Arcos Dorados Holdings Inc.

Good morning and thank you for joining Arcos Dorado's fourth quarter and full year 2025 earnings webcast. With us today are Luis Aranato, our Chief Executive Officer, and Mariana 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 that is also available in the investor section of our website, ir.arcosdorados.com. To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the screen. After we conclude our opening remarks, we will answer your questions. 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 in today's earnings press release and conference call presentation, as well as the audited financial statements filed today with the SEC on Form 6-K. I will now turn the call over to Luis.

Thank you, Dan, and good morning, everyone. The fourth quarter of 2025 marked a solid finish to the year with double-digit revenue growth, expanded margins, and strong adjusted EBITDA growth, despite ongoing cost and consumer pressures in certain markets. Importantly, we exited the year with improving trends, particularly in Brazil, as well as continued momentum in Mexico and Slavic. Mariano and I will take you through the highlights of the financial results for the fourth quarter and full year 2025, as well as how we see 2026 developing. As I've mentioned in prior calls, our focus remains centered on three priorities. Optimizing the performance of today's business, maximizing returns on capital investments, especially those related to growth, and preparing the company for tomorrow's business trends. The fourth quarter demonstrated progress across all three areas Our teams executed with discipline on pricing, cost control, and marketing relevance while continuing to invest in high-return restaurant development and digital capabilities. Total revenue reached $1.3 billion, representing 10.7% growth. Revenue growth was supported by 16% higher system-wide comparable sales in line with the blended inflation of the 21 markets in the Arcos Dorados footprint. Comparable sales growth was primarily driven by average check, reflecting disciplined pricing, effective promotional execution, and the continued strength of our digital and loyalty platforms. Gaze traffic trends were generally stable compared with the third quarter. Adjusted EBITDA totaled $172.7 million, up 17.2% year-over-year, representing an 80 basis point expansion of the adjusted EBITDA margin. This included a net taxes benefit in Brazil that Mariano will explain in more detail. For the full year, system-wide comparable sales growth was in line with the company's blended inflation rate, with particularly strong performance in Mexico, Argentina, and several other slag markets. Brazil and a couple of new led markets faced a challenging consumption environment last year, but we began to see some improving trends toward the end of the year. Total revenue in 2025 grew by almost 5% in US dollars. Full year adjusted EBITDA was the highest in the company's history, boosted by the net tax benefits we recognized. Together with strong US dollar growth in both slat and dollar, these tax benefits more than offset the impact of higher food and paper costs and lower consumption in the Brazilian market. The strength of our marketing, digital and loyalty platforms have helped differentiate us from the competition by enhancing the brand experience across all channels. We also expanded the brand's presence in 2025 by opening 102 restaurants and bringing the modernized percentage of the portfolio up to 73% at year-end. Let's take a look at a few of the initiatives we used to generate sales growth in the quarter. Marketing activities strengthened consumer connections with the brand through a series of campaigns and initiatives. The highlight for most markets was a fully integrated menu strategy, leveraging the cultural relevance of the Stranger Things Netflix series, which boosted sales, drove high levels of engagement and meaningful brand conversations among consumers. Several markets also offered compelling value platforms, including Economic in Brazil and Más por Menos in Chile. both of which performed well with price-sensitive consumers. Menu innovation in the quarter included a new chicken sandwich in Colombia and limited-time flavors within the dessert category, such as Ovo Mochini in Brasil. Finally, Happy Meal sales were a bright spot for several markets. During the quarter, we ran engaging campaigns for all ages, built around popular licenses, such as Friends, Zootopia 2, and Deezer's Villains. Digital penetration reached its highest level with 62% of total sales coming from digital channels, mobile app, delivery, and self-ordered kiosks. Digital channel sales grew 18.7% versus the prior year quarter, with self-ordered kiosks, delivery, and loyalty showing particularly strong performance. Sales growth in delivery has been strong for several years, which is why the strong performance in self-ordered kiosks is so important. It demonstrates the continued relevance of the on-premise restaurant experience in the Latin American QSR industry. The loyalty program had 27.2 million registered members at year end and is now available in all main markets. completing the planned 2025 rollout and covering more than 90% of all restaurants in the Arcos Dorados food street. At the divisional level in the fourth quarter, we saw continued strength in slide with sequential improvements in both Brazilian knowledge, contributing to consolidated top-line growth. In Brazil, where restaurant industry traffic was down all year, we saw modest sequential improvement in comparable sales growth. We also maintained a significant market share advantage versus all competitors by leveraging the strength of the digital platform and popularity of the loyalty program. Almost three out of every four transactions were generated through digital channels, and about 30% of total sales came through the loyalty platform. These results were supported strongly by the annual Nike Friday campaign that capitalizes on the popularity of the Black Friday shopping day to drive mobile app downloads and digital engagement. It is worth noting that the relative strength of the Brazilian real versus the prior year quarter also contributed to US dollar revenue growth in the period. In NOLA, comparable sales grew 1.7% versus the prior year quarter, with strong gas traffic growth in several markets. As was the case in the first nine months of the year, Mexico was the main contributor in the fourth quarter, with corn sales growth of 5.6% or 1.5 times the country's inflation. Importantly, we began seeing improved trends in several other novel markets, and also benefited from the stronger Mexican peso and Costa Rican colón versus the prior year quarter. Slash comparable sales increased by 49.5% versus the prior year quarter, or 1.2 times blended inflation, driven by strong execution in Argentina. We also saw continued momentum in other markets, such as Colombia and the Dutch West Indies. Digital channel penetration reached a new high and market share gains were particularly strong in Argentina and Chile, where gains responded well to the quarter's marketing campaigns. Over to you, Mariano.

Thanks, Luis. And good morning, everyone. Consolidated adjustability in the fourth quarter grew by more than 17% versus the prior year quarter, as reported. While both periods benefited from tax-related items, even excluding these items, adjusted EBITDA grew by almost 14% in US dollars, year over year, with a 30 basis point margin expansion. For the first time in 2025, the fourth quarter included lower food and paper costs as a percentage of revenue in Brazil. This is a sign that our marketing strategies and supplier negotiations are working as they were designed. The main impact on consolidated food and paper costs in the quarter related to some mixed shifts in NODEP and higher bid costs in Argentina. Payroll expenses were up as a percentage of revenue due to the comparison with last year's quarterly result. which included a tax benefit in Brazil. Excluding this benefit, payroll expenses improved by about 60 basis points as a percentage of revenue. It is worth noting that over the last few years, certain markets have experienced elevated labor costs, but we have been implementing initiatives and technologies that have successfully offset these pressures. Currently, payable expenses are among the lowest in our history as a percentage of sales. As you have heard on recent calls, we are very focused on capturing efficiencies at every level of the business, not just in the restaurants. With that, we made the difficult decision to reduce our G&A expenses through a reduction in headcount. This process, which was completed during the first quarter of 2026, was designed to focus resources on the projects and investments we believe will generate the most shareholder value. Our adjusted EBITDA definition excludes reorganization and optimization charges, so you will see an $8.7 million add-back associated with this initiative in the IPDAR reconciliation. Finally, the fourth quarter included a net tax benefit in Brazil, arising largely from the same items we recognized during the third quarter. We recorded a benefit of $20.5 million, mainly as other operating income, and below the line, we recorded $13.3 million of interest income. With that, the full P&L impact of this net tax benefit was recognized in 2025. As a reminder, full-year adjusted EBITDA includes $106.1 million and interest income includes $52.9 million from this benefit, for a total impact of $159 million in 2025. Importantly, we have already begun to apply the credit to tax liabilities in 2026. We expect to utilize the tax credit over the course of the next five years with an annual cash benefit of around $30 million. In terms of full-year 2025 results, we are encouraged that even though food and paper costs rose, due mainly to significantly higher beef costs in Brazil, we were able to fully compensate the impact on restaurant margins by capturing efficiencies in payroll and occupancy and other operating expenses. In Brazil, excluding the tax impacts from both the fourth quarters of 2024 and 2025, Adjusted EBITDA grew 3% in US dollars with margin compression of about 160 basis points. The margin decline was primarily related to the higher royalty rate in Brazil in 2025. Remember that royalties were equalized starting in 2025 with a higher royalty rate in Brazil, more than offset by a lower royalty rate in NOLAD and SLAD. The other restaurant-level cost and expense line items in Brazil improved versus the prior year. NOLA generated solid US dollar EBITDA growth in the quarter, despite some margin pressure in food and paper costs as well as GMA. Meanwhile, SLAT delivered another strong quarter to close out a very good year, which included 26.1% US dollar EBITDA growth and almost two percentage points of margin expansion. In addition to rating efficiencies, we are implementing certain projects to improve the efficiency of our capital structure and capital allocation decisions, including the recent liability management transaction completed during the first quarter of 2026. Let me take you through it. In December of last year, our Brazilian subsidiary secured $150 million in new bank debt that matures in 2029. This is why you see the entire total financial debt as well as cash and cash equivalents at the end of 2025, but a stable leverage ratio versus year-end 2024. We entered into certain derivative instruments to hedge the interest rate and maintain the foreign currency expulsion of our long-term debt. As a result of these transactions, the new bond debt has an estimated US dollar cost of 2.53%. The proceeds of the new debt were used to fund a tender offer for about $135 million of our 2029 Sustainability Link Bond, which has a 6.18% interest rate. The tender was completed earlier this month. Among the benefits of the transaction are a reduction of the average US dollar cost of our long-term debt and a more efficient capital structure, both at the consolidated level and in Brazil. Additionally, moving forward, this new local debt increases the deductibility of our interest expenses. In terms of capital allocation, last year we exceeded openings guidance by adding 102 restaurants to our footprint, while deploying less total capital expenditures versus the prior year. Importantly, about half the total CAEX in 2025 was used to fund restaurant openings. For 2026, openings guidance is for 105 to 115 restaurant openings and total capital expenditures between $275 and $325 million, with the goal of improving returns on investments through better cash margins and lower per unit opening capex. Also for 2026, the Board of Directors has declared a cash dividends of 28 cents per share, up from 24 cents last year. payable in equal installments on a quarterly basis this year. Although it is early, we began the year with good momentum by focusing on factors we control. We expect the underlying profitability trends of the fourth quarter to continue. Importantly, we are seeing the potential for a higher gross margin this quarter and throughout 2026. When sales growth normalizes, we believe this focus on cost and expense discipline will generate incremental margin improvement opportunities in other lines of the P&L as well. Back to you Luis.

Thanks Mariano. Let me wrap up with a few final thoughts. We are encouraged by business momentum entering 2026 and confident we are positioned to deliver sustainable growth, expand profitability, and create long-term shareholder value. Our priorities remain unchanged. Disciplined execution, improved returns on invested capital, and continued strengthening of the McDonald's brand into the future. As Mariano mentioned, early results in 2026 have been relatively strong. Although current events have introduced some uncertainty, we believe in the resilience of the Arcos Donados business model. We see a more normalized consumer environment as the year progresses, and we have a strong marketing plan to strengthen the bond with consumers across income levels. In the short term, we are monetizing the significant market share advantage we built over the last several years. There is no other QSR operator in Latin America and the Caribbean capable of delivering the omni-channel experience guests prefer in an increasingly digitalized world. And we believe longer-term sales trends will recover, and we will have even more opportunities to generate value. Thank you for joining today's call. Dan, back to you.

Thanks, Luis. We will now begin the Q&A session. You can submit your questions using the Q&A function on the bottom of the screen. Please limit yourself to one or two questions so that I can read, understand, and convey them to our speakers. We will now pause briefly to compile your questions. Great. Okay. We have several questions already in the queue. We'll try to get to all of them if we can. Good morning again, everyone. We have a question from Fraulein Mendez from J.P. Morgan, and Fraulein asks us about taxes, and Eric from Santander has a similar question. So I'll read both questions, and then I'll pass it over to you, Mariana. Fraulein asks, can you please explain the higher taxes paid during the quarter and if we should expect this higher level going forward? And Eric from Santander says, good morning, all. Thanks for taking your questions. This quarter income tax was quite elevated. Could you help us understand the moving parts behind such high levels? And how should we think about this line in 2026, especially following the capital structure optimization? Over to you, Mariano.

Thank you, Dan. Good morning, everybody. And thanks, Freud and Eric, for the question. Regarding the ETR, remember that we analyzed the effective tax rate on a full year basis, not on a quarter by quarter. For the full year 2025, it's important to note that the ETR of Arcos Dorados was 37.7%, an improvement of almost five percentage points versus 2024. and reasonably close to the regional statutory rates. This reflects the mix of earnings across countries and some discrete impacts, particularly in Brazil. Going to the fourth quarter, the rate was high, compared to the fourth quarter of 2024, but this was in line with our projections. The quarter includes some one-off adjustments, in this case in Chile and Colombia, and higher tax charges in Argentina related to effects and inflation. But it's important to note that there are no structural changes behind that number. So, again, going to the full year, 37.7, five percentage points better than in 2024. Looking ahead, 2026, we expect a full year ETR in line with what we had for the full year in 2025. Of course, again, there may be quarterly variability, particularly early in the year, but the annual profile remains stable, and we are not seeing any structural changes on our ETR. Of course, during the year, we will continue to look for efficiencies and to look into ways to reduce that number.

Great. Thanks, Mariano. And we'll stay with you before I send a couple of other questions that I think will be about yours as well. We'll start with, can you give more color on the drivers of margin expansion in Brazil and SLAT?

Perfect. First of all, we're very pleased with margins in Brazil, specifically with the gross margin. As we have been mentioning during 2025 in the previous course, the impact of the increase in beef in Brazil was very high and impacted us particularly in the first half of the year. Now, in the fourth quarter of 2025, for the first time in the year, we are seeing an improvement, small of 10 bps, but we are seeing an improvement. That, going forward, and we are still in 20, we have not finished the first quarter of 2026, but we are expanding. will continue during the first quarter of 2026 in Brazil and in the other two divisions, and we have a favorable outlook for the rest of the year. But it doesn't end here, the margin expansion or the improvements we have seen in Excluding the one-off related to payroll in 2024, we have seen an improvement in payroll of 90 bps, mainly due to productivity and headcount. And also an improvement in occupancy and other operating expenses. mostly driven in this case by improving delivery margins. So we are very pleased when you exclude the one-offs related to Perlon in 2024, and you exclude the impact of the growth support of Royalties also in 2024, the expansion in Brazil, we are very pleased with that. Regarding SLAD that you also asked about, Freuland, payroll expenses, royalties, and occupancy and other expenses, we saw leverage in all of those lines, having a better other operating income as well, and a flattened G&A in the division. But Slata has seen an improvement of 180 BIPs, regarding same quarter of 2024 from 10.8 in 2024 to 12.6 in 2025.

Okay, great, Mariano. Thanks. And one more from Freud before we move on. And this one is, also, given the recent depreciation of Latin currencies, Does this change your outlook for top line and margins versus the time you share guidance?

Well, if we look at the average for the two main currencies, let's go to the Brazilian real and the Mexican peso. In the first quarter of 26 so far, and we are almost approaching the end of the quarter, the Brazilian real had an average of 5.2 versus... for the same period of last year. And the Mexican peso, an average of 17.4 compared with an average of 20.4 in the first few of last year. So we are seeing an appreciation of the currency that adding the inflation rate, the real appreciation is even higher. We're not seeing that depreciation of the currencies. Of course, in January at some point, the real was a bit more appreciated than what it is now, which, of course, given the worldwide events that we are experiencing, we are seeing an increase in volatility, but the effects are performing much better than everybody expected at the end of last year and even at the beginning of this year. And you know that when Latin currencies are appreciated, and on top of that, with modest level of inflation, we are seeing real appreciation of the currencies that, at the end, have a positive impact in our results.

Great. Thanks, Mariano. We're going to go now to Eric Fong of Santander again, who had asked previously about the same income tax question. And Eric had a second question, this one for you, Luis. Secondly, how should we think about Brazil's comp sales throughout 2026, bearing in mind all of the initiatives undertaken by the company and the additional resources from the increase in income tax rate exemption level in Brazil?

Okay, thank you very much, Eric, for the question. And to answer that, I have to go a few steps into 2025, where the market had a very challenging year with industry volumes down mid to high single digits versus This happened since the first quarter of the year with the additional pressure of the increase in beef costs that somehow made us make an adjustment in our strategy. And the pressure to consumption came especially or was related to especially factors related to disposable income. And, however, given this context, throughout the fourth quarter and full year, we managed to deliver positive comp sales and better margins. So about the consumption, we believe that consumers, particularly lower-income consumers, are being more rational with their spending power. And even though there isn't a lot of room for higher pricing, we are working through a combination of pricing and mix to increase average check, trying to offset those volume declines, protecting our margins. So what happened in the fourth quarter was that the contribution to sales came more from average check and channel shifts than volume. Because, as I said, we're trying to strike a balance between sales growth and profitability. And what we are seeing today, this first month of the year, is that we're seeing similar consumption trends. And our performance in the first quarter is about in line with our expectations. And what we expect from the second quarter and on is that the consumption levels are going to normalize. Still, our focus during this quarter and the rest of the year is going to be to build healthy comparable sales.

Ben, back to you. Thanks, Luis. The next question we have is from Jonathan Schwark of the ION Group. This one will be back to you, Mariano. In addition to a lower rate and no longer needing to hedge part of the U.S. dollar-denominated debt into Brazilian reais, are there any other monetary benefits of raising debt in Brazil or in BRL? i.e., lowering pre-tax accounting results that lowers taxes, avoidance of taxes for taking money outside the country, et cetera. That's a question from Jonathan.

Perfect, thanks. Johnny, how are you? Thanks for the question. I'll walk you through the transaction and I'll try to answer your questions here. In this case, this liability management exercise, we identified an opportunity, a marked opportunity to lower the cost of our debt. You will start seeing that, of course, during the full year 2026. We structured, in this case, three bilateral loans with three different banks and coupled them with the relatives to synthetically maintain our debt in U.S. dollars. Avoid, of course, paying the cost of car in Brazil was key for these transactions. And we ultimately repaid our 2029 U.S. dollar denominated debt. In this case, the resulting cost of these transactions ended in an estimated pre-tax cost of 2.53 in an annual basis, that's the interest rate, which compares in this case with 618 coupon of the Senior Notes 29. And on top of that, in January, we launched the tender offer and successfully repaid 135 of these notes. And this transaction, going to your second part of your question, enabled us to capture an even larger tax shield, therefore having advantages from a tax perspective as well. So I hope that with this flow, your questions are answered.

Thanks, Mariano. I'm going to move on now to Alvaro Garcia from BTG.12. And Alvaro asks a couple questions. The first one for you, Luis. On Brazil's sales, Economaki, are you seeing any interesting behavior from cohorts buying Economaki, i.e., adding other items to their order or increased traffic?

Thank you, Alvaro, for the question. As I said, the situation in Brazil regarding volumes are directly related with the slowdown that we see in the consumption. So, this value platform, the economic value platform that is a national value platform, is giving us the chance to somehow or to protect our market share. For those who do not know about this, it offers a very attractive price point and it gives the opportunity to our guests to build their own menu. And it has very good margins. So far, the platform has very good results. And yes, we do have some add-ons. The value platform is still going on during the first quarter. And most importantly, what we did is that we were able, with that kind of actions, even though the sector is down, we were able to maintain our market share, leading our nearest competitor by a factor of two. We were able to maintain that gap. This is going to position us very well when the operating environment improves, and we expect that to be... around now the second quarter and on into 2026.

Great. Thanks, Luis. Alvaro has a follow-up question, and I have similar questions from Troy at J.P. Morgan and Melissa at both B of A. So I'll read the three, and then I'll bring it over to you, Mariano. I think this one is for you. So Alberto says, headcount reduction, can you give more color on the headcount reduction, both financial impact and strategically why it makes sense for the organization? Troy at JP Morgan asks, can you quantify the impact of the headcount reduction going forward in terms of SG&A reduction as a percent of sales or any other metric that we can use to understand the impact? And Melissa from Bank of America asks, can you provide some additional information on the restructuring charge, including drivers of the decision, areas impacted, and anticipated savings? So all those that think of the same question, over to you, Mariano.

Thank you, and thanks everybody for the question. In this case, maintaining strong discipline over G&A expenses continues to be one of Arcos Dorado's top priorities and is aligned with Luis' message when he assumed his position. We consistently pursue initiatives aimed at improving efficiency and optimizing our G&A structure, always supporting the needs of the business. In full year 2025, G&A as a percentage of revenues remained flat, excluding one of the items that affected 2024. Notably, and this is relevant during the fourth quarter of 2025, we delivered a 50 basis point improvement in G&A over revenues, also excluding those one-offs. But in line with our commitment to long-term shareholder value creation and enhanced cash generation, and supported by efficiency gains from technology investment, we implemented a G&A restructuring over the last few months that is already completed. The objective in this case was to preserve operational excellence while better aligning resources with the activities that are more critical to sustaining growth and strengthening our platform for the future. In terms of numbers, our ongoing cost base has been reduced by more than $10 million on an annualized basis. And in this case, positioning us to generate operating leverage in 2026. Of course, then, there are other moving parts that affect the GNA, as you all know, like FX movements, like share price movements. But in this case, our cost-based case is $10 million less in the labor line. And this restructure has been made in the three divisions and at the corporate level.

Okay, great. Thanks, Mariano. I'll move on to Melissa's next question, which is related to CapEx. And we have a similar question from an investor, Max Joseph. So I'll read first Melissa and then Max. why was CapEx for 2025 below initial guidance despite higher number of openings? Is this FX-related? And how does investment per unit and ROI for recent openings compare with previous vintages? Max also asks about 2025 CapEx. Can you provide more detail on 2025 CapEx outside of new restaurant openings and how much was allocated to restaurant modernizations, technology initiatives, maintenance, and other categories? So I'll stop there, and then they both also asked about CapEx moving forward. But let's talk about 25 first. Over to you, Miguel.

Thanks, Melissa. And last for the question. In 2025, we remain focused on optimizing capital spending while fully executing our planned openings and modernization program. It's important to note that we did not obtain the savings by switching to cheaper restaurant formats. We maintained, even we exceeded the guidance, and we maintained the number of freestanding openings that we planned at the beginning of the year. In the second half of the year, we accelerated initiatives to be more efficient. We localized suppliers. We did right sizing of the restaurants, so a lot of focus on the construction phase, coupled with effects movements that had some benefits on imported elements that go inside the restaurant. specifically at the kitchen level, but all those allow to reduce the per unit cost without, as I mentioned before, compromising quality or scope. This area, it's important to note, has been a main focus for the entire finance and development teams during 2025. And the objective was to maximize return on investments, but maintaining the quality of our restaurant openings. So, as a result of all this, we were able to surpass the plan, opening 102 restaurants on top of the guidance that was 90 to 100, but with lower capital intensity, and we are very pleased with the results we obtained that contributed to increase and improve the free cash flow of the company. Dan, you were going to ask about 2026.

Yeah. So, Melissa from Bank of America, what is the allocation of your 2026 CapEx budget across restaurant openings, reimagining technology in other areas? And Max asked a similar question. Separately, are you planning to increase modernization rate to hit your year-end goal of experience of the future of 90-plus percent?

Perfect. Just as a reference, 2025, approximately 80% of the total capex was allocated to development capex, 20% to non-development capex. That includes mainly technology. For 2026, given that we increase a bit the guideline of openings Our expectation is, and also because we are going to finalize and modernize more restaurants, we are expecting that from the total guidance we gave you in January, approximately 85% will be allocated to development and 15% will be allocated to technology and other type of investments.

Great. Thanks, Mariano. I'm going to move now to Julia Rizzo from Morgan Stanley. She has a couple of questions. I'm going to start with one for Luis. Are there already signs of same-store sales recovery in the first quarter of 26 in Brazil and NOLA? And when do you expect same-store sales to reach inflation levels according to the company's algorithms?

Thank you, Julia, for the question. I mean, our plan is designed to deliver comparable sales growth about in line with inflation level as the year progresses. And we do have a strategic marketing plan that is fairly robust, not only in Brazil and NOLA, but in SLAD also. You saw that in the fourth quarter, for example, we have in Brazil actions like I was saying, telling just a few minutes ago about economici that drives volume, but we also had the Stranger Things action that brings the love for the brand. So, we think that the situation in Brazil is going to last for a while. We are prepared for that. And as I said, our challenge is to build healthy con sales. And in the case of Nodad, we had a slightly different case because even though we did have a challenging and highly competitive environment across most markets, comparable sales grew 1.7% with positive volume. This was supported by a slight shift in product mix and competitive pricing strategies. Overall sales growth was driven more by volume than by average check. And the highlight of the fourth quarter was Mexico and Puerto Rico. And looking ahead, we remain confident because Mexico is going to sustain the trend, and we believe that Panama and Costa Rica are taking the right actions to rebalance average check and gas traffic trends. So we expect to see that reaching that inflation or about inline inflation for the second semester.

Dan? Thanks, Luis. Okay, so I'm going to go now to Julia's second question, and this one will be for you, Mariano. Can you explain the NOLAB margin fall despite the royalty rate being 100 basis points better, and what should we expect for NOLAB margins in 2026?

Perfect. Thanks, Julia, for the question. Well, margins in OLA during the last quarter of last year were challenged due to sales growing below blended inflation. As we always mentioned, when we have sales growing below inflation, then you start having the leverage in several fixed cost lines. On top of that, we have seen some food and paper cost pressures during the last quarter. Remember that at During the full year 2025, NOLA did not experience foot-on-paper pressures in the first half of the year, but started having some pressures on the second half of the year. The good news here is that we saw improvements in occupancy and other operating expenses. and we managed to keep payroll almost in line with prior year. If you recall in 2024, payroll line was under pressure in NOLA due to increases in minimum wages in several markets such as Puerto Rico, Panama, Costa Rica and Mexico. So we are pleased to see that in 2025 through productivity gains we saw leverage in this line. We are also very pleased with Mexico's results and is the division's largest market where comp sales grew well above inflation and we expect to generate leverage during 2026. Going back to the food and paper line, and as I mentioned when I was asked about Brazil, in the case of NOLA, and let me add in the case of SLAD as well, we have seen very good signs during the first quarter of this year that, of course, is still ongoing, but early results are showing an improvement in food and paper costs in Brazil. uh the three divisions and in in the case of knowledge in particularly in uh knowledge so uh the fourth quarter was not great uh we agree but we are seeing some uh good news starting 2026 and we are very pleased how we have managed the Remember that between payroll and food and paper are the two most important cost lines in our P&L.

Great. Thanks, Mariano. I'm going to move over to Thiago Bortolucci from store sales in Brazil at 2% same store sales growth. I assume traffic in Brazil is at least mid-single digit negative. How has it evolved sequentially versus the third quarter? And to which factors would you attribute this evolution? And what are the drivers for an eventual inflection in 2026? I think Luis addressed this earlier. Jago, I think you said this while he was answering a similar question. So we'll try not to be repetitive. And then Tiago's other question, which is a two-parter, I think the first part will be for you, Mariano, and probably hooks on what you just mentioned around food and paper costs. And then the second part will be for you, Luis. The first part is, what is your base case for beef prices in Brazil in 2026?

Okay, thanks, Tiago. In Brazil, the main pressure, I will try not to be that repetitive, but the main pressure on food and paper last year came from beef inflation, which was up above 30% over the last 12 months. The good news is that we have seen two consecutive quarters of sequential improvement and that the trend has continued into early 2026. so we feel confident in our ability to continue recovering gross margin at this in this respect and the recent appreciation of the real also helps especially for our imported items it's important to mention that our pricing strategy remains disciplined and aligned with inflation with cpi so we're avoiding aggressive actions that compromise long-term health of The business, and as Luis mentioned, our new affordability platform is performing very well so far.

Thanks, Mariano. And then the second part, which is sort of a continuation of Chavo's question, and this one will go for you, Luis. How have you prepared your menu board for the next 12 months in the context of this?

for the question. Good morning. The good news about our menu board is that under one brand, we have all the categories. We do have beef, and we have our core items, our core sandwiches. We have our value platform, and we do have our premium sandwiches. So, In this, we are really well-covered. Then we have the chicken category that with the launch of the McCrispy chicken has reinforced and is now an engine of growth. And then we have desserts. We are focused on trying to recoup the levels pre-pandemic, that we had pre-pandemic. And then we have beverages, for example, and coffee that many of our main competitors around the region do not have the chance to talk about all the categories. So, our menu board is very healthy. we have an opportunity not only to increase our top line, but to improve our margins trying to push in these other categories. So, I would say that, Thiago, it is important to say that in the region 2025 was challenging, and one of the great outputs of 2025 is For example, we managed to shield our market share. Around the region, we gained one percentage point versus 2024, and we maintained the gap versus our main competitors two times more. So, I already talked about Brazil that had 2.2 times last year, but we have the case of Colombia, Mexico, Costa Rica, and Panama. taking in consideration our internal research. We have more than two times in those countries in comparable footprints, and more than three times in markets like Argentina, Uruguay, or Chile in comparable footprints also. So, going back to the question that you had, just to give you a little bit more color, we've seen sequential improvement that is reflected in our market share in comparable sales and, of course, in margins. And as we have mentioned in other calls, our target is to bring sustainable top-line growth and to improve operational efficiency. Our focus is in every line of our P&L. This should drive profitability. This should generate free cash flow and, of course, create shareholder value.

Great. Thanks, Luis. And we actually have no more questions in the queue, so we've reached the end of the Q&A session. Thank you once again for your interest in ARCOS and for joining today's webcast. We look forward to speaking with you again in the middle of May on our first quarter of 2026 earnings webcast. And until then, stay safe and have a nice rest of your day.