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DATE

Aug. 13, 2025 at 10 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Luis Raganato
  • Chief Financial Officer — Mariano Tannenbaum

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TAKEAWAYS

  • Total revenue-- Total revenue reached $1.1 billion for Q2 2025, with system-wide comparable sales up 12.1% in constant currency, exceeding blended inflation.
  • Adjusted EBITDA-- Adjusted EBITDA reached $110.1 million for Q2 2025; adjusted EBITDA grew by more than 7% and margin expanded by about 40 basis points when excluding the prior year’s Brazil labor contingency reduction.
  • NOLAD division revenue-- Up 6.9% in constant currency for NOLAD in Q2 2025, with comparable sales rising 1.8 times blended inflation; Mexico achieved 12.4% comparable sales growth.
  • SLAD division revenue-- Rose 37.8% in constant currency in Q2 2025; comps up 1.4 times blended inflation, and margin expanded by about 260 basis points adjusted for a prior year transaction.
  • Brazil revenue-- Increased 2% in constant currency in Q2 2025, with positive comp sales in Brazil despite a negative industry volume environment; market share held steady.
  • Digital sales penetration-- Reached about 60% system-wide in Q2 2025, with loyalty programs representing almost 23% of total sales in the six available markets and 26% of Brazil division sales generated by loyalty program members.
  • Restaurant openings-- 20 new Experience of the Future (EOTF) restaurants added during Q2 2025, totaling 32 in the first half of 2025; full-year 2025 guidance remains 90-100 openings.
  • Debt and ratings-- Net debt to adjusted EBITDA at 1.4x; S&P assigned initial BBB- investment-grade rating, following Fitch upgrade in January.
  • Beef cost pressures in Brazil-- Beef prices in Brazil rose approximately 30% over the last twelve months, but no further significant cost pressures are expected versus current levels in the second half of 2025.
  • Capital expenditures-- $55.3 million invested in capital expenditures in Q2 2025, including $26.8 million in growth CapEx for new restaurant construction.
  • Loyalty program expansion-- Now covers two-thirds of restaurants; expected to reach 90% portfolio coverage by the end of 2025.
  • Saint Martin acquisition-- Three restaurants acquired and exclusive franchise rights secured; addition not expected to materially impact consolidated results.
  • Dessert segment-- Represented almost 10% of total sales in 2024 and carries significantly higher margins than other segments.
  • Operating margin in Brazil-- Margin pressured primarily by higher food and paper costs, notably from beef.

SUMMARY

Management announced a leadership transition, appointing Luis Raganato as CEO and establishing three strategic priorities focused on organic operations, development, and long-term positioning. Arcos Dorados(ARCO 9.78%) reported that its digital ecosystem, with increased app downloads and loyalty engagement, underpinned market share gains and higher brand preference across Latin America. S&P granted an initial BBB- investment-grade rating, aligning Arcos Dorados' debt profile with full investment-grade status. A seventh market entered loyalty prelaunch, and system-wide digital sales penetration continued to rise. Guidance for annual new restaurant openings and capital expenditures remains unchanged, with management reiterating a disciplined approach to pricing and capital allocation.

  • Chief Executive Officer Raganato noted that “Brand preference rose to almost twice that of the nearest competitor across the region.”
  • Chief Financial Officer Tannenbaum indicated, “For the full year 2025, we expect to have an EBITDA margin close to 2024, excluding, of course, the one-offs related to labor contingencies in Brazil.”
  • Management confirmed the cash outlay for the Saint Martin acquisition “was not a material sum within the context of our consolidated cash flow.”
  • Argentina’s market share gains versus competitors, cited as three times larger than its main competitor, were credited to disciplined pricing and prior investments.
  • Management stated that current CapEx is back-end weighted and projected to align with $300 million-$350 million annual guidance.
  • Chief Executive Officer Raganato described the dessert segment as having "significantly higher margins" than other segments, noting aggressive competition and ongoing category innovation.

INDUSTRY GLOSSARY

  • SLAD: Southern Latin America Division, encompassing operations in countries such as Argentina and Chile.
  • NOLAD: Northern Latin America Division, covering countries including Mexico and Central America.
  • EOTF: Experience of the Future; McDonald’s format restaurants with modernized digital and operational concepts.
  • Comp sales: Comparable sales, measuring sales growth at restaurants open at least 13 months.

Full Conference Call Transcript

Luis Raganato: Thank you, Dan. Good morning, everyone, and thank you for joining us. Before getting into the quarter's results, let me take a moment to thank our executive chairman, Wood Staton, and the entire board of directors for their confidence in appointing me CEO of Arcos Dorados Holdings Inc. I am honored to continue the work of my predecessors, each of whom took the company to new operational and customer experience heights by working collaboratively with all stakeholders of the Arcos Dorados and McDonald's systems. I would also like to congratulate all members of the team who are taking on new roles as part of this management change. We always said that Arcos Dorados has a deep bench of talented executives.

This includes Carlo Gonzales, who is taking on the role of chief operating officer, bringing very significant management experience and a demonstrated ability to bridge cultural and generational gaps to drive strong performance. I look forward to working with him and the entire team to exceed our guest expectations and generate value for all stakeholders. Moving now to the key highlights of the quarter. We generated solid results in very dynamic macroeconomic and operating environments. Total revenue reached $1.1 billion. Constant currency revenue remained solid, built on 12.1% higher system-wide comparable sales, which was above blended inflation for the period. Comp sales growth was particularly strong in NOLAD and SLAD, growing well above blended inflation in each division.

The same calendar effect that impacted NOLAD results in the first quarter helped boost the division's results in the second quarter. Marketing and digital initiatives focused on value and brand strength across sales channels and product categories. Additionally, the loyalty program continued to drive an increasing percentage of sales by bringing members back to our restaurants more often. These efforts helped support robust market share gains in many markets. More on that later. We generated $110.1 million in adjusted EBITDA in the second quarter. Excluding last year's labor contingency reduction in Brazil, adjusted EBITDA grew by more than 7% and margin expanded by about 40 basis points.

The growth plan for 2025 remains on target, and we opened 20 new Experience of the Future restaurants in the second quarter. This brings total openings for the first half of the year to 32 sites, and the plan remains to deliver 90 to 100 this year. In addition to adding new restaurants through openings, we are excited to announce that last month, we added a twenty-first market to the Arcos Dorados family. We acquired three existing restaurants and the exclusive franchise rights to Saint Martin in the Caribbean. The choice of Arcos Dorados as the new operator in Saint Martin is a testament to our operational excellence and commitment to growth in the region.

Marketing and digital campaigns drove strong comparable sales growth in NOLAD and SLAD during the quarter, while also helping to protect market share within a challenging consumer environment in Brazil. The digital ecosystem that accounted for about 60% of sales in the quarter supported campaigns designed to stay close to guests and adapt to changing consumer preferences. This included the Big Fest, which celebrated core favorites at a compelling value. The results were clear. Brand preference rose to almost twice that of the nearest competitor across the region. Brand attributes related to value, taste, and trust saw significantly higher favorable gaps versus the nearest competitor as well. App downloads and loyalty program membership increased strongly during the campaign.

The digital loyalty program is now available in countries, with a seventh market currently in its prelaunch phase. The program already covers two-thirds of the restaurant portfolio, and we expect it to be available in 90% of all restaurants by the end of this year. Loyalty program members visit us at a much higher rate than non-loyalty guests, and they represented almost 23% of total sales in the six available markets during the second quarter. In Brazil, where the consumer environment has been challenging this year, we took steps to remain close to guests. For example, the Mequidogia campaign offered one menu favorite per day at a compelling value.

Across the operating footprint, the Minecraft Happy Meal also strengthened ties with our guests. The game has significant crossover appeal to both kids and adults, which we optimized by offering a unique adult happy meal with Chicken McNuggets. We also used the regional Formula One sponsorship to strengthen ties with families and guests of all ages. Capitalizing on the appeal of Formula One, the movie, we introduced a limited edition sandwich and a collectible race car exclusive to McDonald's restaurants. The campaign was extremely successful, selling out in just a matter of days or weeks depending on the market. Finally, the dessert category has become increasingly competitive, so we kept the entry level comprised at an attractive price point.

We also innovated by leveraging a favorite McDonald's with the Grimace shake, and by adding more local flavors to the McFlurry platform. Over to you, Mariano.

Mariano Tannenbaum: Thanks, Luis. And good morning, everyone. Brazil's total revenue in constant currency grew 2% in the second quarter, including positive comp sales despite operating within a context of negative industry volumes. We were able to offset volume pressure with higher average check with a combination of targeted pricing and product mix. Importantly, market share remained steady versus the prior year, and the brand attributes we track are as strong as we have ever seen. This undoubtedly positions us well for when consumer trends improve in the country. More than 70% of system-wide sales were generated by digital channels, and the Meomeki loyalty program surpassed 18 million members who accounted for 26% of the division's total sales.

NOLAD's total revenue rose 6.9% in constant currency. US dollar revenue growth was mainly by the year-over-year depreciation of the Mexican peso. Comparable sales rose 1.8 times blended inflation in the period. This included 12.4% comp sales growth in Mexico, much higher than all main competitor brands. Digital sales penetration remained steady in NOLAD where we offer the loyalty program in Costa Rica and we are in the test phase in Puerto Rico. We believe digital sales performance will ramp up in the division as we expand the loyalty program to additional markets by the end of this year. SLAD revenue rose 37.8% in constant currency, with comparable sales up 1.4 times blended inflation in the period.

Market share expanded strongly in several markets, including Argentina and Chile. Argentina built on last year's market share gains to boost its continued rebound from 2024. Digital sales penetration in SLAD surpassed 60% and loyalty generated 17% of total sales from the four SLAD markets currently offering the program. Let's shift now to profitability and capital allocation during the second quarter. Adjusted for last year's labor contingency reduction in Brazil, second quarter consolidated EBITDA grew very solidly in US dollars despite currency headwinds. While food and paper remained pressured due to higher beef prices in Brazil, improvements in all other restaurant expense lines supported a solid EBITDA performance.

Similar to the first quarter, Brazil's margin contraction was mainly due to higher food and paper costs from rising beef prices in the market. As you already know, the royalty fee this year is higher in Brazil due to the normalization of the royalty rate across the three divisions. Excluding last year's labor contingency reduction, the net result of the remaining expense lines had a positive margin impact in Brazil. NOLAD's margin included improved performance in all restaurants' expense lines, except food and paper, which rose modestly versus last year as a percentage of revenue.

Royalties were lower due to the normalization of rates across the three divisions, and the result also included a gain from a sub-franchisee restaurant transaction in Mexico during the quarter. Margin performance was strong in nearly all the divisions marketed in the period. SLAD delivered another strong quarter of margin expansion, with lower costs and expenses in nearly all line items. Notably, last year's EBITDA included a positive impact from a sub-franchised restaurant transaction. Adjusting for that impact, SLAD's margin expanded by about 260 basis points versus 2024. With these results, the company's balance sheet remains strong, and we continued making investments in future cash flow growth.

As of the end of the second quarter, our debt was concentrated in two long-term bonds: the 2029 and 2032 notes, with an average US dollar cost of 6.28% and an average duration of almost six years. After receiving an upgrade to investment grade from Fitch in January, S&P assigned an initial rating of BBB- to our debt. As a result, Arcos Dorados Holdings Inc.'s debt is now considered to be full investment grade, which should help support future capital market transactions. At the end of the second quarter, net debt to adjusted EBITDA ratio was a comfortable 1.4 times, and we expect it to remain near this level for the remainder of the year.

Our growth strategy remains intact, and during the second quarter, we added 20 EOTF restaurants to the portfolio. As has been the case for the last five years, most openings were freestanding units, and the majority were opened in Brazil. We invested $55.3 million in capital expenditures, including more than $26.8 million in growth CapEx associated with new restaurant builds. We expect to continue making prudent investments in growth, as we remain convinced this is the best way to increase free cash flow generation in the long term. As Luis already mentioned, after the quarter ended, we acquired the three existing restaurants in St.

Martin and the exclusive franchise rights for that market, which will be subject to the same terms as our existing master franchise agreement with McDonald's. St. Martin will be managed by NOLAD and will be included in the division's results beginning in 2025. We do not expect a material change in consolidated results from this acquisition. Back to you, Luis.

Luis Raganato: I would like to touch on a topic that remains at the core of everything we do at Arcos Dorados Holdings Inc. We recently published the 2024 Social Impact and Sustainable Development Report for Arcos Dorados. In it, you can learn more about the initiatives we advanced within the Recipe for the Future framework. This ESG platform is built on six pillars: Climate change, which saw us reach 50% renewable energy, allowing us to reduce energy costs while also meeting our targeted scope one and two emissions reduction. Circular economy, which includes recycling of both packaging and used cooking oil. Sustainable sourcing, which supports local economies through local sourcing. Youth opportunity, which includes over 60,000 employees younger than 24 years.

Family and well-being, which supports young people in partnership with local NGOs. And diversity and inclusion, which ensures a welcoming working environment and restaurant experience for collaborators and guests from all backgrounds. You can access the full report at recipeforthefuture.com. Before we open the call up for questions, let me tell you about my priorities as CEO. To begin with, I helped design and implement the current strategy, so I do not expect to change the big picture. With that in mind, I would say that I have three main strategic priorities or pillars of focus. First, today's business. The organic business. In other words, everything that goes into exceeding customer expectations today.

That means the experience we offer through menu, quality, service, and cleanliness. Inside our restaurants, in customers' homes, and in the digital ecosystem. Second, growing the business. Our development strategy. I am challenging the entire team to revisit every element of our development process to further modernize and improve the way we grow. To increase our cash flow generation and create more value for our shareholders, we need to ensure that every dollar invested brings the best possible return. And third, tomorrow's business. We will work to answer the question of where Arcos Dorados Holdings Inc. will be in ten years.

We need to begin preparing now to meet future customer expectations, and we'll do whatever it takes to maintain our leadership position beyond 2035. Needless to say, this will be a collaborative effort within Arcos Dorados Holdings Inc., with McDonald's, with our suppliers, and with our sub-franchisees. As we often say, there's nothing we can't accomplish if we work together. I look forward to speaking with all of you over the coming months and years as I am certain the best is yet to come for Arcos Dorados Holdings Inc. Thank you for joining today's call. Dan, back to you.

Operator: Thanks, Luis. We will now begin the Q&A session. You can submit your questions using the Q&A function on the bottom of the screen. Please limit yourselves to one or two questions so that I can read, understand, and convey them to our speakers. We will now pause briefly to compile your questions. Okay. Great. So we have, actually, quite a few questions already in the queue, and a number that are related to the same topic or similar topics. So bear with me as I go through a few of these. And then we'll start with you, Luis, actually on this first set of questions. First, Thiago Bortolucci from Goldman Sachs. Good morning, everyone.

Thank you for taking our questions. It's always a pleasure to engage with the team. Before we begin, we would like to once again express our gratitude to Marcelo for his openness and constructive dialogue during his tenure, and we wish Luis, Francisco, and Carlos continued success in their extended responsibilities. Regarding the results, they have three questions. The first two of the first three I'll combine here. And this is number one, how do you assess the balance between foot traffic, pricing, product mix, and profitability in Brazil? Additionally, what internal initiatives should we anticipate from you to potentially reignite same-store sales growth in the back end of the year?

Continuing with that concept, they also asked, do you have any preliminary insights on demand trends in July for Brazil and Mexico. Related to Thiago's question, we have a question from Eric Huang from Santander. And he asks, Brazil's sales remain quite subdued in 2025. How was the company perceiving the consumer environment as we turn into 2025? And how are the revenue management initiatives expected to help in sales momentum ahead? And finally, Melissa and Buck Ford from Bank of America ask with respect to Brazil also, can you discuss consumption dynamics during the second quarter and in July-August? Was weather a factor in the second quarter deceleration?

So with all of that as background, Luis, I'll turn it over to you.

Luis Raganato: Thank you, Dan, and thank you, Thiago, Eric, and Melissa. Let me I'll try to cover everything. First about the context the market continues to face a challenging macroeconomic environment. Uncertainty and weakening consumer confidence. But given this context, even though various sources point to a drop in the flow of visits in the QSR market, we managed to deliver positive comp sales. We offset a drop in traffic with a combination of targeted price increases and product mix. So the contribution to sales came more from average check than volume. What we're trying to do here is to balance between the sales growth and profitability. Alright? What we're trying to increase our margins.

And regarding channels, Melissa, the impact on weather was mainly in the dessert center. But, you know, and we do have a more aggressive competition mainly in Brazil. We are addressing that with a plan. But the good news is that the strongest performance was through our front counter. And this is very good news for us. Because it is a proof that, you know, our and our on-premise is aspirational. And it's going to be that on-premise experience is going to be very important. About the most important marketing actions that we had in the market, was first, Mequidogia, it is a value campaign, and then Makeifest digital campaign.

Those were very successful and helped increase visit frequency and drive a 15% increase in identified sales. You know that for us, identified sales are very important. We had 26% in the region, but in Brazil in particular, 32%, which is that share in June specifically. So even though we're trying to shield our market share by being prudent with pricing, we do have a comprehensive plan. Which includes those short-term initiatives, more transactional, but we complement that with long-term focus because we want to build on the brand's aspirational aspect.

And that's why we have, for example, the license of Minecraft in the Happy Meal or, for example, the launch of the Grimace shake or even the Formula One action. That reaches all socioeconomic groups. And builds on the coolness of the brand. As a result, and very important, our market share in the market remains steady. We're leading our nearest competitor by a factor of 2.2. And attributes like favorite brand, and brand awareness, are at the highest scores according to internal research. So we are today in a position of strength and despite we see that the challenging macroeconomic environment will remain during the third quarter and maybe during the second semester.

We're confident because we have a solid marketing plan. We're going to keep on working with our affordability platform to drive traffic to shield our market share, like I said, and we'll remain close to our customers building on the love of the brand because we're going to be having cool launches too. Regarding Mexico, Mexico had a very strong quarter with plus 12% in sales, and you know, it was the highest in the in the market. And not only marking the QSR and entire industry. They could use it that it was driven by dessert centers, by delivery, and by front counter. We are seeing a similar trend in the in the beginning of the third quarter.

Operator: Thanks, Luis. So now over to you, Mariano. And, this will be a combination of questions. Actually, to be fair, we received questions from Jack Adler, J. L. Hambro asking for more detail on the Brazil division. Consumer demand, and also Giulia Rizzo from Morgan Stanley asked about same-store sales trends in Brazil, which I think you just answered Luis, so I'm not going to come back to those. Just wanted to recognize both Jack and, Giulia. So now I'll move to Mariano. And start with one of the questions that came in from Thiago from Goldman Sachs. Combined with a question from Melissa and Bob at Bank of America and also Froylan at, JPMorgan.

So bear with me again, Mariano, please. From Thiago, could you elaborate on which regions and specific actions contribute most significantly to top line and margin performance in NOLAD? I think associated with that, is Froylan's question from JPMorgan. Can you give us some sense on sorry. I think I'm I'm confusing myself here. Yeah. I am confusing myself. And then asked, can you how much of the 12% same-store sales growth in Mexico was driven by positive calendar effect? How sustainable is this going into the second half? And Melissa and Bob from Bank of America asked, additionally, can you comment on the underlying sales and margin performance of Mexico specifically excluding the Holy Week impact?

So this is kind of a general NOLAD slash Mexico question for me, Mariano.

Mariano Tannenbaum: Perfect. Good morning. Everyone, and thanks, Thiago, Melissa, and Froylan for the question. We're very pleased with the performance of NOLAD during the second quarter of this year and, of course, on the first half of this year. First, we have seen in NOLAD sales increasing at 1.8 times inflation, so and as Luis already mentioned, Mexico stands out in this performance. So it is true, and we mentioned in the first Q that Holy Week has an impact in Mexico, strong impact, and that we were expecting good results for the second Q. But if you consider the first half of the year, Mexico is performing much better and is growing above inflation compared with the 2024.

In terms of impacts in margins, NOLAD is showing in this quarter an improvement of 450 bps compared to the same quarter of last year. And this the good news here is that this is due first despite a deterioration of the effects. Because the Mexican peso in the quarter averaged this quarter 19.5 versus 17.3 last year. So despite the devaluation of the Mexican peso, we are seeing a much better margin in Mexico and in the division. And this is due to a better payroll, a better service fee as we already explained the new MFA.

Better occupancy and other expenses, with better margins in delivery, and in this particular quarter, we are seeing as well a better other operating income given the transaction on the new the restaurants acquired in Mexico. So all that together is improving the margin in NOLAD in 450 bps. Of course, when we see sales in the division growing at almost two times inflation, we see leverage in all the fixed cost lines and that's also reflecting, of course, in the results.

Operator: Great. Thanks, Mariano. The next question comes from Frey Mendez from JPMorgan. And although we've talked about ticket and traffic trends with Brazil specifically, he asks, for a view on a regional basis. And this question will be for you, Luis.

Luis Raganato: Alright. Thank you, Fred, for the question. In general, what we saw in the region was volatility and changing marketing conditions. But despite that, we believe we have the best position to face this current situation or any that, you know, may get. The sales performance was solid in local currency. And consolidated comparable sales were in line with the company's blended inflation. Within the context of each division. I already talked about Brazil. In NOLAD, our comps were up 1.8 times blended inflation, with a low single-digit contribution from traffic. So the contribution to sales, if you do the math, were two-thirds from average check.

Like I said, Mexico stood out and is keeping that performance, you know, in this third quarter. And by channel, in NOLAD, the sales strength was driven by front counter, dessert centers, and delivery in local currency. With positive volume growth in all three segments. In SLAD, comps were they were up 1.4 times blended inflation, with a mid single-digit contribution from traffic and average check-in line with inflation. So in general, all markets had a good a very good quarter and we're seeing a similar performance in the beginning of this third one. In by channel, the sales growth was strong across all the channels in the quarter.

For the remainder of the year, we're going to keep on focusing on the factors that we control. Of course, the brand, the four D strategy, and taking advantage of the footprint and geographic diversification.

Operator: Thanks, Luis. Okay. The next one for Mariano again, this will be a series of questions, all of them related to the beef cost trends of Brazil. So Froylan from JPMorgan. You please give us color as to the beef trend in Brazil? Eric from Santander, could you please elaborate on your expectations for margins, especially in Brazil and how are you seeing beef prices impacting margins in the upcoming quarters? Alvaro Garcia from BTG Pactual, asks, how does management see beef prices evolving in the second half of the year in Brazil? And Jeronimo de Guzman from, Inca Investments asked, about can you comment more on the beef cost pressures you're seeing in Brazil seen any changes?

And do you still think you can maintain if margins is stable ex one offs on a consolidated basis for full year 2025. So multipart question. That I'll turn over to you.

Mariano Tannenbaum: Perfect. And thanks, everybody, for the question related to the beef prices in Brazil. Beef prices in Brazil, as I mentioned, impacted our results during the first half of the year. We have seen price increases of around 30% in the last twelve months. Here we have good news and that is that we do need we do not expect further significant cost pressures versus current levels in the second half of this year. On top of that, for the other items in the food and paper line in Brazil, we have seen so far a devaluation of the Brazilian real that, of course, impacted the costs on imported goods.

What we have seen or what we are expecting now in July, we have seen an appreciation of the Brazilian real to below 5.4 reals to the dollar. Actually, today, last time I checked was at $5.39. And this could have if these effects trend persists, a positive impact on the gross margin for the rest of the year. So, of course, we the outlook and what we know so far is that we are not expecting significant cost pressures from beef from the current levels.

Operator: Mariano. Actually, I think you addressed it, but Eric also had asked if the tariffs on Brazil exports had prompted an improvement in commercial terms and prices of beef on the company side. We've already sort of addressed the beef trends, so, just wanted to mention that. So the next question will be for Luis. I'll let you catch your breath, Mariano, because the next one will be for you. And the next one is from Jack Gator at J. O. Hambro. And he asked if we can expand on the changing competitive landscape in desserts. What's the margin of dessert centers and what percentage of sales does this contribute to the total?

And we'll give that one to you, Luis.

Luis Raganato: Alright. Thank you. Thank you for the question. The dessert centers as of the 2024 represented almost 10% of total sales. The segment has significantly higher margins is the, you know, in, you know, in percentage. Relative numbers. And what we are seeing in the in the landscape is that we're seeing an increasing competition in general in the region, mainly in Brazil, but we have a already implemented a solid plan regarding aggressive pricing and with innovations. Like, for example, as I said, the Grimace shake.

Operator: Yeah? Back to you. Okay. Thanks, Luis. And now another multi-parter for you, Mariano. Starting with Melissa from Bank of America. How are you thinking about pricing and your ability to offset higher costs in the context of softer demand? I presume that's mostly a Brazil question, but in general. And then Geronimo de Guzman from Inca asks a similar question. Given your focus on affordability and prudent pricing to drive traffic and protect market share, what does this mean for margins? And do you still think you can maintain margins stable x one offs on a consolidated basis?

That second part I'd already said, but the piece about pricing versus margins I think, is the crux here, and I'll give that to you, Mariano.

Mariano Tannenbaum: Perfect. Thanks, Melissa, and Jeronimo for the question. Related to pricing to offset costs as we have seen in the first half of the year. A deterioration of margins in Brazil. In fact, we will continue with our strategy to increase prices in line with inflation. We are not going to in order to pursue quick gains in margin gains to increase prices well above inflation because this will be maybe something that have an impact, positive impact in the short term, but it's not going to be sustainable in the mid to long term. As an example, we have done that in Argentina last year.

Argentina in 2024 experienced an important devaluation of the currency and impact in the whole economy. We have been very prudent with pricing in Argentina, and we are seeing the results this year with very, very good results in terms of sales, traffic, and margin recovery, and Argentina is going to be one of the key contributors to EBITDA growth during 2025. In Brazil, we are not expecting to do anything different from our strategy. We will continue increasing prices in line with inflation and when the consumer environment starts recovering, we are confident that our margins will start recovering, and we will see much better margins than what we have seen in the first half of the year.

And going to the second part of Geronimo's question and how do we see the EBITDA margin for this year excluding one offs, first, during this quarter, we're very pleased with the EBITDA margin. We have seen that excluding labor contingencies from last year, we increased EBITDA margin by 40 basis points during the quarter. Compared, of course, to the same quarter of last year. For the full year 2025, we expect to have an EBITDA margin close to 2024, excluding, of course, the one offs related to labor contingencies in Brazil. As I explained, we're not expecting further deterioration on the gross margin line.

And, for example, during this quarter, we have seen gains in the payroll line with excluding one off 50 bps better than last year. We have also seen improvements in the occupancy and other expense line of 70 bps during this quarter. And if we continue focusing on cost on cost efficiencies, and trying to you know, look at all the cost structure and trying to minimize those increases. Are confident that we will be able to maintain or to be very close to the EBITDA margin that we achieved in 2024 that was record for the company.

Operator: Thanks, Mariano. We have one more from Alvaro Garcia from BTG Pactual. And this one is going to be for you, Luis. And he asked about Argentina traffic trends in the quarter. Relative to the 2023 baseline.

Luis Raganato: Alright, thank you, Alvaro, for the question. What is happening in Argentina this year since the, you know, the second semester of last year is that it's showing a more stabilized macroeconomic environment. The inflation is dropping and the recovery of the economy is happening, but, you know, showing mixed behavior across different sectors. If we compare with 2023, we are mostly in line with that performance. But, you know, what I want to highlight here is that in the con in this context, in the context of that recuperation of the economy, our business is very solid.

With a strong evolution and we have a local team that is doing a great job harvesting the investments that they did last year. Last year, they stayed close to the customers. They increased market share. And those gains that we had in during 2024 are driving strong results this year. That's why it's so important that we keep and we are focusing on keeping that strategy in another markets that have this similar, you know, challenging environment. And so in Argentina today, we continue to be very prudent with pricing. We're trying to take like, across the region, all the opportunities possible to improve margins.

And, you know, we had the, for example, the tasty feed quarter as a highlight of marketing action or the Formula One action that is important in the market too. According to internal research, these actions helped us further increase our market share. We are outgaining all players in the market. And in Argentina, the difference is of three times the size we compare with our main competitors. And another great news is that while we are improving strongly the brand attributes, and we are seeing a similar trend in now in the third quarter of the year. Dan, back to you.

Operator: Okay. Thanks, Luis. The next one will be for you, Mariano, and this question comes from Giulia Rizzo from Morgan Stanley. She says that CapEx was well below expectations. And could the company end the year with CapEx below initial expectations? What are the gains and improvements we're noticing, if any?

Mariano Tannenbaum: Perfect. Thanks, Giulia, for the question. We actually maintain our 2025 openings guidance of between 90 to 100 EOTF restaurants, with a CapEx guidance of between $300 million to $350 million. The CapEx this year is usually a bit more back-ended. So we expect for the full year to keep on and maintain our we maintain our guidance. In terms of improvement, are always looking at improvements and ways to reduce the cost of each opening, and we are doing that all the time. We are looking at efficiencies, we are looking at reducing costs, at localizing the core packages, to reduce the impact of currency movements.

So you know, my team and the development team is continuing focusing on these improvements and cost reductions to make our investments more profitable.

Operator: Great. Thanks, Mariano. The next question comes from Max Joseph. This one will be for you, Luis. He goes, congratulations on the promotions and the strong results. Luis, could you share more about how you're challenging the team to ensure that every dollar in growth generates the best possible return? Where do you see the biggest opportunities to further maximize those results? And I think maybe you can get started. And, of course, Mariano, if you have anything to add there, please feel free.

Luis Raganato: Yeah. Thank you. Thank you very much, for the message, Max. And for the question. Yeah. Well, as I said, I'm going to have those three priorities, today's business, tomorrow's business, and the development strategy. As I as I said in the opening remarks, what we are doing is revisiting the whole process starting with people, the teams, and how we you know, look in the field for the sites. And how we build the sites and working as a team with Mariano how we measure those returns. I would say that we would like to focus on the modernization of the process and implementing, you know, new innovative and more sophisticated tools like, you know, artificial intelligence.

So we better estimate our sales, we better manage the whole construction and you know, measuring the process afterwards with finance when, you know, we already have the outcome of, you know, the performance. I don't know, Mariano, if you if you want to add.

Mariano Tannenbaum: No. What Luis just mentioned, and I also mentioned in the previous questions, a question from Giulia. Return on investments is one of our top priorities, and we are as a team, looking of ways always to reduce costs and make our investments more profitable driving a better and a higher shareholder return in terms of investments. So we are focused. This is one of our top priorities. And, yes, that's that would be my add to Luis' answer.

Operator: Great. Thanks, Mariano. We have a question from Lorena Reich from Luker Analytics. And, actually, it's let's call it a four-parter. I'll take the first one, which is why did we stop releasing detail by region? Actually, Lorena, I think if you, take a look at our earnings release, what you'll find is that what we eliminated are it was redundancies from the previous version. The information by region or by division is still in the release. Toward the end, you'll find all of the sales, EBITDA, operating income, same-store sales information that has always been in the release. What we did is just eliminate that redundancy that was in the document previously.

And our discussion of both sales growth as well as EBITDA performance at the consolidated level includes commentary on the divisional performance. And as you I'm sure you saw in today's presentation, we further explained some of those details. So I think that the information is still there. It's just a little bit different format. The second question from Lorena, has also, I think, already been answered, which is related to Giulia's question around CapEx and store openings. Is do you expect to reach the annual guidance for store openings? Mariano, you just answered that, so we're we're good. And then we have two more from her, these are a little bit sort of quick fire in there.

They'll be for you, Mariano. The first one is, what's the amount paid for St. Maarten acquisition?

Mariano Tannenbaum: Yes. Thanks, Lorena, for the question. The cash payment for the rights to St. Maarten was not a material sum within the context of our consolidated cash flow. And this payment will be reflected within the investment investing activities in our statement of cash flows by the September 2025.

Operator: Great. And then another question. That relates I guess to our cash flow statement, can you provide more detail on the acquisition of short-term investments of $106 million in the, investment cash flow. That's again for you, Mariano.

Mariano Tannenbaum: Yes. This is simply time deposits executed with relationship top-tier banks, and was done in order to minimize the carry cost of the new money funds raised on our latest bond issuance in January.

Operator: Okay. And then we have a thank you, Mariano. We have a question, for you, Luis. This one comes from Jeronimo de Guzman from Inca Investments. Can you please give us an update on the competitive environment in Brazil? Are you seeing any significant changes given the softer consumer environment?

Luis Raganato: Yeah. Thank you, Jeronimo, for the question. What we are seeing in Brazil is that there is reducing guest traffic in the sector. We saw that in the second quarter. For this reason, it's that for us, it's very important to remain focused on offering a compelling value proposition with competitive pricing delivering a great experience through all the channels. In general, in the industry, the competition continued to focus on promotional activities. We have a comprehensive plan that complements actions targeted to increase traffic and gain or shield our market share like, you know, ComboLogia with aspirational aspects. Like Minecraft, and the Formula One menu.

So that's why you're seeing as a result of that regarding to Chris, we are, you know, being able to maintain our market share and given the difference, the distance that we have in market share, when we compare with our nearest competitor, the differences of 2.2 times. So what are trying to do is, you know, combine that healthy comp sales, new restaurant openings with a much healthier much healthier margin. And you know, we are convinced that we are in position of strength here in Brazil to face the current situation and any situation that may arise.

Operator: Yeah. Thanks, Luis. We actually had a question from Max Joseph a follow-up question. I think we've already answered it. Just to recognize you, Max, I know you asked about our perspective on pricing strategy and how we think about raising prices in line with inflation, versus keeping them below inflation to direct traffic. I think we touched on that. We have one more question here, and it's from Alvaro Garcia from BTG. This one will be for you, Luis. And he says, I'm not sure if this has been asked or answered already. I think but I'd like to ask about Francisco Statement's new role as chief strategy officer. What's the nature of his new role?

Luis Raganato: Alright. Thank you, Alvaro, for the question. Francisco has been with us for more than ten years now. In increasingly senior leadership positions. We believe he's uniquely qualified to help develop a long-term strategy for every aspect of the business. He has supported brand building and sales generation in Brazil and Mexico, and, he gained experience leading operations in Colombia as managing director, not only in Colombia, but Colombia, Curacao, Aruba, and Trinidad. At the time. And he gained experience as divisional president for SLAD also. So I can tell you that I am already working with Francisco very close in the pillar of especially tomorrow's business.

Operator: Thanks, Luis, and thanks everyone for participating today, a longer than usual Q&A session. But very happy to see all the engagement. This is the end of the Q&A session, and I'd like to thank you for your interest for joining the call today. We look forward to speaking with you again in November on our third quarter 2025 earnings webcast. Until then, stay safe and have a great day.