Arcos Dorados Holdings Inc.

Good morning and welcome to the Arcos Dorados first quarter 2020 earnings call. A slide presentation will accompany today's webcast, which will also be available in the investor section of the company's website, www.arcostorados.com. And as a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. Today's conference call is being recorded. At this time, I would like to turn the call over to Dan Schleiniger, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our earnings call. With me on today's call are Marcelo Rabach, our Chief Executive Officer, and Mariano Tannenbaum, our 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 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-gap financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found on the press release and 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 country's ongoing macroeconomic volatility. 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, Marcelo Rabach.

Thanks, Dan, and good morning, everyone. I hope you and your families are healthy and safe. Today, Mariano and I will address the topics on slide three, starting with a review of our results for the first quarter of 2020. We will also provide another update on how COVID-19 is impacting our business. including recent trends. And we'll go through some of our expectations for the post COVID-19 operating environment. Before we review our first quarter results and more recent trends, I want to take a moment to recognize the truly heroic efforts of healthcare professionals, first responders, and other essential workers across the globe. We thank them for putting themselves at risk to save lives, protect our communities, and ensure that we have access to essential goods and services while we fight to contain the spread of the virus. We extend our deepest condolences to everyone who has been personally affected by this situation. As we navigate this historically challenging period, our primary focus and attention remains directed toward the wellbeing and safety of our restaurant crew, staff, sub-franchisees, suppliers, and guests. I am filled with pride and appreciation for the hard work of our Arcos Dorados family in Latin America and the Caribbean. They are displaying our core values on a daily basis. providing support to their communities we serve, including the donation of more than 120 tons of food from our restaurants and distribution centers, as well as hundreds of thousands of Macombos to hospitals, emergency services professionals, and humanitarian aid organizations. Turning to our first quarter results on flight four. The momentum we generated in 2019 with our winning three-pillar strategy continued into the beginning of the first quarter of 2020. Year over year, system-wide comparable sales grew 10.9% for the first two months of the quarter. In other words, as we mentioned last time, we entered this crisis from a position of strength. Our strategy is supported by investments in opening new restaurants, modernizing existing locations, offering a compelling menu and unmatched service, developing an industry-leading digital platform, and leveraging the growth potential of the delivery and drive-through sales channels. Throughout 2019 and into early 2020, these investments drove comparable sales growth well above inflation, market share gains in most of our markets, consistent improvements in brand metrics and important gains in operational efficiency. And we accomplished all of this while significantly reducing our financial leverage, putting us in our strongest financial position in many years. When the COVID-19 crisis began in Latin America, governments throughout the region quickly implemented quarantine measures and mandated the closure of non-essential businesses. This was the main driver for reduced guest traffic, and together with a growing number of restaurant closures, a significant decline in March sales. By the end of March, we were operating 55% of our restaurants, primarily through drive-through delivery, and or takeaway. Against that backdrop, first quarter system-wide comparable sales, which by definition include all restaurants in our footprint over the last 12 months, fell 4.5% versus the prior year. These trends continued in April. Looking at the evolution of our restaurant operations since the beginning of the crisis on slide five, The number of operating restaurants dipped below 50% in the first few days of April. Four out of our five SLAT division markets and many smaller Caribbean division markets were completely closed for most of the first half of the month. There is still a long road ahead, but we believe we may have seen the worst in April. with a 64% decline in system-wide compatible sales, excluding Venezuela. In Brazil, we were forced to close most of our mall-based stores. However, since more than half of our restaurants in the country are freestanding or street-facing, we adapted these locations to operate through drive-through, delivery, and or takeaway. With system-wide compatible sales in Brazil, finishing down 54% in April. Importantly, we saw better sales trends during the second half of the month, as some of our other markets were able to partially resume operations, notably Argentina, Chile, Ecuador, and some of the Caribbean markets. And so far in May, we are seeing gradual improvements in sales trends. As of today, Thanks to the largest freestanding restaurant footprint in our industry, about 74% of our restaurants are operational. Brazil is now operating 70% of its restaurants, NOLAD 83%, CLAD 69%, and the Caribbean is operating 82% of its restaurants, excluding Venezuela. Throughout this crisis, we have gained invaluable insights from across the McDonald's system, which helped us to develop a three-phase recovery plan. This will not only guide us through the current situation, but is also preparing us for the pandemic's impact on consumer behavior and preferences in the long term. I'll turn the call over to Mariano now for a further review of our operating and financial results.