Arcos Dorados Holdings Inc.

Good morning and welcome to the Arcos Dorados third 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.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, that today's conference call is being recorded. At this time, I'd like to turn the conference call over to Dan Schleiniger, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Jamie. Good morning, everyone, and thank you for joining our earnings call. With me on today's call are Marcelo Rabach, our Chief Executive Officer, Mariano Tannenbaum, our Chief Financial Officer, and Luis Raganato, our Chief Operating 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 unaudited financial statements we will file 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 doing well. Today, we will review the topics listed on slide three. We will start with an operational update. Then we will take you through the details of our third quarter results and more recent events. We will wrap up with some early thoughts on next year. You have heard me say on each of our calls that, without a doubt, we have the best restaurant system in Latin America. The heart and soul is our people who have worked hard and overcome significant obstacles to ensure that our guests enjoy the safest and most convenient restaurant experience in our region. They make us very proud every single day. The three phases of our plan to navigate the pandemic are summarized on slide four. Our proactive and aggressive approach to the crisis management phase involves prioritizing our people and guests, supporting our communities, and stabilizing our cash flows to ensure the long-term health of our business. We are now solidly in the recovery phase of our plan, operating at least one sales segment in 99% of our restaurants. By focusing on the three Ds of our business, drive-through, delivery, and digital, while also building consumer confidence with our MAC Protegidos or MAC Safe program, we are gaining market share across the board. Sometime next year, we expect to enter the full revival phase of our plan. That is when all or substantially all our restaurants should return to full operations. We will build on the successes and learnings from 2020 to support a further recovery in sales and capitalize on the renewed excitement for the McDonald's brand in our region. Taking a more detailed look at our operations on slide five, in addition to reopening 99% of our restaurants, we are already operating all sales segments in about 70% of our locations, and have also reopened around 90% of our dessert centers. This comes ahead of the summer months in South America, when dessert centers usually perform strongly. We are also benefiting from operating the region's largest freestanding restaurant footprint, which returned to positive system-wide compatible sales in the month of September. While we are gaining significant traction, the pace of our recovery will be subject to how government restrictions evolve. We are still facing strict restrictions on both hours of operations and restaurant dining capacity. We have successfully offset some of the reduction in on-premise sales with very strong growth in both drive-through and delivery. But in the long run, we will still be a favorite destination for Latin American families. I will share more thoughts on that when we provide our early outlook on 2021. Let's turn now to the highlights of the third quarter on slide six. Our system by comparable sales, which include all restaurants in our system for more than 13 months, whether open or temporarily closed, recovered throughout the quarter. In fact, comparing the last months of each of the last two quarters, comparable sales recovered by about 25 percentage points. The three Ds drove the sustained recovery in top line results. together with efficient cost management generated positive consolidated EBITDA starting in July, reaching almost $26 million for the full quarter. In fact, all four divisions and about 80% of our markets delivered positive EBITDA in the quarter. Notably, Brazil had a solid rebound and we were particularly pleased with the Caribbean's performance. Adjusted EBITDA in the Caribbean, which is generated mostly in hard currencies, such as the US dollar and the euro, was almost 2.5 times higher versus the prior year period. Also, as we mentioned on our last two calls, we proactively implemented aggressive costs, investment, and cash management measures that stabilized our cash flows by the third week of April. This limited the crisis-related increase in our short-term debt, which we have already refinanced through liability management transactions that Mariano will describe in detail today. I will turn the call over to Luis now for a deeper dive into our sales trends and other operational highlights in the quarter.