Alsea S.A.B. de C.V

Good morning, everyone, and welcome to Alcea's first quarter 2026 earnings video 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 pre-IFRS 16 standards. I will now hand it over to Christian for his initial remarks. Please go ahead, Christian.

Thank you Gerardo, Federico, good morning. Good morning and thank you all for joining us in ALCEA's Fresh Squatter 226 earnings video conference. I will begin with an overview of our performance for the Fresh Squatter, highlighting key operating trends across regions and brands, as well as our progress in digital expansion and ESG initiatives. Federico, our CFO, will then walk you through our financial results in more detail. Before going into quarterly figures, I would like to briefly step back and reflect on how we started the year. As we shared during our ASEA Day in March, our focus remains on taking care of what matters most, our people, our customers, and our resources. This means building the right portfolio, Driving traffic through innovation and best-in-class service and improving profitability. The first quarter reflects a consistent execution of this approach. Coming out of 2025, where we made deliberate decisions around portfolio focus, capital allocation, and operational discipline, our priority has been to maintain that trajectory while navigating a challenging environment. In this context, S.A.B. de C.V We maintain robust operating performance supported by the strength of our brands, our scale, and our execution. With that context, let me now turn to our first quarter performance. In the first quarter, we reported a 1.4% year-over-year increase in total sales, reaching 20.1 billion pesos, or a 5.8% increase. excluding foreign exchange effects, same-store sales grew by 4.1%. EBITDA increased 1.8% in the first quarter, reaching 2.4 billion pesos, with a margin of 11.8%, increasing by 10 basis points year over year. Regarding brand performance in the first quarter, Starbucks Alsea same-store sales increased by 3.5%, For Starbucks Mexico, same-store sales grew by 2.1%, supported by a strong start of the year and a stable demand, which was partially compensated by our high-demand commercial collaborations of peanuts in 2025 and the negative impact from our Jalisco and other state events at the end of February. For established Europe, same-store sales increased by 1.3%, with solid performance in Spain, while France remains challenged, also showing a gradual improvement. Finally, in South America, same-store sales rose 12.1%, driving primarily by Argentina. Excluding Argentina, same-store sales increased 5.5%, supported by strong performance in Colombia and an important recovery in Chile. Domino's Pizza Alsea posted a 5.3% increase in same-store sales, reflecting continued growth supported by the expansion of our delivery capabilities. In Spain, same-store sales increased by 5.1%, reflecting effective commercial execution, such as the launch of the Madrissima pizza, which is made of sourdough, extra virgin olive oil, and a slow double fermentation process. This is another example of how innovation is driving profitable traffic. In Colombia, Domino's same-store sales increased 8.7%, with continued strong momentum with a better-than-expected Domino's Mania value campaign. Burger King's same-store sales, excluding Argentina, increased by 0.7%. In Mexico, Burger King reported an increase in same-store sales of 3.0%, showing early signs of recovery. In Chile, same-store sales decreased 2.3%, reflecting softer trends during the quarter. The full-service restaurant segment delivered 4.3% same-store sales growth, remaining one of the most consistent performers during the quarter. Full-service restaurants in Mexico increased by 4.9%, supported by higher order volumes and a strong value proposition across brands. I want to highlight Vips Performance, who grew 7.2% driven by traffic generation from a consistent execution of our value platform, Menú del Día. Same-store sales for full-service restaurants in Spain grew 3.5%, reflecting solid performance across most brands, with Foster's Hollywood standing out, posting same-store sales growth of 7.5%. Our expansion strategy continues to be guided by clear focus on quality, returns, and capital efficiency. During the first quarter, we opened 32 new stores, 20 corporate units, and 12 franchises. As in previous quarters, we remain focused on prioritizing high-return locations and formats while maintaining a disciplined approach to capital allocation. As we highlighted in our most recent S.A.B. day, remodeling continues to be a key priority across regions as store remodeling delivers attractive returns to improve customer experience, higher productivity, and faster payback periods. In addition, as previously announced, we are moving forward with our plans to introduce our new brands, Chipotle and Racing Games, with the first store openings expected in the second half of 2026. Our digital platforms continue to be key drivers of growth. By the end of the quarter, loyalty sales increased 12%, reaching 5.5 billion pesos, representing 26.4 million orders, and contributing to 28.8% of total sales. By the end of the quarter, loyalty sales increased 12%, reaching 5.5 billion pesos, representing 26.4 million orders and contributing 28.8% of total sales. We also surpassed 84 million active customers, which are around 200,000 more, versus the fourth quarter across our loyalty programs, confirming the strength of our digital engagement and our loyalty base. Additionally, we served nearly 35.7 million digital orders in the quarter, representing 7.8 billion pesos, which accounts for 41.2% of our total sales. During the quarter, we continued advancing our ESG agenda as a core pillar of our long-term strategy. Fundación Alcea achieved a record fundraising campaign through Movimiento Va Por Mi Cuenta, raising more than 62 million pesos and surpassing the previous year. These resources will support more than 14 million people in vulnerable communities during 2026. Through programs focused on food security and in collaboration with multiple partners organizations. Across our operations, we continue to strengthen our environmental and social impact in Europe. Domino's advancing its transition towards a low-emission delivery fleet, while we continue our food donation programs contributing to waste reductions and community support. In South America, we supported communities affected by wildfires in Chile through food donations and fundraising initiatives while our teams across the region continue contributing in local volunteering programs. These efforts continue to reinforce ESG as an integral part of how we operate. Let me now turn it over to Federico, our CFO, who will provide further insight into our financial performance. Thank you.

Thank you, Chris, and thank you. And good morning, everyone. The sales increased by 1.4% in the first quarter, supported by effective commercial strategies and solid performance in Mexico, Spain, and Colombia. Excluding foreign exchange effects, the sales increased 5.8%. During the quarter, disruptions in Jalisco and surrounding states resulted in a negative one-off impact of approximately 60 million pesos in revenues. In the first quarter, sales in Mexico were up 4.9% to 11.2 billion pesos. In Europe, sales increased by 1.5% to 6 billion pesos, while in Europe sales increased by 6.3%. Finally, South America sales fell 10.7% to 2.9 billion pesos, mainly due to currency effects. During the quarter, the gross margin was adversely affected by segment and geographic mix, as higher-cost businesses represented a larger share of sales, while Europe contributes less to consolidated cost of food. Furthermore, as expected, the kickoff of the operations of the Guadalajara Manufacturing and Distribution Center is on a stabilization stage. These impacts were partly offset by favorable foreign exchange effects. Evida increased by 1.8% with a margin expansion of 10 basis points, mainly due to discipline, execution, and operating efficiencies across regions. By region, in Mexico, the adjusted Evida increased 5.8%, with margin expansion of 20 basis points supported by favorable cost dynamics, partially offset by higher labor expenses. In Europe, The EBITDA increased by 4.2% year-over-year with a margin expansion of 30 basis points, primarily due to same-store sales growth and operating leverage. In South America, the adjusted EBITDA decreased by 14.3% with a margin contraction of 50 basis points, primarily impacted by currency effects and some pressure on labor costs. The same as in the revenue line during the quarter, disruptions in Jalisco and surrounding states resulted in a negative one of impact of approximately 25 million pesos. It took from three to six weeks to recover the lost traffic. The net income for the first quarter decreased by 65.7% year-over-year, reaching 115 million pesos, reflecting the one-off impact from the early settlement of the debt refinancing, including derivative instruments related to the U.S. dollar bond of approximately 250 million pesos. Additionally, in 2025, we had a positive non-cash FX gain driven by the strong Mexican peso. First quarter free cash flow improved year over year, mainly reflecting improved working capital management. The capex for the three months of the year total 876 million pesos. Out of this total, 81% was allocated to store development initiatives, including the opening of 20 new corporate units, the renovation and remodeling of existing locations, and equipment replacements across the branch. The remaining 20% was directed at strategic projects primarily focused on technology, process improvements, and software investments. By the end of the first quarter, the pre-IFRS 16 gross debt increased by 666 million pesos year-over-year, reaching 35 billion pesos. The company's net debt, not accounting the impact of IFRS 16, was 29.7 billion pesos, which is 507 billion less than it was at the same time last year. This increase in gross debt reflects funding requirements related to CAPEX and working capital during the quarter. Consolidated net debt reached 46.4 billion pesos, including lease liabilities. S.A.B. de C.V. Turning to the financial ratios, the total debt to postage for a 16 EBITDA ratio closed the quarter at 2.9 times, while the net debt to EBITDA ratio stood at 2.5 times. I will now pass you over to the operator for the Q&A session. Please, operator.

We will now start the Q&A session. If you have a question, please press the question button in the browser. Please make sure you are not in full screen mode to see the button. The first question is from Ms. Renata Cabral from Citi. Please go ahead.

Hi, everyone. Thank you so much for taking my question. So I have two, if you'll allow me. The first one related to the recovery in Europe. So my question is, how are you seeing this evolving along the year? And my second question is about the digital capabilities, because we saw that the company is generating around 40% from digital capabilities, which is a huge change compared to five years ago. So what is the path that you are considering, the digital, I mean, in terms of further efficiencies and at the same time not be so much dependable on the aggregators? Thank you so much.

Good morning, Renata, and let me start by answering the second question. In terms of digital capabilities, as you clearly expressed, We continue growing on this particular channel. In the case of Domino's Pizza in Mexico, the growth comes directly with the implementation of full service with one of our aggregators last year. So we are seeing clearly the benefit of having made this decision in the numbers of orders and how it's positively impacting our business. S.A.B. de C.V and also with Club Buy in Europe, which we have a very stable platform which represents almost 38% of our transactions, our traffic. And to sustain this, we are also launching this Club Buy loyalty platform for our full-service restaurants in Mexico, which we have the know-how, we have the technology, and we're in the process of implementing by the fourth quarter of this year. as well as improving the capabilities in our different apps. So this continues to be a clear channel that the customer is recognizing, and that's why we are reacting in this way. In the case of the recovery in Europe, we see a very stable performance in Spain. Clearly, in all of our brands, Starbucks with very positive trends in Spain, as well as our food service restaurant brands, which clearly driven, this has been clearly driven by innovation and our value proposition growth. which are, I can give you the example, we launched Madrissima, as I mentioned before, which is a, we come from the launch of Croissant, which had extraordinary results. We export this to Mexico, import this to Mexico also with extraordinary results. And now, with this innovation of this sourdough pizza, we are clearly seeing the customer recognizing this. Talking about France, we see a more flat, S.A.B. de C.V

Thank you very much for your question. Our next question is from Mr. Troy Mendez from J.P. Morgan. Please go ahead.

Hello, gentlemen. Thank you very much for taking my question. How would you rate Starbucks Mexico performance in the quarter since your sales of 2.1% was well below the other banners? Do you see any specific source of acceleration for Starbucks on the remainder of the year? And a second question, if I may, how do you see gross margin evolving in your key regions given ethics volatility, input cost dynamics, and labor pressures? Two questions from our side. Thank you.

Hello, Roy. Regarding the gross margin, let me explain a little bit of the gross margin in the first quarter. We had a positive impact of around 60 basis points by the ethics. Remember that from a sensitivity analysis, S.A.B. de C.V Guadalajara. We expect to have something similar in the remaining part of the years. Obviously, we will recover maybe in the second half of the year, the start-off of operations, and you will see a slightly expansion, but it is positive, and as you can see, we are still expanding the EBITDA margins on a four-wall level.

And let me compliment Federico's answer, Troy, and then go back to your first question. Part of this margin strategy is we are optimizing our value platforms to protect margins while using innovation to sustain perceived value and keep customers engaged. That has been key in the evolution of our value platforms. Make sure we S.A.B. de C.V S.A.B. de C.V S.A.B. de C.V S.A.B. de C.V of February. We had an important hit back, particularly with the footprint we have with Starbucks across all these states, and Guadalajara being one of our key markets, clearly took us, depending on the states and the cities, in some cities, two weeks after we were in the right track, and some states took us until the first two weeks of April to come back to our previous prior to this event. So, fortunately, we are back there. Also, it's important to mention that different innovation in drinks, particularly protein, the launch of the protein drinks campaign is driving very important, and it was an expected campaign. It's driving really positive traffic. And likewise, we are with this platform coming soon about Devil Wears Prada 2, which is really driving a lot of excitement across our customers. So we're seeing this driving important traffic across particularly Mexico.

Thank you so much.

Thank you very much for your question. Our next question is from Mr. Alejandro Fiuch from Itao BBA. Please go ahead.

Hola, Cristian, Federico, Gerardo. Thank you for the space for questions and congratulations on the results. I have a very quick one in Europe. I wanted to see maybe a little bit what do you expect for the rest of the year, right? We have many moving parts with, you know, probably commodity prices going up and maybe we could have some pressure on the consumer there, but results were quite, you know, good.

Hola, Alejandro. We are really cautious around inflation and the energy because we lead that in 2021. By today, we have not seen any kind of pressure in the CPI for the Alceas. Alceas, in this time, we are still trying to close all the positions for the relevant commodities. I'm talking around coffee, cheese, etc., But as of today, we're not seeing any kind of pressure, not only in the cost of food, but in the electricity prices. Remember that in 2021, we have around 8 million euros of pressure. But so far, so good. But we are taking a lot of precautions there.

I think, Alejandro, you're on mute. Alejandro, can you hear us?

Let's go to the next question, operator.

Thank you very much for your question. Our next question is from Ms. Melissa Villun from Bank of America. Please Go ahead.

Hi. Thank you so much for taking the questions, and I apologize. I'm having some trouble with the audio, so I don't know if you've already answered this, but I was going to ask if you could comment on the increase in admin expenses in Mexico during the quarter. We saw four-wall margin expansion, but a contraction in full EBITDA margin, and I just wanted to understand if there was anything non-recurring. And then also on the expense side, I wanted to ask for an update in terms of the integration process for the headquarters in Mexico and South America. Were you in that process to anticipate any one-time expenses and when should we begin to see some of those benefits flow through?

Okay. Thank you very much, Melissa. Regarding the first question related with the expansion margin in the difference in the expansion margin in the EBITDA for the world and the total EBITDA of the company, let's remember that last year we had a one-off positive non-cash effect related with the releasing of the accrual of the long-term incentive of around 150 million pesos in the first quarter. When you normalize this effect in 2025, the evident margin expansion in the first quarter of 2026 would be above 100 basis points. So this is more a comparison effect than something negative in the first quarter of 2026.

Yeah, I will answer the second question about the integration of Mexico and South America. We continue the process of consolidation. I can share with you that in terms of the store development and expansion, we are pretty much done with the integration. Likewise, with supply chain and procurement, we have finalized the first stages of the integration. and we also continue executing different efficiencies around the divestment, as we did the divestment of Chili's and P.F. Chang's in Chile and also by the end of the month, starting the first of May, we will finish the process of divestment of our operations in Colombia of Archie's. leaving this with a strategy to optimize our portafolio and leaving the region with the three brands, with the South American region, with the Starbucks, Domino's, Pizza, and Burger King. So we continue on this consolidation. We continue doing the different changes or shifts towards the reduced portfolio and the integration, as I mentioned, of the key functions in the region. So the plan is going even a little bit faster than we expected, and we continue and think that by the end of the year we will be fully integrated.

Complementing Christian's answer regarding the synergy around the headquarters in Mexico, Europe, and South America, Melissa, we had a positive impact of around 50 basis points because of these synergies. We'll see these synergies during the next three quarters. And obviously was offsetted by the positive non-cash effects that I talked at first.

Thank you so much. That's very helpful. Thank you very much for your question. Our next question is from Mr. Ben Theroux from Barclays. Please go ahead.

Hi, good morning. I hope you can hear me. Thanks for taking my question. I wanted to dig in a little bit in what's been happening within your working capital on the cash flow because obviously as we look into the investments last year, we're quite significant in the first quarter and it was still an investment but it was like less than half than what it was last year. So maybe help us understand a little bit what were the drivers of the improvement on the working capital needs here on a year-by-year basis and then I have a quick follow-up question on Europe.

Thank you, Ben. I would say that we are working a lot, and remember at ASEA Day, we talked around the cash conversion from EBITDA. We pretend to have around 20% of the total EBITDA of the year into the treasury position by the end of 2026. S.A.B. de C.V More openings while we are really leveraging the businesses in the same store sale. And additionally, we are working with all the different suppliers to have more rationalized working capital during the whole year. As you have seen, we're able to offset it around one billion pesos year over year in the working capital. And that's part of the commitment of the management with all the shareholders. So you will see this on the long term.

Okay, perfect. Thank you very much. And then real quick, coming back to Europe, I mean, we've seen that little improvement finally in France, but obviously it's still, I would say, fragile. So I was just wondering, are there any initiatives you're currently working on or is there anything that's more like under your control as to address it and also then come back into what the commitments are with Starbucks in terms of growth and openings, et cetera, which I know has been a little bit more on the softer side, just given what the situation was. Thank you.

Hi, Ben. Yes, absolutely. We put together a plan in October, a very, I would say, strong plan in terms of capital or the resources we're going to invest there, and also the strategy we're having there. I can tell you, I would like to summarize the planning, too. First is all the different commercial strategy around to turn around the market with different initiatives in terms of the food program elevation, the different campaigns, very locally relevant campaigns, renovated beverage or innovative beverage portfolio, also supported with different licenses that I cannot disclose right now but very expected and interesting licenses that have been proven successful in other geographies like Asia or even in Mexico and on the other half is everything linked to brand equity and brand reputation which The first part of the plan is to deliver short, middle-term results across the year, and the second is a continuation of trying to bring back and build the reputation and the equity around the brand. That is what we are working on. We understand that some of these initiatives are going to pay off during the second half of the year. And the other one in terms of reputation and brand equity will be to continue driving and positioning the brand across the market. that is also accompanied by certain leadership changes in the region which we are optimistic that this will also drive and improve or accelerate the recovery in the market.

Thank you very much.

Thank you very much for your question. Our next question is from Mr. Ulises. from Santander. Please go ahead.

Buenos dias. Following up on Freud's earlier question, but just wanted to understand beyond the effects, we should also expect some improvement on the gross and EBITDA margins that are coming from better raw materials. I know it's mixed on the different regions, and it's not a clear story, but just trying to get any additional color there. and basically trying to gauge if margin improvement should accelerate ahead, which is kind of the expectations that we have in our minds over here. And just another quick one on that is if you have any comments on how you're seeing the warm-up here to the World Cup, any updates on expectations, anything on that and on the particular formats, that would be really helpful. Thank you.

S.A.B. de C.V S.A.B. And additionally, maybe the black part of the gross margin is regarding the startup of the distribution center in Guadalajara. This is not a surprise. We were expecting this, and it was included into the guidance that we delivered more than one month ago. But it was around 20 basis points of negative impact. By the third and fourth quarter, we are eliminating this impact. So you will see an expansion of the gross margin in the last two quarters.

Hola Ulises, and thank you for your question. And let me share a little, give you a little bit of color of what's going on and what we're expecting towards the World Cup, specifically in Mexico. Across all of our brands, we have very strong initiatives in Q2 around value and innovation. We continue considering innovation as one of our key levers to drive profitable traffic, no? We are also, in a way, as you mentioned, levering the FIFA World Cup, but our initiatives go beyond and ahead of the World Cup. We are confident the World Cup will be a key driver in increasing traffic across our stores, and at the same time, we continue to execute our remodeling plan. For example, in Pool Service Mexico, we pretty much are done with all our remodeling and investment in technology, particularly in our Chili's brand, which, as you know, is one of the preferred places to see the games and sports. And we are done with remodeling, so we are ready for the World Cup traffic. and likewise in Starbucks, we remain on track to deliver our committed plan. So this, we expect a strong performance in the months of May and June due to these particular initiatives that, as I mentioned, are beyond the World Cup. We understand the World Cup is a moment in time, but we are We have strong initiatives to be able not only to profit from the World Cup, but also to continue driving the traffic to innovation and value.

Very clear. Thanks for that.

Thank you very much for your question. Our next question is from Mr. Antonio Hernandez from . Please go ahead.

Hi, can you hear me there?

Yes, we can.

Perfect. I just wanted to get a sense regarding any consumer perspective on perhaps how VIPS is behaving lately and your outlook for the year, especially as, you know, the consumer overall environment hasn't been that upbeat. So any specific strategy there that can prepare you for the remainder of the year and maybe if the World Cup is also a tailwind there. Thanks.

Excuse me. Hola, Antonio. Good morning. You mentioned VIX. As you have seen in the results of Q1, VIX continues driving strong traffic into their stores. I would say that the main initiative and the main driver of this is the Menú del Día. which as I mentioned before by adjusting and adapting our value proposition with new dishes we keep the customer engaged but at the same time we are careful to maintain the margin and clearly this is not a consequence of actions from the first quarter this is a consequence of I would say a consistent execution on this platform which clearly the customer is recognizing and as I mentioned and answered to Lisa's question we are pretty much focusing our initiatives on value and innovation and sorry I have been repeating myself on these particular words but it's Clearly, what we're seeing with innovation is that it's the most profitable traffic drivers driving a way to do it. We can go to drive traffic through promotions or to doubling prices, but the reality is that we are clearly recognizing that innovation is what is driving the most important and profitable traffic across our different brands. And as I mentioned, we have a strong list of different actions across our different brands, not only in Mexico, likewise in South America and Europe to maintain these particular trends.

Okay, perfect. Thanks.

Thank you very much for your question. Our next question is from Ms. Isabella Lamas from UBS. Please go ahead.

Hi, Christian, Federico, and Tim. Thank you for the space here. A quick one from our side. I would like to go into further details about the protein-based beverage for Starbucks that you've mentioned previously. If you could comment a bit more on the level of growth you're seeing and how is consumer adoption growing and maybe how good that could be in the midterms and also a bit more of detail in terms of ticket prices and how this could be maybe accretive to margins and every more detail that you could share. I would appreciate it. Thank you.

Sure, Isabella. Thank you. Protein, the protein platform was very much expected in Mexico and other geographies like in Europe. The way we like to describe innovation is through breakthrough innovation, disruptive innovation, and category innovation. So innovating over the same platforms that we were already having. So this particular protein innovation kinds of falls between disruptive or at the same time category innovation, which is pretty much based on our beverage platform. So we are happy with the results. We are in line with the expected results of this particular platform. But most important is how we can continue building on top of it. Right now we did the launch, but eventually it's how you continue evolving and building over this particular platform. I will ask Gerardo to share with you specific details on the USBs and how this has been positively impacting traffic in the stores. but clearly we are happy and optimistic about what we have what the platform has delivered so far but most important is the prices as I mentioned a few seconds a few minutes innovation when you innovate in drinks and certain categories you can do a markup on the prices and this allows us to have a S.A.B. S.A.B.

Thank you. Thank you, everybody.

Thank you very much for your question. Our next question is from Mr. Alvaro Garcia from BTG Paxful. Please go ahead.

Hey, gentlemen. Good morning. I have a question on interest expense. Can you hear me?

Yes, we can.

Awesome. I have a question on interest expense for Fede. Obviously, big liability management in early January, early in the quarter. It would seem to be that the benefits of that weren't fully reflected in the quarter. So if you could speak to maybe, you know, how much of the increase in interest expense was driven by IFRS-related items versus your sort of core interest expense on your debt service would be really helpful.

Yes, Álvaro. As I mentioned in my remarks, we had a one-off impact from the early settlement of the debt, the breakup or the unwind of the forwards that we had in place for the USD bond, and this was around 250 billion pesos. This is a one-off for the year, and it was completely taken into account with the refinancing. And additionally, in 2025, we had a positive non-cash effects gain of around 130 million pesos. And that's fully reflected in this quarter, and that's the 100% of the increase. Going forward, you will see reflected the savings that we took about two months ago of around $25 million year over year.

So the 250 million pesos is reflected in your interest expense this quarter.

Exactly.

Great. And then maybe just one last one on Spain. We haven't spoken about VIPS in Spain for a while. So how do you think the World Cup could impact traffic there? And how do you feel about VIPS Spain in an environment where sort of consumer confidence is waning?

You mean VIPS Spain or Mexico, Alvaro?

VIPS Spain.

The reality is that VIPS Spain is one of the, as I mentioned before, one of our very consistent and best-performing brands across the portfolio. And I'm going to answer the question in two ways. First of all, particularly for Mexico, the brands that we see that are going to be most benefited by the World Cup are going to be Chili's, Starbucks, and Domino's Pizza. In the case of Chili's, it's the preferred place to go and see sports and the games. and the schedules of the games are very convenient in order for us. Obviously, Dominos, with the nature of its delivery and historically has been a preferred to share with the games. And in the case of Starbucks, obviously, with the incremental traffic that we're going to have in different cities, not only the cities that are going to be hosting the games, but also some of the airports and some of the additional venues that are going to be linked to the games in Mexico City, Guadalajara, and Monterrey. In the case of Spain, I mean, I would say that Bips is not necessarily going to be benefited by the World Cup. It's more the different initiatives that we have launched around the menu, innovation around new platforms which are driving different incremental traffic. Right now we launched a new sandwiches campaign which is performing extremely well with some bringing back classics but at the same time with interesting innovations as a tartar sandwich and other more premium products and also a platform that we call the perfect dish El Plato Perfecto which is driving a different type of S.A.B. de C.V a friendly menu for business and office workers. So in a way, I'm sorry, I cannot link to the World Cup performance, this particular brand and particular in Spain, but more with what they are doing with different platforms to continue engaging traffic, existing and new traffic.

The brand that will have a change on the trend will be Domino's Pizza in Spain because of the culture. The full-service restaurant in Mexico and in Spain is completely different, and this is a wrong culture. We cannot expect that the same things work in Mexico for the full-service link to the World Cup works in Spain, and that's part of our job. But Domino's Pizza will have a double-digit impact.

for example in Spain we don't have the TV, the technology it's not necessarily the place to go and watch the games and I guess just now that we're on this topic and sorry for taking so much time how are you thinking about throughput for Starbucks and Domino's specifically so hiring more people to attend to the increase in demand you expect how should we think about that into May and June

Absolutely. Absolutely. We are preparing, as I mentioned before, Chili's, Starbucks, and Domino's to make sure we capture every single customer that we can capture. And this includes different initiatives in some restaurants, particularly in Chili's. We are adding additional seating. Tables, investing on TVs, on audio to make sure the customer gets the most out of the game. In Domino's Pizza with the crew and delivery particularly. And in Starbucks, likewise, with enough partners to satisfy the demand. And fortunately, we have a strong base of collaborators across the different brands and regions. And our model is very flexible to be able to cover these demands. Alvaro.

Great. Thank you very much.

Thank you very much for your question. Our next question is from Mr. Thiago Bortolucci from Goldman Sachs. Please go ahead.

Hey guys. Good morning everyone. Thank you very much for taking our questions. First of all, we all know it's been a challenging quarter. but in context of a weak demand in Mexico, I think your numbers were remarkable and just showcasing the consistency of the strategy. Congrats on the, you know, good evolution in terms of free cash flow generation in a quarter that we know is a melody, isn't positive, but it's improving. And my question is related to that, right? We all know part of the improvement in free cash flow generation has to do with accounting, with better EBITDA, with growth, lower context, but the debt service burden is an important component of that moving part. And to this point, you already have a guidance of that $20 million improvement on your net financial expense this year. I'm just wondering how this ties up to the evolution of your gross leverage, right? You are improving for cash flow generation. Your leverage is much more comfortable now. S.A.B. de C.V S.A.B. de C.V

by parts. I will answer by parts your question, Tiago, because it's really complex. The accounting is pretty much the same. We do not have any kind of impact by accounting because we would be lying and you will see that by the cash treasury position at the end. So that is pretty much the same. But from the beginning, by the end of the 2034, we started to change the conditions with the different suppliers S.A.B. de C.V S.A.B. de C.V S.A.B. de C.V S.A.B. de C.V liability management not only with the U.S. dollar bond and the Euro bond but last Friday we refinanced the local bonds that we had in place. So by the end of this year we expect to have a minor growth debt and a better net debt. So that is the answer.

That's helpful.

Thank you very much for your questions. That was the last question. I will now hand over to Mr. Cristian Gurria for final comments.

First of all, I want to thank you all for your interest and your questions today. If you have any additional questions or require further information, our investor relations team is always available to assist you. We wish you an excellent day and look forward to having you join us for our next quarterly call update. S.A.B. de C.V