Arcos Dorados Holdings Inc.

Good morning, everyone. Thank you for joining our fourth quarter and full year 2020 earnings webcast. With us today are Marcelo Rabach, our chief. to maximize the slides. Also on the left-hand side of the screen, you'll find some basic information about today's speakers, as well as the chat function for this webcast tool. At the end of today's presentation, you will be able to submit questions using that chat function. Before turning the call over to Marcelo, I'd 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 6K. Our discussion today also 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. If you'll please now turn to slide three. Marcelo, over to you.

Thank you, Dan. And thanks to all of you for joining us on today's webcast. Almost two months ago, We reported system-wide comparable sales for the fourth quarter, commented on the main trends in the three Ds, drive-through, delivery, and digital, and delivered a preliminary outlook for 2021. Today, we will fill in the details of our strong fourth quarter performance and talk about more recent trends as well. Additionally, we will provide more color on the ongoing digital transformation of Arcos Dorados, which will increase our lead in the digital race across the region's restaurant industry. Finally, we will share some important news related to our ESG commitments. In 2020, we managed through the most unexpected and unprecedented crisis of our lifetimes. we were forced to find new ways to work in our restaurants and offices, managing a business with an enormous geographic and cultural footprint, while coordinating efforts with a vast network of suppliers and sub-franchisees. Looking now at slide 4, I believe our successful crisis management was the result of our proactive and aggressive response to the crisis itself, together with our historical long-term strategic approach to growth. We built a superior restaurant footprint with 60% street-facing locations that are resilient in difficult times and flexible in times of changing consumer behavior. We introduced new sales segments to capture emerging growth opportunities, such as MAC delivery in recent years and the search centers further back in our history. We began investing in digital tools more than five years ago, likely as the earliest movers in Latin America's QSR industry. And we never lost sight of the company's most important assets, our people and their relationship with the communities they serve. The recipe for the future is rooted in generating opportunities for young people, and ensuring that we have a positive impact on the environment for the benefit of future generations. Before I turn it over to Luis and Mariano for specifics on the fourth quarter, let me take you through the highlights of the full year 2020 on slide five. Total revenue for the year was almost $2 billion, which was about 33% lower than the prior year, due to the impact of the pandemic and the depreciation of several of the region's key currencies. However, by focusing on the competitive strength of the three Ds, we generated strong sequential top-line growth beginning in May, which included 33% constant currency drive-through sales growth and 153% constant currency delivery sales growth versus the prior year. All of this supported by the most popular and highest rated digital mobile app in the industry. Adjusted EBITDA was $72.5 million, despite a very difficult result in the second quarter. Both profitability and cash flow generation improved significantly in the second half of 2020. The benefit of having both geographic and currency diversification became clear in 2020, when we did not depend on any single market to navigate the crisis, nor did we feel the impact of the pandemic in all markets at the same time. In fact, 30% of last year's EBITDA before corporate expenses came from the US dollar or euro generating markets. and another 20% was generated in markets with relatively stable local currencies. We began 2021 the way we ended 2020, with strong top-line and profitability trends, despite a difficult comparison with the 10.9% comparable sales growth we generated in the first two months of last year. As we told you at the beginning of the year, we expected to face near-term volatility before entering the full revival phase of our plan. In fact, several governments recently increased restrictions on mobility and gatherings that negatively impact consumption. This includes Brazil, where Sao Paulo State is about to complete two weeks of strict quarantine measures. However, in other markets, such as Argentina and Chile in SLAD, Colombia and Puerto Rico in the Caribbean, and all NOLAD markets, the strong recovery trends have continued so far in March. We also do not expect renewed restrictions to last as long or have the same impact as when the pandemic began one year ago. Today, we are a more agile and adaptable company, with all the learnings from last year. We know which safety protocols are needed, how to move inventory from closed to open restaurants, which sales channels to focus on and in what way. Keep in mind that the fast-growing drive-through and delivery segments generated 52% of total sales in 2020, and these segments are not materially impacted by the restrictions. consumers also know how to better deal with these restrictions the second time around and they know which brands they can trust and which touchless service models are available finally with our broad geographic footprint we are seeing solid contributions from hard currency markets and benefiting from operating the industry's best brand and restaurant portfolio luis Over to you for a look at operating highlights in the fourth quarter on slide six.

Thanks, Marcelo. In January, we reported fourth quarter system-wide comparable sales for the company and by division. So today, I will just point out a couple of additional highlights. Brazil faced the toughest comparison with the prior year after posting 9.5% comparable sales growth in the fourth quarter of 2019. Despite this, fourth quarter 2020 comparable sales approached 90% of the prior year's level and the cumulative sales impact of the last two years was down just 1%. far outperforming the industry in the period. And at the beginning of last year, we finished acquiring all sub-franchise restaurants in Puerto Rico. As a result, we now recognize 100% of the revenue from those locations rather than just rental income. Although this does not change the system-wide comparable sales result, It did contribute 14.4 percentage points to the 19.2% U.S. dollar revenue growth in the quarter. One of the consistent themes of 2020 was the contribution of the 3Ds on slide 7. The fourth quarter was no exception. as constant currency growth in drive-through sales exceeded 48% and delivery sales rose 171% over the prior year quarter. The contribution to total sales from these two segments declined sequentially over the last two quarters. as sales at the front counter and other sales segments continue recovering with fewer operating restrictions in most markets. Still, drive-through generated almost 37% and delivery contributed more than 14% of the quarter sales, slightly higher than and in line with our long-term expectations, respectively. Drive-thru was particularly strong at the end of the year when we reached a record number of vehicles served per restaurant in December. And delivery started 2021 on a high note, reaching the highest ever number of daily orders per restaurant in February. Both segments are performing above expectation so far this year. We're also very proud that McDonald's Corporation recently named our delivery squad among the winners of its Circle of Excellence Award, which celebrates the success of cross-functional teams that have come together to drive significant results across the business. I want to congratulate our team for leading the way in Latin America and across the McDonald's system as well. On the digital front, at the end of 2020, we had 46 million mobile app downloads. I am very pleased to announce that just a few days ago, we became the first Latin American restaurant operator to cross the important milestone of 50 million downloads. According to App Annie, in Brazil, the McDonald's mobile app is consistently and by far the most downloaded app in the restaurant industry. Perhaps a reflection of the app's industry-leading customer rating. Let's turn to another important and consistent trend from 2020 on slide 8. Market share gains in our key markets. According to the latest report from Crest, which started tracking the industry in 2016, McDonald's brand reached its highest share in Brazil's QSR industry last year, with the largest share gain across all QSR brands, maintaining its significant leadership position. There were similar gains in markets such as Argentina, Chile, Colombia, and Puerto Rico, just to name a few. While we surely benefited from a consolidating industry and consumers who trusted larger brands to provide a safe restaurant experience, we believe the outperformance against the industry came from factors we controlled. Proactive management decisions that leveraged our freestanding restaurant portfolio a focus on the strength of the 3D strategy and the rapid implementation of the Mac Protegidos program. In other words, we have capitalized on the opportunity to strengthen the McDonald's brand across the region by taking care of our people and guests, focusing on operational excellence and enhancing brand trust through safety. we expect this consistent leadership to boost future growth while markets normalize. The McDonald's brand remains the most trusted restaurant brand in the region for being the safest place to eat out of home by a wide margin. In 2021, we will double down on the Mac Protegidos program to ensure excellence and consistency of execution. Looking at the main priorities for 2021 on slide 9, we are capturing further benefits from menu simplification, focusing marketing efforts on core products, and reviving the family business in support of top-line growth. We are also sharpening our focus on the competitive advantages of operating the largest number of drive-through restaurants with segment-specific initiatives. For example, a Swim By Any Way You Like campaign that encourages guests to visit our drive-thru lane no matter how they get there. Another example is the loyalty program linked to the drive-thru segment, Club VIP Automag. The program, which already has 900,000 registered users, was originally launched in Argentina and was rolled out to Colombia, Chile, Uruguay, and all three knowledge markets during the fourth quarter. Finally, I cannot overstate the significance of the delivery business. We're continuously reducing our delivery times while improving the accuracy of the orders, which has resulted in some of the highest customer satisfaction scores since we launched the service in 2018. This year's marketing plan is focused on driving delivery sales growth with a number of initiatives around special dates, exclusive promotions and relevant consumer occasions. While we develop expanded delivery options, including on delivery, we are also optimizing our aggregator relationships. In fact, after launching the service and building the MAC delivery brand by partnering with major aggregators in each market, we are now testing exclusivity agreements with aggregators in Brazil, Colombia, and Peru. Among the benefits are the alignment of incentives and growth investments, together with a greater focus on execution to improve the customer experience. So far, the results have been very promising. Mariano, over to you for a closer look at the company's profitability and capital structure.