ARCO - Earnings call transcript Q2 2021 | Arcos Dorados Holdings Inc.

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Daniel Schleiniger

Good morning, everyone. Thank you for joining our second quarter 2021 earnings webcast. With us today are Marcelo Rabach, our Chief Executive Officer; Luis Raganato, our Chief Operating Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation, also available in the Investors section of our website, www.arcosdorados.com/ir.

As a reminder, to better view the presentation on the webcast platform, we suggest you scroll over the upper left-hand side of the screen and click on the arrows to maximize the slides. screen. their can we function submit left-hand of conclude questions, answer on speakers side you which using the our opening will remarks, your the After the chat

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We earnings I with to Before make no like any section the assume Today's will forward-looking the to and the statements, our statement. to contain harbor statements events would forward-looking reflect update turning release safe or I to over filings or the statements call forward-looking call SEC. new and Marcelo, recent following changed refer or obligation of circumstances. you revise to

the In today in compared the accordance which financial certain reconciliation with non-GAAP found addition financial we with in statements unaudited can filed Investors report be SEC results Form non-GAAP principles, reporting the to generally financial GAAP accepted review are results, of press results financial X-K. these as and on accounting results. with release to encouraged

the excludes country's ongoing Venezuelan as division the to today level operation, due for volatility. the discussion well consolidated the results macroeconomic as Our at Caribbean both the of

For full we include excluding statement, with earnings reference, release. income our your Venezuela, a

you. with our for by Marcelo, and our of on consolidated to an investments main will profitability As sharing presentation, Drive-Thru Recipe today's Marcelo quarter will the divisional about Three delivery level elements growth and news ESG take the at providing Luis of the part our D’s along update strategy structure. platform. our digital, wrap as some second provide XXXX an you through of Marcelo and and results. Mariano overview over sales capital well Future will up of as

Marcelo Rabach

of us the webcast. Dorados people to and business. while Dan, safety for focusing of you the of on also guests the the long-term have and beginning you, of all pandemic, we the health on Arcos Thank our ensuring today's prioritized Since thanks joining

year and D's as followed the generation. normalized balance expecting face in portfolio, conditions the by region. first unmatched this cash to strong competitive by semester the Three have stronger advantages sheet leveraging done challenging and began second operating free-standing a We flow of much superior restaurant the a We semester

with but far, is than in better still line a are there trending initially to go. expected, even long we or So way we

Given the last impact XXXX. just year's for XXXX quarterly will on not comparing this of remainder year, also results, the period with or of year pandemic the with of be the same quarter, the prior but results, prior we

to levels very the are returning while We currency local have profitability. in with also sales pleased approaching made XXXX pre-pandemic progress we

normalizing, are as Although entertainment our hamper for May full conditions help on generate government theaters or from in weekends that and such a normally were comparable systemwide essentially flat X-year quarter, restrictions continue sales Despite night and basis, on ability movie the usually benefit to growth guest consolidated traffic. operate positive to this, at activities June. including

X delivered quarter X same fact, entire comparable the XXXX. for sales In in period the the positive of versus divisions

the as in excited restaurants return the progresses. preparing year and of are the we ahead, free-standing Looking on-premise and business both for mall-based

The which comparable on divisions Let's in at X-year take into I systemwide XXXX basis. sales a look quarter a quarter comparable government closer in of building almost all with last than July results. second million market. Adjusted this of million restrictions our momentum trend, mentioned, impact offset continues just EBITDA strong credit $XX.X quarter, $XX million from sequentially largely including tax grew that Brazil, a to more the $XX in

strongest leverage operating able with in Importantly, Caribbean SLAD. all significant to divisions the generate and the coming growth were

our each growing basis. remained highest-rated As sales sequentially, while driving on-premise industry's Three not a in The on mobile this app, According have and sales, the passing a constant to result, delivery have EBITDA generated Drive-Thru are we recovery. App records Annie, in modest month. we a seamlessly will increase gains currency-adjusted the in personalization. we despite sales enhancing that stopped X-year strong to XX.X% recovery setting Notably, divisional D's over new a Luis supported guests expanding in market advantages now channels, markets, move turn capabilities a Brazil. our and have across strong these our and digital it closer competitive our convenience share are performance. including I at for improving allow main delivery on-premise, sales to will takeaway look

Luis Raganato

the focus The months without periods and the recovery the operation Marcelo. single-brand Arcos and diversity out served to disruptions. of of last geographic Dorados crisis XX Thanks, smooth management

comparable X XXXX a As in of were sales the positive X the X-year sales quarter second with divisions. result, comparable of of within X%

last XX% down mentioned the but we restrictions the with of XXXX, relaxation with course performance the government April our As of on compared call, sales over Brazil quarter. improved began

More Marketing unique guests. importantly, its brand gaining in second bond, favorites brand percentage focused in CREST, versus McDonald's menu points the to Three the our continued emotional market core that versus market has X.X market. According points D's. on we XXXX, the share. more percentage McDonald's XXXX gained quarter Brazil the is share X.X activities and strengths, on any competitor than and the other capitalizing with of far

and in of to addition become famous by X months, in global VIP We our Panama. the June. able National the The excitement international XX to building one May Méqui introduction was country's June opened X-year which conditions took The despite quarter. driven an comparable the Argentina out restaurant. on also line persistent division's platform drive the within and sequentially surpassed X on we making the the based introduced food the infrastructure the the of the soccer get campaigns digital Copa products the strong core selling mobility Chicken government growth portfolios that the our and of activities the and and place capitalizing focus to the which we use capitalize the product image a America meal improved has Drive-Thru is generate Latin Mexico, country's we both Soccer orders SLAD's market. helped few were positive and by hygiene restaurant activities. Drive-Thru sales Costa big markets of on America's delivery both already Argentine through more aggregators brand's in stars, reputation to accelerated digital guest June on loyalty us days. division. with registered allowed participating a in experience first largest July NOLAD in on basis Chilean through top growth various free-standing the sales co-branding platform on Messi, offset X-year digital of of important activities was which most This just frequency X Mexico, country. members country's campaigns upgrades In the sales year-over-year Association. in to continued we significant These the In strength by to million with and the soccer tough meal, have restaurants. is capabilities leveraging Mexico driver. Rica and restrictions XX. basis from with BTS across NOLAD's All in promotional launch club sponsorship, and supported operations growth the dates. in program boosted Delivering X-year Lionel introduce are than some while brand-building the has BTS particularly Mexico, driven EOTF to in Marketing and prepare including celebrate markets, bundles in sales important our and sponsorship where McNuggets IT occasions X, special been boost double-digit of the a in to for to safety were sales as tournament, just helped

also first solid quarter in and program. of sandwiches the Puerto the focus sales BTS its momentum the AutoMac markets, and VIP supported times, of the launch on Rico to the another grown the growth Rico West delivered customer Drive-Thru service complexity, Rico, Puerto Finally, of the improved in successful the chicken main reduced results crispy significantly, in and menu Indies. Puerto Colombia, Meal Caribbean thanks introduction of the from with on French experience Club We quarter. the platform in building Colombia have chicken

been Caribbean broad benefit diverse proving of now, across the quarters operating footprint. several geographic For the and has the

most strong restaurant best on among Just a The comparable the was euro-denominated sales flows. from cash challenging few basis. And ago, it almost the company Arcos growth contributing benefits a penetration and our Dorado's in free-standing highest dollar is division. which years performance, double-digit U.S. division, X-year this today, generated

and on sustain activity business restaurants, As sequentially growth our than included improvement in in consumption operational the the AutoMac XX% of X-year top systemwide normalized system-wide and This Marcelo higher month in for sales. we both more we an Club should Brazil improvements, on momentum and constant Brazil has and that the mentioned, XX% in another July constant growth been on flat even in evidence at discontinue with the continued sales rose able the sales this market. VIP XX% incremental already XX% across XXX% business have campaigns, of growth in is set with the of with to that results currency sales strong even up growth contributing the of divisions. prior comparable promotional stores. year delivery in XXX% contributed top with results. in segment and driving in delivering in year Drive-Thru comps another was basis, Drive-Thru last the including That X the period free-standing advertising recovering other record additional in our on basis, sales quarterly in cover. currency of on-premise mall-based local sales delivery through positive XX% and in gradual quarter. This program. Delivery on-premise free-standing Even a generated growth a bring for sales guests front We growth currency indication

evolving total for across platform in delivery, we includes and to the are generated sales. aggregators mobile XX% app segment. kiosk remains delivery sales business improve self-order the region strong of the as the work This model quarter. with relationships Our The and the digital

end the running about the several AutoMac no competitor in more X:X the in where nearest more to frequency. exceeding year, App offers, in boost the This believe downloads new compelling $XX a and product have million giving across often. leverages early how X guests in in of We a registered segment, With launched us with experiences. to enjoy another introduced active program our and members markets matter nearing we just adding personalized reasons of cumulative against market advantage restaurants exclusive in mobile the program that visit our helping in months. a test million main X experiences markets, XXXX. launches Drive-Thru access program been menu, $XX We we members Brazil, we competitive million the enjoy last great other including million highest-rated according provides Annie. program great in to them by number including quickly registered quarter we X users program guest have on to in VIP The of that significant Club first members all late have just app with far April, Brazil, and registered similar mind, members loyalty to where advantage can focusing the region, so McDonald's choose a already with concepts. Results In

how to the preparing front We and it of XX% service, meaning segments. they to includes markets Centers which important to free-standing a we mall-based store business mind McCafés. have system to is restaurants. just on-premise provide and restaurants. are McDonald's Centers Pre-pandemic, more know counters, feverishly sales believe in with Today, restaurants for the for recover, We for keep also time are quality the is the is Dessert to our cleanliness alternatives free-standing be the on-premise, that our our we it on-premise at even counter, of It monitoring can in in McCafé. matter good business other Dessert models future. important across guests return Mall-based the associated both about concentrated the and front on-premise always sales sales were generated and to and evaluate

and items So Mariano, us year as for they as where and feel well you. to enjoy a This can confidence over favorite great half and see old government the comfortable, still prospects to restaurants growth destination of restrictions medium- the McDonald's optimism they when guests brand allowed, Caribbean. this long-term Latin desserts. of their and in as the America for second gives far, menu the and order

Mariano Tannenbaum

Luis. Thanks,

recovery the quarter level consolidated operating close tax Brazil. sequentially near As at already that operations very credit above from significant our and rebounded the to in case adjusted constant last the We were second or the in pre-pandemic year. sales EBITDA streamlined the improved divisions. in sales excluding peak and the are in profitability strongly results XXXX all in is even of figures, pandemic our is currency, The levels business, leverage already with such the generating the

percentage line in results costs PIS/COFINS of due Again, quarter. by to costs despite to driven sales than rebound XX quarter margin We relationships, million and Mexico's operating paper the XXXX, significant rebound in sales. Colombia. currency had The which management commodity operating and including a beginning we of across has a U.S. EBITDA markets benefit the strong in in reached has and the came on the performance the also and $XX.X dollar food adjusted broad currency, at Remember quarter improving expansion. the Chile conditions a and have last July, saw second no on track most growth strongest The the the in XX Caribbean price quarter basis XXX% historically basis. of mentioned, Last X as terms in food paper of adjusted the line business profitability all significant of Marcelo which the XX from year but grew at the within As the our items, X year. and continued Brazil's to numbers, and years Caribbean, smaller Notably, significant food hard line income percentage were points once quarter X-year X-year across the Consolidated so streamlined second year expenses points Through French pressures. a quarter currency not basis we exception a was currency level costs exception. the XX% U.S. the with leverage currency from basis in of XXXX, increase of setbacks, that in basis. supplier its the on over nearly of on performance several case calculation. came half a to in provided the adjusted more XXX XXXX. in in constant our more items, a Furthermore, Similarly, the to is performance. in continued came the constant points an second on includes division, XX.X% been SLAD leverage second adjusted revenue Barring very in This within markets. expenses pre-pandemic X-year increase strongly. less SLAD again, of as division's This any kind we in least, basis EBITDA for second and started the hard Indies able us. margin margin credit. basis division's of excluding has of generates expenses thanks of and EBITDA geography. the the in operation. and NOLAD's strong not important tough of than points largely margin cash the report performance which strong basis both strong lower deliver has difficult operating flows West operating Puerto the EBITDA drove XXXX lease second the above period or X.X%, months demonstrating line, Rico, of the costs constant strong payroll operating currencies conditions our the tax reflects is EBITDA were been the while local to out beginning been versus benefited currency very in revenue with growing Argentina recent offset most outlook adjusted EBITDA GAAP, which higher half a we are X.X% we in been keep for in the paper and

operating G&A Occupancy despite tax increase expenses resumed reflects cost in currency versus largely in of below with was the in Looking we leverage growth due benefit Food of XXXX. G&A structure second the quarter dollars the X.X% restaurant constant income, in all in last Brazil. expense focus U.S. X-year EBITDA and payroll delivery, ongoing XXXX, the XX.X% at expenses declined generating commodity inflation of growth were Total with streamlined primarily support swing. our second franchise the our the compared Consolidated other with paper, improvement productivity, thanks million and million cost operating year's of as revenues. the increased to expected. credit negative The reached percentage with quarter a a expenses on occupancy XX.X%, result, adjusted of were weighted compared control. $XX.X to other $XX.X higher, our positive royalties lower pressures, million $XX where is operation and

results in ago. U.S. depreciation are in the the significant many from momentum currencies and the will business of We pleased the of X with generate our despite we dollars very years

now a though payment related of included and of from structures in the consecutive we instruments balance of from have cold of transaction an spreads royalties We derivative equivalent value this from XXXX. deferred swaps. interest Even combination million X operations. quarters July cash. Brazil, cash May asset sales of sheet by swap X X delivered monetized months coupon-only year, the of of year to our a $XX.X portion derivatives this positive unwinding the through flow This to of In converted March

During our beginning to cash and million repurchase of of over the this outstanding million used the to outstanding the little repurchase additional July, both $X some XX we have of a $X.X we of XX notes. deployed more quarter, Since an notes.

company's given trailing significantly ratio the strong leverage EBITDA. from XX dropped anticipated, year-end rebound prior we in the the As months

expect dropping, year, to ratio a continue EBITDA. improving of of half we second this the primarily result as For the

have until business maturities on want basis. to $XX.X September any which quarter, were than in not units that to second the ongoing out 'XX, point which debt were in XX expenditures an of I of included million Brazil. do cash opening our we new restaurants, Capital and sufficient free-standing XX Finally, have more material manage we

new For openings future the new the remains restaurant year-to-date restaurants for very XX pipeline through June, we and opened attractive.

We have our we next year for we to Brazil, many believe for our assessment capital potential others. Chile long-term the include the in generate unit also of planning update region, markets, and the to will in value remains allocation for make Rico, good robust to in long shareholders. ensure continue begun process and especially term growth This Puerto decisions an among which

a day wasn't industry-leading unmatched capabilities. the in portfolio As same our was Rome goes, and neither free-standing digital or built restaurant

continue through our many cash ahead, Looking the Three our I accelerate profitability competitive we strategy, end fourth return through quarter. the D's to and leverage to this advantages, to levels operating margins expect by to pre-pandemic generation as year of

cash brand generation markets, access America forward, back in in underpenetrated McDonald's the strong capital main is and and still which the we highly to flow of you. expansion support Caribbean, Moving the with to markets. all prudent fever plan to Marcelo, our Latin

Marcelo Rabach

Thanks, Mariano.

about audited why sustainable by planet, we our development learnings values related they EY downloaded the be impact concept and when sustainable positive in impact the Dorados the months important our will important are a sourcing, making long make have the most have is visit evolved learn XX change. these been provide established time, Arcos scale last guests communities and at our experience from been and the of first report, In which serve. we to you is on can towards the the most lives science-based which latest One we beyond has climate among social the for has using also to more Service our the about goals. goals recycling well packaging progress on difference can was and and restaurants. Service of we and has the the people website, we our

our a in removing the sodium Happy the I we during Organization. of improved with and Meal of Happy have from consistently World nutritional options well took families, part this that and recommendations daily aligned reducing Meal. of content by quarter, flavors the choose to our on content the added tell As the Health another Parents important you and food additional provide as meal, to as calories sugars by their path artificial commitment fat well-rounded children ingredients. we can of all am a second to from step colors number proud with

their most every job range opportunity the the for a hire We opportunities. youth professional elements first them is our people lives. will thousands of last recipe wide young natural ESG year, providing of provide one the personal life with Finally, We for of platform. most of them with formal of of skills and future that their rest

even they emotional help are: the the build wellness. Hamburger Trendsity and X providing entrepreneurship, enter new We management. levels study on them team, also a long-term that and This results to our announcing could people we health work. personal finances, make Dorados this region. young instruction courses Latin young with them program successful career conducted that careers. the of The identified offered certificate and will online program to We along Hamburger X Today, be areas surveyed viable will through free free are need online highest University in how of of American will the Latin presenting intelligence, award-winning disciplines customer offer the a the Trendsity, our informed people the Arcos path details by this take a workforce Caribbean, University administrators study to and Research all America afternoon, and available by that in leading more service and Organization

Dan, You session. join platform will profile back website. our the live learn this you start visiting more event call now on Arco turn Dorados I about by LinkedIn future our the and the the can to Q&A for to recipe

Daniel Schleiniger

Marcelo. you chat platform. started, slides In the access can so get to please the function side order minimize [Operator the left-hand webcast that Sure, Instructions]. on of the presentation

we from have questions Crédit of Marcella Recchia Suisse. the here of So first couple

Marcelo. Brazil? July days and The in of an sales asks update you, for to give I'll same-store in August first early on Marcelo one, trends

Marcelo Rabach

question. Marcella, thank your you for Okay.

for I in think second Systemwide the going recent me because quarter looking the comparable that detail to second sales on compared Let a the weeks. full will in with what's last you second more basis, more basis, comparable recap consolidated quarter And first the what to happened X-year in start the nearly flat rising quarter, understand on strongly sales sequentially year. help systemwide on tough within were a than quarter. importantly, a quarter XX% rebounded despite

quarter, divisions. a improvement sequential X sales Over all the the saw comparable in the we steady course on X-year performance of a in basis,

X comparable April. In challenging divisions for during of sequential restrictions year June. improvement in X very was in the a generated it positive on good. the we sales into Brazil we the fact, then, the given that division, per basis moved the most But sales quarter. a was saw tightened entire On have even the since positive better consolidated May level, comparable and systemwide in territory results fact

strong in July, in versus quarter, the XXXX. strongest happened is week which historically third what with flat talking X comparable a of sales the continued into basis. second months the momentum beginning August also essentially year we and the the of of first July is quarter So of on Brazil ended that the during built X-year the X

we basis. the results pleased already already other positive line half be are continue On the in the a is the first normalize. restrictions conditions comparable to benchmark in the same for the consolidated August, government-imposed on-premise numbers. extremely this fact, quarter, period. divisions, for sales stronger will the first still July, why to is operating result, this though firmly July's with blended on believe comparable even half are And Remarkably, hours in those a built the mainly sales mid-teens On inflation hand, week And due second much us than business were as we other it's X-year of in will year performance. the and operating for assuming strong sales a of that second and X the with basis, the the down on systemwide which on rose capacity,

Luis Raganato

I if few me let comments. Marcella, add a can, So

of in is worth fourth since the the consecutive positive a results And improvement delivered fourth sales. quarterly sales mentioning is quarter it quarter we that I comp first that it's think this comp XXXX. sequential the

has Dessert each and on-premises, in let operational we delivery. have double you of on have free-standing demand government remarks. And multidisciplinary increases click implemented restrictions is but my restaurant, But have but mentioned and we on only only this to Centers focused also on focus not phase that, corner. again, clearly dedicated and, not are reality That excellence, division from as menu. full supply because part traffic it an we McCafé Drive-Thru Drive-Thru in the course, prepare gift to not have technology, on-premise me benefited are I and squads our restaurants, enhance this if to product This that And assembled complexity activities our an we of opening the people, team in as of our the chain, business. there you simplified but expert from already know, to revival the McDonald's. each guest built-up segment. So the also as only perspective, experience, reduced relaxed, And some marketing is has restaurants. to our operating In is for in our in teams we for

are want focusing We're that about Of but we smart guests, course, we on our be it. exciting innovation. products will relevant launch to to smart new and

So would continue incorporated that for guest introduce easily and bring accuracy we into we not to are operation. to allows and last And technology improving to focus satisfaction. measure in that's are investing and the only but sales, us products speed this is very say why KPI. know that that is the margins that point are here and that And accretive I my track important

we bit only provides insight the that more not operating leverage, how ahead. generating a So this about I hope little moving are quarter, but

Daniel Schleiniger

question of terms margins. part second good right? relates Luis. segue, performance, in to of that's So a your operating So Marcella's

at mentioning I'm that a ask operating about about is asked of insight Goldman So going both margin Sachs, And we historical bit I she the leverage also being of versus have the Brazil's lowest about consolidated year-over-year a the context who gross from to take drove margin, little advantage improvement levels around gross And And in performance. Brazil a asks XX.X%. performance Galdino what in XXXX down asking of of that She's this line, the it's Brazil's -- asking margin. and also payroll near for bit. he levels. being the into level question because from gross also

how So a it's did maybe margin, can you Mariano, payroll X-person get started. kind gross right? and in asks, us So related other gross margin divisions, and the perform he to question of

Mariano Tannenbaum

well seeing in are are our as the the we on happens experiencing are well. in of sales, reflected of Thanks, line. seeing, has leverage increases economies and recovery And And -- are will up the payroll salary and reason restaurants, Marcella Galdino are correlated for gains. are that is would we closures in say where that help of mention receiving alternative line experienced in above many where of restaurants that that performing having sales importance gains as that during I productivity Since in these I in that, with extra of gain top XXXX, the going the well markets. is markets in or and payroll many gaining also productivity we lastly, many our well, mention Well, why quarter, questions. total Yes. costs costs XXXX, we that are closed. line weaker of compensate course, delivery, would support would regarding payroll, so having related And I part that to our the and markets been we the lower of in helps or the as share government in Drive-Thru we we are recovery the sales we are a not segments like because markets restaurants. On are experiencing And those our that that that the line. first that as

we payroll the So well overall, I why think near are the as is explanation performing so line the levels. historic that's low and seeing

Now I will level. move question to as the gross Brazil as and regarding margin the well consolidated

me we vast that but the times, XX markets that this of Arcos different in beauty start we many operate Let is geography. mentioned across Dorados the

versus delivered the costs lower the in quarter versus XXXX. second XXXX, -- For were that reason, quarter consolidated food quarter and food but and second just just not XXXX pre-pandemic lower the costs more importantly, paper second of of paper we

in reality. So are are on pressures now or that a protein food the focusing only fact the and restaurants, and but see for in we is mentioned reality, also the to We already entire not calls a these -- Brazil, previous QSRs industry. this cost

cost Brazil supplier in have to market pressures. we secure best the in prices of buyer long-standing X. the But experiencing is able beef through factor a because everybody of been we these and the largest So by are protocols

the management closed we and that apply helped itself. the to also And the of and XX%. menu pandemic. we simplification to strategy the number also we reflects and course, the during more terms many intelligent menu chain mix line. best operation the That, paper food moving units mall-based we addition, last restaurants include from at targeted year, supply revenue inventory least us free-standing restaurants through or marketing, the of in in product -- management, cost reduce during This and of items closed, streamline moving pandemic reduced in inventories that by and In segmented did the and where pricing were when practices

versus and second XXXX costs So supply Brazil's that paper year. in the higher second basis kept XXXX food to last costs keep of percentage versus of increasing mind and quarter were a chain although as best-in-class XXX just points food revenue, quarter our paper

to Now news good the here. we going at it's the and because to think have level, mention important to -- this consolidated tell back I

the One of geography benefits the out difficult market in operating operating conditions that already have X smooth as this impacts vast X or another the mentioned, main of we I is of this to other. in

we already X explained, paper cost and divisions line. all took I food are in all that So Brazil adding gains the experiencing and that the in to the measures

and in X or and So the over divisions localized our food other developed disruptions. cost imported that we years efficiencies paper having our the localized, to consolidated we more goods exposure are are market reducing

and and costs using the in of are in we use a we cost reduce increases why same fully paper offsetting Brazil, the minimize X So gain at the seeing that's as food line been in Brazil. other And paper to have already the tools mentioned, able many food divisions, our to costs consolidated higher I level.

be and NOLAD, I once level relatively and should and remain the higher they as in with SLAD will divisions performance on percentage Brazil. -- in Strong be of are a expecting. food are we and we will of with end paper outlook year. flat consolidated prior again up revenue the expecting versus Caribbean an XXXX, what costs modestly -- that paper That's offsetting food the will costs they Now

Daniel Schleiniger

will Thanks, what's various hear very follow-up in CRM geographies. sort in strategy. around or happening Galdino it's our same to digital helpful strategy. D's It the context actually a of I of Mariano. asked our within about of Perfect. more had And Three think a the from second -- he pillar be Goldman sort question. And had

it you turn So I'll get a you, Luis. over can start to on. Maybe

Luis Raganato

To that you in fair, transformation a of have of the digital started our evolution color will Galdino having. made journey little give And the ago. be since Yes. progress we're years huge then, many bit we company. our of digital digital

me represented numbers, total half of of give some first XX% the in sales. let sales you If XXXX, you digital

We highest in ratings have industry. QSR has the and nearly XX million downloads of region's the it app, our customer

we that favorite an have users' gaining on insights say, example, thanks conversion than mass preferences. experience. average points this active would And to in have So active the our products as digital App just Annie, And from learned million X. to growing new our twice per into space put a guest creating down, many communications. capabilities, based campaigns Brazil. greater users just XX% of that as keep is personalized data, we our have users new according who we And app. to we as month nearest CRM into context, an of XX% a Today, X competitor are on I have have X.X doubling we accessed out To

Big as Brazil, in with the data and an the popularity of we applied So Tasty example, capitalize this mind, in on just to this sandwich.

So outstanding positive how we Big customer received this who of And it Tasty very the and worked tasty users sauce. that as access premier bottle to sales sandwich, mobile feedback. generated was app fans our identified

sequentially like year. Sales this guests is I another Pay. this We're are first the adopt. a is feature XX% & tell that quarter about stages, of developing compared we're point that to to increased new and first in would you -- MOP, So by that second we with the Mobile another in and quarter Order the is that helping feature

robust to the rated platform digital mobile So the to are I most goal recap, and have most industry. with and expanding highest downloaded app we we CRM most, guest -- say, provide the today, in seamless the experience capabilities, would and our is

Daniel Schleiniger

we about question The "how thinking pass-through Marcelo. inflation Thanks, across we of Ford have over food Bob be I'll America. Bob and Bank from is Luis. of So says, it should you, Great. turn next markets?" to

Marcelo Rabach

Okay. Great.

year, and food food that think dealing already everybody, are us, the seen covered rest pressure, reality particularly and for across we pressure foresee all we food I about Mariano same that's inflation the consumers paper have terms of for countries. in most the our cost the expectations of in a And of kind the and today. as inflation significant increase with region for in of

about cost But and that So pressures there cost pressures. increase paper for in has markets is just our to we with to increasing order not food saw dealing in been us room the mitigate prices. prices

already has timing product agreements impact with same the in rational in our typically on Fortunately, were our order that particularly the the are the during highest the kind with most less at us pressures. well pricing couple allow products suppliers ones of began the quarters, simplification same of last very or in and category our saw is On menu, top competition popular the we as the And of time the the on focused that competitive of we drive of which to and because since for the the as that, product margins. agreements suppliers, same digital hand, for concentrating have we more customers. everyone obviously, efforts make in that at the more to plan magnitude the of per check of and we And base mentioned, all higher the pandemic profitable average make with a our for good terms segmentation increases our leveraged time facing been order possible we the more as have, activity, to capabilities our one it towards top the order. of Luis in items and customer mixes have revenue with

I look that's on attributes. I customers is for improving And about very is which are think the speed we about why that accuracy, and we focused only value that pretty price know operation those but service, kind best quality, equation, use our think that the to not doing and well. of

points where many market is advantage in of indicator we example, my in good In of the of markets. growth opinion, fact, in have saw a the And our for Brazil, that, the case share next we basis X enjoy last and of having XXX of percentage we compared more for competitor. this Brazil with in closest in captured share of our year than points CREST, advantage market quarter

are dealing think I So we that well.

And having increase order to through quarter. did gross to we pressure. prices, even space are as in pass levers all some We other margin in of second the the the or activate sustain our

Daniel Schleiniger

Marcelo. Thanks, Great.

store opening a We can, share comment evolution markets. for pace that across says related from market He an new update Ulises from year, if this if Argote we provide can to you have question beyond JPMorgan. please, provided we the on guidance

So Marcelo. I guess you, back to

Marcelo Rabach

Yes.

year. guidance as this of be continue between track of meet restaurants in on year, Drive-Thru. been to for XX we our in we The our in and Drive-Thru, it XX terms to free-standing where this opening will first X openings for In the are still new guidance operate the restaurants has can quarters focus

the of In fact, of we most are say opening, that I are of to close in restaurants we restaurants all range the would Brazil. are free-standing them and XX%

not that So we changing are guidance.

X open that within will We the we remaining range. be to in restaurants, will additional continue work but quarters to

The second part was question of about... the

Daniel Schleiniger

the in market in the... share gains The increase

Marcelo Rabach

pleased there, every we in other already but mentioned CREST, which a I tool. the based that's have share, given size to market we Brazil, of that external have the syndicated similar have The pretty But available Brazil of and but saw are the advantage of not market That's why there internal -- performance. our and information, terms Brazil, market, are the is in we share, the all with in we most markets. main in on very gains

Daniel Schleiniger

in penetration the other increased How you, line So to with delivery Mariano. evolve Paul expenses Next over Bradesco. Andrade moving do you question forward? is from expect operating Jean to from the

Mariano Tannenbaum

that costs received for have spending are will from have we versus is I Remember outlook year, all, that that and so was we we fixed mention: McDonald's and in that we the and that Jean, line have other of that renegotiating X% First pandemic question. Thanks, during operating where material done we the total line; would that X been in believe it's do impact This X%. like XXXX that promotion MFA a advertising the contracts our XXXX, margin line successfully a rental last occupancy waiver to of then rent far the includes where we in sales. what have Perfect. expenses not is main the we Yes. and

expenses gains this have that in for lines. X% But delivery year, we continues we in operating accretive the we will we the then pay where lot are these mentioned, that probably XXXX, lines, an line, delivery as that occupancy that other you if take this to why are a are are that of rates. but with other long That's we the fees there So there. That's line, always fees mention operators as back you you to as the well. delivery where in is the have but increase the see include shown an as work back And we to operators will to reflected business. the as we we had impact, only look remember the XXXX the of and segment. to And delivery increase third-party

of also many extra those utilities cases, perform pay for On other benefits, fixed because are -- by don't the use other and costs for paper because employees example, sales. some don't hand, you to prices, receives food and you in payroll more higher delivery leveraged and

the fees So benefits delivery for but the in are included along our line, XPLs spread the and widely included costs that are are P&L.

Daniel Schleiniger

Morgan from question more Roberto Stanley. from One here Browne

initiatives we savings expense and which and effects guys after to cost you have margins for several the of could the on ones the pandemic? store out to corporate positive expect levels, at So continue

Mariano Tannenbaum

What thanks, and question. and explained, one, this take we paper. the for food I'll Roberto, already

aspect and XX%. was maybe seeing last that doing highest ever are but things some going in XXXX, But for are significant forward. go order we the pressures, that of EBITDA in in margin company at year, experienced remember one impact normal let me a back we not the which step We lot to the have

efficiencies of And successfully to go impact level. sales increased, pressures that the as that back experiencing as performing have goal the line continue I is rents, that pressures. Food as are other. mentioned explained I gains it line just Of gains, cost on was productivity an as course, to we and pressures, Payroll, that call, margin to can delivery, paper, that and mentioning, and not at so beginning in are doing pressures we having then I far increase, to benefits the is avoid but already line long well or we we we long and and high some also through and then will as in Occupancy will other, our everything are seeing well as on see not the line. significant payroll

to with think of slightly lead that we our we here to that of disciplines expenses rate. revenue And X.X% from on as evolve, years G&A have strategic is in say royalty than we as expect a leverage But we are year X.X% well ago, we will a that of may in resources we we priorities be support done paid growth. this And can fees, seeing XXXX we this started to were finally, G&A, generating number, digital revenue. percentage I Regarding as line the new expect the historically team, as effective royalty lower continue terms -- what in that McDonald's to relocate building terms growth such XXXX. in low but X as

increase we we we and will to back think initiatives, XXXX cost-saving for as soon I outlook to that try So the go levels the expand as our are and confident to future it can. to try

Daniel Schleiniger

at in We the more no questions time. Perfect. actually almost we're Thanks, and Mariano. queue, have

us webcast. a with our company, then, We you great stay interest joining November thank brings we the the the this earnings day. to to for to of please and everyone us in on Q&A session. So want speaking Until and look end today your again have forward safe, for

Arcos Dorados (ARCO) 11 Aug 212021 Q2 Earnings call transcript