AmRest Holdings SE ($EAT)

Hello, everyone, and thank you for joining the AmRest First Quarter 2026 Results Call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Lukasz Wachelk from Wood & Co to begin.

Good afternoon, ladies and gentlemen. My name is Lukasz Wachelko. I'm representing Wood & Company. I have, again, the pleasure of moderating the call with AmRest the reported the results. The component is being represented by CFO, Mr. Eduardo Zamarripa;; and IR Strategy Director, Mr. Santiago Camarero Aguilera. Gentlemen, mic is yours.

Thank you, Lucas. Good afternoon, and thank you for joining us. We appreciate your time and continued interest in Amrest. I'm delighted to be with you today. Joining me is our Head of Strategy and IR Santiago Camarero.. Today's call, objective will be to share with you how our business has performed during the first months of the year. The first quarter was marked by a more challenging macro environment, but also by continued progress in cash generation, disciplined capital allocation and resilience across our diversified portfolio. In Europe, the year started with modest but still positive underlying momentum, gradually improving financing conditions and a relatively resilient labor market provided some support early on. However, the environment became more volatile as the quarter progressed. -- with geopolitical risks rising sharply following the outbreak of the war in Iran. As a result, the quarter ended on a weaker note with inflation accelerating sharply in March, driving largely by energy and with a sharp deviation in consumer sentiment. On top of that, we also saw the impact of short-term factors, particularly weather on trading patterns in several of our markets. as you will see in the results we are about to discuss. With that, let's turn to the materials. We'd like to share with you today if we move to Slide 2, please. AmRest is one of the leading listed restaurant operators in Europe, operating and master frachising, some of the world's most iconic global brands. As of the end of March 2026, we operated 2,129 restaurants across 8 brands and 22 countries, serving around 30 million customers per month with a workforce of over 40,000 employees. Our portfolio is well diversified by concept. Quick service restaurants represent roughly half of the portfolio. fast cash flow, casual dining and coffee provide balance and exposure to different consumption occasions. Geographically, our footprint spans Europe, China and selected Middle Eastern markets, giving us resilience across cycles and consumer trends. Moving to Slide 3. Let me remark the most relevant milestones for this first quarter of 2026, that I would try to summarize in 5 points. Number one, in first quarter, revenues reached EUR 589 million, a 1.5% decline year-over-year on a constant basis that excludes the SCM subsidiary disposal executed last year. Number two, EBITDA amounted almost EUR 77 million, representing a 13% margin, while profitability was impacted by sales leverage. We continue to protect margins through our cost discipline and operational focus; three, importantly, free cash flow improved with net cash from operation increasing by $9.5 million and investing cash flow decreasing by $15.6 million, reflecting higher CapEx control. Fourth, with this, our leverage remains healthy level at 2.6x. Five, and additionally, we opened 12 new restaurants during the quarter with 89 gross openings over the last 12 months. If we go to Slide 4, we remain fully committed to delivering compelling products and experiences to our consumers. Across brands, first quarter saw a diverse mix of innovation lead launches refreshed menus and stronger beverage offerings. These initiatives are designed not only to drive traffic but also to reinforce brand relevance and value perception. Let me start with commercial positions of KFC, La Tagliatella and Starbucks brand in Slide 4. At KFC, we energized first quarter with a balanced blend of innovative campaigns and emotionally resident activations, delivering locally relevant experience and value propositions across all markets. Our approach focused on driving traffic, affordability and brand relevance for our customers. Key initiatives such as cheese Cheddar, Bucket 41 and the Mafia IRL menu drove excitement and encourage guests to explore indulging flavors. Solo dining and new experiences. Meanwhile, value platforms like Smart and Tuesday bucket sustain everyday affordability and frequent visitors. At La Tagliatella, we continue to strengthen our commitment to innovation and bringing La Tagliatella to our life of our guests with the launch of our new 2026 many. This latest many reflects our refreshed visual identity, now progressively roll out across an increasing number of restaurants and introduces a range of key product innovations, including the [indiscernible] and Gorgon Sola pizza and the [indiscernible]. In addition, the new menu of signature dishes created in collaboration with Mission in starch chefs, further elevating the brand's culinary proposition. Totes launched La Tagliatel once again reaffirms its commitment to delivering an exceptional guest experience while continuously offering new distinctive and differentiated propositions. Starbucks limited time beverage offerings continue to gain traction with the beverage LTO mix rising. Consumer preference are shifting towards cold beverage throughout the year as evidenced by ice coffee mixing to 13% from 11% last year. Signaling a structural change in consumption patterns. On the other hand, food sales maintained their strong momentum, supporting a higher average checks and reinforcing the appeal of our food and beverage hearing strategy. Moving to Slide 5. At Sushi Shop, we were building a strong momentum during the second part of the quarter. fueled by the launch of Le Petit Prince, limited time offer. This town out LTO quickly became the most successful in our history, surpassing all previous records. It was widespread appeal lead over 25,000 boxes sold across all markets. In Bluerock, we further elevated its culinary identity and regional relevance with the launch of the flavors of China series. This initiative features line-up of new dishes inspired by iconic regional Chinese flavors. Each through fully remaining through the Blue Frog signatures East meats Western led by blending traditional test profiles of sensing ingredients and local culinary stories into contemporary guest-friendly formats. The flavors of China series brought B-brand regional inspiration to the main. At Pizza Hut, the focus has been on driving traffic and relevance through the value of menu innovation by launching dynamic consumer-driven campaigns across market. the well-known Pizza festival and new hot deals introduced accessible pricing and streamlined choices, boosting fast cash flow on food court transactions and reducing decision barriers for guests. These initiatives reinforce Pizza Hut reputation for consistency and trust, while ongoing hot deals continue to deliver incremental volume and serve as corner stores of brand loyalty. And finally, at Burger King, we strengthened our value proposition across the region by expanding the portfolio with more affordable offers in Poland [indiscernible] the campaign was designed to drive traffic through and compelling price point with reinforcing BK's superior food preventions. Altogether, this initiative reflects our continued commitment to delivering relevant, high-value propositions to our guests. In summary, the objective is clear, allow customers to enjoy high-quality meals without stretching their budget, while maintaining brand integrity and margins. If we go to Slide 6. During the quarter, a number of temporary external factors influence consumer behavior, leading to more cautious and convenience-driven purchasing decisions, adverse weather conditions, together with the escalation of Iran conflict, disrupted normal trading patterns during the period, reduced mobility and higher uncertainty prompt consumers to prioritize convenience, which resulted in noticeable channel mix effects. As a consequence, delivery gained further momentum, exceeding 20% of total group sales and reaching its higher levels in the post-COVID period. as consumers increasingly flavor off-premise occasions. At the same time, the sharp rises fuel prices in March had a direct impact on mobility patterns, which was reflected in double-digit declines in drive-through sales. Looking at sales channels overall, digital sales continue to advance and remain firmly established at the levels above 60% of total sales. excluding casual dining. This compares with less than 20% prior to COVID and clearly reflects the structural shift in consumers' behavior rather than a temporary trend. Importantly, the digital sales growth is well diversified and supported across multiple touch points, including our proprietary mobile apps and self-service kiosks. Web-based ordering platforms as well as aggregators and franchise source channels. Taken together, the evolution of our channel mix reinforces the strategic importance of digital capabilities as a long-term competitive advantage for the group. Moving to Slide 7. This slide shows the progress we are making in normalizing CapEx and improving investment discipline. In these years, immediately after covered CapEx lever well high. We had to catch up on deferred maintenance and accelerate a broader restaurant refurbishment program. The [indiscernible] is now behind. And what you can see here is that CapEx is moving back towards a more normalized steady-state level. Starting with the chart on the left, CapEx as a percentage of trailing 12-month sales continued to trend down. It was around 9% at the end of 2023 and has gradually decreased roughly 6% by first quarter of 2026, reflecting a clear reduction in investment intensity. The chart on the right helps to explain how this is happening. Our gross opening path remains, while the renovation effort is stabilizing. We are renewing the portfolio and opening a new restaurant, keeping our clients' experience at the highest standards and driving traffic up. This improvement means better spending. We are being more selective in growth, prioritizing projects with best returns and focusing on efficiency and value creation rather than scale for scale's sake. This disciplined approach is it time to support cash generation. Moving to Slide 8, please. At the end of first quarter, AmRest operated 2,129 restaurants. As we have explained in several occasions, underlying growth has been combined with delivery strategic exits from nonperforming or noncore businesses, including Pizza Hut in Russia, Germany and France and disposal of KFC Russia. This reflects clearly strategy grow where returns are attractive and exit where long-term value creation is limited. With this, Santi, you can cover the main financial highlights, please.

Thank you, Eduardo, and good afternoon, everyone. As Eduardo has described, the first quarter of the year has been challenging from our sales perspective, affected by temporary headwinds and an uneven market performance. However, the group demonstrated resilience. We improved cash generation. We have now a discipline capital allocation that will pay off and a robust balance sheet. Nevertheless, we are not satisfied with the sales outcomes, and we want to be clear on our priorities. We're building momentum where it has been impacted, increasing profitability through operational discipline and stay in a laser focus on cash generation. We have strengthened our commercial initiatives through a broad set of actions, covering new menu development and product design enhancements. The objective has only been mitigating the temporary headwinds experienced during the period, but more importantly, to restore sales momentum in the coming quarters. If we can move to Slide 10, please. We have here the main financial highlights of the quarter. Sales reached almost EUR 589 million on a constant perimeter basis. This is excluding revenues from business as consolidated last year. This figure represents a 1.5% decrease versus the same period of 2025. And the same store sales index stood at 96.3. We have already discussed the temporary factors behind this performance that affected consumer sentiment and restore trading patterns in several markets. In terms of profitability, EBITDA reached almost EUR 77 million, while EBIT stood at EUR 5.5 million. Net profit was negative in the quarter at EUR 17.3 million, largely reflecting weaker sales leverage and nonoperational factors, but also the seasonality of our business in the first quarter of the year. And finally, CapEx totaled EUR 22 million, almost EUR 9 million below last year, in line with our optimization strategy, where we opened 12 new restaurants during the quarter. Moving to Slide 11, please. This page summarizes the evolution of EBITDA and EBIT and how margins progressed into the first quarter of the year. In this period, as we discussed, the group generated EBITDA for EUR 77 million, which translates into an EBITDA margin of 13%. This is almost EUR 5 million below the level achieved last year or EUR 7.7 million lower on a constant perimeter basis. The key driver behind the EBITDA decline was lower volumes of sales in select markets, which created adverse operating leverage, while food cost showed early signs of easing in some categories, benefiting from price relief after several quarters of cumulative inflation as a result of our procurement decisions as well as positive market dynamics. However, this improvement was not sufficient to offset the lack of sales leverage. In particular, fixed and semi-fixed cost line, especially rent and labor costs were more difficult to absorb due to lower volumes, which limitated the flow-through. EBIT was more impacted and stood at EUR 5.5 million, which represents a modest EBIT margin of almost 1 percentage point. It is also important to be transparent about where the press I was concentrated. The fits were more pronounced in Czechia, France and Germany, affected by temporary factors which can distort the underlying view of the quarter's operational performance. In this sense, to provide a clearer picture of this underlying performance, excluding the Czechia Gia business, the picture looks much more encouraging. Revenues increased by 1.4% year-on-year and EBITDA rose by almost double-digit figures, 8.5%, lifting the EBITDA margin to 13.5%, up 0.3 percentage points versus the previous year. So the key takeaways from this slide are [indiscernible] resilience. Even in a quarter with mixed sales dynamics affected by higher seasonality effect that in other locations, EBITDA margin remains broadly stable at around 13%, while we are focused on restoring sales momentum and gradually revealing operating leverage as conditions normalized. Moving to the Slide 12, please. So when profitability was pressure, cash generation improved strongly. Net cash from operating activities increased by almost EUR 10 million year-on-year to EUR 62.6 million, which represent nearly 18% improvement versus last year. This improvement was supported by tighter cash [indiscernible] and working capital movements, showing that even in a saving [indiscernible], the environment, we can protect liquidity and continue to generate cash. Second, we continue to reinforce our focus on capital efficiency. Investing cash outflows decreased by almost EUR 16 million to EUR 32 million, reflecting lower cash absorption in CapEx compared with the prior year period. This is fully consistent with our objective of delivering a stronger free cash flow generation through 2026 as investment intensity normalizes and we prioritize returns. Finally, we are still building for the long term. Net equity restaurant count increased by 35 units over the last 12 months, which supports sustainable growth while we remain disciplined on where and how we deployed capital. So the takeaway from this slide for me is a balanced one. Q1 profitability was pressure, but we delivered a clear improvement in cash generation and kept a tight grip on investment, strengthening the foundation for the rest of the year. If you go to Slide 13, please. Here, you can find a detailed view of our liquidity and leverage position. Our overall risk profile remains broadly unchanged with a net financial debt now at EUR 547 million and with a leverage of 2.6x. What we consider to be a healthy level. At the end of the quarter, we held nearly EUR 117 million in cash and have access to an additional EUR 119 million in committed credit lines. All this ensures that our liquidity position remains prudent and efficient, fully aligned with the group's operational and strategic nets. Going into the Slide 14, please. We can find the breakdown of revenue, EBITDA and the number of restaurants that we have on each geography. These segments comprise businesses in 22 countries where once again, we have observed very different commercial dynamics. CEE remains the largest contributor to sales, EBITDA and units, followed by Western Europe, with China representing a smaller but strategic footprint. So turning to Slide 15 and 16, please. We present here the key metrics for Central and Eastern Europe, our [indiscernible] bank. Revenues in the CEE segment reached EUR 365 million, representing a 0.4% year-on-year decline and 62% of our group sales. Remark the good performance achieved in Hungary and Balkan countries with double-digit growth. Despite the uneven revenue backdrop, the segment generated EBITDA of EUR 59 million, implying an EBITDA margin of over 16%. I'm confirming that profitability across CEE remain broadly resilient overall. Hungary posted the strongest profitability with an EBITDA margin of more than 19%, while Poland also delivered a very robust 18% margin. The remaining markets produce broadly comparable levels of profitability a step Czechia. From a footprint perspective, AmRest ended the quarter with 1,283 restaurants in CEE following the opening of 8 new restaurants during the period. Moving to Slide 17 and 18, we have the information about our Western European business. Revenues in the Western European segment amounted to EUR 204 million in the period, representing a 2.5% decline year-on-year. EBITDA reached almost EUR 25 million, implying an EBITDA margin of 12.2%. Performance will remain highly uneven across the main markets. France again posted a steep double-digit decline in sales, reflecting a more challenging trading environment and a weaker consumer confidence, while all the large markets were more resilient. Spain delivered broadly flat sale of sales on years, while Germany recorded 2.3% growth, supported by continued momentum in the market. Profitability in the region also so continue to be very erogenous driven by different sales tractors and cost structures. Spain remains the clear profitability anchor so sustaining an EBITDA margin above 20% threshold, while Germany's margin stayed at the low end, up 4.3%, underscoring the lack of operating leverage and are more press based in that market. In terms of restaurants at the end of the quarter, EBITDA maintained 762 restaurants in the region after opening 4 units. And finally, move all to the Slide 19 and 20, we have our numbers for China. Revenues in China among the EUR 19 million in the first quarter, representing more than [indiscernible] year-on-year decline. Here, the depreciation of the Chinese joint against the euro with a key headwind. I mean constant euros, sales decreased by 7.5%. From a macro perspective, the operating backdrop in China was not recessionary, but it remains in balance and is still cautious on consumption. -- which is consistent with a softer demand environment for discretionary spending as the quarter progressed. Despite the softer top line, EBITDA reached EUR 3.1 million, delivering a solid EBITDA margin of over 16%, which indicates continued cost discipline, and Brazilian operating execution in the segment. The number of restaurants in the country at the end of the quarter was 84. And with this Eduardo, I believe that we are ready to take questions from the audience. Many thanks.

[Operator Instructions]

Maybe taking the momentum using my moderators position. I was there -- the question or questions related to the Czech market. It's been weak for you in the fourth quarter last year. There were some negative peer on the quality of your restaurants? And I remember a quarter ago, you were playing that down at -- no issues in fact were actually discovered by your internal audit. So can you tell us what exactly happening? What are you doing to improve the situation? And when do you expect the business in Czech Republic will back to the previous sales levels.

Thank you for the question, Lukasz. We are addressing the sales situation check with urgency and focus, seeing a positive response from our consumers. We have implemented a comprehensive recovery plan starting with core operational fundamental space on recertification programs to maintain continued highest standards. Our immediate priority is to strengthen the brand's relevance with the Czech consumers. To inform our approach we have conducted extensive consumer research to better understand current perception and trends within the QS market. Based on these insights, we have developed a very targeted marketing plan centered on limited time offers, value-driven campaigns and improved accessibility of our core products. A recent example is the mass campaign, featuring a locally developed riches offering created by our Czech team, which has resonated well with consumers. In parallel, we continue to build brand affinity through community engagement, including our long-standing support of the Czech University HCL. We are really encouraged with the initial results of these initiatives. Weekly sales volumes are showing an upward trend and consumer sentiment towards the brand is improving. We are optimistic about the trajectory and remain committed to executing our plan to drive sustained recovery in the coming months.

Okay. So can you tell us when exactly should we expect the Czech issue will be back under control? Do you expect it to happen already in the second quarter? Or we shall wait in the summer. What was your view on that?

As I said, Lukasz, we are really encouraged with the initial results of all the initiatives that we are putting in place. And right now, we are showing a positive word trend. So the sentiment continues towards the brand is improving. So all these are encouraging that.

And exactly when have you started to apply those measures.

We have been working on that.

What was the performance month-by-month. So how the implementation was really impacting the numbers?

I would say Lukasz, I think that's very detailed information. Really, what is important here is the trend. And we have a very positive trend, and we are optimistic about that.

So can you share with us the like-for-like for Czech Republic for the first quarter? And where the same-store sales are shaping up now in the second quarter? Would it be possible to just take it out of the whole like-for-like?

I believe, Lukasz, what is important here is that the trend is improving, and that's what we are positive on, and we are working on that, and we are taking that very seriously. The full context, I think gives a better picture of what is happening.

I don't remember from the top of my head right now, have any opening in the Czech market during this first quarter of the year, Lukasz, but basically, semi-store sales is going to be very similar to the figures that you already have. So there is nothing high over there.

Okay. And can you tell us where is like-for-like coming now in the April and May? 20% decline in the fourth quarter.

Lukasz, we are talking about here about the first Q figures. We don't have over here the figures for April and May, of course, in due time, we will disclose these figures, discuss everything there, but it now that the message of Eduardo is clear. We are working on the situation. We are seeing results from the actions that we are taking. And this is all we can tell you at the moment.

And after a couple of months of these issues being visible in Czech Republic -- can you share with us what's your view? What has actually happened in Czechia. What's the issue? Is just pure PR or there were some issues also on your end what happened?

I mean I've seen that in the previous quarter, we make a very clear disclosure referring to the social media news, basically -- I mean, it's public information, our assessment of what it has been the situation there. What we're bringing you today is what are the actions and the works that we are doing in order to restore the situation. And is visible, and we have provided you with a detailed information of what it has been the impact on this market. Also, what is the situation in the rest of the markets with a different dynamics. I think the key message over here is that we are focused, we are working on, and we are seeing positive results from the work that we are undertaking at the moment.

Okay. Great.

[Operator Instructions] We have no questions at this time. So I'd like to hand back to Eduardo for closing remarks.

Thank you very much for joining the conference call of the first quarter. Hope to see you soon in one of our restaurants and in the release of the results of the second quarter. Thank you very much, and have a great weekend.

Thank you very much. Thank you.

This concludes today's call. We thank you all for joining. You may now disconnect your lines.