Good morning, everyone. Thank you for joining our Fourth Quarter and Full Year 2020 Earnings Webcast. With us today are Marcelo Rabach, our Chief Executive Officer; Luis Raganato, our Chief Operating Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation also available in the Investors section of our website, www.arcosdorados.com/ir. We will be using the same webcast platform we used for our investor update in January of this year. As a reminder, to better view the presentation, we suggest to scroll over the upper left hand part of the screen and click on the arrows to maximize the slides. Also on the left hand side of the screen, you'll find some basic information about today's speakers as well as the chat function for this webcast tool. At the end of today's presentation, you will be able to submit questions using that chat function.

Thank you, Dan. And thanks to all of you for joining us on today's webcast. Almost two months ago, we reported system-wide comparable sales for the fourth quarter, commented on the main trends in the 3Ds, drive-thru, delivery and digital and deliver a preliminary outlook for 2021. Today, we will fill in the details of our strong fourth quarter performance and talk about more recent trends as well. Additionally, we will provide more color on the ongoing digital transformation of Arcos Dorados, which will increase our lead in the digital race across the regions' restaurant industry. Finally, we will share some important news related to our ESG commitments. In 2020, we managed through the most unexpected and unprecedented crisis of our lifetimes. We were forced to find new ways to work in our restaurants and offices, managing the business with an enormous geographic and cultural footprint, while coordinating efforts with the vast network of suppliers and sub-franchisees. Looking now at Slide 4, I believe our successful crisis management was the result of our proactive and aggressive response to the crisis itself, together with our historical long-term strategic approach to growth. We built a superior restaurant footprint with 60% street-facing locations that are resilient in difficult times and flexible in terms of changing consumer behavior. We introduced new sales segments to capture emerging growth opportunities such as smart delivery in recent years and the search centers further back in our history. We began investing in digital tools more than five years ago, likely as the earliest movers in Latin America's QSR industry. And we never lost sight of the company's most important assets, our people and the relationship with the communities they serve. The recipe for the future is rooted in generating opportunities for young people and ensuring that we have a positive impact on the environment for the benefit of future generations.

Thanks, Marcelo. In January, we reported fourth quarter system-wide comparable sales for the company and by division. So today, I would just point out a couple of additional highlights. Brazil faced the toughest comparison with the prior year after posting 9.5% comparable sales growth in the fourth quarter of 2019. Despite this, fourth quarter 2020 comparable sales approached 90% of the prior year's level and the cumulative sales impact of the last two years was down just 1%, far outperforming the industry in the period. And at the beginning of last year, we finished acquiring all the franchised restaurants in Puerto Rico. As a result, we now recognize 100% of the revenue from those locations rather than just rental income. Although this does not change the system-wide comparable sales result, it did contribute 14.4 percentage points to the 19.2% US dollar revenue growth in the quarter. One of the consistent themes of 2020 was the contribution of the 3Ds on Slide 7. The fourth quarter was no exception as constant currency growth in drive-thru sales exceeded 48% and delivery sales rose 171% over the prior year quarter. The contribution to total sales from these two segments declined sequentially over the last two quarters as sales at the front counter and other sales segments continue recovering with fewer operating restrictions in most markets. Still, drive-thru generated almost 37% and delivery contributed more than 14% of the quarter sales, slightly higher than and in line with our long-term expectations respectively. Drive-thru was particularly strong at the end of the year when we've reached a record number of vehicles served per restaurant in December. And delivery started 2021 on a high note reaching the highest ever number of daily orders per restaurant in February. Both segments are performing above-expectation so far this year. We were also very proud that McDonald's Corporation recently named our delivery squad among the winners of its Circle of Excellence Award, which celebrate the success of cross-functional teams that have come together to drive significant results across the business. I want to congratulate our team for leading the way in Latin America and across the McDonald's system as well.

Thanks, Luis. Let's start with fourth quarter adjusted EBITDA on Slide 10. We worked hard in 2020 to transform Arcos Dorados cost structure successfully converting a significant portion of previously fixed costs and expenses to variable. This is why we saw a rapid improvement in profitability in the second half of 2020 despite softer sales. Our decisive cash management actions, together with our strong supplier and McDonald's relationships, helped to quickly stabilize our cash flows, which grew throughout the second half of 2020. In terms of margin impact, food and paper costs were basically flat both sequentially and versus the prior year quarter despite all the cost pressures we faced with protein prices, changes in mix and volatile market conditions. Payroll and employee benefits as well as occupancy and other operating expenses improved significantly versus the third quarter and we're close to flat versus the prior year quarter. Margin pressure in the quarter came mostly from other operating expenses. Turning now to Slide 11. All four divisions improved EBITDA results versus the third quarter of 2020. However, both Brazil and NOLAD saw margins and total EBITDA contract versus the prior year. Brazil's results reflects lower sales and net negative impact from one-offs in other operating income and the depreciation of the Brazilian real versus the prior year. NOLAD's EBITDA contraction was mostly the product of the sales decline versus the prior year. SLAD's EBITDA improvement was largely driven by the recovery in the Chilean business as well as margin expansion in the quarter.

Thanks, Mariano. In general, we gave you some insight into the ongoing digital transformation of Arcos Dorados. Today, I want to provide a few more details starting with Slide 14. We began this journey more than six years ago when field servers being digital could meaningfully change the quick service restaurant business. Our Chief Technology Officer, Marco Cordon, joined the company about 18 months ago to leave three interconnected groups. Throughout 2020, we talked mostly about the customer-facing group, which we call ADVANCE. However, the other two groups are crucial to the long-term success of everything we are doing in ADVANCE. First is the information technology group that is working on modernizing our IT infrastructure to ensure we have the hardware, software, services some people necessary to extend Arcos Dorados lead in the Latin American QSR industry's digital race. Then, there is the data group that is working to improve the way we capture and analyze data to make better, faster and more targeted strategic decisions moving forward. The ADVANCE team has three of its own interconnected agile squads made up of around 80 employees and best-in-class partners working on delivery, which is now working to optimize our aggregator relationships as Luis already mentioned, as well as the logistics and operations of all delivery channels, including our own delivery capabilities. Digital marketing has made significant progress from a couple of years ago when we used the mobile app for one-size-fits-all digital couponing to today when 100% of the digital offers we send customers are segmented to drive we send customers are segmented to drive frequency and profitability, and we are starting to implement personalized communications and offers to take advantage of our ability to identify at least 45% of digital sales down to individual guests. Digital experience is the newest…

Sure, 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. I'll be moderating today's Q&A session, so please limit yourself to one or two questions so that I can read, understand and convey them to our speakers. We'll now pause briefly to compile your questions. Great. So let's start with a couple of questions we have here from Ian Luketic of JPMorgan. Both these questions, I think, are for you, Marcelo. How are sales performing after the fourth quarter and when we expect them to normalize? And if we can quantify how much sales are down in Brazil in March with the second wave of pandemic and the associated lock-ins?

Okay. Thank you, Dan. And good morning, Ian, and thank you for joining us for today's webcast. And based on the conversations we have had with many of you in recent weeks, I think that this was one of the most frequent asked question to us. So, I try to give you a very comprehensive answer about this. First, how we see this year -- how we see 2021? We started 2021 with relatively modest expectations for the first half of the year. And our base assumption and our most likely scenario is that operating conditions will be closer to normal in the second half of the year. The year started with sales strengths in line with our expectations, but with better-than-expected profitability trends in both January and February. Consumers continued responding positively to the safety of our operation and to the convenience that we are offering through the 3Ds, drive-thru, delivery and digital, all of which maintain a very strong growth rates at the start of the year. In March in particular, we have seen the return of government-mandated restrictions in some markets, most notably in Brazil. So, let's talk in detail about what's going on in Brazil in these days. As of today, about 15% -- to be more specific, 155 restaurants are closed in Brazil, mostly in shopping malls and mostly in the state of Sao Paulo. Remember that at the peak of the crisis last year, we had closed around 40% of the restaurants in Brazil. And at that time, no restaurant was able to operate all size set in . As of today, 23% of our restaurants in Brazil are fully open or operating all business segments and we have the other over 60% operating at least once a segment. So, we are fairly seeing…

Perfect. Next couple of questions are from Marcella Recchia of Credit Suisse. And the first one, I think, is for you, Luis. And she asks about the Club VIP Automac loyalty program around our drive-thru programs. And if you can comment on sort of the nature of the program, provide a little bit of visibility in terms of what we expect to do with it moving forward if we're going to roll it out into Brazil or -- and also if is this the only loyalty program or if there are any other loyalty programs, excuse me, that are underway as well?

Thank you, Dan. Good morning, Marcella. And thank you for the question. First, for us, having a loyalty program is a strategic initiative since it stimulates the frequency of consumption of our customers, increasing their loyalty to the business and to the brand. And there are different way the loyalty program. We have already started through the use of digital offers in our app where we can identify the frequency of visit and their February stores and product. Additionally, as we mentioned, we have already this Club VIP Automac that is the first step of building a compelling loyalty program platform. This club is already in Argentina, Colombia, Chile, Uruguay, Costa Rica, Panama and Mexico. And our plan is to roll it out to the rest of the region, of course, Brazil included. Today, the members receive exclusive offers and information related to their favorite products, stores and use occasion. And it already has, like with 900,000 registered users. And even though it's in the early stages, we are focusing on developing it efficiently because it's going to be very important in the near future.

Great. And the second question from Marcella is for you, Mariano. And she asks about sort of the nature of the tax-related provisions in Brazil in the quarter -- in the fourth quarter of this year and last year. So if you can just provide a little bit of color there that would be great.

Yes. Thanks, Dan. And thank you, Marcella, for the question. Yes. Half of the decline in Brazil's fourth quarter 2020 margin is explained actually by the other operating income line, which was mostly the result of tax-related and other provisions that generated relevant positive one-offs already reported in 2019 and some negative one-offs in the fourth quarter of 2020. And we are not expecting that the specific items that I just mentioned will continue going forward.

Perfect. We also have a number of questions here from a number of folks, Marcel Moraes from and Marcella also from Credit Suisse. They've all asked different questions related to our delivery aggregator relationships, company relationships we have in the various markets and also a little bit more color or if you can provide a little bit more background on what we mentioned in our opening remarks related to the exclusivity agreement with Brazil and possibly other tests that we're doing along those lines. So, I think, Marcelo, that's for you.

Okay, thank you. And thanks for the questions. As you may know, we are operating delivery in 17 of our 20 markets in the region. And we have a very strategic approach to the segment, which grew dramatically in a spectacular way last year. So we are negotiating with all the aggregators operations in our markets -- in different markets. And we are looking market by market in order to optimize our results, our sales growth, our margins and our market share in this business segment, which is very important for us. So, typically we have markets, most of the markets where we work with three or four aggregators, the main ones in those markets. And at the same time, from the last part of last year and at the beginning of this year, we are running some experiences -- new experiences in terms of exclusivity in some markets, particularly at this moment we have some exclusivity agreement in three of our markets, Brazil, Colombia and Peru. And in these cases, we base the negotiations with aggregators with which we sign this agreement based in three pillars, sales growth, which is maybe the most important for us, okay, which is a player that can give us the fastest pace in terms of sales growth in the short-term, that obviously translates in gains in market share, particularly for the future. And third, profitability, which is a main part of the decision. So, we are very pleased with the results -- the early results we are getting. We mentioned during our opening remarks that we hit our record sales per day per restaurant in delivery in February. And let me add to that that March is looking even better. So, we have a very strategic approach and we are looking market by market, how we can optimize this channel, how we can optimize the results of this business segment for the company. And we leverage obviously our size, we are the only player in the region that can sit with any aggregator and talk about 70 markets at the same time, just one brand, just one operator. That's a huge advantage in order to negotiate different conditions across the region. So that's more or less what I have to say about this, Dan.

Yes. And Marcelo, let me add regarding margins -- delivery margins, given the incrementality of sales in this segment, the fact that delivery does not require almost any additional investment, the strategic negotiations that you just mentioned with our 3POs in every market where we operate, the higher prices that we have in the menu board for delivery, plus the higher average check of this segment. We have been able to manage this segment very efficiently, allowing us to leverage on the fixed costs at the restaurant level and bringing additional dollars to the business. So that's more or less the picture regarding margin related to this segment, which is very accretive for the company.

And so, Mariano, what don't we keep it with you? Barbara from JPMorgan asked the question with respect to what your expectations are for working capital dynamics in 2021. We have a somewhat related question related -- from Luminous Capital who is asking about sort of our margin outlook if that margin seem pretty high considering the current sales level, and I was wondering if there is a structurally higher margin expected than pre-COVID or if it's too soon to say. So, maybe you can sort of take the cash flow and margin perspective there.

Perfect. Thanks, Barbara and . Well, first of all, it's worth noting that we started the year with a very strong balance sheet, including a very comfortable cash balance of $166 million, no short-term debt and a manageable maturity profile for our long-term debt. So, for this year, we are starting with a very strong cash position. In part, the reason for that are all the successful negotiations that we performed during 2020. Within those, it's worth mentioning that from March to July of 2020, we did not pay royalty fees to McDonald's that we are starting to pay this year. Starting in January, so from January to March regarding working capital, we are going to have some pressure on our cash, because we are paying each month double royalties. But having said that, we are starting the year with a very strong cash position. And on top of that, we continue negotiating with all our suppliers to -- in order to increase and have better payment terms. When I say suppliers, I'm mentioning all the food and paper suppliers, I'm mentioning all landlords, all corporate suppliers. So, regarding working capital, 2020 was a cash flow -- working capital generated additional cash to the company. In 2021, we will go back more to normal levels, mainly because we are paying these royalty fees to McDonald's from last year. But it's important also to note that this year we are receiving the broad support as we explained already during our investor call in January, so the royalty fees for this year are going to be lower in percentage terms oversights so that's regarding working capital, we are not expecting any pressure and we are very comfortable with our cash position and the cash that we are expecting to generate throughout the…

Thanks, Mariano. And a comeback question from . And this one relate to market share gains. Yes, if we can quantify market share gains in Brazil. And if we believe these gains were on top of smaller players or even some of the larger QSR players in the market? And I think that's for you, Marcelo.

Okay. Let me first start talking about how we measure market share. We mentioned and we track market share using a variety of sources of information. And what we do is, we try to triangulate the identified trends and areas of opportunity. Particularly talking about Brazil, we have the opportunity to work with CREST. CREST is -- it has a very large sample size, more than 70,000 cases per year. So it's a very robust tool and sampling error is very small. And according to this tool -- this CREST tool, we have in 2020 our highest market share ever in Brazil. They began measuring Brazil in 2016. And our expansion compared with 2019 was a multiple of all other players in the marketplace. So, most of the gain came from smaller players. That's what the information tell us. And at the time we have more than two times the market share that our closest compared in Brazil in both measures because we have information both from visits and sales. And in both measures, we have more than two times of the market share of our closest competitor. And in both categories because they measure market share related to QSR, quick service restaurant industry and to the EO, informed eating out industry. So the whole industry, in both cases, we have the two times -- more than two times their market share of our closest competitor. And it's important to notice that this kind of trend showing us that we gained market share big time last year is similar in other markets, where we operate not only Brazil, markets like Argentina, Chile, Colombia, Puerto Rico, we have a pretty strong market share gain in 2020. And we are -- we are building on that, in order to come out of this crisis in an even stronger position that we have before it. That's more or less what I can disclose about market share.

Great. We'll keep it with you, Marcello Joaquin Lei from Itowu has asked us to elaborate on how digital and targeted marketing will impact our pricing and costs. And if we have an ongoing program to improve data management, yes.

Hi, Joaquin. And thank you for joining us today. Yes, definitely. We see the this as an -- as a big opportunity for us. That's why we were talking about digital transformation for the last few years. The name of the game for us in this is moving from mass marketing to mass personalization. And given the fact that we have better tools, and we have a better understanding, we analyze better data and with better tools, including artificial intelligence, we have the opportunity to, first, segment our offers, our promotions, our incentives for the customers. And we are reaching the point where, for example, at this time, we have, approximately, 45% of our digital sales identify up to the customer with the individual customer. So, with that information and all the tools we are building, and we are working with not only internal tools, but with the partners, world-class partners that we are working with, we have the opportunity to target individuals with specific promotions, specific incentives and proposals in order to increase frequency and profitability. So we are very excited with this in the company. We talk a lot about winning the digital race in our region. I think that we are the front runner right now. But we still have higher aspirations for these in order to improve our results going forward.

Great. Thanks, Marcelo. A question -- I think, Mariano, maybe you can talk about this, with respect to concerns around supply chain, how supply chain has been performing and maybe the impact on gross margins?

Yes. Well, regarding concerns about supply chain, we don't have any concern regarding availability of products to arrive to our restaurants. In that respect, we don't have any concern. The only concern, and I already mentioned something during the question about margin outlook for 2021, is about the protein prices. So far, we have been pretty successful defending our gross margin. If you look at gross margin during 2020, we have been very successful, absorbing those costs, either via successful negotiations with suppliers and also having the revenue management skills to identify and to be able to transfer those increases to our check and being able to sell the products that have higher margins. Marcelo already explained how the digital transformation that the company is having has allowed us to improve our revenue management skills and our pricing skills. And that's the way we are doing. And that's the way that we are expecting to continue do -- to do it in 2021. So, I think the answer to the question is there -- to summarize it is, we see some pressures in the protein prices. That pressure comes to the entire industry, not, of course, not only to us, we really think that we are much well prepared to face that challenge, as we already demonstrated that during 2020, and you can see that in the -- specifically in the fourth quarter, and all the things that we are doing to improve our pricing skills and improve also the product mix. We also -- we are -- we are also very confident that will -- that will allow us to maintain a very healthy gross margin for 2021.

Thanks, Mariano. A follow-up question from our Marcella Recchia of Credit Suisse. She asked if we could comment on how much pricing we've passed around Brazil in order to reach the current margin levels. I think that's for you, Marcelo.

Okay. Thanks, Marcella. I would say that if you look at our menu board prices, or price increases, what we did in 2020, was pretty in line with inflation in the market. But as I was mentioning before, it seems more and more of our sales are digital and come from different sources and different tools, like delivery and the -- like our McDonald's app in the region. In those sales, we have the opportunity to make different prices strategy, even for each customer. So we have more flexibility. And we are trying to offer very compelling value propositions for customers, particularly, for example, last year, at the beginning of this year, we are really focused in family bundles, and group of products for groups of persons. And in those, we can offer very compelling value propositions for the customers at the same time, at very good prices and margins for us. I think that part of the explanation for our results in terms of gross margin last year was not only the excellent job that our supply chain team did during the year, in order to keep the costs in our backdoor as low as possible, but at the same time, the ability that we have in order to deal with pricing. So that's more or less what's going on in this area.

Perfect. And we have time, I think, for one last question comes from . And he asked for a little bit of clarity or we can comment, Mariano, on the FX hedges we haven't placed for 2021 food and paper purchases, and maybe contrast that with how we were positioned last year.

Okay, thanks, Kenny Moore for the question. Well, last year in 2020, we were -- our hedging program. And as I always mentioned, this is not speculative, this is to give us -- this program is to give us visibility on our cost structure. Having said that, during 2020, the average spot in almost all the hedges given the depreciation of the currencies, was very accretive for the company. And just to explain how it works, each time currencies depreciate, and when we hedge in advance, that will bring a gain in our food and paper line. This -- and we always have six to nine months in advance. That means that during 2020, even the sharp depreciation of all Lat-Am currencies, we had a lower food and paper costs than we would have had without hedges. Same is happening for 2021. We already -- we already -- we already hedging for the third quarter of 2021 and the hedging of the FX values for those hedges are well below the current spot for the currencies. Of course, the figures that we hedge for 2021 are or the rate at which we hedge for 2021 are higher than the ones that we hedge for 2020. It's also worth mentioning that we hedge our imports, only 50% of our imports in the main countries, where we hedge or the main countries that we have hedging in place, which are Brazil, Colombia, Uruguay, Chile, and Mexico.

Great. Thanks, Mariano. I think we're a little bit over. So I want to thank everyone again for joining you -- joining us today and for your interest in the company. We look forward to speaking with you again on our main earnings call. Obviously, the IR team has always available to you for any follow-up questions today and as we move forward. Until we speak again, please stay safe and have a great day.