Alsea S.A.B. de C.V

Good morning, everyone, and welcome to Alsea's third quarter 2025 earnings media conference. My name is Gerardo Lozoya, head of investor relations and corporate affairs. Today you will hear from our chief executive officer, Christian Gurria, and Federico Rodriguez, our chief financial officer. 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 obliged to update or revise any such forward-looking statements. Please note that unless specified otherwise, the earnings numbers referred to are based on the pre-IFRS 16 standards. I will now hand it over to Christian for his initial remarks. Please go ahead, Chris.

Thank you, Gerardo. Good morning, everyone, and thank you for being with us today. Thank you. Today, I'll provide an overview of our third quarter results, covering our financial earnings, regional highlights, and key brand developments. I will also highlight our progress on digital transformation, ESG initiatives, and expansion strategy. Federico, our CFO, will follow me with an analysis of our results, including revisions to our 2025 guidance. Before we turn to the quarterly results, I want to remind everyone of the continued focus on our strategic priorities that will guide us moving forward. As we mentioned last quarter, our first priority is to continue driving disciplined organic growth. S.A.B. de C.V In addition, we will continue rolling out successful commercial campaigns such as Menú del Día from VIPS in Mexico and Spain, Tres Para Mí or Three For Me in Chile in Mexico, Paradiso Italiano with Italianis in Mexico, and Good Med Burgers from Foster's Hollywood, among other initiatives which would have consistently improved our product offering and reflect our commitment on innovation. Our second priority is to optimize our brand portfolio. We will prioritize return on investment by ensuring that each brand and store format is aligned with the needs of each regional market. Also, scalability and growth across all brands remain a core focus to unlock their full potential. We are also addressing and analyzing potential divestments on noncore assets to concentrate on the business with the greatest strategic and financial value. Our third priority is to enhance profitability. More value is being generated in our existing store's portfolio through consistent operational improvements by leveraging the strength of what we call high-impact operational talent. Organic growth is supported by strategic new store openings and the remodeling of key locations. As mentioned, two stores are being remodeled for every opening. As refreshing, the existing base delivers faster and more efficient returns on capital. Finally, our fourth priority consists on discipline and strategic capital allocation. We will prioritize growth and productivity initiatives with clear return thresholds. Also vertical integration and long term sustainability continue to be central to our strategy. Our CapEx plan is being optimized, adjusting long-term investments to become even more efficient and ensuring every peso invested aligns with our capital allocation priorities as well as different G&A efficiencies that we have been consolidating and working through the year. Now, I'll provide an overview of our quarterly performance, including our financial results, regional highlights, and key brand developments, along with updates on our digital advancement ESG initiatives and expansion strategies. In the third quarter, we reported a 5.7% year-over-year increase in total sales, reaching 21 billion pesos, or a 6.7% increase, excluding foreign exchange effects, since store sales grew by 4.1%. EBITDA increased 1.8% in the third quarter, reaching 2.9 billion pesos, with a margin of 13.7%, decreasing by 50 basis points year-over-year. Regarding brand performance during the third quarter, Starbucks Alsea same-store sales increased by 3.9%. For Starbucks Mexico, same-store sales grew by 3.3%, demonstrating solid in-store performance backed by our loyal customer base. For Starbucks Europe, same-store sales increased by 1.6%, reflecting a challenging environment in France, offset by continued strong momentum in Spain, driven by effective commercial initiatives. Given the strong results in Spain and the importance of the brand in the country, we are very excited about the latest opening of our flagship store in the Santiago Bernabéu Stadium, Starbucks Bernabéu. Finally, in South America, same-store sales rose 9.6%, driven primarily by Argentina. Excluding Argentina, same-store sales declined 1.3%. Nonetheless, there is a sequential improvement in Chile despite lower traffic. Domino's Pizza Alsea posted 2.6% increase in same-store sales. In Mexico, Domino's same-store sales increased 1.6% driven by our continued efforts in product innovation. In Spain, same-store sales increased by 2.9% reflecting the ongoing effective promotional efforts and positive customer response to product innovation. In Colombia, Domino's delivered strong results. Same store sales increased by 9.1%, supported by successful marketing initiatives. Burger King's S.A.B. same store sales, excluding Argentina, decreased 1.4%. In Mexico, Burger King reported a decrease in same store sales of 1.7%. This was driven by a shift of mix toward low price and discount items, combined with a decrease in premium innovation and digital coupon. The full-service restaurant segment delivered a 4% same-store sales growth. This segment remains strong and resilient, supported by marketing campaigns that enhance our product offering and demonstrates our commitment to innovation. Full-service restaurants in Mexico increased by 5.3%, with most brands growing at mid-single-digit pace, while Chilis and Italianis stood out by achieving high single-digit growth. The performance was driven by the strength of our value product menu offering, product innovation, and launches. Same-store sales for full-service restaurants in Spain grew 2.4%, with Foster Hollywood and Genos delivering solid growth of 5.5% and 4%, respectively. We are focusing on introducing new and premium products to attract new guests, capitalize on existing traffic, and strengthening our customer loyalty. Our global expansion strategy remains focused on prioritizing quality over quantity. targeting the most profitable opportunities across our key markets. We remain committed to delivering strong value to our customers, maintaining our pricing strategy and customer loyalty through our resilient brand offering. In the third quarter, we opened 46 new stores, 35 corporate units, and 11 franchises, with an emphasis on high traffic and high potential locations. S.A.B. de C.V. Given the profitability and payback of store remodeling, such as increased customer satisfaction and higher sales, we will continue prioritizing a refreshed and modernized look across all our locations. Our digital platforms continue to be key drivers of growth. By the end of the quarter, loyalty sales increased 7.9%, reaching 5.1 billion pesos, representing 24.6 million orders and contributing 26.1% of total sales. We also surpassed 8 million active users across our loyalty programs, confirming the strength of our digital engagement. Additionally, we serve nearly 33.6 million digital orders in the quarter, totaling 7.3 billion pesos, which represents 37.4% of our total sales. This quarter, we continue to strengthen our sustainability model by aligning our purpose with every aspect of our operations. As part of this effort, we made significant strides towards reducing CO2 emissions, installing over 215 solar panels in Europe, and installing 159 kilowatt per hour of power of Power in Spain. In Mexico, Starbucks served over 1 million beverages in reusable cups and granted 3.2 disposable cups as part of our efforts to reduce waste. We also continue to strengthen our social impact through Fundación Alsea and Movimiento Va Por Mi Cuenta, supporting vulnerable communities and driving positive change. As we launch new fundraising campaign, we expect to surpass previous year's results, reinforcing our long-term commitment to responsible, purpose-driven growth. Let me now turn it over to Federico, our CFO, who will provide further insight and financial performance. Thank you.

Thank you, Christian. Good morning, everyone. During the quarter, the sales increased by 5.7%, supported by the brand resilience and strong performance in Mexico, Spain, and Colombia. Excluding foreign exchange effects, sales increased 6.7%. In the third quarter, sales in Mexico were up 7.5% to 11.5 billion pesos. In Europe, sales increased by 8.2% to 6.5 billion pesos, while in Europe sales increased by 3.8%. Finally, South America sales fell 4.7% to 3.1 billion pesos. The EBITDA increased by 1.8% with a margin contraction of 50 basis points, mainly due to a loss of operating leverage given the lower consumer environment in the month of September. These impacts were partially offset by the resilience of the brands across most regions, disciplined revenue management, and improved SG&A efficiency. In this context, we chose to limit price increases to protect traffic and sustain brand competitiveness amid consumer demand slowdown. In Mexico, adjusted EBITDA remained flat as there was lower operating leverage given the softer consumer environment in the month of September. In Europe, adjusted EBITDA increased by 6.2% year-over-year, primarily due to an increase in same-store sales of 2.3%, driven by new products and campaign launches that led to improvements in all brands, offsetting higher labor costs. In South America, adjusted EBITDA decreased by 14.2%, reflecting a lower consumption environment in the region, except for Colombia. A slowdown in consumer activity weighted on operating leverage and contributed to the slow recovery in the region. The net income for the quarter increased 559% year-over-year, reaching 512 million pesos, reflecting a positive non-cash effect, which reduced the cost of our U.S.-denominated debt in Mexican pesos terms. The CapEx for the first nine months of the year totaled 3.8 billion pesos. Of this total, 77% was allocated to store development initiatives, including the opening of 35 new corporate units, the renovation and remodeling of existing locations, and equipment replacement across the branch. The remaining 23% was directed at the strategic projects such as the distribution center in Guadalajara, technological upgrades, processes improvements, and software licenses, all reinforcing the long-term competitiveness and operational efficiency. At the end of the third quarter, the pre-IFRS 16 gross debt decreased by 1.8 billion pesos year-over-year, reaching 51.8 billion pesos. The company's net debt, not counting the impact of IFRS 16, was 34.5 billion pesos, which is 2.5 billion more than it was at the same time last year. This increase reflects the bank loans used to settle the minority stake in the European operations, short-term debt for working capital and capex needs. Consolidated debt debt reached 47.1 billion pesos, including lease liabilities. At the end of the quarter, 74% of the debt was long-term, with 67% denominated in Mexican pesos and 33% in euros. will remain focused on maintaining a healthy capital structure supported by prudent financial management. At the end of the quarter, the cash position stood at 4.7 billion pesos. Turning to financial ratios, the total debt to post-IFRS 16 EBITDA ratio closed the quarter at 2.9 times, while the net debt to EBITDA ratio stood at 2.6 times. Well, while we are still committed, we have adjusted the 2025 guidance given the negative impact generated by a lower than expected consumption dynamism during the month of September and the ongoing impact of the appreciation of the Mexican peso affecting the top line. Now, we expect a high single digit top line growth and a low single digit EBITDA growth for the year. I will now pass you over to the operator for the Q&A session. Thank you very much.