International Meal Company Alimentação S.A. ($MEAL3)

Good morning, ladies and gentlemen. Welcome to the IMC Conference Call to discuss the earnings results for the fourth quarter '25. This conference is being recorded and the presentation is available for download at the company's website. [Operator Instructions] As a reminder, forward-looking statements are subject to known and unknown risk and uncertainties that cause the company's actual results to differ from those in the forward-looking statements. Such statements speak only as of the date they are made. At this conference, we have Fernando Calamita, CEO of IMC; and Natalia Lacava, the CEO. I would like to turn the floor over to Natalia, who will begin the presentation. You may proceed, ma'am.

Thank you, and good day to all of you. Thank you again for attending our call for the fourth quarter '24 (sic) [ '25. ] Before we begin, I would like to welcome our CEO, Fernando Calamita, who joined us in February. We're very enthusiastic with your arrival and doubtlessly, you will contribute a great deal to the company. I will give you the floor for the opening. And once again, welcome, Fernando.

Thank you, Natalia. It is a pleasure to take on the position of CEO at IMC and to address you. Over the past 6 years, I have the opportunity to lead, GRSA, one of the leading food service companies in the country. In addition to prior experience across different segments, which gave me a broad perspective in management and operations. I joined IMC with the objective of strengthening execution, enhancing operational efficiency. I see a company with relevant assets, strong brand and tangible opportunities for value creation. I would to thank the IMC Board of Directors for their trust and reaffirm my commitment to deliver consistency, predictability and disciplined execution. 2025 was a challenging year for the company. With significant pressure in some operations, particularly in the U.S. in addition to a highly competitive environment in Brazil. In this context, the company's focus has been on improving cost management efficiency, increasing cash generation, a foundation for sustainable growth. We will detail the performance for the period, the progress achieved, and how we are addressing these challenges. Our priorities for 2026 remain aligned with the same pillars as the previous year. We will continue to focus on simplifying operations, developing partnerships for Frango Assado and maintaining financial discipline. At the end of 2025, we signed an agreement to divest our remaining stake in the KFC operation in Brazil. This early closing had a positive impact of $5 million on the company's cash position for the fourth quarter of '25 and another $20 million in the first quarter of '26. This transaction was executed without a discount and part of the proceeds will be used to reduce indebtedness. We closed the fourth quarter of 2025 with 357 stores in the system. Throughout the year, we closed 26 restaurants, most of them under the Pizza Hut brand. As part of our portfolio rationalization initiative, this decision was based on unit performance and returns. Now the opening of new restaurants will be selective prioritizing those with higher returns on invested capital and focused on the priority brands within the portfolio in the fourth quarter of 2025 despite a 5.4% decline in net revenue vis-a-vis 2024. We delivered a significant improvement in operational and financial performance, adjusted EBITDA pre-IFRS increased by 146% year-on-year, and the G&A expenses were reduced by 28%, reflecting efficiency gains and cost control. Operating cash flow also stood out increasing by 139% over the year, demonstrated improved cash generation. Lastly, net debt was reduced by 33%, reaching a leverage level of 2.5x, highlighting financial discipline and strengthening the capital structure. We continue to prioritize Frango Assado. We were able to sustain same-store sales growth even amidst investment constraints in recent years with the divestment of the KFC business, which carried contractual obligations. For new store openings, we will have greater resources available to invest in Frango Assado operations. The brand's leadership will be even close to the operations. We believe operational efficiency will be the key driver to unlock investments, in-store improvements and revenue growth. In Pizza Hut in 2025, we saw an excellent turnaround effort by the team. We were able to transform a unit that was operating close to breakeven into a profitable business for the group. We still detect growth opportunities as this is a strong brand with solid relationships with franchisees and consumers. We also maintain close proximity with a brand owner who has been very supportive and back to our initiatives. Domestic brands recorded in 2024 of 14% decline in net revenue vis-a-vis 2024, impacted by a one-off revenue effect in the fourth quarter of 2024 as well as by stores closed in 2025 for renovations. They typically generated significant revenue, considering only revenue, excluding those extraordinary effects, revenue would have increased 6% compared to 2024. In 2026, we will continue to focus on improving this performance, especially given the strong brand recognition among consumers. Net revenue from the U.S. operation was impacted by store closures in 2024. These units generated significant revenue, although we opened new stores at the end of 2024, they have not yet reached maturity to offset these losses. For 2026, we have an action plan underway to recover revenue and strength in the operation. Our focus is on optimizing the sales performance of new stores through customer experience and product and service innovation initiatives. Global revenue closed 2025, down 4.3% vis-a-vis 2024. On a comparable basis, revenue was flat, indicating that the decline reflects portfolio adjustments with the closure of underperforming stores and a focus on more profitable units. In Brazil, despite the closure of 30 units, revenues remained positive, supported by Frango Assado and Pizza Hut brands. In the United States, the operation posted an 11% decline. As mentioned, we already have a plan in place to recover sales and reverse this performance. Despite the strong performance in the last quarter, the full year consolidated result shows a decline in operating performance, adjusted EBITDA decreased by 9.6%, totaling BRL 236 million. On a pre-IFR 16 basis, the decline was 19%, impacted by store closure costs and other nonrecurring effects. For 2026, we have an action plan to reverse scenario with initiatives focused on improving operational efficiency, reviewing costs and expenses and strategic actions to drive priority brands and U.S. operations. These measures aim to restore margins, strengthen cash generation and support the group's growth. Before handing over to Natalia, I would like to comment on general and administrative expenses. In 2025, we recorded a 24% reduction in corporate expenses and 16% reduction in consolidated expenses. This reflects the efficiency initiatives and expense management and the structural adjustment following the exit of the KFC operation. I will now turn the floor over to Natalia.

Thank you, Fernando. And before going into the details, I would like to remind you some of the items that we mentioned through the company. Not everything in the release excludes the results of KFC. And we do have a pro forma report excluding all the factors relating to KFC. Additionally to this, we have also enhanced our operational management for the market. We have a separate accounting system for the U.S. and Brazil. Now -- we have now separated everything by the more relevant brands. And I believe that this will better enable us to discuss the performance of our segments in a way that is more aligned with our present-day vision. Now EBITDA and cash flow are being accounted for an IFRS, and we believe that these changes will clarify the focus of the company, the strategy and the interpretation of results. Let's speak a bit about cash flow and investments. As Fernando mentioned, this was a difficult half of the year. U.S. has certain seasonality that had negative performance in the last quarter, but we ensure that cash flow would continue to grow, making a significant contribution for the entire year. We reached BRL 46 million in the fourth quarter '24. And thanks to the result of the initiatives mentioned by Fernando. We had the ability to adjust our G&A structure and adjust our working capital to work with that cash flow. If we were to adjust the effects of KFC and cash flow, which was not done, we would be saying that we went from BRL 9 million to BRL 40 million. Therefore, this is a considerable change that we were able to deliver through the year. When we look at investments, our CapEx, we're working in a more selective way. As we mentioned in the calls, we have dropped to half of last quarter, BRL 13 million and almost half of what we invested in previous years. Now the figures would be more expressive. Where we to exclude the carryover from KFC, we had BRL 20 million of CapEx paid at the beginning of the year, referring to KFC in 2024. We would have reached BRL 78 million. For 2026, our agenda continues to be one-off discipline. There have been several reforms in the United States that will not be repeated. So the CapEx for the U.S.A. is even lower than what you see here. We're going to improve cash generation with a selective focus and once again, be very selective in terms of the company investments, always thinking about the highest return on investment. When we speak about our capital structure. The company's net debt stands at BRL 470 million. This includes all of the amortizations we're carrying out as an extraordinary factor for KFC. Our net debt reaches BRL 241 million. When we look at other cash structure, it doesn't fully reflect the repercussion of this transaction. We have BRL 200-additional million that came in, in March that will be used to amortize our debt to reduce the company leverage. We are lengthening our debt. We made strides in the fourth quarter. For the first quarter, we're working with extraordinary amortizations. And of course, we're working towards lengthening the duration of our debt. Our leverage remains at 2.5x, according to our covenant, which is 3, and we have reduced debt and the leverage of the company. Therefore to close, I would like to reiterate that despite the challenges mentioned by Fernando, we have been able to balance our cash structure. We continue with a very strong agenda based on cost and efficiency, and we are going to focus on our investment agenda. Now this is one of our main pillars once again, so that we can preserve the company. I would like to thank all of you for your attendance. We will be at your disposal for questions and answers. Once again, thank you for your attention.

Thank you, Natalia. To conclude our presentation, I would like to highlight our priorities for 2026. We see Frango Assado is a very strong business with solid margins and significant growth potential. Our focus is to continue driving sustainable revenue growth, both organically and through partnerships. At Pizza Hut, we maintained the momentum for 2025 with revenue and margin expansion supported by innovation and operational efficiency. In the U.S., our focus is on recovering sales through initiatives centered on customer experience events and product and service innovation. At the corporate level, we remain committed to financial discipline and cash generation. Every real invested must contribute to delevering and to shareholder returns. Natalia and I are now at your disposal to answer your questions.

[Operator Instructions] Our first question comes from Edison Roberto Marcellino from E2M.

Can you hear me? Allow me a minute please. [Technical Difficulty]

We have [ Guilherme's ] question, which is a forecast for the opening of new Frango Assado stores?

Well, Guilherme, our focus is on the maintenance and optimization of existing stores, making the most of the resources that were devoted to the KFC operation. However, we still assess new opportunities that could strengthen the brand and strengthen the company as well.

We have a question from [ Guilherme Macedo. ] He's asking about if the company is taking any measures?

It has been only one day. We have a full month to wait before we adopt measures. Once again, it's much too early on. We're carrying out a close monitoring. But so far, we cannot come to a conclusion based on only one day of negotiation.

[Operator Instructions]

Pedro to answer your question -- Pedro from Seven Partners. He is asking if the leverage does not take into account the BRL 100 million we received? You're right, Pedro. We don't. We have not included the BRL 102 million we received in December. Our leverage if we recalculate it would be closer to 2x.

[Operator Instructions] We have a question from [ Fabio. ] [Operator Instructions]. We have a question here, the expansion of the Frango Assado unit, does it have a focus?

Yes, focus, of course, is the continuity, the growth of Frango Assado. Frango Assado is an iconic brand. It is a benchmark. It has good margins and excellent recognition. And because of that, we're working in that direction with the resources that were formerly geared to the KFC operation. We understand that it will be possible to continue to invest in our stores and consequently capture this value.

Another question from [ Fabio. ] Which actions are you planning to recover the sales in the United States. Are you planning to sell question -- units in the U.S.A.?

Thank you, [ Fabio,] for your further question. As mentioned in the presentation, in 2024, we did have an impact in the United States because of the closure of some stores. At the end of 2024, we opened some stores, but these stores are not performing as expected. Our actions in the United States will be geared towards creating more momentum to capture revenues to attract the consumers to those stores. And we want to have something more special in those stores. And through these actions, our expectation is that we will recover the sales as well as the revenues vis-a-vis the year 2024.

[Operator Instructions] We have a question of [indiscernible] Alvis. What is it that impacted the company with the write-off of KFC?

While when we think about the capital gains of the operation that we recognized in the second quarter of 2024, we wrote off BRL 1 million and all of the accounting effects after June, when we think about equity value that we had in the 6 months. We're referring to a magnitude of BRL 3 million that we had as an impact for the entire year.

[Operator Instructions] Question from [ Guilherme ] [indiscernible]. Are there discussions on the combination of businesses with KFC?

[ Guilherme, ] there is no negotiation regarding that. KFC is a shareholder in the company, they have a stake. They were accepted in the Board, but there is absolutely no ongoing discussion. Our focus is on our brands, our domestic brands Pizza Hut, Margaritaville, well, they have a great potential to grow and to generate value in those operations.

The last question here from [ Rafael Martins ] about our central kitchen.

Our kitchen as a Go is going to fund everything that happens in the company, and we work it will be in a breakeven position to contribute to the other brands. Fernando is going to focus on this based on his prior experience, and this will become part of our strategy, so that we can better monetize this asset. But for the time being, it is not a profit center. It is a center to minimize the costs in our other operations.

The question-and-answer session ends here. We will return the floor to the company CEO, Mr. Fernando Calamita for the closing remarks.

Well, thank you all for your attendance. I'm very excited about the next steps. And as we are approaching lunch time, I consider this an invitation for Pizza Hut. Thank you very much, and see you next time.

The IMC earnings call ends here, we would like to thank all of you for your attendance. Have a very good day.