Alsea S.A.B. de C.V

Good morning, everyone, and welcome to Alfea's fourth quarter and full year 2022 earnings video conference. Today, our chief executive officer, Armando Torrado, our chief financial officer, Rafael Contreras, and myself as the company's IRO will be presenting the results of fourth quarter and full year. Now, I would like to hand over to Armando for his initial remarks. Dito, Armando.

Thank you, Salvador. Good morning, everyone. And thanks for joining our fourth quarter of full year 2022 earnings video conference. I'm excited to talk about our results, our regional and brand performance and other strategic developments. For the full year, we are pleased to report an increase in total sales of 28.9% for a record high of 68.8 billion pesos. which was 15.5 billion pesos above 2021. Same store sales for the full year increased by 34.8% compared to 2021. EBITDA post IFRS 16 was 14 billion pesos for the year of 14.1 compared to 2021 leading to an EBITDA margin of 20.4%. An operation cash generation was healthy at 6.1 billion pesos, allowing us to continue to deliver and invest in new projects. Net sales excluding the hyperflation effect from Argentina for the fourth quarter of 2022 were up 12.2% year over year to a record high of 18.4 billion pesos. Same store sales for the same period were up 21.5% while pre-IFRS 16 EBITDA was up 3.4%, reaching 2.5 billion pesos. Now, before I get into post-IFRS numbers for the quarter, I would like to make a few comments about IFRS 16, which impacted our four-quarter EBITDA margin. First, as you well know, IFRS impacts how we account for our leasing contracts. It has poorly known cash effects that we don't consider internally for our metrics. We prepare this as an accounted market requirement. During the COVID pandemic, we obtained reductions on our rent payments. We have been working on many of our releases to be set to a variable rate, depending on our sales. Since our sales have increased, so have our variable list payments were up. In addition, measuring against a difficult comparative base from the fourth quarter of 21, where post-IFRS results were especially favorable. Rafael will get more in details regarding this topic later on. That said, post-IFRS 60 net sales for the fourth quarter were up 14.4% year over year, to a record high of 19.1 billion pesos, and due to that of 14 mentioned factors, EBITDA was down 18.4% to 3.5 billion pesos versus a 4.5 billion reported in 4-21. Our record sales in the quarter and full year show a strong demand for our brands. The underlying profitability is also solid, despite post IFRS effects, which are largely non-cash. and all of this despite the backdrop of challenging macroeconomics conditions, especially that we lived in Europe. In the second half of 2022, we were impacted by significant energy expenses increase in Europe. Since the end of June, our fixed price energy contract expired. In the second quarter of 2022, energy cost represents 2.3% of sales in Europe, rising to a 6.8% in the third quarter and falling to 4.3% in the fourth quarter of 2022. Regarding electricity, the highest price point we witnessed in the year was €308 per MWh in the third quarter. which was 580% higher than the historical cost of the month of August. Since then, electricity prices have been gradually falling, which was continued into 2023. This year, we are expecting to pay in the range of 90 to 100 euros per megawatt hour. We have been watching the market for long-term electricity hedging contracts. However, Given the current market conditions and the centrality of the situation in Europe, we prefer to be cautious and not close to a long-term deal now. In the short term, we are implementing a strategy of partial electricity hedges in Europe on a month-to-a-month basis. In the fourth quarter, we are in 74 new corporate restaurants and 12 sub-franchises across all regions. 147 Net Corporate Units and 38 Net Subfranchise for the full year. Since we restarted our openings process a bit later than initially expected, we are not able to open all the project units within the year. We are constantly revaluating every aspect of potential openings to reflect our focus in profitability. Among our openings this year, In France, we opened 17 Starbucks locations in the year. We see a potential for further growth in this market where we estimate to open between 400 to 500 stores in the future. In Uruguay, we have opened our first Domino's pizza store and currently we have three more under construction. The entry of Domino's in this market has been very successful and we have been observing twice the demand we initially forecasted. We ended the quarter passing 1,000 sub-franchise team mark. We also have more than 4,400 total stores and over 75,000 team members. We continue to be in a strong position to take advantage of the market opportunities with our core brands in the market that we currently operate in. We will share in our strategic plan and along with further guidance for the year at our upcoming Universal Day on March 30 in New York City at City Corporate Offices. Finally, I would like to give a quick overview of our main achievements in ISG Miners. In 2022, we launched our goals for 2030 and made the following progress during this year. We were able to help over 1.8 million people by delivering more than 38.6 million pesos and in kind donations for more than 70 tons of food. Also, during that year, Alsea Foundation in association with World Vision Mexico created a premio Alsea and awarded for food and nutrition related to research. 69 projects from Argentina, Colombia, Chile, Spain, and Mexico participated, and we gave $150,000 prize to the winning research project. In Mexico, we achieved 72% clean energy consumption. Additionally, in our four manufacturing centers, we were recertified as safe quality food and all our regions. We are being a baseline survey of the current state of our supplies regarding ISG issues. At the end of 2022, Alcibo remained in the fifth position out of 95 companies that were evaluated in the restaurant category of the Standard & Poor's Global Corporate System GDP Asset Assessment. of the Dow Jones Sustainability Millionaires. Regarding advancements in gender equity and social inclusion, we were pleased to announce in January 2023 our newest board members, Cristina Quena and Gabriela Garza. Now, ALCEA board has a total of three woman members, and women make up to 25% of the total board and 43% of the independent board members. Christine has over 22 years of experience as a technology investor, identifying innovation trends, managing complex fundraising and M&A transactions, and driving global corporate strategy. Christine is a part of the ITNIA Venture Capital and has previously held leadership positions at Google, IT Education First, and IWI Parfenthal. Gabriela is a director of a family office and a strategic executive advisor. She is the co-author of the first and second edition of Women Matters MX and is an expert in gender diversity and inclusion. Gabriela was a former consultant in McKinsey and Company. In addition, 872 members of our global workforce come from disadvantaged groups and 23% of our managing position are held by women. We know that much remains to be done regarding ISG to meet expectations and interval our stakeholders. We are working on our plans to achieve key milestones and ultimately our 2030 goals. Now, I will pass it back to Salvador for him to give you a more detailed overview of our sales.

Perfect. Thank you, Armando. Well, as Armando mentioned, sales increased 14.4% for the quarter and 28.9% for the full year. And we continue to see improved performance compared to pre-pandemic levels. Excluding foreign exchange effects, sales increased close to 22.6% for the quarter and 35.6% for the full year. Our solid business model and the strategic decisions made over these past couple of years have proven to be effective. Customers have returned to dining in as pandemic-related restrictions have been removed across all our regions. Despite this, and even As sales continue to increase, food delivery as a percentage of sales hasn't wavered. In the fourth quarter, it remained sequentially stable at 17% of total sales. We served over 12 million orders by home delivery in the quarter, which represents an increase of 13.2% compared to the fourth quarter of 21. Looking at the full year, delivery was up 13.8% compared to 2021. reaching 12.3 billion pesos, which is over 46.6 million orders, and represented 17.8% of Althea's consolidated sales. Our digital channels and technology-based solutions continue to be fundamental pillars of our long-term growth strategy. We are currently working on an innovative digital solutions for our Starbucks, Domino's, and Burger King brands that will be rolled out over the next few quarters. In Starbucks, for example, the all-encompassing digital platform called Starbucks Digital Solutions, which was already put in place in Europe, will expand e-commerce delivery, loyalty programs, and payment methods. While at Domino's Pizza and Burger King, we're developing advanced in-store digital displays to help our customers better explore our menu options, boost conversion, and improve ticket size. Especially as labor costs have risen, we have seen the increased utility of these digital solutions. Regarding our core brands, the fourth quarter, thanks to sales growth year over year of Starbucks in Spain and France, was in the low 20s range, while Chile and Mexico were in the mid to high 20s. For the full year, all of those regions had thanks to sales growth over 30%, with France reaching more than 50%. In 2022, out of the Starbucks units that we opened, 40% were drive-thru locations, which reported outstanding results. Even though these units are in average 30% more expensive than other formats, they have achieved more than 50% higher sales and 30% more orders than traditional stores. Therefore, we plan to keep on developing this strategy by opening around 60% of all Starbucks units with drive-thru capabilities. Domino's Pizza in Spain and Mexico had 11% and 7% comparable sales during the quarter, respectively. Domino's in Colombia reported a mid-single-digit decrease in its same-store sales compared to the fourth quarter of 2021, mainly due to a menu restructure and cutting out some aggressive promotions which impacted orders but improved margins. Burger King posted increases in Chile, and Mexico of 10%, 7%, and 6% respectively during this quarter. I'm also pleased to announce that Bips Mexico has now recovered to pre-pandemic 2019 levels. In the fourth quarter, same-store sales were up 15% year-over-year and 34% for the full year versus 2021. Bips in Spain in the fourth quarter also reported strong same-store sales, increase of 20.8% versus the same period, and 40% growth on a full year-over-year. Despite cost increases, mainly due to inflationary pressures in raw materials and non-recurring benefits related to agreements negotiated with some of our strategic partners in the fourth quarter of 21, our pre-IFRS 16 EBITDA in the fourth quarter of 22 grew 3.4%, reaching 2.5 billion pesos with a margin of 13.7%. Excluding the exchange rate effect, the EBITDA increased 11.4%. For the full year, 3 IFRS 16 EBITDA in 2023 grew by 33.3%, reaching 8.7 billion pesos, with a margin of 12.9%. In the fourth quarter, costs as a percentage of sales rose 260 basis points year-over-year, reaching 33.3%, and for the full year, costs represented 32.7% of sales, increasing 130 basis points. Given the ongoing inflationary pressures, we have demonstrated our cost-controlled strategies, such as inventory planning, negotiating long-term agreements with suppliers, and eliminating aggressive promotions are working. Also, as we mentioned earlier, we are constantly monitoring input prices and evaluating potential overstocking agreements. Also throughout the year, we worked on carefully studied price increases and using our dynamic display menus and apps to guide customers towards higher margin offerings. Looking to results by geography, Mexico's quarterly sales increased 19.1% year over year with adjusted EBITDA falling 153 million pesos to 2.5 billion pesos. Mexico's annual sales increased 28.6% year-over-year, with adjusted EBITDA growing 1.7 billion pesos to 9.8 billion pesos. We're pleased with Mexico's continued demand performance in the face of rising inflation and declining purchasing power in real terms. Sales in Europe grew 2.1%. However, due to increased costs and expenses, adjusted EBITDA was 596 million pesos lower for the quarter, at 1.4 billion pesos. For the full year, sales grew 19.3%, and for the same reasons, adjusted EBITDA was 487 million pesos lower at 5.4 billion pesos. In the continued phase of increased inflation and energy expenses, the sales numbers in this region showed resilient demand and consumer preference for our brands and products. The contraction in adjusted EBITDA margins in the European region was also explained by the end of non-recurring benefits from the previous year related to agreements with our strategic partners, both on the cost side and in royalties, in addition to the foreign exchange effects. In 2022, our tourism was lower than usual due to China's COVID-19 restrictions, especially in France. We expect a positive impact this summer from tourism now that Chinese citizens are traveling again. On a normal basis, tourism accounts for approximately 25% of Alsea sales in Europe. And finally, in South America, we posted a strong 25% sales increase for the quarter with adjusted EBITDA at 899 million pesos, representing a 70 million pesos increase year over year. For the full year, sales increased 49% and adjusted EBITDA was 3 billion pesos, representing 937 million pesos increase. South America's positive results were driven by strong demand, decreasing SG&A, successful product innovation, and digital strategies. Now, I will leave you with Rafael to give you a more detailed overview of our results and balance sheet. Rafael, please go ahead.