Arcos Dorados Holdings Inc.

Good morning and welcome to the Arcos Dorados first quarter 2019 earnings call. A slide presentation will accompany today's webcast, which will be available in the investor section of the company's website, www.arcosdorados.com backslash IR. And as a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. And today's conference call is being recorded. At this time, I would like to turn the conference call over to Patricio Esnalala, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our earnings call. With me on today's call are Sergio Alonso, Chief Executive Officer, Marcelo Raba, Chief Operating Officer, and Mariano Tannenbaum, Chief Financial Officer. Please turn to slide two. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, and I refer you to the forward-looking statement 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 the press release and audited financial statements filed today with the SEC on Form 6-K. Our discussion today excludes the results of the Venezuelan operation, both at the consolidated level as well as for the Caribbean division, due to the differences in the exchange rate and inflation in the country. For your reference, we include a full income statement excluding Venezuela with our earnings release. I would now like to turn the call over to our CEO, Sergio Alonso.

Thank you, Iñaki. Good day, everyone. and thank you for joining us today. Please turn to slide three. Last year, we expanded our margin at a faster pace than we projected, delivering 90 basis points of margin expansion. Having built in significant operating leverage in our business, we turned our attention to top-line growth, particularly in our largest market, Brazil. However, we have not lost sight of our commitment to deliver an additional 10 to 110 basis points of EBITDA margins within the next 18 to 24 months. As you may recall, we committed to 100 to 200 basis points expansion at last year's investor day for the period. During the remainder of the year, we expect to expand our margin further as we accelerate sales growth. At the end of the fourth quarter, we began executing strong marketing and promotional campaigns, which continued during the first quarter. We indicated this would result in stronger comp sales beginning the year. consolidated comparable sales group 10% on top of 9.8% in the prior year's first quarter. Excluding Venezuela and Argentina, both hyperinflationary economies, comp sales would have been 1.6 times blended inflation, a healthy growth rate. Our adjusted EBITDA in constant currency terms increased 6.5% in the first quarter. This growth was consistent throughout the quarter and in many of the markets of each division. Furthermore, we are maintaining this momentum in the current quarter and expect it to continue for the rest of 2019. Of particular note, in Brazil, Comp sales increased 6.8% well above inflation. In SLAD, outside of Argentina, we're seeing significant improvements in each market. These are countries with stable and growing economies, and they're acting as a counterweight to our business in Argentina, which continues to face strong macroeconomic headwinds. In Chile, for example, we have a very strong leadership position. Year after year, our results in these countries have been improving, and we've been gaining share for some time now. We expect the counterbalancing benefit to continue this year. In NOLA, we remain focused on increasing sales and guest counts. We deliver our eighth consecutive quarter of sales growth in Mexico, despite the Easter holidays being outside the first quarter, unlike last year. Sustainable growth across the company is being driven by accelerators that includes delivery, mobile, and EOTF, which comprise our omnichannel approach in our market. McDelivery is now available through 45% of our restaurants and drives up approximately 70% of incremental sales. Our mobile channel, combined with digital menu boards, self-ordered kiosks, and enhanced repayment technology for drive-thrus represent a powerful technology ecosystem. These channels significantly enhanced the guest experience and strengthened brand loyalty in addition to generating sales lists. The complete digital experience is embodied in our EOTF restaurants, not just the menu boards and customers ordering via kiosks, but digital table entertainment and our playlands as well. The McDonald's app plays an integral role in communicating with our customers in the way they want to engage with us. With over 24 million downloads today, our app is by far the most downloaded in the entire food and beverage segment in the region. I noted Chile and the growth were tapping there. Starting this year, we began extending EOTF to the country. This most recent rollout reflects our agility as a business and the flexible approach we take to capital allocation. In other words, we direct our investments toward those markets within our vast geographic footprint that have the most growth potential. Marcelo will update you on our EOTF landscape today, but I would like to emphasize here that they generate safe lift beyond the first year of operation, in addition to strengthening our competitive position. Another important source of growth is our research centers. We are the leading dessert brand in the region, with the most sales of ice cream in the broader food segment. Along with macafes, our dessert centers are also powerful brand extensions. Arcos Bananos is proud to operate under the McDonald's brand, which continues to strengthen in the region. Based on our ongoing research, we remain the number one QSR brand in the vast majority of our territories. In April, Folio de São Paulo, one of Brazil's leading newspapers, named McDonald's the top preferred restaurant brand in the state of São Paulo. This state is by far the most populous and represents approximately one-third of of Brazil's total GDP. This was the second year in a row that our brand was ranked at the top, and also the gap between us and the nearest competitor widened versus last year. Keep also in mind that we have multiple standalone brands, not just the Big Mac. For example, this includes McFlurry, and the signature collection among many other leading product brands that are important brand extension platforms. Marcelo will also discuss how we are extending our signature collection brand. Translating our brand is also being the most sustainable restaurant company in Latin America. Equally important, we are the most socially beneficial as the largest formal employer of youth in the region, among other important contributions to society. This is a key brand differentiator across our markets, and we believe that this kind of commitment will only become more important among future generations as they choose the brands that matter to them. In addition to featuring sustainable beef in our menus, as well as other important food certifications, we maintain multiple sustainability programs in the areas of water and energy savings in our restaurants. We're also piloting innovative projects with regard to paper, plastic, and waste. And most recently on the social front, The Global Council of Corporate Universities, the most prestigious entity in this field, recognized Arconforados for having one of the best corporate universities. Each year, we host over 1,000 managers and provide online courses to over 50,000 employees. Also, for the second year in a row, we earned the number two spot as the best employer in Mexico, as ranked by top companies. Returning to our first quarter performance, it is sustainable, with growing markets in each of our divisions, counterbalancing countries that are currently facing headwinds. In Brazil, first quarter momentum continues with the strong marketing calendar we have in place. And we will also have each year comps, as you know, given the trucker strike in the second quarter of last year. In SLAD, Argentina's macro environment continues to be very difficult. While our numbers are better than reports from the Association of Medium-Sized Retailers, It is a challenging environment nonetheless. But we continue to do very well in the rest of the division. And we also expect to maintain our strong sales momentum in NOLA, particularly in Mexico. In Panama and Costa Rica, we're seeing improved sales with implementation of a new affordability platform that is resonating strongly in these countries among others. Marcelo will also expand on this platform. So with that, Marcelo, the call is yours.