Arcos Dorados Holdings Inc.

Good morning, everyone. Thank you for joining our third quarter 2021 earnings webcast. With us today are Marcelo Rabach, our Chief Executive Officer, Luis Naganato, our Chief Operating Officer, and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of preparing part of the screen and click on the arrows to maximize the slides. After our speakers conclude their opening remarks, we will answer your questions, which you can submit using the chat function on the left-hand side of the screen. You will need to minimize the slides to access the chat function. Before turning the call over to Marcela, I would like to make the following safe harbor statement. Today's call will contain 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 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, Marcelo, Luis, and Mariano will take you through the main highlights of our consolidated and divisional results, as well as our investments and capital structure for the third quarter of 2021. They will also update you on the achievements and recent commitments we've made related to our Recipe for the Future ESG platform.

Marcelo, over to you. Thank you, Dan, and thanks to all of you for joining us on today's webcast. The results we are reporting today are among the best ever for the third quarter and demonstrate what is possible with the full revival of Arco Dorados. We are very pleased with the trends in the business and believe we are the best positioned restaurant company to capture the opportunity ahead of us, no matter what short-term challenges we may face in the region. But before we get into the specifics of the quarter's results, I want to talk to you about the structural competitive advantages that are now bearing fruit. This starts with the McDonald's brand. Thanks to our long-term strategic approach, brand metrics across Latin America and the Caribbean indicate we are the region's favorite restaurant. We have worked hard to revive and reposition the brand, implementing a variety of strategies to establish this important competitive pillar. One of the most important is the operational excellence that makes Arcos Dorados the strongest restaurant operator in the region. Quality, service and cleanliness are the mantra of our restaurant teams, and indeed the entire organization. This was put to the test in March of last year and our teams stepped up to the challenge. We quickly developed and deployed the Mag Protegidos or MagSafe hygiene and food safety protocols to all restaurants, reinforcing our industry benchmark procedures and strengthening trust with our people and guests. We also reinforced the loyalty that our teams already felt to the company by doing everything we could to protect them and their families throughout the period. ESG is part of the DNA of Arco Dorados, which is why we pushed ahead with the Recipe for the Future ESG platform, continuing to establish and meet tangible commitments to benefit the planet, our people and guests. I will tell you more about this later in today's presentation. Brand, operational excellence and the recipe for the future platform have translated into trust. But we cannot talk about competitive advantages without mentioning Arco Dorado's restaurant portfolio, nearly half of which are freestanding units. In fact, we have the most freestanding locations by a wide margin over the nearest competitors in most markets. This is another structural competitive advantage that cannot be easily replicated and was one of the keys to our ability to adapt to changing guest preferences over the last six quarters. By leveraging these foundational aspects of the business, we have accelerated both top-line performance and profitability by remaining focused on the 3D strategy of drive-through, delivery, and digital. We also operated our supply chain with no material interruptions, keeping costs under control with highly localized sourcing and a simplified menu of guests' favorites. We are now harvesting the benefits of these competitive advantages, as well as the efficiencies we built into the business over the last 18 months. Let's turn now to the third quarter results. Total revenue surpassed $723 million, just 3.2% below the total from the third quarter of 2019. despite the significant currency depreciations of the last two years and a very different sales channel mix. This was backed up by a 16.5% increase in two-year system-wide comparable sales, including positive results in all divisions, and above the period's blended inflation in three divisions. Importantly, this momentum has continued into the fourth quarter, with consolidated two-year comparable sales growth in the high 20s in October. Adjusted EBITDA reached almost $90 million, with a margin of 12.4%. This was more than three times the year-ago EBITDA in US dollars, and up 17.7% versus the third quarter of 2019. The result included a tax credit of $6.5 million in Brazil. Excluding the tax credit, the consolidated margin was 11.5%, up 130 basis points versus the third quarter of 2019. Almost 40% of the quarter's EBITDA before corporate expenses was generated in countries that operate in hard or relatively stable currencies. Another 48% came from Brazil, while less than 8% of the quarter's EBITDA was generated in Argentina. Off-premise sales through the drive-through and delivery sales segments remain sticky. Guests also love choosing their favorite McDonald's menu items through the mobile app. and are now coming back to the modernized experience of the future restaurants that will support future digital innovation. I will now turn it over to Luis for a closer look at our divisional sales performance.

Thanks, Marcelo. All Arcos Dorados divisions generated positive two-year comparable sales growth in the third quarter, and the three exceeded the blended inflation for the period. This is a testament to the structural competitive advantages that Marcelo just described. We surpassed pre-pandemic sales levels in local currency by leveraging the flexibility of the restaurant portfolio to offset the temporary decline in mall stores and the on-premise sales channels. Importantly, we delivered another quarter of increased market share across all divisions, building on the gains from 2020. Brazil's two-year comparable sales growth turned positive at the end of the quarter, growing mid-single digits in September. Digital sales channels of delivery, mobile app, and self-order kiosks are very strong in Brazil, where they generated 45% of system-wide sales. On-premise channels are recovering gradually as mobility improves in the country, leading both mall-based locations and restaurant front counters to see improved traffic. In fact, October two-year comparable sales growth was already very close to double digits in Brazil. Marketing activities in Brazil included a new line of map chicken sandwiches take home bottles of the popular tasty sauce, the elimination of all artificial colors and flavors from the kids menu, and the first ever 100% plastic free Happy Meal toy collection. As has been the case in each of the last five quarters, NOLA delivered a sequential improvement in top line growth. Total revenue in US dollars grew by 3.7% versus the third quarter of 2019, backed by 5.1% growth in comparable sales on a two-year basis and a relatively stable currency environment. Mexico is the main story here, benefiting from the strength of the brand and the restaurant portfolio in a resilient consumption environment. Panama and Costa Rica are also returning to normal after experiencing a more prolonged period of government-imposed operating restrictions despite high vaccination rates. In Mexico, we executed a quarter pounded numbers campaign driving 70% unit growth. Drive-thru continued to perform well while both delivery and the family business achieved sales records in the quarter. Topline growth has been very strong in SLAC and was higher than the Divisio's blended inflation rate over the last two years. Total revenue in US dollars was 3.8% higher than the third quarter of 2019, despite the 48% devaluation of the Argentine peso over the last two years. In Chile, guests have adapted quickly to digital sales channels. Delivery volume per restaurant has tripled since the beginning of the pandemic. We also operate Chile's largest street-facing restaurant footprint, supporting strong drive-through sales growth, even as the on-premise sales segments begin to recover. Argentina has also performed well this year, compared with the softer results we saw in the country in recent years. Marketing activities in SLAD included the launch of the premium Grand Tasty sandwiches in Argentina and Chile, which already took double digit share of total meals sold in both countries. Dessert category sales grew double digits, boosted by a new flavor in Chile. Results in the 3Ds were also promising. The drive-through VIP loyalty program, which is executed exclusively through the mobile app, drove increased frequency among the 1.3 million registered users in SLAT and more than 3.2 million registered users across all markets. As we have mentioned in the past, the Caribbean today operates at a different level of revenue and profitability. Two-year system-wide sales growth was almost 28% versus the third quarter of 2019, significantly higher than the blended inflation for the period. Colombia, Puerto Rico, and the French West Indies were the standouts. Once again, we are benefiting from structural competitive advantages in Colombia. with a market leading number of street-facing restaurants and the growing popularity of both the drive-through and delivery channels. Puerto Rico maintained the momentum we have been building since the beginning of last year. Marketing activities in the Caribbean included the launch of the signature chicken sandwich, Spicy Dacha, in Colombia. Two months after the launch, sales remained above expectations as we continued on the journey to grow the chicken category. All divisions benefited from our exclusive access to Disney licenses for the family business, helping to drive traffic while strengthening the brand's bond with families. Finally, the Caribbean already enjoys the company's highest penetration of trade restaurants, and we accelerated delivery sales with special promotions to support own delivery channel in Colombia. The off-premise channels continued growing in the quarter despite the gradual recovery in mall stores and on-premise sales. In fact, The split between on and off premise was still nearly 50-50 in the third quarter. Drive-thru sales rose about 12% in constant currency versus the third quarter of 2020, on top of 54% last year. Drive-thru volumes per restaurant proved to be resilient, even as front counter and dessert center volumes continued recovering month after month during the quarter. delivery was up 43% on top of 180% growth last year on a constant currency basis, boosted by very strong growth in value per restaurant. This included 52% growth in Brazilian local currency on top of 147% growth in the prior year period in that market. We believe the structural competitive advantage of our restaurant portfolio together with the 3D strategy will continue to support total sales growth in both drive-through and delivery moving forward. We also expect the contribution to total sales from these two channels to be diluted rather than cannibalized by growth in on-premise sales. Digital sales have been boosted by the strength of the McDonald's mobile app. which offers the most comprehensive functionality in the QSR industry. In fact, total digital sales grew 54% in US dollars during the third quarter 2021 versus the prior year period. The digital platform generated 36% of total sales in the quarter and the industry's highest rated app reached cumulative downloads of 56 million. with strong customer engagement evident in the active user numbers. This momentum continued into the fourth quarter, with October capturing the highest number of active users for the year, and there is still much more to come. The evolution of the performance of the 3Ds gives us great confidence and optimism for the medium to long-term prospects of the McDonald's brand in our region. Mariano, over to you.