Arcos Dorados Holdings Inc.

Good morning, everyone, and thank you for joining our second quarter 2022 earnings webcast. With us today are Marcelo Rabach, our Chief Executive Officer, Louis Faganato, our Chief Operating Officer, and Marina Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation, also available in the investor section of our website, www.arcosdorados.com.ir. As a reminder, to better view the presentation on the webcast platform, please scroll over the upper left-hand part of the screen and click on the arrows to maximize the slides. After we conclude our 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. 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-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 on the press release and unaudited financial statements filed today with the SEC on Form 6K. Our discussion today excludes the results of the Venezuelan operation, both at the consolidated level as well as for the SLAB division. For your reference, we include a full income statement excluding Venezuela with today's earnings release. Marcelo, over to you.

Thank you, Dan. Good morning, everyone, and thank you for joining us again today. I am pleased to report a strong set of results for the second quarter of 2022. Today, Luis, Mariano, and I will take you through the highlights of our consolidated and divisional results. Mariano will also cover our balance sheet and growth metrics, while Luis will provide an update on the 3D strategy of digital, delivery, and drive-through that has been driving performance. Before I turn to the highlights of the quarter, let's take a look back at how we built the foundation to deliver today's results and drive sustainable growth in the years to come. Fifteen years ago last week, Arcos Dorados began operating with the exclusive rights to run and sub-franchise McDonald's restaurants in 19 countries and territories across Latin America and the Caribbean. Shortly thereafter, we added a 20th country and began the transformation of the company's operations and restaurant portfolio with a long-term sustainable growth strategy. Over that period, we expanded our footprint to almost 2,300 restaurants, including nearly 900 Experience of the Future locations. Freestanding units were the cornerstone of our unit growth and now represent 50% of total restaurants. We have also contributed to the economic and social fabric of the communities we serve by generating hundreds of thousands of first formal job opportunities for young people throughout our footprint. Discipline execution over the last 15 years allowed us to generate consistent unit sales growth in local currency, navigate some very challenging economic periods, and improve operating results even as competition intensified in the region's under-penetrated QSR industry. We carried significant operating momentum into 2020, by re-accelerating unit growth, reinvigorating the restaurant experience, and recapturing the magic of the McDonald's brand. When 2020 began, we were just beginning the company's digital transformation, focused on developing mobile app capabilities, deploying self-order kiosks, and growing our delivery sales. Today, we have the industry's leading digital platform, with the most downloaded and used mobile app, highest self-order kiosk penetration, and still growing delivery channel, despite the ongoing normalization of the on-premise business. Sales growth focused on higher restaurant volumes helped offset the cost pressures we have faced over the last few years. And the McDonald's brand is as strong as it has ever been in our region. This includes Brazil, where sales growth had been very strong and we have expanded the favorable gaps in both the favorite brand and top of mind index versus our main competitor. There were no shortcuts along the way, but the hard work is now paying off and we have the structural competitive advantages to keep this momentum going. Let's turn to the key highlights from the second quarter. Total revenue surpassed $880 million, and comparable sales grew about 48% versus the prior year. Most of that growth came from higher restaurant volumes rather than aggressive price increases. We have avoided contributing to the problem of high consumer inflation in our region. Instead, we are offering our guests a good value to build long-term loyalty through a responsible menu pricing architecture and the best restaurant experience in the industry. Topline grew well above inflation across our markets, driven by the 3D strategy and the largest freestanding restaurant footprint in the region. This, combined with effective cost and expense management, led to significant operating leverage and a 230 basis points EBITDA margin expansion. Excluding the Brazilian tax credit from last year's result, EBITDA margin expanded by 430 basis points and total EBITDA almost tripled versus last year. Net income was $15.6 million, or 7 cents per share, up from 3 cents per share in the second quarter last year. Finally, with 30 restaurants open so far this year, including 26 freestanding units, we are on pace to exceed the growth guidance we provided for 2022. Luis, over to you for a closer look at our sales results.

Thanks, Marcelo. All divisions grew comparable sales by at least three times inflation in the second quarter. This is a testament to the experience we are delivering in our restaurants. The cultura de servicio mindset we began implementing in 2016 is now an important competitive advantage. Offering value to restaurant guests is about much more than pricing or affordability platforms. It's about the experience we deliver and the service we provide, no matter how guests choose to interact with the McDonald's brand. That is what makes it real in the restaurants. In Brazil, digital channels generated 52% of system-wide sales. higher guest volume across nearly all channels, and a responsible menu pricing architecture drove sales growth. We strengthened McDonald's brand equity in the country with the Make It Easy campaign, where some of Brazil's most popular celebrities and influencers described their favorite orders. We also launched the McCrispy chicken lineup with a very encouraging result. Brazil enjoys one of our highest levels of digital channel penetration and guests are loving the flexibility only we can offer. In fact, the McDonald's brand preference index was two times that of our closest competitor in the market during the second quarter. Mexico, Costa Rica, and the French West Indies markets were the strongest contributors to NOLA's comparable sales growth. It is worth mentioning that the U.S. dollar markets of Panama and Puerto Rico also grew comparable sales at or near double digits. We ran the Mas Sabor, Mas Diversión campaign in Mexico, leveraging the iconic Big Mac, while in Costa Rica, we launched the McCrispy Chicken platform. The family business continues to benefit from our exclusive rights to Disney properties, with Happy Meal sales in Nolad and the entire company registering a very solid quarter. Finally, we took another step toward increasing digital channel penetration in the division by rolling out the order ahead functionality across Nolad markets. Slabs comparable sales growth benefited from important contributions from Argentina, Colombia and Chile. Marketing activities were a key factor in building sales and traffic growth momentum in the quarter. Guests enjoyed innovation in the premium menu lines with new sandwiches in Argentina, Chile and Uruguay. We also boosted our chicken credentials in Colombia, Ecuador and Peru with the launch of the delicious, craveable and juicy spicy McNuggets. Underlying the strong sales performance has been the success of the 3D strategy. Digital channels generated 41% of sales in the quarter and drive-through has remained sticky as well. In the coming quarters and years, we will roll out new technologies and capabilities in restaurants, the mobile app, and the back end to support future sales growth. I will be back later to talk about the three Ds in more detail. But first, I will turn it over to Mariano for a look at our divisional profitability, capital structure, and restaurant growth.