NYSE:ARCO Arcos Dorados Q1 2023 Earnings Report $7.46 +0.45 (+6.35%) Closing price 04/17/2025 03:59 PM EasternExtended Trading$7.72 +0.27 (+3.55%) As of 04/17/2025 05:04 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Arcos Dorados EPS ResultsActual EPS$0.18Consensus EPS $0.12Beat/MissBeat by +$0.06One Year Ago EPSN/AArcos Dorados Revenue ResultsActual Revenue$985.49 millionExpected Revenue$959.61 millionBeat/MissBeat by +$25.88 millionYoY Revenue GrowthN/AArcos Dorados Announcement DetailsQuarterQ1 2023Date5/17/2023TimeN/AConference Call DateWednesday, May 17, 2023Conference Call Time10:00AM ETUpcoming EarningsArcos Dorados' Q1 2025 earnings is scheduled for Wednesday, May 14, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Arcos Dorados Q1 2023 Earnings Call TranscriptProvided by QuartrMay 17, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Morning, everyone, and Speaker 100:00:00thank you for joining our Q1 2023 earnings webcast. With us today are Marcelo Rabaf, our Chief Executive Officer Luis Ranganato, 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 on the Investors section of our website, www.arcosurados.com/ir. As a reminder, to better view the presentation on the webcast platform, please scroll over the upper left hand part of the screen and click on the arrows to maximize the slides. After we conclude our opening remarks, we will answer your questions, which you can submit using the chat function on the left hand side of the screen. Speaker 100:00:44You will need to minimize the slides to access the chat function. Today's call will contain forward looking statements, and I refer you to the forward looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non GAAP financial results. Investors are encouraged to review the reconciliation of these non GAAP financial results as compared with GAAP results, which can be found on the press release and unaudited financial statements filed today with the SEC on Form 6 ks. Speaker 100:01:26Marcelo, over to you. Speaker 200:01:30Thank you, Dan. Good morning, everyone, and thank you for joining us today. The McDonough System has been generating consistently strong results around the world for the last couple of years. Arco Dorados is no exception. This is a direct result of our long term strategic approach to generating value for our shareholders. Speaker 200:01:56And we expect the structural competitive advantages of our restaurant portfolio and digital platform to continue to drive value creation for the foreseeable future. Our guests have spoken. There is no doubt we are operating the most beloved brand in the QSR industry in Latin America and the Caribbean. They recognize the value we offer in our restaurants on a daily basis And the positive impact we make in our communities every year. This is why restaurant volumes continue to grow And brand trust metrics are at all time highs. Speaker 200:02:40Each time we open a restaurant, We bring McDonald's favorite menu items closer to our guests, while also creating new job opportunities for young people and investing in the economic development of local communities. We are operating in underpenetrated region for the QSR industry, which represents a significant growth opportunity. Against that backdrop, we are working to support a sustainable future for our business and the communities we serve As we capture the substantial potential that lies ahead of us. This is the first with no material COVID impact since the pandemic began, and we are off to a strong start. Let's take a look at the consolidated results for the Q1 of 2023. Speaker 200:03:39Total revenue in the Q1 rose 25.3% in U. S. Dollars versus the prior year, Supported by double digit guest traffic growth. Strong top line growth drove operating leverage and improved profitability. Adjusted EBITDA was up 28% in the quarter, Including modest margin expansion. Speaker 200:04:08Net income in the quarter also improved significantly, Growing 52.7 percent versus last year. System wide comparable sales grew a robust 1.7 times blended inflation across the company and at least 1.5 times in each division. Market share trends remain positive as well. McDonald's brand business share in the quarter was about 2 and 3.5x as big as that of our 2 closest competitors, respectively. The 3 d strategy drove sales higher in the quarter. Speaker 200:04:52Total digital sales Accounted for 47% of system wide sales, with 18% identifiable sales across the business. This included strong performance in both the delivery and drive thru sales channels despite an acceleration of sales growth at the FrontCounter. And our development plan is on track. We opened 8 freestanding restaurants in the quarter And expect the pace of openings to pick up as we move through the year with a higher number of openings in the second half of twenty twenty three. Mariano will talk more about that in a few minutes. Speaker 200:05:38I'll turn it over to Luis now for an overview of sales performance in each division. Speaker 300:05:46Thanks, Marcelo, and good morning, everyone. System wide comparable sales growth Was strong in all divisions in the Q1. Brazil's comparable sales rose 2.6 times inflation in the period. About 2 thirds of the growth came from higher guest volumes as we maintained a competitive pricing strategy To support volume growth given the softer consumer environment in the country. Digital sales Accounted for 57% of total sales in Brazil, including 23% identifiable sales, which are users that provide their contact information and explicitly allow us to use it. Speaker 300:06:35Brazil sponsorships of Big Brother Brazil, among the most highly rated television programs in the country and Lollapalooza, one of its most popular music festivals, connected the brand with younger consumers. New product launches included premium offerings in both the beef and chicken platforms. And digital sales benefited from channel specific campaigns in drive thru, early access to new products for app users and a MAC delivery activation during Lollapalooza. Lola's comparable sales Grew 2.8 times blended inflation in the quarter. Similar to Brazil, about 2 thirds of NOLED's comparable sales growth Came from increased guest volumes. Speaker 300:07:32Mexico and the French West Indies were the strongest performers. Costa Rica, Panama and Puerto Rico also delivered solid top line growth in the quarter. Marketing activities in NOLA included the Big Mac Chicken launch in Mexico and Costa Rica, Leveraging an iconic product to expand the chicken platform. We continued the rollout of the platform to Panama, capitalizing on best practices from the implementation in Costa Rica. Panama's comparable sales growth, up 14% in the quarter. Speaker 300:08:15As a reminder, Best Burger is a new quality standard for McDonald's classic burgers. It makes our burgers even better With small changes that add to a big difference. Guests experience hotter, Juicier and Tastier Hamburgers. Results in these first two markets demonstrate that this new standard Helps drive even more robust sales growth. Comparable sales grew 1.5 Times inflation in slide in the Q1, including mid teens guest volume growth and strong inflation aided average check growth. Speaker 300:09:00Performance was consistent across the division with all markets delivering strong volume and total revenue growth. SLAT maintained strong sales growth momentum, while reinforcing Its leadership position in the QSR industry by reaching its highest value share on record. SLAG also reached its highest penetration of digital identified sales, Growing 91% compared to the prior year quarter. The division Rolled out the mock crispy chicken platform in Argentina and Chile with strong consumer response in both markets. The launch of the signature Turbo Tasty platform strengthened the line of premium beef products in Chile, Which helped fuel sales while reinforcing value for money perception. Speaker 300:10:04SLAD Also connected with younger consumers with sponsorships of some of the most relevant music festivals in the region, Lola Palouse in Argentina and Chile and Steropinik in Colombia. We have always enjoyed a significant competitive advantage from our freestanding restaurant portfolio. This is especially pronounced in challenging economic times when mall based restaurants tend to suffer most. Listen from the past also have us well positioned in terms of pricing that should support continued volume growth even in a softer economic environment. Over to Mariano for a closer look at consolidated and divisional profitability in the quarter. Speaker 400:10:57Thanks, Luis. Good morning, everyone. A compelling value proposition drives guest volume and top line growth Above inflation, which then leads to operating leverage and improved profitability. With that, 1st quarter adjusted EBITDA grew 28% in U. S. Speaker 400:11:19Dollars versus the prior year. It is worth remembering that the Q1 of 2022 was the easiest comparison we will face this year Since it was the last period to include a material impact from COVID due to the omicron strain of the virus. Adjusted EBITDA margin improved by 20 basis points versus the Q1 of last year. We generated efficiencies and operating leverage in payroll, occupancy and other operating expenses and G and A. These were partly offset by higher food and paper costs as a percentage of revenue due to our pricing strategy and a tough comparison with the Q1 of last year. Speaker 400:12:14I should note that food and paper costs Have been well controlled over the last 3 plus years despite supply chain disruptions and commodity price Spikes in the period. The Q1 2023 margin also included the impact of the final step up of our royalty rate. For the full year 2023, we expect food and paper costs to be relatively flat As a percentage of revenues versus 2022, sustained sales growth will be the key driver of operating leverage needed to offset the impact of the higher royalty on our full year margins. And As has been the case for the last few years, we would prioritize sales as the main generator of adjusted EBITDA growth in U. S. Speaker 400:13:11Dollars in 2023. During the Q1, we kept with that priority. Adjusted EBITDA grew by double digits in all three divisions. Brazilian slab benefit from higher sales per restaurant, which is the main driver of operating leverage over fixed costs. This generated strong U. Speaker 400:13:36S. Dollar growth in EBITDA as well as margin expansion in both divisions. NOLAD's EBITDA growth benefited from total sales growth, But sales per unit is still below company average. This made it more difficult for operating leverage to offset the margin impact of the higher royalty versus last year. Speaker 300:14:03By now, Most of you are familiar with the 3 d strategy of digital delivery and drive thru. All three components of the strategy Performed well in the quarter. Digital, which includes sales from delivery, the mobile app and Self Order Kiosks achieved its highest ever penetration in system wide sales. As you already heard, the percentage of identifiable sales continued growing in the quarter as well. We expect to see this penetration increase once we launch our rewards program in all of Brazil. Speaker 300:14:42Our pilot program has generated encouraging results and is being expanded to more restaurants in the country. We are still on track to launch the program in all of Brazil later this year and to the rest of our markets Over the next couple of years, delivery and drive thru sales were up Year over year and sequentially, we are particularly pleased with the sustained sales performance In these channels, especially with front counter sales growing more than 50% versus the prior year in constant currency. Delivery sales grew across the entire Arcotirados footprint, Supported by strong guest volume growth in both SLAD and Brazil. Brazil's delivery sales Grew by more than 22% in constant currency in the period and generated more than 17% of the division sales. Drive thru sales rose by 13% in the Q1 versus last year. Speaker 300:15:58As expected, Guest traffic in drive thru is beginning to moderate given the growth in front counter sales. Speaker 400:16:07Our balance sheet remains strong even as we invest some of the cash to fund our growth plan. Our net leverage ratio remained at a very healthy 1x. We expect the net leverage ratio to remain well below our historical comfort range of 2 to 2.5 times at the end of 2023. Historically, cash flow from operations It's relatively low during the first half of the year due to the seasonality of our working capital needs. This year's Q1 also reflects the additional openings at the end of 2022 and the increased openings planned for 2023. Speaker 400:17:00We expect cash conversion to remain in the 85% to 90 accelerating a few restaurant openings earmarked for the Q1 of 2023. We still expect to open between 7580 restaurants this year with a Higher concentration of openings in the second half. We opened 8 freestanding restaurants And capital expenditures were $47,000,000 in the quarter. Finally, we paid the first of 4 installments of this year's dividend at the end of March. Marcelo, back to you. Speaker 200:17:52In the next few days, we will publish our 2022 Social Commitment and Sustainable Development Report. In the report, you will see all the work we did last year across the 6 pillars of our recipe for the future. For example, the strong results we are generating make it impossible to continue investing in our growth and the communities we serve. Last year, we increased our renewable energy usage by nearly 2.5 times, expanded our circular economy initiatives such as the recycling of oil and packaging Intensify our efforts to procure our ingredients from responsible sources Offered thousands of development and job opportunities for young people and distributed over 890,000 books for children to enjoy with their Happy Meals. You can learn more about all these initiatives by downloading the report in English from www.recipeforthefuture .com. Speaker 200:19:09Before we open the call up for Q and A, I would like to leave you with a few thoughts. First, we believe that building a loved brand creates value for the company and its shareholders. This is why our marketing spend has shifted over time to focus on culturally relevant brand activations in our markets Rather than just pricing and products. Examples include the Big Brother Brazil and Lola Panuza sponsorships That drove brand affinity among younger guests. But the brand lives every day in the more than 2,003 100 Restaurants We Operate. Speaker 200:19:58We have the largest freestanding restaurant portfolio by a wide margin. And as someone who began his career in the operation, I believe our operational expertise is second to none. Almost half of the portfolio has already been modernized to Experience of the Future, And all restaurants were converted to our culture of service several years ago. This service oriented culture Is what truly distinguishes the McDonald's restaurant experience in Latin America and the Caribbean. We are also part of a global McDonald's system. Speaker 200:20:39We developed tools such as the 3 d strategy That help us maximize the potential of our restaurant footprint and operational expertise. Clearly, these channels are driving engagement with guests and offering them the choice of when, Where Speaker 100:20:58and Speaker 200:20:58how to enjoy their favorite McDonald's orders. Finally, to build a strong brand and Sustainable business model, we must operate responsibly. This is why we have the industry's leading ESG platform with ambitious initiatives and goals aimed at benefiting our business, the communities we serve and the planet we all share. Thank you for your ongoing support. Dan, over to you to start the Q and A session. Speaker 100:21:34Thanks, Marcelo. In order to get started, please minimize the presentation slides so that you can access the chat function on the left hand side of the webcast platform. Please limit yourself to 1 or 2 questions so that I can read, understand and convey them to our speakers. We will now pause briefly to compile your questions. Operator00:22:00Great. So our first question this morning comes from Joaquin Le of Itau. And I'm going to combine it with a question that Thiago Bertolucci from Goldman Sachs Ascentis. Joaquin says, congratulations on the results. And can you please elaborate on the reasons explaining the very different margin performances in Brazil and SLAD versus of NOLAD. Operator00:22:21And Thiago has a similar question that says margins for NOLAD came in a touch lower even if adjusted for the royalties despite solid same store sales growth. Why is that and what's the outlook? And then he says, gracias. So that question, I'm going Speaker 100:22:36to turn over to you, Mariano. Speaker 500:22:38Perfect then. And good morning, everybody, and thank you, Joaquin and Thiago, for the question. Well, 1st of all, the 3 divisions are showing sales growing well above inflation. We're very pleased The 3 divisions are showing double digit EBITDA growth in U. S. Speaker 500:23:02Dollars. Brazil in this respect is growing almost 30%, 29.2%, SLAP 34.3% and NOLA, 10.7%. Slab in Brazil with higher sales per unit Are more capable of leveraging on fixed costs and with that even offset the royalty step up That happened in August last year. Know that on the other hand, with lower sales per store And also with a higher exposure to food and paper imported goods is less capable for the moment Leverage on those fixed costs. And that's the main reason why we are seeing different behavior Between Brazil and SLAD on one side and NOLAD on the other. Speaker 500:23:59Regarding the outlook in general for on a consolidated basis, Here, our plan is clear and that's our expectation for the rest of the year. We remain very focused on driving top line with sustainable volume growth in all channels To deliver the EBITDA growth in dollars with a very healthy margin profile. This is what we have been doing. Last year, we are continuing to do during this year and that's our expectation for the year. Regarding, for example, Food and Paper, we expect to have a similar figure than we had last year. Speaker 500:24:45And we expect to leverage on all the fixed costs. Maybe you will see that on payroll, on G and A And other than occupancy that when sales continue to grow above inflation, we would expect Speaker 300:25:07Cecilia, Rich, on those lines. Operator00:25:07Great. Thanks, Mariano. The next question actually is the first two parts of Jack was original question. Good morning, team. Congrats on the amazing results. Operator00:25:17A couple of questions, both of which will be for Marcelo. On Brazil, how have same store sales performed throughout the quarter, especially in March? And what does the quarter performance imply for market share evolution? That's the first part. And maybe Marcelo, you want to start with that, and I'll give you the second one here in a second. Speaker 600:25:36Excellent. Thank you, Dan. And Hi, Thiago. Nice to have you in the call. Well, we are very pleased with the performance of sales in the whole company, but particularly in Brazil. Speaker 600:25:51We did extremely well across the quarter. Even though during the 1st 2 months, the numbers figures for comparable sales were better because the base of comparison In 2022, was still affected by the omicron impact in some restrictions, But we did well very well in March. We grew sales comparable sales well above inflation and we grew volumes, which is very, very important for us. And most importantly, the trends that we are seeing in the second quarter Shows that we are keeping momentum in Brazil and in the whole company. So sales trends in the second quarter are doing Extremely well. Speaker 600:26:40So we remain cautiously optimistic as we go through the rest of this year. We knew By the figures published by other retailers in the market that there are some headwinds in Brazil, but we are beating the market. And that's reflected in market share figures in Brazil. We continue to do extremely well. We have more than doubled The market share of our closest competitor and based on the public figures about comparable sales in the market, we are Getting the gap even bigger, thanks to our acceleration in the comparable sales performance. Operator00:27:25Perfect. And the second part of Thiago's question, Marcelo, is Argentina has been extremely volatile And apparently, you closed some stores in SLAD. How are you seeing the consumer backdrop in the region? Speaker 200:27:38Yes. First, let me tell Speaker 600:27:40you that the restaurants that we closed in SLAD, most of them are in Venezuela. We closed Six restaurants in Venezuela. So we didn't close any restaurant in Argentina. And despite the challenging macro environment in the market in Argentina. We are very pleased with the performance of our business in that country Where the McDonald's brand has gained preference and market share in the last several quarters. Speaker 600:28:12The volume growth has been the real story in Argentina at the beginning, thanks to the 3 d strategy. But more recently, From counter volume has reaccelerated and is now above pre pandemic levels in Argentina. So Argentina Has one of the highest levels of guest traffic per restaurant in all of our markets, in all of our hotels. And digital channels Has a lot to do with that. The digital sales penetration in Argentina is one of the highest in our region and That allows us to work with segmentation and personalization. Speaker 600:28:51And these tools help us not only in terms of Growing sales and volumes, but helps us in terms of improving our profitability in the market. So we are very, very pleased With the performance in Argentina despite the challenging macro environment. Operator00:29:13Perfect. Our next question is also a 2 parter from Melissa Buhn of Bank of America. The first one for you, Mariano. Can you please discuss the outlook for protein and other food costs and any hedges or purchase commitments you've made? Speaker 500:29:31Perfect. Thanks, Melissa, for the question. In terms of food and paper costs, We are expecting for the full year a similar cost to last year, as I mentioned in the previous question. Regarding protein and other food costs pressures, we are seeing actually less pressure on that front in the beginning of the year. But that together with our prudent pricing strategy that is allowing us To grow sales above inflation, that's the reason why we are expecting stable food and paper costs throughout this year. Speaker 500:30:17And regarding the hedges, as we already Mentioned our policy is to hedge 50% of projected fuel and paper exposure on a rolling basis. So we are doing that with an outlook of 2 to 3 quarters and that's what we continue To do and we will do that for this year. Operator00:30:46Great. The second part of Melissa's question is can you comment on the pricing and promotional environment in your markets in your major markets? Are you seeing any acceleration in the market Your shift from the informal and independent to the formal and chained operators. And she says thank you. That one for you, Luis. Speaker 300:31:04Thank you, Melissa, for the question. Hello, everybody. I will start with the second part of the question. We do not See an acceleration in the market share sheet from informal to formal operators. What we are seeing is a rational Competitive environment and sales recovery of smaller branded competitors of the sector, of the Euro SaaS sector. Speaker 300:31:31But we are prepared to face future competitive pressures. We think we have the right strategies and we're focusing On execution at the restaurant level, our strategy is built on offering value With a pricing architecture that maximizes the targeted or addressable Market. And that allowed us to offer attractive value for our guests. So we have positive results in market share In the Q1 of 2023, our business share advantage was 2 to 3.5 times as big as that of our 2 closest competitors. Dan? Operator00:32:18Thanks, Luis. Our next question actually a couple of questions Come from Antonio Hernandez of Barclays. Hi, good morning. My questions are number 1, where are you seeing more payroll and labor headwinds? We'll start with you, Miguel. Speaker 500:32:32Perfect. And thanks, Antonio, for your question. First of all, let me say that we are very pleased With the level we are having in payroll on a consolidated level Below 20% of revenues. That's a very healthy figure for Anagost. And we expect to continuing to obtain leverage on the payroll line as we continue to grow sales about inflation. Speaker 500:33:07Having said that, what we are observing is that we are having More leverage in Brazil and a bit more pressure on the labor front In NOLAD and in some markets in SLAD. Operator00:33:28Perfect. Thanks, Mariano. The second part of Antonio's question for you, Luis. Is the deceleration in drive thru changing your pipeline for this Speaker 300:33:41All right. Yes. Hello, Antonio. Thank you for the question. The first, it is important to say that the drive thru channel had a strong growth during the pandemic, And we had the chance to have new customers, new guests that had the opportunity to try even though that we've been They get in our market to try this challenge for the first time, okay. Speaker 300:34:10They found out that it was not only fun, Convenient, safe, but cool, okay? And now with a very strong recovery in Trunkar With more than 50% in the Q1 of 2022, even with that, the sales are growing about 13% Versus that the Q1 of 2022. So this is expected in moderation in this traffic today In the course that we attend. But our challenge is now to continue making drive thru A growth engine for the company. And we have to make adjustments in operations. Speaker 300:34:55And we have the right set of programs in place for marketing and digital. Even with the modernizations, we make with adjust The adjustments that we make in the buildings, we make not only for drive thru, but for delivery, we make our operation easier And that allows us to capture additional sales. Dan? Operator00:35:17Thanks, Luis. The next question comes from Ulises Argote of JPMorgan. Just a quick one on the sales trends. Any color on how performance has been into the start of Q2 'twenty three and how sales performed sequentially through the Q1 of 'twenty three Speaker 100:35:34as we rolled out the effect from Omicron on the base. Operator00:35:38And that one, I'll turn over Speaker 100:35:39to you, Marcelo. Speaker 600:35:41Okay. Thank you. And thank you, Ulises, As I mentioned when I answered the first question about Brazil's performance in the Comparable sales figures for the Q1, that was the same case for the whole company. So within the quarter, the base of comparison The Q1 2022 was easier for the 1st couple of months. But again, we saw very strong results, Both in terms of volumes growth and in terms of comparable sales growth, well above inflation During the Q1 and in the Q2, same that I mentioned before for Brazil. Speaker 600:36:27We continue to see very strong sales performance. In fact, I would say that May has been a very, Very strong month. The first couple 2 couple of weeks in May have been very, very strong. So we remain very confident that we have in place the right marketing plans, the right marketing initiatives And all the structural competitive advantages that brought us to this point, That brought us to this leadership position, continue to deliver against the environment that we are Facing in different markets. So very encouraging figures coming from sales and volume growth in the Q2 of the year. Operator00:37:21Perfect. So we have a question from Anik. And Anik, I apologize If I don't pronounce your last name correctly, Matsudy from American Trust Investment Advisors. Congratulations on the performance. And can you please And more on the latest digital program expected to release in Brazil later this year and other regions in the following years. Operator00:37:40And that one is for you, Luis. Speaker 300:37:42Hello, Oleg. We currently have a loyalty program that is exclusive to drive through that is called the Club VIP Automak. By the end of March, we have had around 4.4 With the members, but we have launched we've mentioned this before on the last calls, we've launched a pilot of our loyalty program, the Hebra de operator in Brazil with very, very good results. Without even without a massive Media launch. We noticed not only an increase in volume of identifiable sales, But an increasing visit frequency. Speaker 300:38:28That's why today we are starting to get expansion of the program to more restaurants, Including several sub franchisees. And the intention is, like I said, to launch it in to all of Brazil later this year And to the rest of our 20 markets over the next couple of years. Dan? Operator00:38:52Great. Thanks, Luis. I'm showing no more questions in the queue here. So I guess we've reached the end of our Q and A session. I want to thank everyone again for your interest in Arcosrados and for joining today's webcast. Operator00:39:03Look forward to speaking with you again in the middle of August on our Q2 2023 earnings webcast. And until then, stay safe and have a great day, everyone.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallArcos Dorados Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Arcos Dorados Earnings HeadlinesArcos Dorados Holdings Inc. First Quarter 2025 Results Webcast Date and TimeApril 17 at 12:19 AM | finance.yahoo.comReflecting On Traditional Fast Food Stocks’ Q4 Earnings: Arcos Dorados (NYSE:ARCO)April 16 at 12:19 AM | finance.yahoo.comMusk’s AI Masterplan – Our #1 AI Stock to Buy NowDid Elon Musk just set the stage for the next AI stock explosion? One 30-year Wall Street veteran thinks so. Musk has been quietly creating one of the most ambitious AI ventures in history.April 18, 2025 | Behind the Markets (Ad)Is Arcos Dorados Holdings (ARCO) Among the Top Restaurant Stocks to Buy Under $20?April 15 at 4:59 PM | insidermonkey.comArco Dorados updates on its strategies to optimize sales growthApril 8, 2025 | msn.comDo Options Traders Know Something About Arcos Dorados (ARCO) Stock We Don't?April 8, 2025 | msn.comSee More Arcos Dorados Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Arcos Dorados? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Arcos Dorados and other key companies, straight to your email. Email Address About Arcos DoradosArcos Dorados (NYSE:ARCO) operates as a franchisee of McDonald's restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald's restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela. The company was founded in 2007 and is based in Montevideo, Uruguay.View Arcos Dorados ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 7 speakers on the call. Operator00:00:00Morning, everyone, and Speaker 100:00:00thank you for joining our Q1 2023 earnings webcast. With us today are Marcelo Rabaf, our Chief Executive Officer Luis Ranganato, 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 on the Investors section of our website, www.arcosurados.com/ir. As a reminder, to better view the presentation on the webcast platform, please scroll over the upper left hand part of the screen and click on the arrows to maximize the slides. After we conclude our opening remarks, we will answer your questions, which you can submit using the chat function on the left hand side of the screen. Speaker 100:00:44You will need to minimize the slides to access the chat function. Today's call will contain forward looking statements, and I refer you to the forward looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non GAAP financial results. Investors are encouraged to review the reconciliation of these non GAAP financial results as compared with GAAP results, which can be found on the press release and unaudited financial statements filed today with the SEC on Form 6 ks. Speaker 100:01:26Marcelo, over to you. Speaker 200:01:30Thank you, Dan. Good morning, everyone, and thank you for joining us today. The McDonough System has been generating consistently strong results around the world for the last couple of years. Arco Dorados is no exception. This is a direct result of our long term strategic approach to generating value for our shareholders. Speaker 200:01:56And we expect the structural competitive advantages of our restaurant portfolio and digital platform to continue to drive value creation for the foreseeable future. Our guests have spoken. There is no doubt we are operating the most beloved brand in the QSR industry in Latin America and the Caribbean. They recognize the value we offer in our restaurants on a daily basis And the positive impact we make in our communities every year. This is why restaurant volumes continue to grow And brand trust metrics are at all time highs. Speaker 200:02:40Each time we open a restaurant, We bring McDonald's favorite menu items closer to our guests, while also creating new job opportunities for young people and investing in the economic development of local communities. We are operating in underpenetrated region for the QSR industry, which represents a significant growth opportunity. Against that backdrop, we are working to support a sustainable future for our business and the communities we serve As we capture the substantial potential that lies ahead of us. This is the first with no material COVID impact since the pandemic began, and we are off to a strong start. Let's take a look at the consolidated results for the Q1 of 2023. Speaker 200:03:39Total revenue in the Q1 rose 25.3% in U. S. Dollars versus the prior year, Supported by double digit guest traffic growth. Strong top line growth drove operating leverage and improved profitability. Adjusted EBITDA was up 28% in the quarter, Including modest margin expansion. Speaker 200:04:08Net income in the quarter also improved significantly, Growing 52.7 percent versus last year. System wide comparable sales grew a robust 1.7 times blended inflation across the company and at least 1.5 times in each division. Market share trends remain positive as well. McDonald's brand business share in the quarter was about 2 and 3.5x as big as that of our 2 closest competitors, respectively. The 3 d strategy drove sales higher in the quarter. Speaker 200:04:52Total digital sales Accounted for 47% of system wide sales, with 18% identifiable sales across the business. This included strong performance in both the delivery and drive thru sales channels despite an acceleration of sales growth at the FrontCounter. And our development plan is on track. We opened 8 freestanding restaurants in the quarter And expect the pace of openings to pick up as we move through the year with a higher number of openings in the second half of twenty twenty three. Mariano will talk more about that in a few minutes. Speaker 200:05:38I'll turn it over to Luis now for an overview of sales performance in each division. Speaker 300:05:46Thanks, Marcelo, and good morning, everyone. System wide comparable sales growth Was strong in all divisions in the Q1. Brazil's comparable sales rose 2.6 times inflation in the period. About 2 thirds of the growth came from higher guest volumes as we maintained a competitive pricing strategy To support volume growth given the softer consumer environment in the country. Digital sales Accounted for 57% of total sales in Brazil, including 23% identifiable sales, which are users that provide their contact information and explicitly allow us to use it. Speaker 300:06:35Brazil sponsorships of Big Brother Brazil, among the most highly rated television programs in the country and Lollapalooza, one of its most popular music festivals, connected the brand with younger consumers. New product launches included premium offerings in both the beef and chicken platforms. And digital sales benefited from channel specific campaigns in drive thru, early access to new products for app users and a MAC delivery activation during Lollapalooza. Lola's comparable sales Grew 2.8 times blended inflation in the quarter. Similar to Brazil, about 2 thirds of NOLED's comparable sales growth Came from increased guest volumes. Speaker 300:07:32Mexico and the French West Indies were the strongest performers. Costa Rica, Panama and Puerto Rico also delivered solid top line growth in the quarter. Marketing activities in NOLA included the Big Mac Chicken launch in Mexico and Costa Rica, Leveraging an iconic product to expand the chicken platform. We continued the rollout of the platform to Panama, capitalizing on best practices from the implementation in Costa Rica. Panama's comparable sales growth, up 14% in the quarter. Speaker 300:08:15As a reminder, Best Burger is a new quality standard for McDonald's classic burgers. It makes our burgers even better With small changes that add to a big difference. Guests experience hotter, Juicier and Tastier Hamburgers. Results in these first two markets demonstrate that this new standard Helps drive even more robust sales growth. Comparable sales grew 1.5 Times inflation in slide in the Q1, including mid teens guest volume growth and strong inflation aided average check growth. Speaker 300:09:00Performance was consistent across the division with all markets delivering strong volume and total revenue growth. SLAT maintained strong sales growth momentum, while reinforcing Its leadership position in the QSR industry by reaching its highest value share on record. SLAG also reached its highest penetration of digital identified sales, Growing 91% compared to the prior year quarter. The division Rolled out the mock crispy chicken platform in Argentina and Chile with strong consumer response in both markets. The launch of the signature Turbo Tasty platform strengthened the line of premium beef products in Chile, Which helped fuel sales while reinforcing value for money perception. Speaker 300:10:04SLAD Also connected with younger consumers with sponsorships of some of the most relevant music festivals in the region, Lola Palouse in Argentina and Chile and Steropinik in Colombia. We have always enjoyed a significant competitive advantage from our freestanding restaurant portfolio. This is especially pronounced in challenging economic times when mall based restaurants tend to suffer most. Listen from the past also have us well positioned in terms of pricing that should support continued volume growth even in a softer economic environment. Over to Mariano for a closer look at consolidated and divisional profitability in the quarter. Speaker 400:10:57Thanks, Luis. Good morning, everyone. A compelling value proposition drives guest volume and top line growth Above inflation, which then leads to operating leverage and improved profitability. With that, 1st quarter adjusted EBITDA grew 28% in U. S. Speaker 400:11:19Dollars versus the prior year. It is worth remembering that the Q1 of 2022 was the easiest comparison we will face this year Since it was the last period to include a material impact from COVID due to the omicron strain of the virus. Adjusted EBITDA margin improved by 20 basis points versus the Q1 of last year. We generated efficiencies and operating leverage in payroll, occupancy and other operating expenses and G and A. These were partly offset by higher food and paper costs as a percentage of revenue due to our pricing strategy and a tough comparison with the Q1 of last year. Speaker 400:12:14I should note that food and paper costs Have been well controlled over the last 3 plus years despite supply chain disruptions and commodity price Spikes in the period. The Q1 2023 margin also included the impact of the final step up of our royalty rate. For the full year 2023, we expect food and paper costs to be relatively flat As a percentage of revenues versus 2022, sustained sales growth will be the key driver of operating leverage needed to offset the impact of the higher royalty on our full year margins. And As has been the case for the last few years, we would prioritize sales as the main generator of adjusted EBITDA growth in U. S. Speaker 400:13:11Dollars in 2023. During the Q1, we kept with that priority. Adjusted EBITDA grew by double digits in all three divisions. Brazilian slab benefit from higher sales per restaurant, which is the main driver of operating leverage over fixed costs. This generated strong U. Speaker 400:13:36S. Dollar growth in EBITDA as well as margin expansion in both divisions. NOLAD's EBITDA growth benefited from total sales growth, But sales per unit is still below company average. This made it more difficult for operating leverage to offset the margin impact of the higher royalty versus last year. Speaker 300:14:03By now, Most of you are familiar with the 3 d strategy of digital delivery and drive thru. All three components of the strategy Performed well in the quarter. Digital, which includes sales from delivery, the mobile app and Self Order Kiosks achieved its highest ever penetration in system wide sales. As you already heard, the percentage of identifiable sales continued growing in the quarter as well. We expect to see this penetration increase once we launch our rewards program in all of Brazil. Speaker 300:14:42Our pilot program has generated encouraging results and is being expanded to more restaurants in the country. We are still on track to launch the program in all of Brazil later this year and to the rest of our markets Over the next couple of years, delivery and drive thru sales were up Year over year and sequentially, we are particularly pleased with the sustained sales performance In these channels, especially with front counter sales growing more than 50% versus the prior year in constant currency. Delivery sales grew across the entire Arcotirados footprint, Supported by strong guest volume growth in both SLAD and Brazil. Brazil's delivery sales Grew by more than 22% in constant currency in the period and generated more than 17% of the division sales. Drive thru sales rose by 13% in the Q1 versus last year. Speaker 300:15:58As expected, Guest traffic in drive thru is beginning to moderate given the growth in front counter sales. Speaker 400:16:07Our balance sheet remains strong even as we invest some of the cash to fund our growth plan. Our net leverage ratio remained at a very healthy 1x. We expect the net leverage ratio to remain well below our historical comfort range of 2 to 2.5 times at the end of 2023. Historically, cash flow from operations It's relatively low during the first half of the year due to the seasonality of our working capital needs. This year's Q1 also reflects the additional openings at the end of 2022 and the increased openings planned for 2023. Speaker 400:17:00We expect cash conversion to remain in the 85% to 90 accelerating a few restaurant openings earmarked for the Q1 of 2023. We still expect to open between 7580 restaurants this year with a Higher concentration of openings in the second half. We opened 8 freestanding restaurants And capital expenditures were $47,000,000 in the quarter. Finally, we paid the first of 4 installments of this year's dividend at the end of March. Marcelo, back to you. Speaker 200:17:52In the next few days, we will publish our 2022 Social Commitment and Sustainable Development Report. In the report, you will see all the work we did last year across the 6 pillars of our recipe for the future. For example, the strong results we are generating make it impossible to continue investing in our growth and the communities we serve. Last year, we increased our renewable energy usage by nearly 2.5 times, expanded our circular economy initiatives such as the recycling of oil and packaging Intensify our efforts to procure our ingredients from responsible sources Offered thousands of development and job opportunities for young people and distributed over 890,000 books for children to enjoy with their Happy Meals. You can learn more about all these initiatives by downloading the report in English from www.recipeforthefuture .com. Speaker 200:19:09Before we open the call up for Q and A, I would like to leave you with a few thoughts. First, we believe that building a loved brand creates value for the company and its shareholders. This is why our marketing spend has shifted over time to focus on culturally relevant brand activations in our markets Rather than just pricing and products. Examples include the Big Brother Brazil and Lola Panuza sponsorships That drove brand affinity among younger guests. But the brand lives every day in the more than 2,003 100 Restaurants We Operate. Speaker 200:19:58We have the largest freestanding restaurant portfolio by a wide margin. And as someone who began his career in the operation, I believe our operational expertise is second to none. Almost half of the portfolio has already been modernized to Experience of the Future, And all restaurants were converted to our culture of service several years ago. This service oriented culture Is what truly distinguishes the McDonald's restaurant experience in Latin America and the Caribbean. We are also part of a global McDonald's system. Speaker 200:20:39We developed tools such as the 3 d strategy That help us maximize the potential of our restaurant footprint and operational expertise. Clearly, these channels are driving engagement with guests and offering them the choice of when, Where Speaker 100:20:58and Speaker 200:20:58how to enjoy their favorite McDonald's orders. Finally, to build a strong brand and Sustainable business model, we must operate responsibly. This is why we have the industry's leading ESG platform with ambitious initiatives and goals aimed at benefiting our business, the communities we serve and the planet we all share. Thank you for your ongoing support. Dan, over to you to start the Q and A session. Speaker 100:21:34Thanks, Marcelo. In order to get started, please minimize the presentation slides so that you can access the chat function on the left hand side of the webcast platform. Please limit yourself to 1 or 2 questions so that I can read, understand and convey them to our speakers. We will now pause briefly to compile your questions. Operator00:22:00Great. So our first question this morning comes from Joaquin Le of Itau. And I'm going to combine it with a question that Thiago Bertolucci from Goldman Sachs Ascentis. Joaquin says, congratulations on the results. And can you please elaborate on the reasons explaining the very different margin performances in Brazil and SLAD versus of NOLAD. Operator00:22:21And Thiago has a similar question that says margins for NOLAD came in a touch lower even if adjusted for the royalties despite solid same store sales growth. Why is that and what's the outlook? And then he says, gracias. So that question, I'm going Speaker 100:22:36to turn over to you, Mariano. Speaker 500:22:38Perfect then. And good morning, everybody, and thank you, Joaquin and Thiago, for the question. Well, 1st of all, the 3 divisions are showing sales growing well above inflation. We're very pleased The 3 divisions are showing double digit EBITDA growth in U. S. Speaker 500:23:02Dollars. Brazil in this respect is growing almost 30%, 29.2%, SLAP 34.3% and NOLA, 10.7%. Slab in Brazil with higher sales per unit Are more capable of leveraging on fixed costs and with that even offset the royalty step up That happened in August last year. Know that on the other hand, with lower sales per store And also with a higher exposure to food and paper imported goods is less capable for the moment Leverage on those fixed costs. And that's the main reason why we are seeing different behavior Between Brazil and SLAD on one side and NOLAD on the other. Speaker 500:23:59Regarding the outlook in general for on a consolidated basis, Here, our plan is clear and that's our expectation for the rest of the year. We remain very focused on driving top line with sustainable volume growth in all channels To deliver the EBITDA growth in dollars with a very healthy margin profile. This is what we have been doing. Last year, we are continuing to do during this year and that's our expectation for the year. Regarding, for example, Food and Paper, we expect to have a similar figure than we had last year. Speaker 500:24:45And we expect to leverage on all the fixed costs. Maybe you will see that on payroll, on G and A And other than occupancy that when sales continue to grow above inflation, we would expect Speaker 300:25:07Cecilia, Rich, on those lines. Operator00:25:07Great. Thanks, Mariano. The next question actually is the first two parts of Jack was original question. Good morning, team. Congrats on the amazing results. Operator00:25:17A couple of questions, both of which will be for Marcelo. On Brazil, how have same store sales performed throughout the quarter, especially in March? And what does the quarter performance imply for market share evolution? That's the first part. And maybe Marcelo, you want to start with that, and I'll give you the second one here in a second. Speaker 600:25:36Excellent. Thank you, Dan. And Hi, Thiago. Nice to have you in the call. Well, we are very pleased with the performance of sales in the whole company, but particularly in Brazil. Speaker 600:25:51We did extremely well across the quarter. Even though during the 1st 2 months, the numbers figures for comparable sales were better because the base of comparison In 2022, was still affected by the omicron impact in some restrictions, But we did well very well in March. We grew sales comparable sales well above inflation and we grew volumes, which is very, very important for us. And most importantly, the trends that we are seeing in the second quarter Shows that we are keeping momentum in Brazil and in the whole company. So sales trends in the second quarter are doing Extremely well. Speaker 600:26:40So we remain cautiously optimistic as we go through the rest of this year. We knew By the figures published by other retailers in the market that there are some headwinds in Brazil, but we are beating the market. And that's reflected in market share figures in Brazil. We continue to do extremely well. We have more than doubled The market share of our closest competitor and based on the public figures about comparable sales in the market, we are Getting the gap even bigger, thanks to our acceleration in the comparable sales performance. Operator00:27:25Perfect. And the second part of Thiago's question, Marcelo, is Argentina has been extremely volatile And apparently, you closed some stores in SLAD. How are you seeing the consumer backdrop in the region? Speaker 200:27:38Yes. First, let me tell Speaker 600:27:40you that the restaurants that we closed in SLAD, most of them are in Venezuela. We closed Six restaurants in Venezuela. So we didn't close any restaurant in Argentina. And despite the challenging macro environment in the market in Argentina. We are very pleased with the performance of our business in that country Where the McDonald's brand has gained preference and market share in the last several quarters. Speaker 600:28:12The volume growth has been the real story in Argentina at the beginning, thanks to the 3 d strategy. But more recently, From counter volume has reaccelerated and is now above pre pandemic levels in Argentina. So Argentina Has one of the highest levels of guest traffic per restaurant in all of our markets, in all of our hotels. And digital channels Has a lot to do with that. The digital sales penetration in Argentina is one of the highest in our region and That allows us to work with segmentation and personalization. Speaker 600:28:51And these tools help us not only in terms of Growing sales and volumes, but helps us in terms of improving our profitability in the market. So we are very, very pleased With the performance in Argentina despite the challenging macro environment. Operator00:29:13Perfect. Our next question is also a 2 parter from Melissa Buhn of Bank of America. The first one for you, Mariano. Can you please discuss the outlook for protein and other food costs and any hedges or purchase commitments you've made? Speaker 500:29:31Perfect. Thanks, Melissa, for the question. In terms of food and paper costs, We are expecting for the full year a similar cost to last year, as I mentioned in the previous question. Regarding protein and other food costs pressures, we are seeing actually less pressure on that front in the beginning of the year. But that together with our prudent pricing strategy that is allowing us To grow sales above inflation, that's the reason why we are expecting stable food and paper costs throughout this year. Speaker 500:30:17And regarding the hedges, as we already Mentioned our policy is to hedge 50% of projected fuel and paper exposure on a rolling basis. So we are doing that with an outlook of 2 to 3 quarters and that's what we continue To do and we will do that for this year. Operator00:30:46Great. The second part of Melissa's question is can you comment on the pricing and promotional environment in your markets in your major markets? Are you seeing any acceleration in the market Your shift from the informal and independent to the formal and chained operators. And she says thank you. That one for you, Luis. Speaker 300:31:04Thank you, Melissa, for the question. Hello, everybody. I will start with the second part of the question. We do not See an acceleration in the market share sheet from informal to formal operators. What we are seeing is a rational Competitive environment and sales recovery of smaller branded competitors of the sector, of the Euro SaaS sector. Speaker 300:31:31But we are prepared to face future competitive pressures. We think we have the right strategies and we're focusing On execution at the restaurant level, our strategy is built on offering value With a pricing architecture that maximizes the targeted or addressable Market. And that allowed us to offer attractive value for our guests. So we have positive results in market share In the Q1 of 2023, our business share advantage was 2 to 3.5 times as big as that of our 2 closest competitors. Dan? Operator00:32:18Thanks, Luis. Our next question actually a couple of questions Come from Antonio Hernandez of Barclays. Hi, good morning. My questions are number 1, where are you seeing more payroll and labor headwinds? We'll start with you, Miguel. Speaker 500:32:32Perfect. And thanks, Antonio, for your question. First of all, let me say that we are very pleased With the level we are having in payroll on a consolidated level Below 20% of revenues. That's a very healthy figure for Anagost. And we expect to continuing to obtain leverage on the payroll line as we continue to grow sales about inflation. Speaker 500:33:07Having said that, what we are observing is that we are having More leverage in Brazil and a bit more pressure on the labor front In NOLAD and in some markets in SLAD. Operator00:33:28Perfect. Thanks, Mariano. The second part of Antonio's question for you, Luis. Is the deceleration in drive thru changing your pipeline for this Speaker 300:33:41All right. Yes. Hello, Antonio. Thank you for the question. The first, it is important to say that the drive thru channel had a strong growth during the pandemic, And we had the chance to have new customers, new guests that had the opportunity to try even though that we've been They get in our market to try this challenge for the first time, okay. Speaker 300:34:10They found out that it was not only fun, Convenient, safe, but cool, okay? And now with a very strong recovery in Trunkar With more than 50% in the Q1 of 2022, even with that, the sales are growing about 13% Versus that the Q1 of 2022. So this is expected in moderation in this traffic today In the course that we attend. But our challenge is now to continue making drive thru A growth engine for the company. And we have to make adjustments in operations. Speaker 300:34:55And we have the right set of programs in place for marketing and digital. Even with the modernizations, we make with adjust The adjustments that we make in the buildings, we make not only for drive thru, but for delivery, we make our operation easier And that allows us to capture additional sales. Dan? Operator00:35:17Thanks, Luis. The next question comes from Ulises Argote of JPMorgan. Just a quick one on the sales trends. Any color on how performance has been into the start of Q2 'twenty three and how sales performed sequentially through the Q1 of 'twenty three Speaker 100:35:34as we rolled out the effect from Omicron on the base. Operator00:35:38And that one, I'll turn over Speaker 100:35:39to you, Marcelo. Speaker 600:35:41Okay. Thank you. And thank you, Ulises, As I mentioned when I answered the first question about Brazil's performance in the Comparable sales figures for the Q1, that was the same case for the whole company. So within the quarter, the base of comparison The Q1 2022 was easier for the 1st couple of months. But again, we saw very strong results, Both in terms of volumes growth and in terms of comparable sales growth, well above inflation During the Q1 and in the Q2, same that I mentioned before for Brazil. Speaker 600:36:27We continue to see very strong sales performance. In fact, I would say that May has been a very, Very strong month. The first couple 2 couple of weeks in May have been very, very strong. So we remain very confident that we have in place the right marketing plans, the right marketing initiatives And all the structural competitive advantages that brought us to this point, That brought us to this leadership position, continue to deliver against the environment that we are Facing in different markets. So very encouraging figures coming from sales and volume growth in the Q2 of the year. Operator00:37:21Perfect. So we have a question from Anik. And Anik, I apologize If I don't pronounce your last name correctly, Matsudy from American Trust Investment Advisors. Congratulations on the performance. And can you please And more on the latest digital program expected to release in Brazil later this year and other regions in the following years. Operator00:37:40And that one is for you, Luis. Speaker 300:37:42Hello, Oleg. We currently have a loyalty program that is exclusive to drive through that is called the Club VIP Automak. By the end of March, we have had around 4.4 With the members, but we have launched we've mentioned this before on the last calls, we've launched a pilot of our loyalty program, the Hebra de operator in Brazil with very, very good results. Without even without a massive Media launch. We noticed not only an increase in volume of identifiable sales, But an increasing visit frequency. Speaker 300:38:28That's why today we are starting to get expansion of the program to more restaurants, Including several sub franchisees. And the intention is, like I said, to launch it in to all of Brazil later this year And to the rest of our 20 markets over the next couple of years. Dan? Operator00:38:52Great. Thanks, Luis. I'm showing no more questions in the queue here. So I guess we've reached the end of our Q and A session. I want to thank everyone again for your interest in Arcosrados and for joining today's webcast. Operator00:39:03Look forward to speaking with you again in the middle of August on our Q2 2023 earnings webcast. And until then, stay safe and have a great day, everyone.Read morePowered by