Alsea S.A.B. de C.V

Good morning, everyone, and welcome to Alsea's third quarter 2022 earnings video conference. Today, we will have presentations from our chief executive officer, Armando Torrado, our chief financial officer, Rafael Contreras, Miguel Cavaza, our supply chain director of Alsea Mexico, and myself as the company's IRO. Now, I would like to hand over to Armando for his initial remarks. Please, Armando.

Good morning, everyone, and thank you for joining to our third quarter 2022 earnings video conference. I'm excited to discuss this quarter's results, our original and brand performance, and other strategic developments. Looking at the results of the third quarter, we are pleased to report a year-over-year increase in net sales of 25.5%, reaching 17.5 billion pesos, representing more than 3.6 billion pesos increased versus the third quarter of last year. Same-store sales posted an increase of 30.5% compared to the third quarter of 2021 and an impressive 31.4% compared to pre-pandemic third quarter 2019 results. EBITDA post IFRS 16 was 3.5 billion pesos for the quarter, up 10.6% year over year, leading to an EBITDA margin of 19.9%. Our operation cash generation was healthy at 5.1 billion pesos compared to 3.6 billion pesos in third quarter of 2021, allowing us to continue to deleverage our company. S.A.B. de C.V During our third quarter of the year, we were impacted by important increasing energy expenses in Europe, where in the previous quarter these represent only 2.6% of sales. In the current quarter, this was 4.2% points that was in the report that you already saw. Given that at the end of June, we had a fixed prices expiration there in our fixed prices that we already reported. In this regard, I want to point out a couple of points regarding electricity. During the quarter, the highest point in price, which was 584 percent higher versus the historical cost, and approximately 45 euros per megawatt. This was observed in the month of August, but has now been showing a down S.A.B. S.A.B. de C.V Since my appointment of a CEO back there in July, I have visited more than 100 stores out across our regions. I was able to connect with our talent and hardworking team members, affording me with some valuable insights, including ways that we might be able to deepen ties with some of the clients and supplies. I was happy to verify that Alsea has a solid portfolio in our brands, with a diversified offering products and consumption locations, and the right team to operate our brands and support a successful business model. Also, I came away with a deeper understanding of our strengths as a company and areas of opportunity across our regions and brands. One such area is very clear the potential that we have as an opportunity to become our old technology that we are game to have a better operation. So is the same in digital platforms in our brand countries where we haven't developed them yet. We added 37 new corporate restaurants across all regions in the third quarter, totaling 92 for the first nine months of the year. We are in line with complying with our guidance of opening more than 170 stores in 2022 S.A.B. de C.V. S.A.B. de C.V. S.A.B. de C.V. Regarding ESG strategic, within the work done with our imbalance pillar, we have invested over 186 million pesos since the beginning of the year to acquire Energy Star certified equipment for 72 new stores in Mexico. These give us our store efficiency electricity usage. We are also processing with our many offerings to our healthy plant-based products. During this quarter, as part of the Grow Pillar, we made an alliance with NotCo to respond to the demands of our consumers, and we are looking for delicious and balanced options in plant-based products alternatives for our customers. This alliance also has a positive impact in our balance pillar and contributes to our goal of reducing our carbon footprint. In line with a strategic Spain and Portugal, the offer of espresso drinks made a plant-based milk reach over 20% of all the espresso products sold, and we are already offering new vegan snacks at Starbucks. Also in Burger King Argentina, we have expanded our vegan menu, adding meat-free nuggets in addition to already existing veggie Whopper and the Veggie King. As well, I would like to share that as of today, Asel remains in fifth position out of 95 companies that were evaluated in the restaurant category for the S&P Global Corporate Sustainability Assessment of the Dow Jones Sustainability MLI Index. We now... We know that much remains to be done regarding ESG to meet the expectations and needs of all our stakeholders. We are working on a critical route and plans to achieve key milestones on ultimately our 2030 goals. Now, I will have you again with Salvador for him to have a more detailed overview on our sales and report trends. Thank you very much.

Thank you, Armando. As Armando mentioned before, sales during the quarter increased 25.5% year-over-year, and we continue to see a better performance compared to pre-pandemic levels, with 20.9% growth versus the second quarter of 2019. Excluding FX effects, sales increased close to 38% versus 3Q21. Our solid business model and the strategic calls made over these past couple of years have proven to be effective. After the pandemic, our customers began returning to our restaurants. However, performance in food delivery continues to be solid, making a 15% year-over-year sales increase in the third quarter. We served more than 11.1 million orders by home delivery, accounting for 16.7 of total sales in the quarter, a slight slowdown in share versus last quarter, mainly related to the upward trend in on-premise sales. Digital channels and technology-based solutions continue to be fundamental pillars in our long-term growth strategy. We are currently working on exciting digital solutions for our Starbucks and Domino's brands that will be rolled out over the next few quarters. In Starbucks, for example, the all-encompassing digital platform called Starbucks Digital Solutions will expand e-commerce delivery, loyalty programs, and payment methods. While at Domino's Pizza, we're developing advanced in-store displays to help our customers better explore our menu options, improve ticket size, and reduce labor costs. Regarding our core brands, the same-store sales growth year-over-year of Starbucks in Spain and France was in the mid- to high-30s range, while in Chile and Mexico, we're close to 30%. This quarter marked the 20th anniversary of Starbucks in Mexico. We are very proud of this achievement and what it means for the country. We were also glad to announce the 4.5 billion pesos investment in Mexico from now until 2026 that we will earmark for Starbucks new store openings, renovations, and improvements. Domino's Pizza in Spain and Mexico represented a 15% and 12% comparable sales Domino's Pizza in Colombia reported a mid-single-digit decrease in same-star sales compared to the third quarter of 2021, mainly due to a menu restructure, cutting out some aggressive promotions which impacted orders, however, improving margins. And finally, Burger King presented increases in Chile, Mexico, and Spain of 15%, 14%, and 13% respectively. Bips continue as well with a strong recovery in Mexico, reporting a 30% same-store sales growth compared to the 3Q21, while Bips in Spain reported a strong same-store sales increase of 28% versus the same quarter of last year. And we are introducing innovative products to our breakfast menu that have been very well received by our Spanish customers. In spite of the cost increase, mainly due to inflationary pressures in raw materials and non-recurring benefits related to agreements negotiated with some of our strategic partners in 3Q21, pre-IFRS EBITDA figures in the third quarter of 2022 increased 12.9%, reaching 2.1 billion pesos, with an EBITDA margin of 12.3%. Excluding the exchange rate effect, EBITDA increased 22.7%. Costs, as a percentage of sales, rose 200 basis points year over year, reaching 32.9%. Given the ongoing inflationary pressures, we have demonstrated how the cost control strategies we have deployed to counter inflation are working. We have also been proactive as a company in mitigating the global inflation scenario. And later on, Miguel will be talking through some initiatives that we have implemented, particularly in Mexico, that have helped us navigate through these cost headwinds. Looking at our regions and geographies, Mexico sales increased by 25.3% year over year, with an adjusted EBITDA increasing by 558 million pesos to 2.5 billion pesos. S.A.B. de C.V. In the face of major increases in inflation and energy expenses, the sales number in this region showed the resilient demand and consumer preferences for our brands. The contraction on adjusted EBITDA margins in the region were also impacted by non-recurring benefits from the previous year related to some agreements with our strategic partners, both on the cost side and in royalties. At the same time, we're working on mitigation efforts such as carefully studied price increases, negotiating long-term agreements with suppliers, and using our dynamic display menus and apps to guide customers towards higher margin offerings. Finally, in South America, we posted a strong 51.9% sales increase, while our just-edited was 865 million pesos, representing a 56% increase year-over-year. South American solid figures are mainly the result of a strong demand, decreased SG&A, successful product innovation, and digital strategies. Now, I will leave you with Rafael for him to give you a more detailed overview of our results and balance sheet situation. Rafael, please go ahead.