Americana Restaurants International PLC ($AMR)

[Audio Gap] Pujeet, please go ahead.

Good evening, everyone, and thank you for joining us for Americana Restaurants Q1 2026 Earnings Call. I'm Pujeet Parekh, Head of Investor Relations and Business Development. And it is my pleasure to welcome you on behalf of the entire management team. We entered 2026 carrying strong momentum from 2025 with continued focus on disciplined growth, profitability expansion and long-term value creation. During the first quarter, we delivered strong revenue growth, significant margin improvement and continued progress across our strategic priorities while remaining agile in navigating a dynamic regional operating environment. Across our markets, we continue to strengthen customer engagement, scale up our brands, drive operational efficiencies and reinforce our purpose of building communities around the joy of food. Joining me today are Amarpal Sandhu, our Chief Executive Officer; Harsh Bansal, our Chief Operating Officer for KFC and Pizza Hut and Rahul Mathur, our newly appointed Chief Financial Officer. Amar will begin with an overview of the group's strategic and operational highlights for the quarter, followed by Harsh, who will walk you through the financial performance and outlook in more detail. We will also introduce Rahul later in the call. Before we begin, I would like to remind you that today's discussion may include forward-looking statements based on current expectations and assumptions. Please refer to our disclosures for additional details. The presentation design has been refreshed for improved clarity and identity, while the underlying information remains unchanged. With that, let me hand it over to Amar. Mr. Amar, we don't hear you, if you can perhaps unmute. Please start.

Just a voice check, Michael, am I audible?

Yes, we can hear you, please go ahead.

Okay. I think we had a technical glitch. I will restart. Once again, thank you, Pujeet, and good day, everyone, and thanks for joining us today. As I was saying earlier, we entered 2026 with strong momentum, and I'm pleased to say that the base we built in quarter 4 of 2025 accelerated in quarter 1 of 2026. The discipline and execution that defined our finish to 2025 are now translating into tangible results, positioning Americana for a year of meaningful growth. At the core of this performance is a playbook that is both simple and powerful. First, an unwavering focus on value ensuring our brands remain relevant, accessible and compelling for our customers in every market we serve. Second, purposeful innovation, introducing products and experiences that drive traffic and strengthen our brands. Third, operational excellence which is about relentlessly improving quality, consistency and customer experiences across our portfolio. And finally, cost discipline, which is embedding efficiency into every layer of the business to protect margins and fuel reinvestment. These pillars reinforce each other. And when they are all fighting together the results follow. As we walk you through our quarter 1 results today, you will see clear evidence that the playbook is working, and our ambition for 2026 is very much on track. Across the quarter, our power brands executed with focus, driving growth through value and locally relevant occasion-led innovation. At KFC, the story this quarter is quite simple. The brand is firing all cylinders, setting the pace in innovation and cultural relevance and in the kind of consistent execution that keeps customers coming back week after week. A few examples of locally grounded launches like Firecracker, Twister in Kuwait, [indiscernible] and KSA and risa, Royal and Maxi Tacos in Morocco, reflect the deep understanding of local taste, which is both specific and cultural resonance. The big Kentucky momentum from quarter 4 of last year carried forward with the new suite till launch, while the KFC and Costa partnership added fresh synergy in the [ market ]. Once again, both [indiscernible], cultural connection and strong value perception is what keeps KFC getting the formula right. It remains our largest and most powerful brand and quarter 4 -- quarter 1 of 2026 reinforced exactly that. At Hardie's, the focus was on cultural energy and local pride and it landed once again. The DiraBurger in Saudi Arabia drew on genuine Nostalgia bringing back an all-time customer favorite. The 1 piece collectible campaign tapped into one of the most passionately followed anime franchisees in the world. driving repeat through collectible led purchasing behavior. The tornado platform kept the menu fresh and sorted transaction growth throughout the quarter. All these launches help strengthen brand distinctiveness while staying commercially shop. Pizza Hut continued to focus on sharing occasions, bringing people together around great food. The Super line with stuffed crust reinforced value and made group dining occasions were compelling. Ramadan and Valentine's activations with the date cake and heart-shaped pizza created culturally and seasonally relevant offerings. These initiatives reinforce the brand's role in people's lives through family dining and shared food experiences. At Crispy Cream, the brand continued to expand its relevance through seasonal and gifting moments, while the Ramadan range drew inspiration from Arabic suites and regional flavors, creating strong local resonance, the Valentine's campaign drove gifting relevance and cream cheese snacks built on the Savory delights platform launched last quarter, confirmed that Crispy Cream can win in everyday moment beyond traditional occasions. Overall, quarter 1 is a clear proof point when value and innovation are grounded in low taste, cultural insight and occasion relevance, they both -- they drive both growth and lost and customer connection. This disciplined approach remains a core driver of sustainable growth across the portfolio. And coming to our purpose of building communities around the [indiscernible] Food, which remains central during the quarter. Despite uncertain market conditions, we stayed true to that commitment by continuing to support our communities, create opportunities and deliver meaningful social impact across our markets. During Ramadan, we launched our close to people in Ramadan & Beyond initiative across all 12 countries distributing tens of thousands of hot meals supported more than 1,000 families with the essential food boxes. This initiative created lasting impact beyond onetime relief, reflecting our continued commitment to staying close to people, especially during moments that matter most. In the UAE, we signed an MOU with desired authority for people of determination, marking an important step in advancing inclusive employment opportunities. During the quarter, we also opened the first Pizza Hut restaurant in Abu Dhabi operated by people of determination, reinforcing our long-term commitment to inclusion and equal opportunity across our operations. In Lebanon, we prioritized employee safety during a challenging period by providing secure accommodation, meals and essential support to those with urgent humanitarian needs. These initiatives reflect our purpose as a consistent operating principle creating opportunities, supporting communities and ensuring growth aligns with meaningful social impact across the regions. Now let's talk about performance in quarter 1, 2026. This is the illustration of the playbook in practice and the numbers reflected. Our portfolio reached 2,741 stores at end of quarter 1, with 173 gross new restaurants and 111 net new restaurants added over the last 12 months, reflecting disciplined expansion, anchored in achieving return thresholds and strategic market fit. Revenues grew by an impressive 13.3% year-on-year to $649.7 million. Performance was driven by strong like-for-like sales growth of 6.7%, once again supported by value, localized innovation and disciplined operational execution. EBITDA reached $160.5 million, demonstrating strong operating leverage and cost discipline across the business. Net profit increased by 93.5% year-on-year to $63.2 million, driven by revenue growth and significant margin expansion. Capital expenditure reached $42.4 million, representing 6.5% of revenues, including the consideration paid for the acquisition of the UAE subsidiary operating Malak Al Tawouk, balancing growth investment with capital efficiency. Finally, during our AGM held on 29th April, shareholders approved cash dividends of $201.6 million, equivalent to circa 92% of full year 2025 net profit. These dividends will be distributed to entitled shareholders in line with the announced time lines. In summary, quarter 1 2026 reflects strong momentum across revenue, profitability, disciplined expansion and shareholder returns, once again reinforcing Americanas resilient operating model and sustainable long-term growth trajectory. Next, allow me to take you through our network expansion during the quarter. As shown on the left-hand chart, we added a gross of 173 stores to our portfolio since quarter 1 2025. This was done primarily across Power Brands, which contributed 138 gross openings. In parallel, we closed 62 locations as part of our ongoing portfolio optimization, covering underperforming locations, some strategic relocations and also some landlord-led redevelopment projects. In addition, 7 stores from Malak Al Tawouk in the UAE were added to the portfolio, with their financials consolidated during the quarter. bringing our total restaurant count to 2,741 as of quarter 1, 2026. The chart on the right highlights the strength of our pipeline for 2026. During quarter 1, we opened 10 gross stores from our core portfolio and added 7 stores from Malak Al Tawouk acquisition. Consistent with previous years, the first quarter typically carries the majority of our strategic closures as part of our portfolio optimization approach. Our development pipeline for the remainder of the year remains strong, providing confidence in delivering our previously guided 120 to 130 net new store additions, including new brands. Expansion remains focused on high-performing markets while maintaining the flexibility to revisit guidance based on evolving market conditions and return thresholds. With that, I will now hand over to Harsh to walk you through the financial details.

Thank you, Amar, and good day, everyone. I will start by taking you through our Q1 2026 financial performance and beginning with revenue growth and the key drivers behind the quarter. As shown in the revenue bridge on the left, revenues increased from $573 million in Q1 2025 to $650 million in Q1 2026, representing a strong 13.3% year-on-year growth. Like-for-like sales remained the largest contributor, adding $41 million, supported by a robust transaction growth, localized menu innovation and continued momentum across our key markets. New store openings further contributed $32 million, reflecting disciplined expansion across our power brands and the contribution from the recently opened stores. Like-for-like growth remained resilient even during Ramadan and despite broader regional uncertainty. Pre-Ramadan, LFL growth stood at 6.4%, improving further to 7.1% during Ramadan till end of March, this reflects strong customer resilience during periods of uncertainty and continued preference and trust across our brands across countries. Foreign exchange had a limited positive impact of $4 million, largely driven by Egypt and Kazakhstan. Now turning on to the revenue mix on the top right. our portfolio composition remains largely stable and resilient. Our brands contributed 94% of the total revenue, which is slightly higher than last year. And growth in East brands contributed the remaining 6%. In addition, 83% of our revenues came from stable pecurrency markets driving consistency and lower FX volatility across our results. Looking at channel mix on the bottom right, home delivery increased to 51% and following the increased trend from last year. It is worth noting that given the regional uncertainty, we saw some spike in home delivery sales. This reflecting customers' preferences to stay closer to home. We expect this level to normalize and home delivery shares stay stabilized around these levels of 51% to 52%. KIOSKs continue to strengthen as a share of revenue, which is at 17%, supporting both improved customer experience, higher check as well as operating efficiency. Overall, Q1 revenue performance reflects the strength of our diversified portfolio, strong consumer demand, disciplined expansion and the resilience of our operating model. This has been supported by our omnichannel platform, which allows us to adapt quickly to shifting consumer needs. Now let me take you through the performance across brands. Starting with KFC. Revenue reached $391 million in Q1 2026, representing a strong 14.2% growth year-on-year. Like-for-like was 7.5%, which was supported by localized innovation and multi-platform campaigns such as collaboration with Cristal, along with the continued momentum of BikatekiSuchili. Hardies delivered another solid quarter with revenues of $150 million, up 12.9% year-on-year. Like-for-like stood at 5.9% and the performance was supported by strong cursory relevant campaigns and collaborations such as [indiscernible] campaign with Club the customer favorite sandwiches, along with their fan favorite collectibles. Pizza Hut reported $81 million in revenues, a growth of 9.2% year-on-year and like-for-like growth stood at 4.3%. The quarter benefited from strong seasonal relevance such as date cake and Ramadan and Valentine's hardship campaign, reinforcing family dining as well as occasion-led consumption. Crispy Cream delivered revenues of $23 million up 4.4% year-on-year with a like-for-like growth of 3.6%. Performance was supported by strong innovation as well as gifting occasions like Ramadan inspired Arabic see flavors and the expansion of Savery platform to PVC snacks extending relevance beyond traditional sweet occasions. On an overall level, the portfolio delivered 13.3% year-on-year growth in Q1 with a strong 6.7% like-for-like growth, reflecting broad-based momentum across our brands as well as across major markets on the back of strong execution, local relevance and disciplined pricing strategies across markets. Moving on to profitability. Profitability improved materially across all key metrics during the quarter, driven by strong overall sales and the like-for-like growth, delivering better gross margins as well as overall margins. Starting with 4-wall EBITDA. We reported an increase from $115 million in Q1 2025 to $204 million in Q1 2026, representing 29.1% growth and the forward margins expanded from 27.5% to 31.4% in Q1 2026. Reported EBITDA grew by strong 31.9% year-on-year, reaching $161 million and margin expanding from 21.2% to 24.7%. This reflects strong operating leverage at the restaurant level and conversion of sales into like-for-like profitability. Net profit also increased significantly from $33 million in Q1 2025 to $63 million in Q1 2026, representing a growth of 93.5%. Net profit margin expanded from 5.7% to 9.7% on account of higher sales as well as cost measures across lines. Overall, this quarter demonstrates the strength of our operating model with strong revenue growth, cost discipline as well as execution capability delivering not only top line growth, but also bottom line growth along with strong margin expansion. Now we will go through some of the next slides to give additional color on the gross margin and working capital. As you see, the quarterly inventory costs have been well controlled despite volatility and freight pressures. In Q1 2026, our cost of inventory grew to 27.3%, compared to 29.2% in Q1 2025, representing 1.9% improvement year-on-year. This was driven by strong procurement discipline as well as supply negotiations and various other menu and pricing actions, which continue to drive our higher gross margin. In the time of current volatility, our centralized GCC supply chain has proven to be a true competitive advantage, which has given us better control on sourcing as well as we have been able to move stocks with countries to avoid any stock outs. Our long-term strong vendor agreements have also given us the flexibility to get the first reference given the size and scale and relationships we have. It is also important to note that despite recent geopolitical developments, and pressure across logistic routes, we have been able to navigate without any material impact on our inventory costs during Q1. However, we do see some impact coming in, in Q2 especially on account of rate surcharges as well as commodity volatility given what's going on. Overall, this quarter demonstrates the strength of our operating discipline our ability to navigate difficult situations while continue to perform on top line and our margins. Moving on to working capital and capital deployment. Our balance sheet remains strong with disciplined cash management and continued investment in growth. Starting with net working capital on the left-hand side, NWC remained at negative $230 million as of March 2026, representing minus 8.9% of revenue, which is broadly in line with Q1 2025, showcasing efficient inventory management as well as supplier payment terms. Turning to gross CapEx on the item side. CapEx increased to $42.4 million in Q1 2026 compared to $27.7 million in Q1 2025. $42.4 million also includes USD 16 million for the consideration to acquire the UAE operations of Malak Al Tawouk also. Our approved capital deployment remains disciplined and return led to make sure we balance growth as well as shareholder returns. On that note, I will hand it over to Amar to take you through 2026 guidance.

Thank you, Harsh. Before we move to the next section, let me briefly reiterate our 2026 guidance. Our outlook remains aligned with our strategy of disciplined growth, strong returns and scalable platforms while maintaining the flexibility to respond to evolving market conditions. On revenue growth, we continue to guide for mid-single-digit like-for-like growth supported by strong brand relevance, sharper local execution and culturally resonant campaigns across our markets. While we are seeing some moderate softness in top line performance in UAE, this is balanced by momentum across other markets, supporting the resilience of our overall portfolio and the countries of operations. On network expansion, we maintain our guidance of 120 to 130 net new store openings in 2026, including new brands. Expansion remains focused on high-performing markets with flexibility to adjust rollout pace based on market conditions. On profitability, we expect gross margins to remain broadly in line with 2025. As of the end of quarter 1, 2026, we have seen no material impact on margins from the current geopolitical situation. However, we remain flexible to revisit margin expectations based on the operating environment and external market dynamics. We take a similar approach toward EBITDA and net profit balancing growth with prudent cost discipline. As delivery mix increases during periods of market uncertainty, we remain focused on closing the gap between profitability on digital channels and in-store economics without compromising on customer experience. On category expansion, we continue to explore both organic and inorganic opportunities, particularly within Arabic food categories. Malak Al Tawouk was the first step, and we remain open to further opportunities where we see strong long-term strategic value. Finally, on efficiencies, we remain focused on menu engineering and supplier negotiations, alongside streamlining G&A to further strengthen our cost base. Overall, our focus remains on disciplined execution, profitable growth and operational ability to adapt as market conditions evolve. Before we close, allow me to introduce our newly appointed Chief Financial Officer, Rahul Mathur, who joined Americana Restaurants in April 2026. Rahul brings more than 25 years of international experience with leadership roles spanning Europe, Asia Pacific, Middle East and Africa. This transition reflects the strength of internal progression within Americana. Harsh Bansal, who has made oversized contributions towards Americanas growth story, and provided steadfast leadership as our CFO for the past many years, has now assumed the role of Chief Operating Officer for KFC and Pizza Hut, where he will continue to do what he does best, which is to drive performance across 2 of our most important brands, which is KFC and Pizza Hut now. This reflects our belief in developing talent from within, creating positive leadership movement across the organization and ensuring we continue to strengthen both our operational and financial leadership as we scale for the future. I am super excited to have Rahul join us, and I will now invite Rahul to introduce himself to all of you.

Thank you, Amar, and good evening, everyone. I'm delighted to join Americana Restaurants. Over the past few weeks, I've spent time getting to know the business closely, our operations, our markets and what truly drives our performance. What stands out to me is the strength of this platform with strong brand partnerships, leading positions across the region, and a very strong track record of consistent execution. I've also been truly impressed with the quality of our teams and a very strong culture of ownership. My focus will be to build on these strengths with disciplined capital allocation to support our growth plans, driving operational excellence and upholding high governance standards. As I transition into the role working closely with Harsh, I look forward to engaging with you in the coming months. Thank you, and back to Amar for concluding remarks.

Thank you, Rahul. You're getting a free pass for this quarter, but you will be handling the financial section of the earnings in quarter 2. As we conclude this quarter gives us confidence in where we are headed. The foundation we built in 2025 is holding and our playbook of value, purposeful innovation, operational excellence and cost discipline continues to deliver. Stronger profitability, sustained growth and deeper consumer connection across every market we serve. In a period of regional uncertainty, including disruption across key logistics routes such as the Strait of Hormuz moves, we stayed agile and proactive. And yet again, our brands and countries of operations stood the test of resilience. We activated our business continuity framework early, strengthened cross-market coordination secured alternative sourcing routes and leveraged our centralized GCC supply chain to maintain operational stability. Our diversified footprint, local sourcing strength and omnichannel capabilities continue to provide resilience, flying us to serve customers without any material disruption while protecting margins and supply continuity. As we mentioned during our last call, 2026 is a year of momentum. We will keep growing with discipline, innovating with purpose and staying laser-focused on execution, creating awesome experiences for our customers and amazing value for our shareholders. Thank you all for joining us today, and we will now welcome your questions.

[Operator Instructions] Our first question comes from Mr. Taher Safieddine from JPMorgan.

It's Taher from JPMorgan. Again, congrats on a very strong set of numbers. I have 2 questions, Amar, if I may. The first one is just really on the regional conflict, which started in early March. I mean looking just at your performance and the like-for-like you've shared the business was quite resilient so to say, in March. But maybe just a bit of color on trends going into April. And the point here is UAE is the biggest market within your portfolio. It makes up around 33% of your sales. So I just want to understand what kind of trends are you seeing in April versus March? And particularly, maybe I'm interested to see how much are you impacted by tourism? I know there's the argument that fine dining is maybe taking the biggest hit and QSR seems to be in a sweet spot. So maybe just your thoughts on how trends are working through in April, that would be helpful specifically for the UAE? And then maybe I can follow up with the second question, if I may.

Taher, we were taking bets that who would be the first one to ask a question, and I think I won. Always good to hear from you. And I think you've also kind of provided some color on the UAE situation because you're familiar with the market. So definitely, the [ PSA ] brands remain strong. So there's some moderate softness and it's more in the touristic areas. And obviously, brands that are heavy on dine-in like agile dining, we are seeing a bigger impact. But of course, that is a very small portion of the overall portfolio in UAE. So I would say, performance remained relatively strong. Is there some softness compared to conflict which started on February 28? Yes, some moderate softness, but we're also seeing week-over-week growth even across, for example, the brands that are heavily dependent on mall traffic, whether it's peak or the TGI Fridays, we see continued improvement week over week. And on the QSR side, yes, we are seeing some impact in the tourist areas around Sheikh Zayed and for example, JBR Marina, et cetera. But we are also seeing very strong performance, for example, in Northern Emirates, in Elan and Sharjah and Abu Dhabi. So once in a while, we get pleasantly surprised. So let's keep it that way.

Okay. Perfect. And maybe just the second question is on the guidance. I remember in the Q4 call, you said 50 to 100 basis points EBITDA net profit margin expansion year-over-year. I mean just on that side, I think there are like maybe 2 concerns. Number one is the pickup in home delivery, which we understand is a lower margin sales channel compared to others. So maybe just maybe some color there. And the second point is just on the supply chain. I remember you said in other calls that you may be using land routes through Saudi to get some product availability into Kuwait and UAE. So can you just maybe share some color in terms of how should we think about the margin profile, given the increase in home delivery and also maybe higher sea freight costs and so on?

Sure, Taher. So first on home delivery while yes, home delivery is a lower margin channel, but we have also been taking pricing on home delivery as a channel, which net-net I won't say nullify significantly reduced the margin impact given the higher pricing. So while there will be some impact on margin, but a large part of it would be covered through higher pricing and home believable channels, which we have been doing it from that year, and we'll continue to do it. On supply chain, we are seeing some, as I said, yes, we are using land routes as well as tapping into various other ports to get our products in. We are [ able ] to navigate through it. There has been some impact, especially in the logistics given the freight cost as well as the war surcharges. We do not expect that to materially change our gross margin. While for sure, if you compare it to Q1, there is some impact in Q2 in terms of gross margin. Having said that, we still believe we are on track for our guidance, which is better gross margin as well as 50 to 100 basis points better EBITDA margins compared to last year.

Our next question comes from Mr. Sultan Al-Shaalan from Jadwa Investment.

And congratulations on the great results. Two questions from my end. The third would be, if we look at Saudi, Saudi in the first quarter did not go as much as the other main markets, but sequentially, it wasn't impacted as much. I'm just wondering what do you see and how do you see the Saudi market performing going forward? And maybe on the like-for-like, how much of the like-for-like growth is driven from pricing versus traffic or transaction?

So Sultan, on your observation on Saudi, you're spot on that the growth in Saudi has been lower than other markets. Having said that, other markets had a big carryover given quarter-on-quarter last year, we saw good momentum. In Saudi, we are actually seeing positive like-for-like sales, and it is a difficult market, as you know, very price sensitive and highly competitive, but we have been able to gain share in Saudi, and we are positive like-for-like. Even in April, we have had a strong month in April in Saudi, which is again backed by strong like-for-like performance. On your second question, which is the split between transactions and check. So given the higher share of home delivery, the check has contributed to the most of the growth because check on HD is higher compared to other channels. And transactions have been kind of flattish, slightly positive, but most of the growth actually is coming from a check.

Just 1 last question, if you don't mind. On the closures, it seems over the last 12 months, we closed around 60 stores. And out of that, 50 was your Power Brands. It seems like a big number. I'm just wondering where are these closures happening and what are the reasons for them? And I think you're anticipating another 40 closures during 2026.

Yes. So Sultan, the closures are very much in line with what we've been closing each year, right? So there are 3 primary reasons for closures. One is some underperforming stores where we believe that the location is the main reason for the underperformance, and it cannot change. The second is we do some strategic relocations where trade areas have shifted, restaurants have been there for a number of years. And rather than reinvesting in remodeling those restaurants, we are better off building a new one, maybe perhaps in an adjacent facility or somewhere in a new trade area. And the third is force majeures where, of course, a lot of that happened recently, primarily in UAE and Saudi and to some degree, some occasional situation in Kuwait, where landlords, we've been there a long time and real estate moves on and the landlords want to repurpose that area. So in a way they don't want to extendedly or renew the lease because they want to repurpose or redevelop those areas. So those are the main reasons. But our closures are very much in line with what we do every year. It's no 1 particular country. See 50 to 60 closures on a portfolio of 2,700, 2,800 restaurants every year is pretty much in line. It's actually -- it's pretty good.

Our next question comes from Mr. Adnan Mukim of Ryan Investment.

This is Muhammad Adnan from Ryan Investment. I have a question related to the like-for-like sales. So what I remember, the like-for-like sales are soft -- usually soft in Ramadan, so how it's greater than the 2 periods is because of the pricing. My second question is regarding to the inventory cost as a percentage of sales. So it's well controlled this quarter, but what about this quarter, like will it increase because all over the commodity prices have been increased. So we will see the impact in this quarter?

So Muhammad, first is on inventory, as I mentioned earlier, in Q2, we do expect a slight increase or some increase compared to Q1, but we remain on track to our guidance of better gross margin compared to last year. Now on your first question on Ramadan, we have adjusted for seasonality. So if you look at 7.1% on Ramadan is Ramadan to Ramadan. And so it's apple to apple comparison. And anyway, by the end of Q1, we were largely even because Ramadan was on while it moved 10 days in Q1 to Q1, it was fairly even.

Our next question comes from Mr. [indiscernible] from Emirates NBD Asset Management.

Yes, this is [indiscernible] from Emirates NBD. I have 4 questions. The first one is regarding the margin, when we noticed the guidance at the beginning of the year, you were mentioning a 50 to 100 basis point increase in margin, but increase in margin in the first quarter is 3%. And keeping the adherent, does that mean you're expecting the margin to not only to decline from the current level, but from year-over-year because as you're having a very strong first quarter to even out to the guidance, you're expecting some quarters to be weaker or you're just not changing the guidance out of conservatism. That's the first question. The second, regarding the margin again. So the raw material savings is around 1.9% from the 3.1% margin enhancement. What are the other components of this. And the other thing is that the home delivery breakdown, could you break down the home delivery between third party and your channels?

Thank you, Abdullah, for your questions. On the first one, we say our margins are 50 to 100 basis points. That's because if you look at this slide on cost of inventory, as you see, even during last year, our quarter-on-quarter cost of goods sold reduced. So we'll be comping on a higher base in terms of gross margin. So while we expect to do better. On a full year basis, the base will vary given the improvement last year. So we -- as I said earlier, we believe we will be in line to our guidance earlier, which is 50 to 100 basis points. The second is on cost of inventory. There are multiple initiatives. One is we continue to diversify our supply base. The second is there are many other pricing initiatives. The third is we have also taken higher pricing on home delivery channels. The fourth is also some of the menu rationalization exercise. So there are a multitude of factors which contribute to -- even with pricing during we take, so that also impacts it positively. That is on cost of inventory improvement in Q1. The third is home delivery. In terms of share, it is 2/3 or probably 3/4 to 1/4. 3/4 is third-party agators and 1/4 is our channels. But that is for the customer acquisition, we still use our own riders for delivery, which gives us the leverage to stay connected to the customers outside of Saudi. Saudi is the only market where we don't deliver and it is the degregators due to regulatory constraints. But across all major markets, with on delivery, for example, UAE and some of the other markets. But from a revenue -- or from an acquisition standpoint, [indiscernible].

Okay. And on the margin, going back to margin, yes, it's true, you are -- you will be growing from a high base, but that's mainly in the fourth quarter. Speaking with the second quarter last year, it was similar to in cost of the risk cost. So do you expect similar or at least close improvement in the second quarter year over year similar to the first quarter? Or you expect it to complete different picture?

\ But we do expect 2026 to be better than Q2, 2025. But when you compare Q2 2026 to Q1 2026, we may see some dilution, especially given the war surcharges and some of the emergency purchases we had to do given the overall situation. So from a full year perspective, we expect to be better. but it will not be same as Q1 2026, given the headwinds we had on logistics as well as on the sort side.

Our next question comes from Abhisar Mehra from Jefferies.

It's [indiscernible] from Jefferies. I have a couple of questions. How do you see competition versus buying or casual dining evolving? Apparently, there have been some near-term share gains as buying and casual is not exactly geared to the shift to online. But how is it changing now as buying and casual are also launching home delivery channels, and we're also seeing more advertisements from aggregators? And secondly, how do you manage fuel cost pressures for your 20 home delivery channel. Are you planning on raising delivery fees for any customers to compensate?

Vishay. The -- your first question on fine and casual dining. I think fine and casual dining is what has impacted the most during this recent geopolitical situation, especially in UAE. So that allows QSR to gain share because we have mass brands and the -- there's a lot more frequency is higher. And again, fine and casual dining launching delivery is not new. They launched delivery during COVID. It's been 6 years. But that is not what [indiscernible]. People go find a casual dining for an experience. not to get food delivered at one. So we don't really see that as a threat. And I think as Harsh had mentioned earlier in his financial overview, home delivery cost, fuel surcharges or the cost of home delivery, we've taken pricing and that is how we mitigate on the cost side of the business.

Our next question comes from Mr. Bijoy Joy from Qatar Insurance Company.

My question is on your Pizza Hut operations. We see that the Pizza Hut pickup in the Pizza Hut operations have been quite slow, given the ramp-up in the number of stores. So if you can throw some light, how do you see the traction on the ground? Is it other brands like Domino's or Papa John's or some other local brands more favored than Pizza Hut?

So Bijoy on Pizza Hut, we have 2 big markets, apart from Sisolak, which is GOE and KSA. And so it's a very different mix in terms of country mix compared to KFC and Hardie's. Now within OE and KSA, head continues to be a strong brand, especially in UAE, where we are by far the market leader, and we are outpacing the competition in terms of share gain as well as in terms of like-for-like performance. Having said that, Pizza Hut, as a brand, has been a bit more impacted given the situation in UAE because the customer Pizza Hut is a slightly dent customer, and it is more family compared to KFC and has -- so there has been a bit more impact on Pizza Hut compared to other brands. In Saudi, while Q1 has been a strong quarter for Pizza Hut, in pizza, in general, as a category is very competitive, as you all know. And we are continuing to build our presence and gain share. We have slowed down the openings compared to what we have done in the last few years, a lot of folks on getting the Uniti comics, but we are selectively still growing and still gaining share in Saudi as well. So overall, [indiscernible] is strong. We are, by far, the market in UAE as well in some of the other markets, which include Jordan and Berend in Saudi, we continue to pay that sheet.

Our next question comes from Mr. Rashad Kawan from Morgan Stanley.

This is Rashad from Morgan Stanley. And congrats on the results. other on margins, please. So if I look at your gross margins this quarter and last, I think it's the highest 2 quarters of gross margin delivery since listing. I think Q4, you talked about dynamic pricing, particularly in December being leveraged which probably helped, but I think Q1, the delivery here really comes as a surprise, particularly in the context of what you guys were talking about around the higher share of home delivery, et cetera, that we've seen. I guess a 2-part question. I think one, how should we think about the long-term gross margin of this business? And then two, in terms of the evolution of the cost base over the next couple of quarters, given the supply chain disruption we're seeing, I mean you mentioned you haven't really seen a material impact to margins from the situation. Can you just talk us through what's embedded in the guide at this point, right? Are you mean any assumptions around status quo between now and the end of the year? Or are things easing? Just anything you can kind of share around that would be helpful.

So Rashad, on gross margin, as I said, we expect on a full year basis to do better than 2025. In terms of on your question on whether -- what are the assumptions, we don't have a crystal ball, but if the situation continues for another quarter or so, that may have an impact on the gross margin. But for now, we have visibility on our stock situation till end of June, and we do the cost base for that. And after that, depending on how the situation evolves, it will have either positive or negative impact on the gross margin. In terms of home delivery, home a gross margin level actually has no material impact, if any, is positive because the cost of home delivery sits below gross margin, but that has not been the key driver of improved margins. It has been largely driven by the lower food and [indiscernible] cost as a percent.

And then just if you think about kind of the longer term, I mean taking this kind of conflict to the side, if you think about kind of the longer-term gross margin of this business is kind of Q4, Q1, is this kind of the right way to think about where this business could land longer term?

Yes, I would say plus minus 3 basis points. That would be the kind of range, which at least we look at in the longer term or the medium term.

[Operator Instructions] Our next question is a follow-up from Mr. Abdullah from Emirates NBD. Okay. We'll come back to that shortly. In the meantime, we'll take the follow-up question from Mr. Taher from JPMorgan.

Sorry, it's Taher again. So maybe a question on just the recent acquisition of Malak Al Tawouk you guys reiterating that you want to create something around it in terms of the Arabic QSR category. I just want to maybe hear your thoughts on 2 things. How big can Malak Al Tawouk grow for you, you have long-term agreement on the franchisees. You've managed to get the franchisee rights across multiple markets, including the existing 10 branch network and Saudi. So maybe just Help us understand where could Malak Al Tawouk be 2, 3 years from now? Is there any sort of guidance that you can maybe share with us on that front? And the second question is just on the category expansion. I mean, the balance sheet is very strong. There's no leverage. Does this conflict maybe create some further opportunities. I want to say maybe distressed sales or you guys becoming maybe even more aggressive to take on some new brands. If you can just maybe walk us through the M&A on the Arabic, if there's anything that we should think about on that front.

You are extremely perceptive. I think I'll answer your second question first. Yes, so we are constantly evaluating opportunities for M&A especially on the Arabic front. Nothing to disclose at this point. As and when that happens, we will keep everybody informed. And regarding the expansion of Malak Al Tawouk, without getting into specific numbers, we are very optimistic about the brand, especially given that the brand has been in UAE and KSA and we have visibility to the performance of the existing restaurants. Yes, only a handful, 7 in UAE and 3 in KSA, however, the performance is a very impressive. And we are building a strong pipeline for expansion. So hopefully, there'll be more to talk about by the end of the year on Malakal in these countries. And also, we would be launching in a new country as well this year. So we are excited about this acquisition. And beyond that, as we have stated before, we look at Arabic in 4 categories. One is Tawouk. The other one is Chicken Rice. The third is Shawarma and the fourth is [indiscernible]. So and we continue to explore that, and we want to continue to build the Arabic platform. So 2 primary drivers of growth, of course, the enterprise brands and yet again, right through every crisis, our enterprise brands have proven their staying power and KFC, Hardies, Pizza Hut, I mean they have been around close to -- I mean, KFC has been around more than 50 years, right? So -- and it has gone through many crises and I would say, headwinds and yet it is one of the strongest brands globally. So we will continue to drive that brand along with Hardies, now a clear #2 in the burger segment in a DCC countries, and we are quite pleased with the turnaround from 5 years ago of the Hardie's brand. And of course, Pizza Hut is something -- we entered Saudi about 3.5, 4 years ago. We were up to 110 restaurants, and we will continue to grow that brand and gain share in the pizza category as well.

And our final question is once again a follow-up question from Mr. Abdullah from Emirates NBD Asset Management.

Yes. When we dissect the like-for-like growth for the first quarter, we noticed that most of the improvement is coming from Kuwait mainly as we look at the revenue per store, mainly it's coming from there. Do you see this continuing for the rest of the year? Or you are mentioning other areas of now the region's growth to achieve the single-digit like-for-like growth. a, can you hear me?

So Abdullah, Kuwait, for sure, outpaced in terms of like-for-like and as Amar mentioned earlier, UAE was also doing very strongly in Jan and Feb. We had some impact in UAE, especially in March in the tourist locations as well as malls, for example, the Dubai mall and some of the other malls, but that's why there has been some slowness in UAE. But overall, across the board, be it Qatar, Oman, be it Jordan, we are seeing strong like-for-like and also sat -- so the whole portfolio has delivered on like-for-like, For sure Kuwait has been stronger than others. But even Qatar, for example, we are a strong like-for-like Oman, we are comping about 20% like-for-like. So it has been very strong across the board.

Thank you very much. We have no further questions. I'll be passing the line back to the Americana Restaurants team for the concluding remarks.

Thank you all for joining today's earnings call and for continued interest in Americana Restaurants. We appreciate your time, your engagement and the continued trust you place in our business and long-term strategy. I would also encourage you to download Americana Restaurants IR app where you can access all our disclosures, financial results, presentations and say update with all our investor communications in 1 place. We look forward to continuing the dialogue with you in months ahead. Thank you, everyone.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.