with cheese to the live guests. In Argentina, we leveraged the successful premium sandwich platform by introducing a limited time-only grand fee clock house featuring Franco Cola Pinto the well-known Formula 1 driver and local hero. Within the chicken platform, Colombia introduced [indiscernible] and the [indiscernible] option with an encouraging guest response. Finally, we reinforced the brand's culture relevance in Argentina, Chile and Colombia to music a key consumer passion point at Lollapalooza and [indiscernible].

Digital channels, including mobile app delivery and third quarter kiosks grew 21% versus the prior year and contributed about 64% of system-wide sales. Sales growth in delivery remained strong. boosted by promotional activity by new 3PL partners in Brazil. Of course, with an increasingly modernized restaurant base, sell for ac sales also grew an accelerated rate. The loyalty program top 30 million registered members at the end of the quarter, and we expect the program to grow quickly with more active members to visit us more often now that the rollout phase is nearly complete. U.S. dollar revenue performance was strong in all 3 divisions. Brazil delivered the highest growth, thanks mainly to contributions from new restaurants, a higher area check and the appreciation of the Brazilian real.

The first 6 weeks of 2026 were ahead of expectations, but we experienced an important slowdown in restaurant volume in the weeks following [indiscernible] our team in Brazil responded with initiatives designed to recapture volume without sacrificing profitability. By the end of the first quarter, we saw a promising reversal in gas volume trends, while also delivering better margins versus the prior year period. In other words, we took a balanced approach to monetize our significant market share advantage in Brazil. The second quarter is off to a very strong start with positive gas traffic and solid average growth in April and the first half of May. Note comparable sales rose due to higher gas traffic in a couple of key markets. The result was supported by disciplined pricing, targeted mix optimization and continued momentum in Mexico.

Panama, Costa Rica also achieved early progress towards rebalancing traffic and average check. The appreciation of the Mexican peso and Costa Rican [indiscernible] helped contribute to revenue growth in the period as well. [ SLAD sustained ] strong momentum with internal research pointing to either maintained or expanded visit and value share in each slab market within the respective QSR industries. This performance underscores our ability to consistently gain market share. The currency environment in slide was mixed. Most local currencies appreciated versus the prior year, with the exceptions of Argentina and Venezuela. Elevated inflation in these 2 countries probably offset the currency devaluations and helped to generate U.S. dollar revenue growth in the quarter. Over to you, Mariano.

Thanks, Luis, and good morning, everyone. As you just heard, we were aiming to monetize brand and market share advantages in several key markets during the first quarter of 2026. Adjusted EBITDA totaled $118 million at almost 30% in U.S. dollars year-over-year. The consolidated margin expanded by 120 basis points with a very encouraging 60 basis point contribution from food and paper and 60 basis points from G&A as well. modest pressure in payroll and occupancy and other operating expenses was fully offset by income from certain franchisee restaurant transactions in NOLAD and SLAD. Even without these transactions consolidated EBITDA margin expanded by 70 basis points versus the first quarter of 2025.

Going back to food and paper, both Brazil and SLAD we're able to generate margin improvements versus last year when NOLAD was stable as a percentage of revenue despite accumulated food inflation globally. Payroll expenses were up as a percentage of revenue in Brazil and NOLAD mainly due to higher hourly crew wages. This was partly offset by payroll expense leverage in slab. Occupancy and other operating expenses included modest pressure in each division, whereas G&A was lower, partly reflecting the benefits of last year's restructuring process.

First quarter adjusted EBITDA included $5.8 million from some franchise restaurant transactions in SLAD and NOLAD which added $2.7 million and $3.1 million, respectively. In Brazil, adjusted EBITDA was up more than 20% in U.S. dollars improved food and paper was the main driver of the quarter's 30 basis point margin expansion. NOLAD has had a more challenging time generating margin improvement in recent quarters. Excluding the income from the restaurant transaction, EBITDA margin was down about 40 basis points in the quarter. We are working with the leaders in each market to implement strategies that better balance guest volume and profitability. Slab continued generating strong U.S. dollar growth and margin expansion in the first quarter, even without the income from the restaurant transaction with the local franchisee. SLAD EBITDA margin rose by about 120 basis points in the period.

Moving ahead, we remain optimistic that Saris on track to deliver another positive performance this year. navigating the short term while building on the successes of 2025. Starting with today's earnings release, we will be publishing our adjusted free cash flow for the last 12 months. We believe this calculation over a full business cycle provides a clear picture of our ability to service our debt and fund our CapEx plans.

Additionally, this is in line with the 3 pillars of focus that Luis introduced last year, targeting greater operational efficiency and cash flow generation to create long-term shareholder value. For the 12 months ended March 31, adjusted free cash flow generation reached almost $110 million versus a negative $3 million in the previous period. As a reminder, during the first quarter, we also completed the liability management transaction we described on our last call. As of the end of the first quarter, net debt to adjusted EBITDA was unchanged compared with year-end 2025. We continue to have a healthy cash balance and are combining improved profitability and cash flow generation with other initiatives to strengthen our balance sheet and support future growth and modernization.

With that in mind, during the first quarter, we invested $36.8 million, including $16.7 million for new restaurants. Growth continues to be a priority for capital allocation as long as the returns on investment are strong. With all the uncertainty currently influencing local economies and consumer behavior, we continue to focus on the factors we control to drive profitable sales growth and generate value through the investments we make inside and outside our restaurants.

I am encouraged by the progress achieved during the first quarter and our objective remains to deliver improved underlying margin performance throughout the year. Back to you, Luis.

Thanks, Mariano. I have just a few more things to mention before we open up for Q&A. Arco Dorados is in a unique position in the Latin American consumer space. We operate in a segment of the economy that will never disappear as we meet a basic need for guests. Within that segment, we developed significant competitive advantages. Spanning the emotional connection we have with consumers, the multiple channels we use to generate sales, the business foundation built on operational efficiency and the prudent management of the company's capital structure. We also partnered with the communities we serve to support economic development and new former job opportunities for young people.

In fact, over the last several months, we have been recognized by Great Place to Work among large companies as the #1 great place to work in both Argentina and Uruguay and the number four great Place to Work in Brazil, the highest ever ranking in that country's history. In Mexico, the prestigious expansion Media Group publishes an annual super Empresas ranking, which evaluates organizational culture among the country's largest companies. The ranking is based on factors including leadership, professional growth, company policies and social responsibility among others. We were honored to have been ranked #1 in the 2026 ranking. The recognition we received in each of these markets is a reflection of a company-wide commitment to running restaurants while also generating new formal job opportunities that have a positive impact on the community's reserve.

[indiscernible] Arcos Dorados 2025 social impact and sustainable development report. In addition to the impacting ongoing work on youth opportunity and the other pillars of the recipe for the future, you will find the details of how we met the targets of the sustainability-linked bond we issued back in 2022. Check back on the website respite future. come in the next few weeks to download the report. Also, please mark your calendars for Arcos Dorados next Investor Day. We are working on an agenda for the morning of October 1 in New York with the participation of several members of the company's executive leadership who will provide an update on how we are addressing the businesses, 3 pillars of focus, today, growth and tomorrow.

In the coming weeks, we will provide more details on how you can participate in the event. We hope you will join us. Finally, let me reinforce a couple of key messages from today's presentation. The plan for 2026 was developed to optimize sales growth drivers over the course of the year and capture efficiencies to drive improved profitability. This should help us generate positive adjusted free cash flow to create additional shareholder value. The team is focused and the second quarter is off to a good start. Thank you for joining today's call. Dan, back to you.

[Operator Instructions] We're going to try to go systematically through these. We're going to start with a question related to our beef costs, which we have from both Bob Ford, Bank of America who says, how should we think about beef costs and pricing for the balance of the year across markets. And also for [indiscernible] from JPMorgan, can you provide more detail on the evolution of beef prices in Brazil during the first quarter and quantify how much of the margin improvement was attributed to this tailwind? And also, how do you expect beef prices to trend for the remainder of the year and what implications could this have to your margin performance in full year '26 in Brazil. So with all of that, I'll turn it over to you, Mariano.

Regarding food and paper, I will start with Brazil, food and paper and beef, in particular, was the main driver of margin improvement in Brazil during this quarter. As we already -- or I mentioned during the previous call that this is the second quarter where we are seeing big cost reduction in Brazil. So we are very pleased with that. Compared to last year, there's a clear moderation on price increases, and that's, of course, helping our margin performance at the restaurant level. Looking ahead, we expect costs, especially beef to remain dynamic, global demand, as you know, is still shaping domestic prices. Brazil is still with beef costs lower than in many places in the world. We are working on that. For the outlook, we are cautiously optimistic about the evolution of food and paper costs in Brazil. Besides beef, we are seeing the rest of the main categories pretty stable. And going out from Brazil, we haven't seen the same pressure that we have seen last year in beef costs in Brazil, in the rest of the countries where we operate, and we are not seeing further pressures during this year. So in summary, we are very pleased with the performance in the last 2 quarters. We have seen big cost reductions and we are cautiously optimistic for the outlook for the remaining of 2026.

The next question, we're going to stay with Bob Ford from Bank of America. Can you talk about loyalty penetration rates in your bigger markets? And what that's doing to frequency and average ticket? And where are you rolling out loyalty or have yet to lap in terms of the markets, what's already been rolled out. And that one is for you, Luis.

All right. Thank you very much, Bob, for the question. First, to start, loyalty boost the power of the app because it brings busy frequency, while increasing the percentage of identified sales. The program continued to grow this first quarter, reaching more than 30 million resistant members. -- and this is an increase of 62% versus the end of last year, representing 25% of total sales. In the first quarter, we launched 1 additional market, both Panama. So our loyalty program is available in 10 countries now that account for 94% of our stores. Regarding the analyzing the transactions of the program, we calculated a 20% to 25% increase in this frequency and the performance of 90-day active users. Frequency and retention rates is above the average of the market. And regarding margins, we're seeing a positive impact since we didn't products have on average, a higher margin. We are seeing a minimal impact on average check, and this is compensated greatly by the increase in frequency. And another advantage is that it helps us to analyze the customers' behavior to better manage the customer lifetime value that has reached record high figures. So that's the answer there.

Thanks, Luis. And I actually have a couple more from Bob, both of them will be for you, Mariano, one at a time here. First is what's behind your sub-franchisee acquisitions and sales in NOLAD and Argentina were flat? And how do you think about the optimal balance of corporate versus subfranchise locations these days?

Perfect. Basically, this is business as usual for us. We currently have more than 2,500 restaurants in the region, and it's normal for us to acquire some restaurants from franchisees and to sell some restaurants operated by us to some franchisees, and that happens on a regular basis. So this quarter, we acquired some restaurants in Mexico and we sold a restaurant in SLAD. So this is normal for us. You are going to see these type of transactions as you have seen them in the past, and you will see them in the future regarding the mix between Arcos operating restaurants and some franchises. We are not expecting any big changes on the percentage. You recall, more or less, we operate 70% of total restaurants and the sub franchisees operate around 30%, and we are planning to maintain that percentage quite stable throughout this year and next year.

Great. And then final one from Bob Ford, Bank of America. How should we think about the cuts to the central administrative structure net of the severance and opportunities for further improvement due to AI or other efficiencies that's back to you, Mariano.

Perfect. Well, as maintaining a strong discipline over the G&A expenses, it's a core priority for Arcos as we continue to focus on efficiency and operating leverage while supporting the needs of the business. Following this G&A restructuring that started in November last year until January this year, we entered -- we can say that we entered 2026 with a leaner and more agile cost structure. -- it's better aligned with our strategic priorities and growth agenda. So at a consolidated level, G&A over revenues is down 60 bps versus the prior year, and that's supported, of course, by sales growth. and the reductions that we -- that I just mentioned. The only thing is, of course, the increase in the U.S. dollar that is helping our -- sorry, the real appreciation of the local currencies in the last months is helping our results and our EBITDA, but at the same time, is making our G&A in dollars a bit higher. But throughout the year, we expect to maintain the leverage that we obtained during this first quarter, and we are very pleased with these results. In terms of AI. We are beginning this journey with, of course, training on our staff, adoption of AI tools, and we are convinced that we have the scale to generate value through AI and agents. And we will talk about this with much more detail during our Investor Day in September.

The next question is going to be a combination of 3 questions for Luis. And I'll start with Eric Wong from Santander. Three questions from his side. Comp sales in Brazil remained quite pressured, but we saw a sequential improvement in your main competitors indicator in the quarter. Could you walk us through the competitive environment and current expectations towards a rebound in comp sales in Brazil. I'll combine that with one from [indiscernible] from Goldman Sachs, who asked us, could you comment on how traffic has sequentially evolved since mid-last year and how it is into the second quarter. And I'll add to that, Julia Russo from Morgan Stanley, who says she would like to hear management's expectations on the pace of sales recovery in Brazil. And then she has the second part about margins and result come back to you on that one. But the first piece that has to do with Brazilian sales and competitive environment. Over to you Luis first.

All right. Thank you, Dan. SP999 Thank you, [indiscernible] for the questions. Bear with me, I will try to cover everything. First, although I can speak to a specific competitors' performance. I can tell you that -- we believe that we are managing top line growth in a way that is sustainable over time. It is important to understand that the Brazilian QSR industry is undergoing a correction in gas volume. And since this is an industry-wide reality, we have focused our efforts on monetizing the significant market share advantage we do have. So while we are doing that while also improving profitability margins. That is what we did during the first quarter when we delivered EBITDA margin expansion while also increasing the brand's visit share versus the prior year quarter. And by, as I mentioned in the first payment, the second quarter is off to a very good start. And this was thanks to the proactive step that the team -- the resilient team took to reverse gas volume trends with maintaining healthy margins. And for the rest of the question, I will start with 2025 and a little bit of context. We did have a challenging and volume trends remained under pressure during the first quarter of this year, which was the main reason for the quarter's comp sales result. The industry experienced experienced volumes down mid- to high single digits. And this was especially evident in the post-Carnival season. This happened in the first half of March and we experienced an important decline in these volumes in that period. What we're seeing is that cost of income among consumers continues to be limited, which is why it was important for us to maintain our focus on offering a compelling value proposition with competitive pricing that fares were economic in the value -- national value platform starts to play. And we try to do this without pricing margins and delivering a great experience through all the channels. The focus of the operational team is to have the right profile, the right quantity the right level of strength of training to deliver the best accuracy and speed through all the channels. And having said that, what we saw is that when the industry continue to focus on promotional activities driven by pricing and transactional very transactional, we focused on a more comprehensive plan. That complements actions targeted to increase traffic and shield market share with actions that aim to build the love for the brand. As a result of the mix of these initiatives, gas volume trends in the second half of March improved significantly. The contribution to sales came more in the first quarter from average check and channel shifts down volume, but we generated important improvements in margins. And in this context, it's worth mentioning that even we had flattish comparable sales. We achieved our highest visit share label since 2022, and this is according to Crest. We've managed to maintain a multiple of more than 2x the guest traffic of the nearest competitor. And we also saw some of the brand equity scores we track like value, quality, top of mind brand preference that are at or near their auto highs, which not only supports current sales performance but also we believe that puts us in a position of strength for when market conditions improve moving forward. And the last piece of the answer would be with what we're seeing in the second quarter. We have continued supporting gas volume and sales growth. And again, by making the brand both more affordable and more aspirational and so we have initiatives, including doubling down on economic, the national value platform. You know that today, the attractive price that we have is [indiscernible] for less than $4 you can make your own combo, your own menu. We have 4 items to -- that our guest can choose. And we introduced the World Cup sandwiches [indiscernible] is a lineup of sandwiches inspired by different countries participating in the FIFA World Cup. This has happened for the last 20 years. Of course, the story is the [indiscernible] and the results so far have been promising. April tips, case volume and comparable sales reached the best growth levels out of the last 20 months. And so for the month of May is following a similar trend. So with that, we are convinced that we're in a position of strength to face the current or any situation that could arise. And just to highlight that our 2026 plan was designed to optimize sales growth drivers and to improve profitability. We want to generate to shareholder shareholder value. .

And I think you just answered another question that came in. I'll mention it very quickly, but I think you just answered it, which is from a -- what do you think is driving the traffic pick up in second quarter in Brazil and considering the pickup in inflation in the period I think you just addressed that. So right I'm going to shift back to the second part of Julia's question from Morgan Stanley that I mentioned, which was the sustainability of first quarter 26 margin tailwinds through the year. And I think she's talking specifically about Brazil [indiscernible]

Are you already talked about food and paper dynamics in Brazil. But in general, your question is more general about margins in Brazil, update and outlook. So this quarter, we saw an EBITDA margin expansion of 30 bps, reaching 12.7% EBITDA margin in the division. This increase -- as I already mentioned, was mainly driven by the reduction of food and paper costs with less pressure from beef prices and very good results from all our revenue management strategies. In addition, I would mention that leverage of G&A as the same case as in the consolidated level, we saw an average of G&A over revenues after the restructuring process that I already mentioned and we are seeing positive results on that. On the other hand, we experienced small deleverage in payroll and occupancy and an operating expenses. But we expect to reverse that with increasing in sales in the coming months. Of course, the appreciation of the currency of the Brazilian real as many other key currencies where we operate, such as the Colombian peso, the Chilean peso, the Colombian [indiscernible] Costa Rica, the Mexican peso or the Argentine peso, but the appreciation of the Brazilian real, in particular, also was a relevant factor for EBITDA growth. So looking ahead to 2026, after a tough 2025 in Brazil in terms of margin because of big cost increases, we're cautiously optimistic in relation to the food and paper expenses. And of course, we expect to continue increasing sales that will allow us to generate additional level leverage on fixed cost plans.

We're going to stay with you for a couple of more questions from Eric Wong at Santander. His second question, the tax rate in the quarter showed significant improvement on a quarter-over-quarter basis. What can we think about in terms of the effective tax rate going forward.

Yes. We always say and in this case, even if it plays in our favor that we need to look at the ETR on an annual basis. And in this respect, we expect the ETR to be in line with the ETR we saw last year. Of course, we're always looking at different projects and different ways as the one that we mentioned in the last call about Brazil to improve our ETR. We are working on several projects. But for now, I would say that we expect an ETR in line with what we had during 2025.

Great. And then the final one from Eric, also for you, [indiscernible], this is back to a divisional margin question. NOLAD margins were somehow pressured year-over-year. What are the main drivers for the pressure in the quarter. and what could be expected going forward.

Yes. Well, thanks for the question. Margins in NOLAD, all in all, we're 50 bps above prior year, but of course, the main explanation here is the game that we recorded from the restaurant transaction that happened in Mexico. The other good news in terms of margin in NOLAD is also leveraged in the G&A line. In terms of food and paper, it remained flat. We saw increases or improvements in lab and in Brazil, in NOLAD, we saw a flattish foot of paper that -- but having said that, we see a sequential improvement compared to both the previous quarter and the 2025 run rate. Then in terms of payroll and occupancy and other expenses, those 2 lines remain under some pressure. We have seen minimum wage increases in many of not country and sales growth at 1.6% comparable sales has been running below the labor and other cost inflation and that resulted in temporary deleverage in NOLAD. That said, the underlying performance of the business remains solid Mexico, our largest market in the division continues to perform very well with positive traffic, robust comparable sales growth and food and paper costs in Mexico below prior year. So that's supporting the overall profitability profile of the division. So we are confident that this all the initiatives that we are implementing and the expectation of recovery on sales would support the path to higher profitability in the coming quarters. That's what we're looking for. That's our expectation, and we need to work hard to improve and we acknowledge that to improve margins in the division.

We're going to move now to [indiscernible] from Goldman Sachs. So I had a couple of more questions. The first 1 for you, Luis, is the gap between total sales, same-store sales and unit growth suggest there's a better productivity and all that. Can you give us a little more color there?

And the answer is yes. We are having a better productivity in the division. We have a very solid expansion plan, and we are very pleased in particular in Mexico with the organic and inorganic evolution of the business. And as you know, we are focused on improving the return on investments to increase our cash flow generation, not only in order but in the country -- in the company as a whole.

And then the final one from [indiscernible] is related to capital allocation, you're splitting your store growth into a broader ownership and format mix, and that has materially reduced your average cost per store, per store opening. How should we think about this composition going forward? And how should it move the ROIC curve versus previous cohorts? Back to you, Mariano.

Actually, how we are seeing this is -- we're not planning to change the ownership, as I mentioned before, we are pleased with the split between restaurants operated by us, by ACOs and restaurants operated by subfranchisees. We are also -- we are still opening the majority of stores as freestanding units. We are convinced that this model is where we should focus the majority of our store openings. Having said that, of course, if there are opportunities in other store formats, and we see -- we are seeing good returns. We are going for them. So if I would say the main source of efficiency is not about format and not about ownership, it's more about the overall approach of maximizing the returns on capital, looking at better execution, supplier localization, more efficient construction by maintaining the high standards of each restaurant that we open. We are having a very tough discipline in our investment approach. What we have done is we have been searching for highest returns on new store openings and moving investments from countries where we or markets where we were seeing lower returns to markets where we were seeing higher returns. And that, I think, that overall strategy is what is giving us currently the efficiencies that we are seeing in the CapEx. That's also -- you can see that in the new adjusted free cash flow chart that we are including starting this quarter. Capital expenditure in this first quarter totaled $36.8 million, down from $48.8 million in the prior year period. This period we are opening or we opened 19. And in the previous year, we opened 10 restaurants. So having opened 9 more restaurants, the investment is much lower, and that's all about discipline, focus and a more disciplined approach to investment.

The next question is from [indiscernible] at JPMorgan. This will be for you Luis. With digital sales reaching very high penetration, how do we think about the impact of total CapEx and CapEx mix in terms of store openings and format mix over the next few years? Also, how could this be managed under the restrictions and/or commitments of the MFA.

And this answer is going to be related with the one that Mariano just gave -- just a reminder that our growth plan is aligned with our long-term vision. This vision is to unlock McDonald's full potential in the region. It already incorporates market opportunities and funding strategies to support the expansion. We keep the same focus on modernization and digitalization the same focus that we've had in the last couple of years. We are currently at 75% of Experience of the Future restaurants. The objective is to achieve 90% in the next couple of years. And of course, if conditions change, we are flexible in adjusting the pace and focus of investments, as you know that and Mariano just talked about that in the way that we are already doing and we have done in the past, we are prioritizing and we will prioritize the most profitable markets and restaurant formats. As you know, the relationship with the McDonald's Corporation team is stronger than ever. So we do have space to adjust anything we think we need. And as you know, we are, in fact, in the process of revisiting every element of our development process to ensure that every dollar invested brings the best possible return. Dan?

We'll stick with you, Luis, also similar or on the topic of digital sales [indiscernible] from BTG. On digital sales penetration, Luis stressed that 55% of sales remained in store, and this quarter saw a more normalized growth of digital sales. So how should we think about digital sales penetration and a weaker purchasing power environment.

All right, [indiscernible], thank you for the question. The 55% of on-premise that we talked about, that they refer to the opportunity that we have still in the sales delivered by our full brand experience. That is great news because it shows us it's a testament of our aspirational the experience inside our restaurants in the region is they do not get in comfort with digital sales. that in fact are built largely by our self-order kiosks that are inside our restaurants. So we expect to keep on growing digital sales and on-premise sales despite any market situation.

Moving now to a couple of questions from [indiscernible] from [indiscernible]. The first [indiscernible] are going to be for you by the end of but I'll start with the first one. In the company's annual report is the CapEx for new restaurants, a blended figure that includes both company-operated and franchise restaurants -- and what do you expect the opening cost for new restaurant to be going forward, will it be more through owned properties or leased properties.

Perfect. Yes, the CapEx is all the CapEx that the company does. Remember that in the case of new restaurants, Arcos makes the investment in the building. And then Arcos also makes the investment in the inside of the store in case is an Arcos operated restaurant and the sub-franchisee makes the investment inside the store in case this is a enfranchise restaurant. But always, Arcos has an investment there as the developmental licensee as we are. In this case, what do you expect the opening cost per new restaurant to be going forward? Well, as I already mentioned in the previous question related to this topic, we are working very hard, and we have been so far, I think, successful in reducing the average cost per restaurant open, and we will continue to look for opportunities to to reduce these costs. This has been a priority for lease since he started as CEO last year, and the whole team, [indiscernible] in finance and the development team are working very hard to find efficiencies and to reduce the investment, but it's important to note, always maintaining the high quality of the rest and standards of the restaurants opened. And we are very pleased that we are seeing higher returns by lower investments, but keeping sales in and margins in the new restaurants. In terms of if we are going to open more owned properties or leased, the majority of the stores, we opened the vast majority of the stores we opened are on leased properties and nonowned properties. That doesn't mean that we don't buy any land. But the majority of the cases is in on leased land.

The second question from Land is after reaching a 90% EOTF mix by the end of 2027 or so, how many restaurants do you expect to be reimaged or upgraded to EOTF each year thereafter.

Well, in the industry, the standard -- in the QSR industry, the standard is to modernize or remodel approximately 10% of the restaurant base each year. So that means every 10 years, a restaurant more or less than years is due to modernization or redevelopment. And we are expecting to do that. Probably it could be ODS, it could be something new. We are working with McDonald's in order to develop the new restaurant that will come. But we are still planning to keep modernizing our stores that is a key component for being modern being attractive for our customers and to continue increasing same-store sales in our restaurants.

We have another question from [indiscernible] from [indiscernible] Analytics Wondering. Wondering why you no longer compare system-wide comparable sales with blended inflation and also if you can comment on the expected impact from the World Cup and guest traffic and sales in Q2 and Q3. And that question is for you, Luis.

I think I already covered the part of the World Cup actions. We've seen and we are pleased with the performance of that campaign in the first weeks. And regarding the question about the initiation under normal circumstances inflation or inflation is a good measure stick for comparable sales but it is not a load. For example, in Brazil, I already said this, that the QSR industry is undergoing a correction in guest traffic and when that occurs, it is important to maintain as much traffic as possible, which we believe we have done and the evidence is that we have a strong base share performance. We believe it is also a time to monetize the significant market share advantage we built in the market to try to help offset the cost increases that are also impacting the interest rate. That way, we build top line in a sustainable way without buying traffic while also maintaining healthy margins. So at this moment, you can apply this concept to a couple of other markets as well in the region. Long term, we expect to maintain an optimized combination of sales growth drivers based on market conditions and the factors that we can control.

And we have one more question from [indiscernible] from [indiscernible] he's an individual investor. And he's asking the food and paper cost as a percentage of revenue decrease is part of -- is it a part of an average price increase? Or is it a cost efficiency initiative? And the case of a cost efficiency initiative, could you elaborate on those initiatives? So I'll pass that one to you, Mariano.

Okay. I'll try to be fast, so we can end at time. Pricing strategy, it's very important, remains disciplined and closely aligned with inflation. We continue to avoid aggressive pricing actions to protect long-term brand health. So we're not increasing prices above inflation and our affordability platform as the one that Luis mentioned in Brazil, the economic is performing very well, reinforcing value and traffic. At the consolidated level, the food and paper improved 60 basis points versus prior year, but that's more a mix between input cost trends very disciplined revenue management where we can -- we are looking for opportunities in pricing, but being disciplined as I mentioned before, currency appreciation of imported items, as already I mentioned about real depreciation of main currencies. So I would say there's a mix reduction in costs initiatives from our supply chain team, revenue management. So with that mix, but always keeping in mind that we are monitoring prices to be in line or below inflation. That's how we obtain this 60 bps improvement versus prior year. And that's why we remain cautiously optimistic for the rest of. With that, Dan, back to you.

Thanks, Mariano. And before we wrap up the Q&A session, I think, Luis, you had a couple of things that you wanted to mention.

Yes. Thank you. Dan, we have quick a couple of thoughts, even though we continue to see a challenging environment in some markets with pressure on consumer confidence and private consumption we remain very confident because we're in a position of strength and have exciting marketing plans that will help us face any situation and let me mention again that we are targeting sustainable top line growth and improved operational efficiency to drive profitability, generate free cash flow and create shareholder mining.

So that does bring us to the end of the Q&A session. Thanks again for your interest in Arcos Dorados for joining today's webcast. Look forward to speaking with you again in the middle of August on our second quarter 2026 earnings webcast. Have a nice rest of your day.

Good morning, and thank you for joining Arcos Dorados Fourth Quarter and Full Year 2025 Earnings Webcast. With us today are Luis Raganato, our Chief Executive Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team which will be accompanied by a slide presentation that is also available in the Investors section of our website, ir.arcosdorados.com.

To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the screen. After we conclude our opening remarks, we will answer your questions.

Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today's earnings press release and conference call presentation. as well as the audited financial statements filed today with the SEC on Form 6-K.

I will now turn the call over to Luis.

Thank you, Dan, and good morning, everyone. The fourth quarter of 2025 marked a solid finish to the year with double-digit revenue growth, expanded margins and strong adjusted EBITDA growth despite ongoing cost and consumer pressures in certain markets. Importantly, we exited the year with improving trends, particularly in Brazil as well as continued momentum in Mexico and SLAD.

Mariano and I will take you through the highlights of the financial results for the fourth quarter and full year 2025 as well as how we see 2026 developing. As I've mentioned in prior calls, our focus remains centered on 3 priorities: optimizing the performance of today's business, maximizing returns on capital investments, especially those related to growth and preparing the company for tomorrow's business trends. The fourth quarter demonstrated progress across all 3 areas. Our teams executed with discipline on pricing, cost control and marketing relevance while continuing to invest in high-return restaurant development and digital capabilities.

Total revenue reached $1.3 billion, representing 10.7% growth. Revenue growth was supported by 16% higher system-wide comparable sales in line with the blended inflation of the 21 markets in the Arcos Dorados footprint. Comparable sales growth was primarily driven by average [ Czech ], reflecting disciplined pricing effective promotional execution and the continued strength of our digital and loyalty platforms. [indiscernible] traffic trends were generally stable compared with the third quarter.

Adjusted EBITDA totaled $172.7 million, up 17.2% year-over-year representing an 80 basis point expansion of the adjusted EBITDA margin. This included a net tax benefit in Brazil that Mariano will explain in more detail. For the full year, system-wide comparable sales growth was in line with the company's blended inflation rate with particularly strong performance in Mexico, Argentina and several other SLAD markets. Brazil and a couple of NOLAD markets faced a challenging consumption environment last year, but we began to see some improving trends towards the end of the year. Total revenue in 2025 grew by almost 5% in U.S. dollars.

Full year adjusted EBITDA was the highest in the company's history. Boosted by the net tax benefits we recognized. Together with strong U.S. dollar growth in both SLAD and NOLAD, this tax benefit more than offset the impact of higher food and paper costs and lower consumption in the Brazilian market. The strength of our marketing, digital and loyalty platforms have helped differentiate us from the competition by enhancing the brand experience across all channels. We also expanded the branch presence in 2025 by opening 102 restaurants and bringing the modernized percentage of the portfolio up to 73% at year-end.

Let's take a look at a few of the initiatives we used to generate sales growth in the quarter. Marketing activities strengthened consumer connections with the brand through a series of campaigns and initiatives. The highlight for most markets was a fully integrated many strategy, leveraging the cultural relevance of the Stranger Things with Netflix Series, which posted sales drove high levels of engagement and meaningful brand conversations among consumers. Several markets also offered compelling value platforms, including economic in Brazil, and [ MacPormenos ] in Chile, both of which performed well with price-sensitive consumers. Menu innovation in the quarter included a new chicken sandwich in Colombia, and limited-time flavors within the dessert category, such as [ mochi ] in Brazil.

Finally, Happy Meal sales were a bright spot for several markets. During the quarter, we run engaging campaigns for the latest beyond around popular licenses such as France, Zootopia 2 and [indiscernible]. Digital penetration reached its highest level with 62% of total sales coming from digital channels, mobile app delivery and sulfur kiosks. Digital channel sales grew 18.7% versus the prior year quarter, with sulfur kiosks, delivery and loyalty showing particularly strong performance. Sales growth in delivery has been strong for several years, which is why the strong performance in [indiscernible] is so important. It demonstrates the continued relevance of the on-premise restaurant experience in the Latin American QSR industry.

The loyalty program had 27.2 million registered members at year-end and is now available in all main markets. Completing the planned 2025 rollout and covering more than 90% of all restaurants in the Arcos Dorados footprint.

At the divisional level in the fourth quarter, we saw continued strength in SLAD with sequential improvements in both Brazil and NOLAD, contributing to consolidated top line growth. In Brazil, where restaurant industry traffic was down all year, we saw modest sequential improvement in comparable sales growth. We'll also maintain a significant market share advantage versus all competitors by leveraging the strength of the digital platform and popularity of a loyalty program. Almost 3 out of every 4 transactions were generated through digital channels and about 30% of total sales came through the loyalty platform. These results were supported strongly by the annual [ Mike Friday ] campaign that capitalizes on the popularity of the Black Friday shopping day to drive mobile app downloads and digital engagement. It is worth noting that the relative strength of the Brazilian real versus the prior year quarter also contributed to U.S. dollar revenue growth in the period.

In NOLAD comparable sales grew 1.7% versus the prior year quarter, with strong guest traffic growth in several markets. As was the case in the first 9 months of the year, Mexico was the main contributor in the fourth quarter with comp sales growth of 5.6% or 1.5x the country's inflation. Importantly, we began seeing improved trends in several other NOLAD markets and also benefited from the stronger Mexican peso and Costa Rica and Colombia versus the prior year quarter. SLAD's comparable sales increased by 49.5% versus the prior year quarter or 1.2x blended inflation, driven by strong execution in Argentina. We also saw continued momentum in other markets such as Colombia and the [ Dutch ] was in this. Digital tenant penetration reached a new high, and market share gains were particularly strong in Argentina and Chile, where guests responded well to the quarter's marketing campaigns.

Over to you, Mariano.

Thanks, Luis, and good morning, everyone. Consolidated adjusted EBITDA in the fourth quarter grew by more than 17% versus the prior year quarter as reported, while both periods benefited from tax-related items even excluding these items, adjusted EBITDA grew by almost 14% in U.S. dollars year-over-year with a 30 basis point margin expansion.

For the first time in 2025, the fourth quarter included lower food and paper costs as a percentage of revenue in Brazil. This is a sign that our marketing strategies and supplier negotiations are working as they were designed. The main impact on consolidated food and paper costs in the quarter related to some mixed shifts in NOLAD and higher beef costs in Argentina. Payroll expenses were up as a percentage of revenue due to the comparison with last year's quarterly result which included a tax benefit in Brazil. Excluding this benefit, payroll expenses improved by about 60 basis points as a percentage of revenue.

It is worth noting that over the last few years, certain markets have experienced elevated labor costs, but we have been implementing initiatives and technologies that have successfully offset these pressures. Currently, payroll expenses are among the lowest in our history as a percentage of sales. As you have heard on recent calls, we are very focused on capturing efficiencies at every level of the business, not just in the restaurants. With that, we made the difficult decision to reduce our G&A expenses through a reduction in headcount. This process, which was completed during the first quarter of 2026, was decided to focus resources on the projects and investments we believe will generate the most shareholder value.

Our adjusted EBITDA definition excludes reorganization and optimization charges so you will see an $8.7 million add-back associated with these initiatives in the EBITDA reconciliation. Finally, the fourth quarter included a net tax benefit in Brazil arising largely from the same items we recognized during the third quarter. We recorded a benefit of $20.5 million, mainly as other operating income and below the line, we recorded $13.3 million of interest income. With that, the full P&L impact of this net tax benefit was recognized in 2025.

As a reminder, full year adjusted EBITDA includes $106.1 million and interest income includes $52.9 million from this benefit for a total impact of $159 million in 2025. Importantly, we have already begun to apply the credit to tax liabilities in 2026. We expect to utilize the tax credit over the course of the next 5 years with an annual cash benefit of around $30 million.

In terms of full year 2025 results, we are encouraged that even though food and paper costs rose due mainly to significantly higher beef costs in Brazil, we were able to fully compensate the impact on restaurant margins, by capturing efficiencies in payroll and occupancy and other operating expenses. In Brazil, excluding the tax impact from both the 4 quarters of 2024 and 2025, adjusted EBITDA grew 3% in U.S. dollars with margin compression of about 160 basis points. The margin decline was primarily related to the higher royalty rate in Brazil in 2025. Remember that royalties were equalized starting in 2025 with a higher royalty rate in Brazil more than offset by a lower royalty rate in NOLAD and SLAD.

The other restaurant level cost and expense line items in Brazil improved versus the prior year. NOLAD generated solid U.S. dollar EBITDA growth in the quarter despite some margin pressure in food and paper costs as well as G&A. Meanwhile, Slab delivered another strong quarter to close out a very good year, which included 26.1% U.S. dollar EBITDA growth and almost 2 percentage points of margin expansion. In addition to operating efficiencies, we are implementing certain projects to improve the efficiency of our capital structure and capital allocation decisions, including the recent liability management transaction completed during the first quarter of 2026.

Let me take you through it. In December of last year, our Brazilian subsidiary secured $150 million in new bank debt that matures in 2029. This is why you see the higher total financial debt as well as cash and cash equivalents at the end of 2025, but a stable leverage ratio versus year-end 2024. We entered into certain derivative instruments to hedge the interest rate and maintain the foreign currency exposure of our long-term debt. As a result of these transactions, with the new bank debt has an estimated U.S. dollar cost of 2.53%. The proceeds of the new debt were used to fund a tender offer for about $135 million of our 2029 sustainability-linked bond which has a [ 6 and 1/8% ] interest rate. Th tender was completed earlier this month among the benefits of the transaction are a reduction of the average U.S. dollar cost of our long-term debt and the more efficient capital structure, both at the consolidated level and in Brazil. Additionally, moving forward, this new local debt increases the deductibility of our interest expenses.

In terms of capital allocation, last year, we exceeded openings guidance by adding 102 restaurants to our footprint while deploying less total capital expenditures versus the prior year. Importantly, about half the total CapEx in 2025 was used to fund restaurant openings. For 2026, openings guidance is for 105 to 115 restaurant openings and total capital expenditures between $275 million and $325 million with a goal of improving returns on investments through better cash margins and lower per unit of opening CapEx.

Also for 2026, the Board of Directors has declared a cash dividend of $0.28 per share, up from $0.24 last year, payable in equal installments on a quarterly basis this year. Although it is early, we began the year with good momentum by focusing on factors we control. We expect the underlying profitability trends of the fourth quarter to continue. Importantly, we are seeing the potential for a higher gross margin this quarter and throughout 2026. When sales growth normalizes, we believe this focus on cost and expense discipline will generate incremental margin improvement opportunities in other lines of the P&L as well.

Back to you, Luis.

Thanks, Mariano. Let me wrap up with a few final thoughts. We are encouraged by business momentum entering 2026 and confident we are positioned to deliver sustainable growth, expand profitability and create long-term shareholder value. Our priorities remain unchanged, disciplined execution, improved returns on invested capital and continued strengthening of the McDonald's brand into the future.

As Mariano mentioned, early results in 2026 have been relatively strong. Although current events have introduced some uncertainty, we believe in the resilience of the Arcos Dorados business model. We see a more normalized consumer environment as the year progresses, and we have a strong marketing plan to strengthen the bond with consumers across income levels.

In the short term, we are monetizing the significant market share advantage we built over the last several years. There is no other QSR operator in Latin America and the Caribbean capable of delivering the omnichannel experience guests preferred in an increasingly digitalized world. And we believe longer-term sales trends will recover and we will have even more opportunities to generate value.

Thank you for joining today's call. Dan, back to you.

Thanks, Luis. We will now begin the Q&A session. [Operator Instructions] Great. Okay. We have several questions already in the queue. We'll try to get to all of them as we can.

Good morning again, everyone. We have a question from Froylan Mendez from JPMorgan, and Froy asks us about taxes and Eric from Santander has a similar question. So I'll read both questions and then I'll pass it over to you, Mariano.

Froy asked, can you please explain the higher taxes paid during the quarter and if we should expect this higher level going forward? And Eric from Santander says, good morning all, thanks for taking our question. This quarter, income tax was quite elevated. Could you help us understand the moving parts behind such levels? And how should we think about this line in 2026, especially following the capital structure optimization?

Over to you, Mariano.

Thank you, Dan. Good morning, everybody, and thanks Froylan and Eric, for the question. Regarding the ETR, remember that we analyzed the effective tax rate on a full year basis not on a quarter-by-quarter. For the full year 2025, it's important to note that the ETR of Arcos Dorados was 37.7%, an improvement of almost 5 percentage points versus 2024 and reasonably close to the regional statutory rates. This reflects the mix of earnings across countries and some discrete impacts, particularly in Brazil.

Going to the fourth quarter, the [indiscernible] was high compared to the fourth quarter of 2024, but this was in line with our projections. The quarter includes some one-off adjustments in this case in Chile and Colombia and higher tax charges in Argentina related to FX and inflation. But it's important to note that there are no structural changes behind that number. So again, accrual to the full year, 37.7%, 5 percentage points better than in 2024.

Looking ahead, 2026, we expect a full year ETR in line with what we had for the full year in 2025. Of course, again, there may be quarterly variability, particularly early in the year, but the annual profile remains stable, and we are not seeing any structural changes on our ETR. Of course, during the year, we will continue to look for efficiencies and to look into ways to reduce that number.

Thanks, Mariano. And we'll stay with you before I send a couple of other questions that I think will be yours as well. We'll start with can you give more color on the drivers of margin expansion in Brazil and SLAD?

Perfect. First of all, we're very pleased with margins in Brazil, specifically in -- with the gross margin. As we have been mentioning during 2025 in the previous calls, the impact of the increase in beef in Brazil was very high and impacted us, particularly in the first half of the year. Now in the fourth quarter of 2025, for the first time in the year, we are seeing an improvement, small of 10 bps, but we are seeing an improvement that going forward, and we are still in -- we have not finished the first quarter of 2026 but we are expecting that this improvement will continue.

During the first quarter of 2026 in Brazil and in the other 2 divisions, and we have a favorable outlook for the rest of the year. But it doesn't end here the margin expansion or the improvements we have seen in Brazil during the quarter, excluding the one-off related to payroll in 2024, we have seen an improvement in payroll of 90 bps, mainly due to productivity and headcount. And also an improvement in occupancy and other operating expenses, mostly driven in this case by improving delivery margins. So we are very pleased when you exclude the one-offs, related to [ peril ] in 2024, and you exclude the impact of the growth support of royalties also in 2024. The expansion in Brazil, we are very pleased with that.

Regarding SLAD that you also asked about Froylan, payroll expenses, royalties and occupancy and other expenses, we saw leverage in all of those lines having a better other operating income as well and a flattish G&A in the division but SLAD have seen an improvement of 180 bps regarding same quarter of 2024 from 10.8 '24 to 12.6 in '26 -- in '25, sorry.

Okay. Great, Mariano. And one more from Froy before we move on. And this one is also given the recent depreciation of LATAM currencies, does this change your outlook for top line and margins versus the time you shared guidance?

Well, if we look at the average for the 2 main currencies, let's go to the Brazilian real and the Mexican peso, in the first quarter of '26 so far, and we are almost approaching the end of the quarter. The Brazilian real had an average of 5.2 versus [ 5.86 ] for the same period of last year and the Mexican peso an average of 17.4 compared with an average of 20.4 in the first Q last year. So we are seeing an appreciation of the currency, but adding the inflation rate, the real appreciation is even higher. We're not seeing that depreciation of the currencies.

Of course, in January, at some point, the real was a bit more appreciated than what it is now, which, of course, given the worldwide events that we are experiencing, we are seeing an increase in volatility, but the FX are performing much better than everybody expected at the end of last year and even at the beginning of this year. And you know that when LATAM currencies are appreciated and on top of that, with modest level of inflation. We are seeing real appreciation of the currencies that at the end, had a positive impact in our results.

Great. Thanks, Mariano. We're going to go now to Eric Huang of Santander again, who had asked previously about the same income tax question. And Eric had a second question, this one for you, Luis.

Secondly, how should we think about Brazil's comp sales throughout 2026, bearing in mind all of the initiatives undertaken by the company and the additional resources from the increase in income tax rate exemption level in Brazil?

Okay. Thank you very much, Eric, for the question. And to answer that, I have to go a few steps into 2025 where the market had a very challenging year with industry volumes down mid to high single digits versus 2024, and this happened since the first quarter of the year with the additional pressure of the increase in beef costs that somehow made us make an adjustment in our strategy. And the pressure to consumption game, especially or was related to specialty factors related to disposable income. And however, given this context throughout the fourth quarter and full year, we managed to deliver positive comp sales and better margins.

So about the consumption, we believe that consumers, particularly lower income consumers are being more rational with their spending power. And even though this -- there isn't a lot of room for higher pricing, we are working through a combination of pricing and mix to increase average check trying to offset those volume declines, protecting our margins. So what happened in the fourth quarter was that the contribution to sales came more from average check internal shift, time volume because, as I said, we're trying to strike a balance between sales growth and profitability. And what we are seeing today first months of the year is that we're seeing similar consumption trends. And our performance in the first quarter is about in line with our expectations. And what we expect from the second quarter and on, is that the consumption levels are going to normalize. Still, our focus during this quarter and the rest of the year is going to be to build to build healthy comparable sales.

Dan, back to you.

Thanks, Luis. The next question we have is from [ Jonathan Schwark ] of the [ Ion ] Group. This one will be back to you, Mariano. In addition to a lower rate and no longer needing to hedge part of the U.S. dollar-denominated debt into Brazilian reais, are there any other monetary benefits of raising debt in Brazil or in BRL i.e., lowering pretax accounting results that lowers taxes, avoidance of taxes for taking money outside the country, et cetera. That's a question from Jonathan.

Perfectas. Johnny, how are you thanks for the question. I walk you through the transaction, and I'll try to answer your several questions here. In this case, this liability management exercise, we identified an opportunity -- market opportunity to lower the cost of our debt. You will start seeing that, of course, during the full year 2206. We structured in this case, 3 bilateral loans with 3 different banks and couple them with derivatives to synthetically sorry, maintain our debt in U.S. dollars. Avoid, of course, by paying the cost of carry in Brazil was key for these transactions. And we ultimately repaid our 2020 [ non-U.S ]. dollar denominated debt.

In this case, the resulting cost of these transactions and [indiscernible] estimated pretax cost of 2.53 in an annual basis. That's the interest rate which compares in this case with [ 6 1/8 ] coupon of the senior notes '29. And on top of that, in January, we launched the tender offer and successfully repaid 135 of these notes. In this transaction, going to your second part of your question, enable us to capture an even larger tax shield, therefore, having advantages from a tax perspective as well. So I hope that with this flow your questions are answered.

Thanks, Mariano. I'm going to move on now to Álvaro García from BTG Pactual. And Álvaro ask a couple of questions, the first one for you, Luis. On Brazil sales [indiscernible], are you seeing any interesting behavior from cohorts buying [indiscernible], i.e. adding other items to their order or increased traffic?

Thank you, Alvaro, for the question. As I said, the situation in Brazil regarding volumes are directly related with the slowdown whether we see in the consumption. So this value platform, the [ economic ] value platform that is a national value platform is giving us the chance to somehow shield or to protect our market share for those who do not know about this, it offers a very attractive price point, and it gives the opportunity to our guests to build their own menu and it has very good margins. So so far, the platform has very good results. And yes, we do have some add-ons the value platform is still going on during the first quarter.

And most importantly, what did is that, we were able with that kind of actions, even though the sector is down we were able to maintain our market share, leading our nearest competitor by a factor of 2. We were able to maintain that gap, this is going to position us very well when the operating environment improves and we expect that to be around -- now the second quarter and on into 2026.

Great. Thanks, Luis. Álvaro has a follow-up question, and I have similar questions from Froy of JPMorgan and Melissa at BofA. So I'll read the 3 and then I'll bring it over to you, Mariano, I think this one is for you.

So Álvaro says, headcount reduction. Can you give more color on the headcount reduction, both financial impact and strategically why it makes sense for the organization? Froy at JPMorgan ask, can you quantify the impact of the headcount reduction going forward in terms of SG&A reduction as a percent of sales or any other metric that we can use to understand the impact? And Melissa from Bank of America asks, can you provide some additional information on the restructuring charge, including drivers of the decision, areas impacted and anticipated savings.

So all those, I think of the same question over to you, Mariano.

Thank you, and thanks, everybody, for the question. In this case, maintaining strong discipline over G&A expenses continues to be one of Arcos Dorados top priorities and is aligned with Luis message when he assumed at his position.

We consistently pursue initiatives in improving efficiency and optimizing our G&A structure always supporting the needs of the business. In full year 2025, G&A as a percentage of revenues remained flat, excluding one-off items that affected 2024. Notably, and this is relevant during the fourth quarter of 2025, we delivered a 50 basis point improvement in G&A over revenues, also excluding those one-offs. But in line with our commitment to long-term shareholder value creation and enhanced cash generation and supported by efficiency gains from technology investment, we implemented a G&A restructuring over the last few months that is already completed. The objective in this case was we serve operational excellence while better aligning resources with activities that are more critical to sustaining growth and strengthening our platform for the future.

In terms of numbers, sorry, our ongoing cost base has been reduced by more than $10 million on an annualized basis and in this case, positioning us to generate operating leverage in 2026. Of course, then there are other moving parts that affect the G&A, as you all know, like FX movements, like share price movements. But in this case, the -- our cost base case is $10 million less in the [indiscernible]. And this restructure has been made in the 3 divisions and at the corporate level.

Okay. Great. Thanks Mariano, I'll move on to Melissa's next question which is related to CapEx. And we have a similar question from an investor Max Joseph. So I'll read first Melissa and then Max, and I'll turn it over to you. Why was CapEx for 2025 below initial guidance? Despite a higher number of openings, is this FX related? And how does investment per unit and ROI for recent openings compared with previous vintages? Max also asked about 2025 CapEx, can you provide more detail on '25 CapEx outside of new restaurant openings and how much was allocated to restaurant modernizations, technology initiatives, maintenance and other categories.

So I'll stop there and then they both also asked about CapEx moving forward. But let's talk about '25 first. Over to you Mariano.

Thanks, Melissa, and Max, for the question. In 2025, we remain focused on optimizing capital spending while fully executing our plant openings and [indiscernible] program. It's important to note that we did not obtain the savings by switching to cheaper restaurant formats. We maintain even we exceeded the guidance and we maintained the number of freestanding openings that we planned at the beginning of the year.

In the second half of the year, we accelerated initiatives to be more efficient. We localize suppliers. We did rightsizing of the restaurants. So a lot of focus on the construction phase, coupled with FX movements that had some benefits on imported elements that go inside the restaurant, specifically at the kitchen level, but all those allowed to reduce the per unit cost without, as I mentioned before, compromising quality or scope. This area is important to note, has been a main focus for the entire finance and development teams during 2025 and the objective was to maximize return on investments but maintaining the quality of our restaurant openings.

So as a result of all this, we were able to surpass the plan opening 102 restaurants instead of the -- or on top of the guidance that was 90 to 100, but with lower capital intensity, and we are very pleased with the results we obtained that contributed to increase and improve the free cash flow of the company.

Dan you were going to ask about 2026.

Yes. So Melissa from Bank of America, what is the allocation of your 2026 CapEx budget across restaurant openings, reimagings technology in other areas? And Max asked a similar question, separately, are you planning to increase modernization rate to hit your year-end goal of experience to the future of 90-plus percent?

Perfect. Just as a reference, 2025, approximately 80% of the total CapEx was allocated to development CapEx, 20% to nondevelopment CapEx that includes mainly technology. For 2026, given that we increased a bit the guidance of openings our expectation is and also because we are going to finalize and modernize more restaurants we are expecting that from the total guidance we gave you in January, approximately 85% will be allocated to development and 15% will be allocated to technology and other type of investments.

Great. Thanks, Mariano. I'm going to move now to Julia -- from Julia Rizzo from Morgan Stanley. She has a couple of questions. I'm going to start with one for Luis. Are there already signs of same-store sales recovery in the first quarter, '26 in Brazil and NOLAD? And when do you expect same-store sales to reach inflation levels according to the company's algorithms?

Thank you, Julia, for the question. And I mean, our plan is designed to deliver comparable sales growth about in line with inflation level as the year progresses. And we do have a strategic marketing plan that is fairly robust not only in Brazil and NOLAD, but in SLAD, also. You saw that in the fourth quarter, for example, we have in Brazil, actions like I was telling just a little -- a few minutes ago about [ economic ] that drives volume. But we also had the Stranger Things action that brings the love for the brand. So we think that the situation in Brazil is going to last for a while. We are prepared for that.

And as I said, we -- our challenge is to build a healthy comp sales. And in the case of NOLAD we had a slightly different case because even though we did have a challenging and highly competitive environment across most markets, comparable sales grew 1.7% with positive volume. This was supported by a slight shift in product mix and competitive pricing strategies. Overall, sales growth was driven more by volume than by average check. And the highlight of the fourth quarter was Mexico and Puerto Rico. And looking ahead, we remain confident because Mexico is going to sustain the trend, and we believe that Panama and Costa Rica are taking the right actions to rebalance average check and guest traffic trends. So we expect to see that reaching that inflation were about in line inflation for the second question. Dan?

Thanks, Luis. Okay. So I'm going to go now to Julia's second question, and this one will be for you, Mariano. Can we explain NOLAD margin -- NOLAD's margin fall despite the royalty rate being 100 basis points better? And what should we expect for NOLAD margins in 2026?

Perfect. Thanks, Julia, for the question. Well, margins in NOLAD during the last quarter of last year were challenged due to sales growing below blended inflation. And as we always mentioned, when we have sales growing below inflation, then you start having deleverage in several fixed cost lines.

On top of that, we have seen some food and paper cost pressures during the last quarter. Remember that during the full year 2025 NOLAD did not experience food and paper pressures in the first half of the year, but starting having some pressures on the second half of the year. The good news here is that we saw improvements in occupancy and other operating expenses, and we managed to keep payroll almost in line with prior year. If you're recalling 2024, payroll line was under pressure in NOLAD due to increases in minimum wages in several markets such as Puerto Rico, Panama, Costa Rica and Mexico.

So we are pleased to see that in 2025 through productivity gains we saw leverage in this line. We are also very pleased with Mexico's results that is the division's largest market, where comp sales grew well above inflation, and we expect to generate leverage during 2026. Going back to the food and paper line, and as I mentioned when I was asked about Brazil. In the case of NOLAD and let me add in the case of SLAD as well, we have seen very good signs during the first quarter of the year that, of course, is still ongoing, but early results are showing an improvement in food and paper costs in the 3 divisions and in the case of NOLAD, in particularly in NOLAD.

So the fourth quarter was not great. We agree, but we are seeing some good news starting 2026, and we are very pleased how we have managed the payroll line, remember that between payroll and food and paper are the 2 most important cost lines in our income in our P&L.

Great. Thanks, Mariano. I'm going to move over to Thiago Bortoluci from Goldman Sachs. Thiago ask the question related to same-store sales in Brazil. At 2% same-store sales growth, I assume traffic in Brazil is at least mid-single-digit negative. How has it evolved sequentially versus the third quarter and to which factors would you attribute this evolution? And what are the drivers for an eventual inflection in 2026? I think Luis addressed this earlier, Thiago, I think you said this while he was answering a similar question.

Sorry, we'll try not to be repetitive. And then Thiago was other question, which is a 2-parter. I think the first part will be for you, Mariano, probably hooks on what you just mentioned around food and paper costs. And then the second part will be for you, Luis. The first part is what is your base case for beef prices in Brazil in 2026?

Okay. Thanks, Thiago. In Brazil, the main pressure, I will try not to be that repetitive, but the main pressure on food and paper last year came from beef and flesh, which was up about 30% over the last 12 months. The good news is that we have seen 2 consecutive quarters of sequential improvement and that the trend has continued into early 2026. So we feel confident in our ability to continue recovering gross margin in this respect and the recent appreciation of the real also helps especially for our imported items. It's important to mention that our pricing strategy remains disciplined and aligned with inflation, with CPI. So we are avoiding aggressive actions that compromise long-term health of the business. And as Luis mentioned, our new affordability platform is performing very well so far.

Thanks Mariano, and then the second part, which is sort of a continuation of Thiago's question and this will go for you, Luis. How have you prepared your menu board for the next 12 months in the context of the costs?

All right. Thank you, Thiago for the question. The good news about our menu board is that we're under one brand, we have all the categories. We do have beef, and we have our core items of our sandwiches. We have our value platform, and we do have our premium sandwiches. So indeed, we are really well covered. Then we have the chicken category that with the launch of the McCrispy Chicken has reinforced and is now an engine of growth. And then we have desserts. We are focused on trying to recoup the levels pre pandemic that we had pre-pandemic. And then we have beverages, for example, in coffee, that many of our main competitors around the region to not have a chance to talk about all the categories. So our menu board is very healthy. We have an opportunity not only to increase our top line, but to improve our margins, trying to pushing these other categories.

So I would say that, Thiago, it's important to say that in the region, 2025 was challenging. And one of the great outputs of 2025 is for example, we managed to shield our market share around the region we gained 1 percentage point versus 2024, and we maintain the gap versus our main competitors 2x more. So I already talked about Brazil that had last year, but we have the case of Colombia, Mexico, Costa Rica and Panama, taking in consideration of our internal research. We have more than 2x in those countries in comparable footprints and more than 3x in markets like Argentina, Uruguay or Chile in comparable footprints also. So going back to the question that you have, just to give you a little bit more color, we've seen seeing sequential improvement that is reflected in our market share in comparable sales and of course, in margins.

And as we have mentioned in other calls, our target is to bring sustainable top line growth and to improve operational efficiency. Our focus is in every line of our P&L. This should drive profitability. This should generate free cash flow. And of course, create shareholder value.

Great. Thanks, Luis. And we actually have no more questions in the queue. So we've reached the end of the Q&A session. Thank you once again for your interest in Arcos and for joining today's webcast. We look forward to speaking with you again in the middle of May on our first quarter 2026 earnings webcast. And until that, stay safe and have a nice rest of your day.

Thank you, Dan. Good morning, everyone, and thank you for joining us. Today, we will take you through Arcos Dorados' third quarter 2025 results, which included balanced U.S. dollar revenue growth with solid profitability. We successfully navigated challenging consumer dynamics in a couple of our largest markets as well as persistent input cost pressure, especially in Brazil. As I mentioned in August, we are focused on exceeding guest expectations in today's business while modernizing and improving our growth processes to support higher returns on investment and to ensure Arcos Dorados maintains its leadership position well into the future. In the near-term, operating conditions remain challenging, but we believe we are well positioned to resume more normalized top line and EBITDA growth across the business when the consumer and macroeconomic environments improve.

Let's move now to the key highlights of consolidated results for the third quarter. Total revenue reached $1.2 billion, a new high for a single quarter with balanced U.S. dollar growth across the three divisions. System-wide comparable sales rose 12.7%, in line with blended inflation for the period. Comp sales growth was particularly strong in SLAD, specifically Argentina and selected Northern markets such as Mexico and the French West Indies. Average check growth drove the result, more than offsetting a low single-digit decline in guest traffic versus the prior year.

Marketing and digital have been an important differentiator for the McDonald's brand throughout the Arcos Dorados footprint. This has allowed us to protect or expand market share almost without exception in the markets where we operate, which should help us sustain strong performance over the long run. We generated more than $200 million in adjusted EBITDA in the third quarter. This result included the net impact of a federal tax credit in Brazil. Excluding this impact on the quarter's results and the recovery of social contributions from the prior year period, U.S. dollar adjusted EBITDA declined by about 3%, mainly due to continued food and paper cost pressure. We opened 22 restaurants with more than half of the quarter's capital expenditures invested in new restaurant growth. With all remaining restaurants under construction, we are on track to deliver this year's 90 to 100 openings guidance.

Let's take a look at a few of the initiatives we used to generate sales growth in the quarter. Digital channel sales rose more than 11% versus the prior year and generated 61% of system-wide sales in the quarter with continued strength in delivery and self-order kiosks. We are encouraged by the positive impact of the self-order kiosk since it demonstrates the relevance of the on-premise restaurant experience and the value guests see in our omnichannel offerings, convenient restaurant locations and industry-leading service, the only we can offer. Digital sales growth was strongest in Brazil and SLAD, where Argentina capitalized on a modernized restaurant base and a tech-savvy consumer to drive growth.

The loyalty program is now available in seven countries, and we expect it to be offered in about 90% of all restaurants by the end of 2025. The program had 23.6 million members at the end of the third quarter, growing by nearly 50% versus the end of 2024. As the program grows in membership and active users, we expect it to help support more sustainable top line growth in the long-term.

Marketing in the quarter focused on brand strength across all platforms. We deepened the emotional connection with the brand and created memorable experiences for families with the Hello Kitty and Tiny Tan licenses. Value platform offered good value for money to guests and remains a strategic priority given the operating environment. Several markets leveraged the McCrispy Chicken platform to introduce new sandwiches and bundles in this key growth category. The dessert category also supported guest traffic with locally relevant McFlurry flavors and the popular Hello Kitty license.

Finally, we leveraged the exclusive regional sponsorship agreement with Formula 1 to drive sales and strengthen brand love in several markets.

Over to you, Mariano.

p id="418686546" name="Mariano Tannenbaum" type="E" />

Thanks, Luis, and good morning, everyone. Brazil's total revenue grew 4.9% in the third quarter, including a sequential improvement in comp sales performance. We believe this is an early indication that the worst is over in Brazil in terms of sales growth, especially since guest volumes were down slightly less than during the second quarter. Importantly, according to third-party measurements, we maintained significant market share leadership in Brazil through the first nine months of 2025 despite a challenging environment for the entire restaurant industry. This is a testament to the dynamic approach we have taken in Brazil with competitive pricing designed to balance sales growth and profitability.

Digital channels in Brazil accounted for almost 72% of system-wide sales with notable strength in delivery and self-order kiosks. Additionally, 30% of Brazil's system-wide sales involved Meu Méqui loyalty program members. NOLAD's total revenue rose 6.1% in U.S. dollars with strength in Mexico, Costa Rica and the French West Indies. In fact, Mexico's comp sales rose 6.3% or 1.8x the country's inflation rate and 2x to 4x higher than the main competitors' brands.

In NOLAD, Costa Rica and Puerto Rico are seeing excellent guest engagement with the loyalty program, which is also being piloted in Mexico.

We expect the program to help drive higher digital sales penetration and guest frequency in 2026. SLAD's U.S. dollar revenue rose 4.9%, supported by comparable sales up 1.3x the division's blended inflation in the period. Argentina's sales growth remained strong in the quarter, and the division's sales also benefited from good performance in markets like Colombia and Uruguay. 

Digital sales penetration in SLAD was 61.5% during the third quarter, supported by a strong performance from the loyalty program, which was available in Argentina, Colombia, Ecuador, and Uruguay. Third quarter profitability remained solid despite below inflation comparable sales growth in Brazil and NOLAD. And as Luis mentioned, the quarter's result included the net impact of a federal tax credit in Brazil. Let me take you through the details. We generated more than $200 million in adjusted EBITDA, which included the net benefit of $85.6 million related to a federal tax credit in Brazil.  The credit, which also includes $39.6 million in interest, arose from the treatment of certain government-related tax incentive for the period 2016 to 2023. We expect the $125.2 million net credit to have a positive cash impact since we plan to use it to offset federal tax obligations beginning in 2026. We expect to recover the taxes over the next 5 years. As a reminder, last year's result included a $5.6 million recovery related to social security contributions in Brazil. 

Excluding these impacts from both periods results, adjusted EBITDA declined by about 3% in U.S. dollars due to modest margin pressure. The main margin headwind in the third quarter was elevated food and paper costs. The domestic price of beef in Brazil rose significantly at the end of 2024, but we were able to leverage our supplier relationship and significant purchase volume to delay the impact of the price increase until the first quarter of this year.  By generating operational efficiencies during the third quarter, we were able to partially offset the food and paper cost pressures with greater labor productivity as well as leverage in occupancy and other operating expenses. This translated into stable margin performance sequentially in the third quarter, and we expect to capture additional efficiencies moving forward. 

NOLAD's margin included improved payroll and lower royalties, more than offset by margin pressure from food and paper, occupancy and other operating expenses, and G&A. SLAD has been the bright spot all year, generating strong quarterly adjusted EBITDA growth in U.S. dollars and margin expansion in each of the first 3 quarters of 2025.  Adjusted EBITDA grew more than 30% versus the prior year, supported by a 2.2 percentage point margin expansion. Increased payroll productivity, leverage in occupancy and other operating expenses, and the lower royalty rate more than offset food and paper cost pressure. 

Our balance sheet is strong. And as I mentioned, in the coming years, our cash flows are expected to benefit from the gradual utilization of the federal tax credit in Brazil. At the end of the third quarter, the net debt to adjusted EBITDA ratio was a comfortable 1.2x. We believe this, together with the extra flexibility provided by the new syndicated revolving credit facility, gives us plenty of room to support our medium-term growth plans.  Through the first 3 quarters of 2025, we opened 54 restaurants, including 34 in Brazil, with more than half the period's CapEx invested in openings. By the end of the year, there should be more than 2,500 restaurants in the Arcos Dorados footprint. We are revising every element of our development processes with a focus on identifying and implementing initiatives designed to improve operational efficiency and generate more consistent returns on investment from each of these assets. Performance has been strong this year in Argentina and Mexico, SLAD and NOLAD's largest markets, and we believe this is sustainable going into next year. 

As Luis mentioned, we believe we are well-positioned to return to healthier sales growth in Brazil moving forward. With our 3 largest markets aligned, operational profitability and cash flow generation should also improve. We know this is the best way to create shareholder value, and we have the entire team working toward that goal. Back to you, Luis.

Thanks, Mariano. Let me wrap up with a few final thoughts. As you have heard before, one of the pillars of the Recipe for the Future platform is youth opportunity. Part of providing first-time formal job opportunities to young people is making sure they have a positive experience in that first job. This is why it is so satisfying to be recognized by Great Place to Work as one of the top employers or to see Arcos Dorado's corporate reputation continue to climb the rankings in several of the markets where we operate. 

All 6 pillars of the Recipe for the Future platform are good for business and good for the social, environmental, and economic impacts we make throughout Latin America and the Caribbean. Since beginning my tenure as CEO 4.5 months ago, I have worked to refocus the team and the company on 3 big priorities: optimizing the performance of today's business, maximizing the return on investment from capital expenditures, and ensuring the company is preparing itself for the long term. With that mindset, we're pushing to have a solid finish to the year while positioning ourselves for a stronger performance next year. 

We are excited about our marketing plans for the remaining 7 weeks of 2025, and we believe next year's plan is among the strongest ever. One spoiler I can give you is that next year's marketing calendar includes McDonald's sponsorship of the FIFA World Cup, which is the most popular and impacted sporting event in all the markets where we operate.  Notably, next year's World Cup will include Arcos Dorado's 3 largest markets: Argentina, the defending champion; Brazil, the winningest team in the [indiscernible] history; and Mexico, one of the 3 host nations. 

Last week, we reviewed the plans for 2026 with the team, and each of the country-level managing directors, divisional presidents, and corporate leaders is targeting sustainable top-line growth and improved operational efficiency to drive profitability, generate free cash flow, and create shareholder value. Thank you for attending today's call. Dan, back to you.

Thanks, Luis. We will now begin the Q&A session. [Operator Instructions]. We have a few questions to get through here in the queue already. We'll start with Alessandro Ciarnelli from Sal Muoio. He says, just a question on the tax benefit and EBITDA. If I adjust out the tax credit from EBITDA, then it was down year-over-year. Was that related to food and paper costs? And could you give some color on that? I'll start with you, Mariano, on that one.

Okay. Thank you. Good morning, everyone, and thanks, Alessandro, for your question. You're right. Basically, if we remove the one-off, we can see that we have margin contraction mainly related to food and paper and mainly related to the increase in beef costs in Brazil of 35% over the year and in a much lesser extent in increases in NOLAD. There is also some G&A increase, mainly related to timing and appreciation of the Argentine peso and the Brazilian real. These forces were partially offset by a very relevant increase or better payroll of 60 bps year-on-year. We can see this increase in payroll -- or this better payroll mainly in the 3 divisions in Brazil, in NOLAD and SLAD. We're very, very pleased with those efficiencies. Also, there are gains in occupancy and other operating expenses of 20 bps and royalties on 10 bps approximately.

Great. Thank you. We now have 3 questions from Eric Huang from Santander. I'll give this next one to you, Luis. And Eric asks, in Brazil, how has the company's market share evolved in the previous quarter? And how has competition been moving given it's a still challenging macro backdrop in the country? He further goes on to ask, does management foresee potential additional initiatives to boost revenues? Or is the balance between market share protection and/or gain versus profitability protection at comfortable levels? Again, over to you, Luis.

p id="263403931" name="Luis Raganato" type="E" />

All right. Thank you, Eric, for the question. Good morning, everyone. First, let me give you a little bit of context. Traffic in Brazil remained, and remains, challenging, especially due to factors related to disposable income. Consumer confidence is still down and out-of-home consumption is negatively impacted. We believe in general consumers, particularly lower income consumers, are being more rational with their spending power [indiscernible]. We've seen an impact in reduced guest traffic in the sector in general. For this reason, it was very important to remain focused on offering a compelling value proposition with competitive pricing and try to deliver a great experience through all the channels our customers today are omnichannel, so we have to deliver the good -- excellent operation in all of them.

And what we have seen regarding our competitors is that the industry in general continue to focus on promotional activities. They have been more transactional, trying to just drive traffic on a more comprehensive plan that complements actions targeted to increase traffic and shield our market share with those actions that aim to build the love for the brand. For example, we have just launched by the end of the third quarter, the beginning of this fourth quarter, Economequi in Brazil. It is a national value platform where customers can get a 4 item menu for BRL 22.9 or about $4.2. We also have actions like Formula 1. Today, we have implemented a co-branded with Red Bull, for example, that makes the brand more aspirational, and those are the actions that aim to keep on improving our revenue in a more healthy way. According to CREST, regarding the part of the question that was asking about our market share, our visit share remains strong, near record highs and maintaining a positive gap versus our other main competitors. We are comfortable with that position. The main goal in Brazil is to recoup margins. So our main focus is going to be on that. And we think that we are in a position of strength to capture the rebound of the economy when it starts to come back.

The second question from Eric that we'll take here is, given the potential for dividend taxation in Brazil starting in 2026, does the company see any potential impacts on its operations when it comes to the repatriation of results from the Brazilian entity to the parent company or the holding company. I'll give that one over to you, Mariano.

Perfect. Thanks, Eric, for the question. First of all, this taxation has not been approved yet. But we can mention that we deal with similar rules all over the countries we operate. We have a very efficient cash management structure. On top of that, we have very relevant expansion plan in Brazil. But if the law is approved, we will comment on that later.

Great. Thanks, Mariano. Now I'm actually going to take Eric's third question and combine it with a question that we received from Froylan Mendez of JPMorgan. First from Eric, entering 2026, if the softness in consumer conditions in both Brazil and to some extent Mexico, persists, how does management think about expansion? Would it be an opportunity to perhaps scale down openings and accelerate the renovations, especially in Mexico, for example? So on some [level], that's associated with what's going into 2026. One question is on the side of renovations. Froy asked a similar question with a different punchline. Also, what are your initial thoughts on pricing versus affordability in '26? Are you considering a strategy to gain market share in '25? Will you be able to recover pricing in '26? Maybe what we should do is focus on what we're seeing for '26, and then we can talk about the expansion side after that. Over to you, Luis.

Okay. As I mentioned, my focus or our focus for the pricing in 2026 is that we're going to remain close to our customers, having a compelling value proposition, trying to shield our market share. We're going to be laser-focused trying to capture any opportunity that we have to improve our margins. The objective for next year is to expand the EBITDA margin versus this year. And regarding the growth plan, right? Yes, let me first tell you that our growth plan is aligned with our long-term vision that is to unlock McDonald's full potential in the region. It already incorporates market opportunities and funding strategies to support this expansion. But let me tell you that we're going to be flexible. If conditions change, we are going to be flexible to adjust the pace and the focus of investments, not just in Brazil and Mexico, in the whole region, as we have done in the past. We're going to prioritize the most profitable markets and restaurant formats. In fact, as I said in our call in August, we're in the process of revisiting every element of our development process because we are convinced that in order to increase our cash flow generation and create more value for our shareholders, we need to ensure that every dollar invested brings the best possible return, and we're going to -- regarding the nondevelopment investments, we're going to accelerate or defer as needed to preserve cash.

As you know, the guidance for 2026 are going to be given in the first quarter of next year as we have done historically. I think I covered the 2 points.

Yes, Thanks, Luis. Next question for you, Mariano, staying with Froylan Mendez from JPMorgan. Should we expect lower input cost pressure in Brazil already in the fourth quarter given the recent beef trends?

Perfect. Thank you, Froylan, for the question. Let me elaborate a bit on the gross margin of the paper costs in Brazil that were mainly impacted by beef inflation, which remains the primary pressure point. In the last 12 months, they have increased more than 35%, as I already mentioned. However, we believe that the second quarter was the lowest point of the year, and we're confident that we will continue to recover gross margin going forward. In addition, let me point out that the current appreciation of the Brazilian real is also positive for our imported products, so we also can see an improvement related to the appreciation of the currency.

And of course, all the tools that we actively use in order to mitigate impacts like the ones we saw in beef through pricing, mix, supplier negotiations, our scale, operational efficiencies and so forth. On top of that, what we can say is that overall and the early -- very early numbers that we are seeing for the last quarter, we are seeing some signs of improvement in beef costs in Q4. And for sure, we are not expecting additional pressures as we have seen in the last 12 months.

Thanks, Mariano. Now we have a few questions from Alvaro Garcia from BTG Pactual. I will start with a bigger picture question he has on Brazil. He says you're clearly not losing market share. So I wanted to get your take on consumer weakness. What are your thoughts on the impact of sports betting or GLP-1 drugs might be having on your sales? And I'll give that one to you, Luis.

Okay. Yes. As I said, we are seeing an impact in the consumption. And as I said, it's related to disposable income and mainly in lower income consumers. The [indiscernible] for sure, are having a big impact in the purchasing power of -- in general but mainly in lower income socioeconomic levels. And the GLP-1 today regarding that, we're not seeing yet an impact in consumption due to this kind of treatment in the region. And we really do not believe that it will have a material impact in the future.

Okay. Thanks, Luis. The next question from Alvaro, and this will be for you, Mariano. Double checking on the $125 million tax credit in Brazil, can you share how those savings might be phased over the next 5 years? And is $125 million the fair number of gross savings to use going forward on federal tax benefits in Brazil?

Perfect. Thanks, Alvaro. Yes, $125 million is the fair number. And the credit will be gradually compensated with federal taxes over the next 5 years. We are currently building our compensation strategy, of course, in full compliance with the law. But we can assume it will be evenly distributed in the next 5 years.

Great. Thanks, Mariano. And Alvaro has another question, and this one, I'll give it to you, Luis. A bigger picture question on chicken. Can you please provide an update or view -- updated view on how you see your mix shifting towards chicken in a heavy beef-loving markets like Brazil and Argentina?

Yes. Thank you, Alvaro, for the question. As you know, under the umbrella of the McDonald's brand, we have different categories like beverages, like desserts and chicken that are today and are going to be very important, after the -- for us, an inflection point for the category was the launch of the McCrispy chicken platform that has sandwiches that are excellent regarding quality that were greatly accepted by our customers and that are gaining share quarter after quarter.

The growth will be and it's being gradual, but it will be consistent. We're giving -- but it's going to be relevant for us in the near future. We do have room for innovations. For example, we have [indiscernible] windows that we bring innovation with, for example, spicy chicken, that is a flavor that is very well accepted in the region, or for example, in this quarter in Brazil, we launched the Chicken Bacon Ranch, and that is going to be important for us, not only in the top line as you're seeing and saying in the question is going to be important for us in the bottom line.

Important to say that we still have a huge opportunity to keep on growing with a category like McNuggets that is an asset for us that within the chicken category is strength for our business. So for sure, this is going to be a strategic pillar in the coming years.

Okay Luis, I'm sorry to do this, but we actually have 3 more questions I'm going to give you, and it's going to be a combination of questions.

First, from Thiago Bortoluci of Goldman Sachs. Thiago asks, could you please expand on your same-store sales foot traffic performance in Brazil, Mexico and Argentina and Brazil, how did traffic share evolve? Aligned with that, we have from Alejandro Fuchs at Itaú. First question is for Luis. Same-store sales in Brazil. Could you provide some thoughts on the competitive environment today? And how have other markets in NOLA performed, especially against Mexico? So I think it's another same-store sales question related to that. And Jeronimo de Guzman from INCA Investments asks if we can comment on recent sales trends. Are you seeing a recovery so far in the fourth quarter? So maybe a little bit of the third quarter performance in terms of same-store sales with the 3 biggest markets and then a little bit of recent trends as well.

Perfect Dan. Bear with me. I'm going to start with Brazil because I already said a few things. As you -- even though we did see a challenging situation in the market because we know for a fact that the QSR market is down in visits, we managed to deliver positive comp sales. And even though there isn't a lot of room for higher pricing, we're working through a combination of pricing and mix to increase average check because we need to offset that volume decline that is related to the market, and we need to offset the pressure that we have in margins.

So the contribution to sales in the market came more from average check than volume. We are seeing that, that is improving in the beginning regarding traffic in the beginning of this quarter. And we are doing that because we're trying to reach a balance between sales growth and profitability. And to give you a little bit more color about what is happening in the different channels, the strongest channel was delivery in Brazil that kept on growing in sales, supported by positive guest traffic, from [indiscernible] remained roughly flat for us is very good because it is proof of how aspirational our brand and the on-premise experience continues to be important. And very relevant too, the dessert [indiscernible] channel are recovering as a result of better operational execution, right pricing and relevant innovation. For example, we have Hello Kitty under the Hello Kitty platform and licensing the Happy Meal. We did have some innovation with [indiscernible] and McFlurry. So in this channel, we still have room to grow and improve and the goal is to achieve pre-pandemic volumes. So regarding the [indiscernible] and Mexico, as I said, in Brazil, we think that we are in a position of strength and ready to capture any rebound in the economic activity. Regarding Mexico -- Mexico, the economy remains under pressure with high uncertainty levels, and this is driven by external and internal factors. Talking about external factors, we have the potential tariff policies that could be implemented or internally, there have been some conversations about proposed reforms. If any of this happens, we don't see that it's going to materially impact our business. But despite the uncertainty that I was talking about, the food service sector shows resilience. And from our business perspective, we were able to deliver 6.3% growth in comparable sales. This was driven by growth in guest traffic that we know that outperformed this sector.

Regarding the channels, the research centers were the main growth engine. All the other channels had a solid performance that is very good for us. And what is happening in Mexico and the improvement in performance that we're having is that besides the launches and the innovations, we are adding an operations improvement that has been going on for the last years. And everything has been working on under the umbrella of a brand campaign that is called Mexico Me encanta. All this is bringing a very strong improvement in brand attributes and market share gains. According to internal research, we know that the market share gap versus our main competitor is almost 3x more in comparable footprint, and we are consolidating our leadership position in the industry.

And now I will go to Argentina. Argentina was the main driver of the division results, the SLAD division results. The context remained during the third quarter challenging due to the macroeconomic instability. This instability had a negative impact on the levels of uncertainty and it had a negative impact on private consumption. What was notable in the quarter is that despite the ongoing [devaluation] that we had during the quarter, inflation remained stable at almost 2% per month. And this indicates that we do have limited pass-through to consumer prices. But despite of this, the good news is that our business remains solid and continue to show strong performance.

The local team has done a terrific job. They were able to capitalize on last year's investments to try to maintain themselves close to their customers. The market share gained, we were able to maintain the market share this year, but the market share that we gained last year also helped us drive strong results. We were able to maintain the gap of more than 3x the market share of our main competitor. And in Argentina, even though the market will remain disciplined on pricing, they will also be focused on capturing every opportunity to improve margins. And I think part of the question then was about the trends in this quarter, right?

Yes. And actually, I'll add one more because Thiago's second question is associated with that as well. So what are your general expectations for the fourth quarter performance in Brazil? And what gives you confidence what are your expectations for fourth quarter? And what gives you confidence in sequentially better trends? So...

All right. First, we're going to be finishing this year even though we've had a challenging macroeconomic and social situation across the region in a position of strength, shielding and protecting our leadership position with excellent brand scores. And as you know, going into this fourth quarter, historically, the second half of the fourth quarter is the strongest part of the year. We are excited about the marketing plans that we have for the remaining weeks. We think that these actions will help us push for a solid end of the year. The whole team is working on that, specifically in Brazil, sales performance stabilized between the second and the third quarter, and we believe we can improve on those results in the fourth quarter.

In NOLAD, NOLAD continues to see a challenging environment. We were seeing this in several markets like, for example, in Panama, Panama faced a challenging comparison this year with strong sales growth during the first half of the year. What made more challenging was the social unrest in the country. We see that the situation is normalizing. But so far, we have not seen the rebound we expected for the QSR industry. Similar situation in Costa Rica that has also been dealing with a weaker consumer environment and reduced industry volumes. And what we see in NOLAD is that Mexico has been very resilient. It's going to have a good end of the year, and we believe we're taking the right steps in the rest of the markets to resume more normalized growth. And regarding SLAD, SLAD's results have been strong all year, and we believe it will end the year with another strong quarter. And I think with that, Dan, I covered everything.

I think you did ... As I said, it's a long set of questions here, maybe you want a glass of water, but there's one more for you before we shift back to Mariano. And this one is also from Thiago from Goldman Sachs, where he asks, how has McDonald's value gap evolved versus food away from home and versus other burger QSRs in Brazil? Where is it today? And where do you want it to be? And Jeronimo de Guzman from INCA Investments asked a similar question, how much pricing have you taken in Brazil as a result of input cost pressures? What's been the impact on traffic? And how are you thinking about pricing going forward to protect margins versus traffic? Again, I think this is the pricing question between the 2 of them.

Okay. So I already talked about the main objective that we have in Brazil. Again, we're going to try to be close to our customers. We already launched a national, very convenient value platform called Economequi. In that context, we're going to shield our market share, but we aim to improve our margins. So in this context, we increased prices above inflation this year. We did it with the goal to mitigate the margin pressure that we had in Brazil. And having said that, we maintain promotions and affordable prices to try to remain affordable according to internal research in the brand attribute value for money, we have reached a record high this year.

And so far, we were able to maintain our market share, as I said, to maintain the gap versus our main competitor. And again, we believe that we are in a position of strength and ready to capture the rebound of the economy.

Great. Thanks, Luis. Back to you, Mariano. A question from Alejandro Fuchs at Itaú. Now with more cash flow generation expected and the flexibility of the new MFA in terms of CapEx, how do you feel about the possibility of buybacks as a priority for capital allocation?

Okay. Thank you, Alejandro. Well, in 2025, our Board declared already a $0.24 per share dividend, which was declared on March this year. And we have been paying dividends in the last few years. But having said that, the Board of Directors will always consider options such as buybacks based on what they believe is best for the company and its shareholders, considering our capital allocation priorities, available cash, of course, and expected cash generation. So this is on the table. And the Board will decide if this is the right path to go, given that we will have more cash generation for sure next year.

Great. Thanks, Mariano. Actually, I had another question from  Jeronimo de Guzman from INCA, which I think Luis has already answered. Just regarding [indiscernible] can you comment on what's helping maintain strong comp sales in Mexico? On the flip side, what's driving lower sales trends in the other markets?  I think Luis has already covered that. So I'm going to move now to [Bob Ford], who has sent us 4 questions. And back to you, Mariano. Bob's first question. Can you explain the source of the tax credit in Brazil and the rate at which you expect to monetize it over the next 5 years?

Okay. Thank you very much for the question. Well, we cannot go into all the specifics, but the case is based on the treatment of [indiscernible] subsidies within the federal tax calculations. And as I already mentioned, in terms of monetizing it over the next 5 years, we don't know yet for sure, but our best estimate is that this credit will be evenly monetized in the next 5 years. That's the best we can -- our best estimation right now.

Great. Thanks, Mariano. The next one is a 2-parter, the first part will be for Luis, and then I'm going to come back to you, Mariano, on this one. Can you provide an update on your promotional strategy in Mexico, Luis, and then sources of margin pressure in NOLAD, given Mexico's strength, that I'll move over to you, Mariano.

All right. Thank you, Bob. As I said, in general, but specifically in Mexico, we're going to be prudent about pricing. We want to be close to our customers, but take care of margins. So in Mexico, we have like 3 engines of traffic growth. The first one is desserts that we're taking care of with the right pricing and with the right operational execution. Then having innovations like, for example, Hello Kitty or the Grimace Shake, that -- I don't know if you know that, but it's a very historic and very famous McDonald's character. That launch surpassed our expectations in the market. So desserts is one of those engines.  Then we do have the value platform. The value platform is divided into 2. We have one that begins pricing at MXN 99 and another one that is called [indiscernible]. That is being very effective and with good margins. And we're trying to take care of the promotional activities because at some point, we needed to be more prudent, taking into consideration margins. 

And then another engine of traffic are the Happy Meal licenses. Like I said, August  Hello Kitty was very important, and Tiny Tan in September. Those 2 months were the strongest for Mexico in the quarter. With that, Mariano, I pass it to you so you can talk about margins.

Perfect.  And the question is the sources of margin pressure in NOLAD. They were mainly in food and paper costs. So even though Mexico is growing well above inflation, in terms of food and paper, we have seen some pressures during this third quarter. And that also applies to other NOLAD markets. And also, there was a timing effect on G&A that we expect to normalize in the coming quarters.

Great. Actually, sticking with you, Mariano, and your last third question is what is your outlook for key input costs in Brazil and other markets? And where do you see additional operating efficiencies? I think you've covered the input cost [piece] in Brazil. Maybe you want to touch a little bit on other markets and then talk about where we see some additional efficiencies.

Perfect. Yes. Well, I already mentioned, as you said, what's going on in Brazil. In other markets, what we are seeing is that we are very pleased with the efficiencies that we are observing in payroll in the 3 divisions, 60 bps. If you recall, last year, we saw important minimum salary increases in many of our markets, such as Panama, Puerto Rico, Costa Rica, Mexico, and some of SLAD countries. and payroll was a source of pressure during 2024.

What we are seeing in 2025 is that with the implementation of the scheduling system and the efficiencies that we implemented, we have seen a recovery and even a much better payroll than what we had last year. So we are very pleased with those results. Then, in occupancy and others, we have been seeing some improvements there, even though sales during this quarter in NOLAD and Brazil were growing below inflation. We have seen improvements in this line, related also to better deals negotiated with 3POs. So we are making deliveries also more efficiently. So we are seeing as sources of operational gains, the payroll line and the other [indiscernible] occupancy line as well. 

And as I mentioned in a previous question, not from you, but from, I think, Jeronimo, what we are seeing in the fourth quarter is that the pressures that we have seen in gross margin, are mainly -- they are much less now than what we have seen in the last 12 months. So with a better outlook in gross margin, I think we will be able to leverage the gains, and margins will improve as long as sales continue to improve, as Luis also mentioned.

Great. Thanks, Mariano. Final question from [Bob Ford] is, how do you expect the World Cup to impact traffic? And are there global McDonald's marketing campaigns and/or regional efforts that you can comment on? And I'll give that one to you, Luis.

All right. Thank you, Bob. What you can expect is a positive impact from the FIFA World Cup event. It's very popular and very important for the whole region from Mexico to Argentina, Brazil, and other geographies. So what you can expect is a positive impact in brand -- attributes like favorite brand and brand awareness, and you can expect a positive impact on traffic. 

What happened and what is different today is that, comparing with the World Cup in 2022 is that, today, the delivery channel is a strength for us. So during the games, we're going to be able to be at home with our customers when they will be enjoying the games. And we're going to have, for sure, marketing campaigns throughout the whole period and more that, for sure, we're going to surprise you with, all right? That's all that I can tell you. But yes, the impact is going to be positive.

Great. Thanks, Luis. And I think we have time for one more. This one is from [ Yuron from Obam ]. And he asks, at what point do you believe operating leverage after a long stretch of very strong top line will convincingly lead to a higher level of margins, especially taking into account further improvements in the digitalization and other efforts. And maybe you both want to take this, but I'll start with you, Mariano.

Perfect. Thanks, [indiscernible]. Well, our strategy has been to grow sales at or above inflation, and we have done this consistently, although in some quarters, like the third quarter of this year has been tough in Brazil and in NOLAD, given external factors as economic conditions and consumer situation, we think that by doing that, we will be able to leverage on all the operational efficiencies that we have been working on. 

As for example, I just mentioned payroll and other occupancy expenses. So as we are seeing, for example, pressures in gross margin, we have been working a lot in the company in every single cost line to bring efficiencies to the business. We are doing that. And I think for 2026, we are pretty comfortable that this strategy will yield, at the end of the day, better margins, better cash flow, focusing also on efficiencies in our investments. The company will have an improved free cash flow. And with that, we will be able to return to shareholders and invest in the business for all the opportunities that we have.

Yes. And Mariano, if you let me add, when we talk about the digitalization, and that is part of your question. And we're talking about not only customer-facing, but also back office. We have just implemented, and we finished the implementation by the end of last year, a new scheduling system in the whole company that is bringing already efficiencies, and you can see that in our payroll line, that is helping us to mitigate, for example, the cost pressure that we have in food and paper.

And just to finish this part of the question and the Q&As, I want to just make sure that you understand that our focus, my focus, the team's focus is to try to deliver sustainable top-line growth and improved operational efficiency, to your point, because the main focus for the whole team is to drive profitability. We're working on the returns on investments, working in every line of the P&L, because the main goal is to generate free cash flow to create shareholder value. So with that, Dan, I pass to you.

Thanks, Luis. And that actually was the last question that we have here in the queue. So that brings us to the end of the Q&A session. Thank you once again for your interest in Arcos and for joining today's webcast. We look forward to speaking with you again in the middle of March on our fourth quarter 2025 earnings webcast. Until then, stay safe, and have a great holiday season, everyone.