Alsea S.A.B. de C.V

Good morning, everyone, and welcome to OSEA's first quarter 2024 earnings video conference. My name is Gerardo Lozoya, head of investor relations and corporate affairs. And today, our chief executive officer, Armando Torral, and our chief financial officer, Federico Rodriguez, will be presenting the results. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view. of our business and that future results may differ materially from these statements. Today's call should be considered in conjunction with disclaimers contained in our earnings release and in our most recent Bolsa Mexicana valores report. The company does not have the obligation to update or revise any such forward-looking statements. It is important to note that earnings numbers referred to are based on pre-IFRS 16 standards unless specified otherwise. I would now like to hand it over to Armando for his initial remarks. Please go ahead, Armando.

Thank you, Gerardo. Good morning, everyone, and thank you for joining our first quarter 2024 earnings video conference. I'm pleased to share with you our financial results, regional highlights, and brand accomplishments for the quarter. Additionally, I will talk about the progress we have made on our digital strategy and ESG initiatives. I would first like to take an opportunity to thank our team members and our other stakeholders for their continuity, dedication, or . Before joining to the numbers, let me share with you our top priorities for this year. Regarding organic growth, we remain very commitment to grow organically both by generating more traffic sales per store and open new stores, where we see attractive returns on capital. As we highlighted in our recent Alsade, we saw plenty of white space ahead to continue to grow our main brands in our key markets. At the same time, we are constantly innovating to make our existing stores still more productive And so you can see from our results today, it has been very successful. Regarding operation efficiency, while S.A.B.' 's growth gets most of our attention, our management team spends a lot of time finding new ways to be more efficient and improving our operational margins without affecting the customer experience. This is a product of rigorous attention to detail Deep knowledge of the company and its process and openness to share the best practice across the organization. Digitalization of our company. ASEA started the digitalization journey a long way back. We were convinced about three things. Our customers will want to order their food digitally. Second, data generates by the company could help improve frequency and sales. And three, the internal process could be simplified and requires less manual work. I am immensely proud of how we can achieve this progress. Some 30.3% of our sales right from this quarter are digital, broadly defined, but we will still see huge opportunity ahead to improve this number. Regarding our RESTL Highlights 2024 results, as you will have seen, the year has started off well. In the first quarter, we posted a 2.7% year-over-year increase in total sales, reaching 18 billion pesos, or a 12.2% increase when excluding for exchange effects. same-store sales grew by a robust 10.1% year-over-year. EBITDA grew by 12.4%, reaching 2.6 billion pesos for the quarter, with a 14.3% margin for the quarter. These results demonstrate robust demands for our brand, even as the strength of the Mexican peso continues to affect our currency translations. We serve over 28.1 digital orders in the quarter, coming to 5.5 billion pesos, which accounts for 30.3% of our total sales. Let me go deeply into a quick overview of our brands. Regarding Starbucks... We reported a strong year-over-year same-store sales growth of 8.6%. The Starbucks same-store sales for Mexico were up 10.6%, driven by promotions like Frappy Birthday. For Europe, they declined 5.7%, mainly affected by the boycott to American brands in France and Benelux. And in South America, the increase was 19.5% driven by inflationary pressures in Argentina, with a better performance in terms of traffic than the rest of the staples market. Regarding Domino's Pizza, we posted a robust 12.5% store sales growth in Mexico, largely driven by initiatives such as Domizmania, some other carryout initiatives that we've been doing, and another successful S.A.B. de C.V In Mexico, the successful roll-up of digital chaos continued to lead to double-digit growth in the average ticket. Regarding the full-service restaurant segment, we had a trended positive same-store sales of 8%, and orders' ticket frequency growth or traffic grew by 3.6%. The strong results were driven by successful innovations with the launch of nine new burgers in Foster Hollywood, a sandwich platform in Vips, Mexico, and a new breakfast menu in Spain. Additionally, we opened a new Cheesecake Factory restaurant in the city of Querétaro, Mexico, with great success. Regarding our expansion strategy, during the first quarter, We target the most profitable opportunities available to us. We opened 27 corporate units and 9 franchisees, so we did a total of 36 openings in the quarter. Most of these new locations were Starbucks and Domino's outlets, strategically positioned in high-traffic areas and regions, particularly in Mexico and Spain. While we often see a slower start to expansion in the first quarter due to seasonal variation, We expect to increase the pace of openings through the year, alignment with our strategic growth goals and guidance. Another important pillar of our strategy is the remodeling of our units. And once we do work traffic, and once we do the work, the traffic increased by 6% on average, we pay backs aligned to the minimum returns set to the openings of the stores. During the first quarter, we have remodeled 13 units globally. Regarding our loyalty programs, we supported by our digital transformation strategy and at the end of the quarter, our loyalty sales grew 21.7%, reaching 3.7 billion pesos and representing 20.3 million orders and 20.6% of our total sales. By the end of the first quarter, we had more than 7.8 million active users in the different loyal programs. Programs such as Starbucks Rewards and Club Buy play a crucial role in driving sales and growth. At the end of the first quarter, just a few months following its launch in Spain, Club Buy already had 1.5 million users. Regarding ESG, In the first quarter, Alsea advanced in its ESG initiatives. Some of the highlights include all the new opens of Starbucks in Iberia and Mexico we'll consider as green stores in 2024. Also, we have certified 44 Starbucks stores as greener stores, reaching 129 in Latin America. In Mexico and in Europe, We use 70% and 50% respectively of clean energy to cover our electricity needs. Fundación Alsea has donated over 25 million pesos to one institution committed to food, education, and employability in Mexico. These contributions have benefited more than 8,000 people thereby demonstrating a significant commitment to the well-being and development of our communities. Also, Fundación Alsea together with World Vision Mexico launched the third edition of the Alsea Award in March with the aim of promoting the dissemination and creation of innovative initiative-rich research projects in the field of food and nutrition. It contributes to the development of public policies. I will now pass you to Federico so he can give you a more detailed review of our financial information. Please, Federico. Thank you, Armando. Good morning, everyone.

We are pleased with ASEA's first quarter performance as quarterly sales increased 2.7%, driven by positive consumption trends in most of the regions, brand preference, and effective commercial strategies. Excluding foreign exchange FX, sales increased 12.2% for the quarter. In Mexico, sales were up 13.1% to 10.1 billion pesos for the quarter. Sales in Europe decreased by 2.4% to 5.4 billion pesos, but in Euro terms, sales increased by 6%. Finally, in South America, we post an 18.4% decrease in sales for the quarter to 2.5 billion pesos, mainly driven by the devaluation in Argentina and a lower consumer trends in the region. In Mexico, adjusted EBITDA increased 23.3% to 2.4 billion pesos for the quarter. This improvement was driven by positive consumption trends, better portfolio mix, and lower raw material prices. Also, the 10.1% growth in same-store sales boosted operating leverage, and the appreciation of the Mexican peso helped cut dollar-denominated costs. In Europe, adjusted EBITDA increased by 1.8% to 739 million pesos for the quarter, and 10.9% in euros, driven by growth in same-store sales, as well as a reduction in energy prices, food costs, and other inputs. In South America, adjusted EBITDA decreased by 18% to 413 million pesos, driven by the devaluation of the Argentinian pesos in more than 400% year-over-year, as well as by pressures on the operational leverage stemming from the decrease in regional consumption. In the net income for the first quarter, we had a decrease of 22% to 440 million pesos year-over-year. This was mainly driven by the purchase of U.S. dollars in Argentina and the lower appreciation of the Mexican peso in comparison to the same period of the last year. For the first quarters, the earnings per share were 3.08 pesos, post IFRS earnings per shares rose to 3.36 pesos, an increase of 58% year over year. Regarding the CAPEX, In terms of the investments, our first quarter capex amounted to 940 million pesos. We allocated 23% of this amount to maintenance activities, 62% to store openings and remodelings, and 15% to other strategic projects like digitalization or change of the digital platforms. We have made prudent and responsible investments throughout the year, focusing on profitability. For the debt, our pre-IFRS gross debt increased 1.7 billion pesos year over year, closing at 28.1 billion pesos at the end of the quarter. This increase resulted from a bank loan to finance the exercise of the option to buy out the minority shareholders in Europe. Finally, the financial ratios. Looking at the total debt to EBITDA ratio, we closed the quarter at 2.5 times and the net debt to EBITDA ratio at 2 times. The debt structure at the end of the quarter was 88% long-term, with 67% in Mexican pesos and 33% in euros. We expect to continue with the strong balance sheet going forward and meet all our debt covenants thanks to the healthy ongoing cash generation. At the end of the quarter, we posted a cash position of 5.4 billion pesos. Before going to the Q&A, Gerardo will remind us of the 24 guidance. Please go ahead, Gerardo.