Alsea S.A.B. de C.V

Good morning, everyone, and welcome to Alsea's first quarter 2025 earnings video conference. My name is Gerardo Lozoya, Head of Investor Relations and Corporate Affairs. And today, our Chief Executive Officer, Armando Torrado, our Chief Financial Officer, Federico Rodriguez, and our upcoming Chief Executive Officer, Christian Gurria, 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 in our earnings release and our most recent Bolsa Mexicana de Valores report. The company is not obligated to update or revise any such forward-looking statements. Please note that unless specified otherwise, the earnings numbers referred to are based on pre-IFRS 16 standards. for his initial remarks. Please go ahead, Armando.

Thank you. Thank you, Gerardo, and good morning, everyone. Welcome to ASEA's first quarter 2025 earnings video conference. I would like to begin by thanking our team stakeholders for the continued commitments as we set our priorities for the year ahead. Before going into our quadrant information, I want to give a warm welcome to Christian Gurria, that is here with us. And this will be my last CEO call as a CEO of Alsea. Christian will be present and he will present his strategy priorities as the new CEO in the next earning call in July. Today, I will provide an overview of our quarter performance, covering our financial results, regional highlights, and key brand developments. I will also highlight our progress on our digital transformation, ESG initiatives, and expansion strategy. Before diving into the highlights previously announced, I am pleased to share that we signed a strategic agreement with Chipotle Mexican Grill to launch The Brown in Mexico. The first locations are expected to open in early 2026. This partnership strengths our portfolio with a high-potential concept and aligns with our long-term growth strategy. Chipotle offers a fast, casual dining experience centered on customized and fresh, high-quality ingredients, providing a different concept. To begin, let me give you some highlights from this choir. In the first quarter, we report a 12.8 year-over-year increase in total sales, reaching 20 billion pesos, or a 7% increase when excluding for-exchange effects. Same-store sales grew by 5.1%. EBITDA decreased by 9.1% in the first quarter, reaching 2.3 billion pesos, with a margin of 11.7%. This decline was primarily driven by negative calendar effect, the depreciation of the Mexican peso, and three-week labor disruptions in Chile and persist macroeconomic pressures. In the context and with a long-term perspective, we maintain cautious approaching to pricing environment on elevated input costs. As we remain focused on driving traffic while sustaining brand competitiveness and customer preference. We serve over almost 34 million digital orders in the quarter, amounting for 7.4 billion pesos, which accounted for 38.7 of our total sales. This performance confirms the continuous effective transactions of our digital strategy. Regarding our brand's performance in the quarter, Starbucks Alsea same-store sales increased by 4.7%. For Starbucks Mexico, same-store sales increased by 3.5%, mainly driven by a loyal customer base and solid in-store performance, despite a negative calendar effect and more cautious consumer backdrop. For Starbucks Europe, same-store sales declined 2.2% as we continue progressing toward traffic recovery following last year's boycott in France. There's early signs of improvement and emerging. This is supported by local initiatives and target commercial strategies, a main at rebuilding consumer engagement. And finally, in South America, same-store sales increased by 18.6%, and decreased by 6.7, excluding the effect of Argentina. In Domino's Pizza Alsea, we posted a 2.6 increase in same-store sales. In Mexico, Domino's Pizza same-store sales increased by 1.5%, supported by stable performance in the delivery channel. although growth was moderated compared to prior periods due to the softer trends in the telephone ordering channel. In Spain, same-store sales increased by 2.4%, reflecting effective promotion strategies and solid customer response to product innovation, including our continued successful campaign of Crosantissima. And in Colombia, Domino's delivered a strong result, achieving a 10.57% same-store sales growth, mainly driven by effective marketing campaigns, such as Dominos Mania, which contributed to higher volumes and strengthened our brand momentum. Burger King Salcea same-store sales grew in Argentina, decreased by 4.8%. In Mexico, we reported same-store sales contraction of 7.8%. This contraction was driven by a slowdown in delivery and in our premium offerings. However, However, we expect digital kiosks and more efficient promotions to support future growth. The full-service restaurant segment delivered a 3.4% growth in same-store sales. This segment continues to deliver resilient results, posting mid-single digital same-store sales growth consistently over the past three years. reflecting the strength of our value proposition and operational excellence across key brands. VIPS Mexico achieved a solid 2.8 year-over-year growth in same-store sales, fueled by strongest response to many offerings and consistent store execution. That reinforced the brand's value proposition. In Mexico, most of the full-service restaurant brands has a good performance with a mid-single-digit growth in same-store sales. And in Spain, Bibs and Genos reported a solid same-store sales growth of 3.5% and 2.2% respectively. Our global expansion strategy remains focused on capturing the most profitable opportunities across our key markets. In line with our guidance, we opened 34 new stores during the first quarter, including 27 corporate units and seven franchisees, especially targeting high-traffic areas. We expected openings to accelerate as the year progresses. As part of this strategy, we are expanding into flagship locations such as our upcoming Starbucks stores, the store in the Santiago Bernabéu shopping mall in Madrid, which underscopes our commitment to long-term brand position and strategic growth. Along our expansion in high potential regions, we are also remodeling existing locations to enhance customer experience and driving growth. Regarding our loyalty programs, our digital transformation continued to full growth. By the end of the quarter, loyalty sales grew by 21.6%, reaching 5.2 billion pesos, accounting for 25.3 million orders and contributing for a 27.4% of total sales. Additionally, by the end of the first quarter, Club Buy has surpassed 3.1 million members, which represent almost 7% of Spain population, while Starbucks rewards reach over 2.3 million active users across all ASEA region. Regarding ESG and people, this quarter we continue advancing in our ESG and digital transformation agenda. We are affirming our commitment to sustainable value creation through transparency, innovation, and social responsibility. As part of this effort, we are currently working in our 2024 integrated annual report set to publish later today. For the second time, this report will include a double materiality assessment, a binarial evaluation of how ESG factors impact in our financial performance, and how our operations impact that communities and environments where we operate. This approach allows us to identify the ESG priorities most valuable to our stakeholders and the long-term sustainability in our business. In line with this commitment, we invested over 13 million pesos in social programs, this quarter, and directly benefited more than 80,000 people that it demonstrates our ongoing dedication to that community while delivering meaningful social impact. Looking ahead, we will continue to align our ESG and digital priorities with our long-term strategy goals, ensuring a responsible and innovation path forward for Alsea and our stakeholders. I would like to hand it right now to Federico Rodriguez.

Thank you very much Armando and good morning everyone. Sales increased by 12.8% in the first quarter, driven by the preference for the company's brands and the effective commercial strategies in Mexico, Spain and Colombia. Excluding foreign exchange effects, sales increased 7%. We remain firmly committed to the 2025 guidance we provided earlier this year and we believe we are making good progress toward achieving it. Supported by the discipline execution, Despite being repetitive, both negative calendar effects, the Easter and the Leap Year, were included into our 2025 guidance. For the first quarter, sales in Mexico were up 5.9% to 10.7 billion pesos. In Europe, sales increased by 17.3% to 5.9 billion pesos, while in Euro terms, sales decreased by 5.3%. Finally, S.A.B. sales increased by 32% to 3.3 billion pesos. EBITDA decreased by 9.1% with a margin contraction of 280 basis points, reflecting a more complex macroeconomic backdrop and a negative calendar effect, including one less day in February and the shift of Easter from March to April. In Mexico, adjusted EBITDA represented 67% of total EBITDA and declined by 7.2%, primarily due to the depreciation of the Mexican peso and inflationary pressure on dollar-denominated inputs, both impacting gross margin by approximately 100 basis points each. Additionally, the 2.5% growth in same-store sales was not enough to continue to improve operating leverage. In Europe, the adjusted EBITDA accounted for 22% of the total EBITDA and grew 3.6% year-over-year, supported by positive sensor sales and stable performance across key markets. However, a negative calendar effect weighted on margins resulting in a year-over-year contraction when excluding its FX. In South America, adjusted EBITDA represented 11% of the total EBITDA and declined by 10.5% mainly due to the three-week labor disruption in Chile, negative calendar effect in all the region, and softer consumer trends across the region, despite the solid performance in Colombia. The net income for the first quarter decreased 23.9% year-over-year to P335 million. These results reflect a lower financial impact compared to the same period last year, mainly driven by the loss of treasury position in Argentina in 2024. Going to the CAPEX, the CAPEX for the first quarter totaled 1.1 billion pesos. 64% were allocated to store development initiatives, including the opening of 13 new units, the renovation and remodeling of existing locations, and equipment replacement across the brands. The remaining 36% was directed to strategic projects focused on technology upgrades, process improvements, and software licenses, reinforcing our long-term competitiveness and operational efficiency. At the end of the first quarter, our pre-IFRS 16 gross debt increased by 6.2 billion pesos year-over-year, reaching 34.3 billion pesos. This increase is related with the postponed payment of the remaining minority stake in our European operations that we acquired in the first quarter of 2024. The net debt, excluding the IFRS 16 effect, totaled 30.2 billion pesos, of 7.6 billion pesos compared to the same period last year. Including lease liabilities, consolidated net debt reached 48.6 billion pesos. At the end of the quarter, 86% of the debt was long-term, with 64% denominated in Mexican pesos and 36% in euro. We remain focused on maintaining a healthy capital structure supported by prevent financial management and a strong commitment to meeting all obligations. At the end of the quarter, our cash position stood at 4.1 billion pesos. Turning to financial ratio, the total debt to post-IFRS 16 EBITDA ratio closed the quarter at 3.1 times, while the net debt to EBITDA ratio stood at 2.9 times. As expected and mentioned in previous calls for this time of the year, there was a high use of cash during the first quarter, reflecting the typical seasonality of the business and the temporary use of working capital. We anticipate a gradual recovery in working capital over the second half of the year, as it is every year. I will now pass you over to the operator for the Q&A session. Thank you very much.