UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN
PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2024
Commission File Number: 001-35129
Arcos Dorados Holdings Inc.
(Exact name of
registrant as specified in its charter)
Río Negro
1338, First Floor
Montevideo, Uruguay,
11100
(Address of principal
executive office)
Indicate by check
mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
ARCOS DORADOS
HOLDINGS INC.
TABLE OF CONTENTS
ITEM |
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1. |
Press Release dated May 15, 2024 titled “Arcos Dorados Reports
Strong First Quarter Financial Results”
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SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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Arcos Dorados Holdings Inc. |
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By: |
/s/ Juan David Bastidas |
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Name: |
Juan David Bastidas |
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Title: |
Chief Legal Counsel |
Date:
May 15, 2024
Item 1
Arcos Dorados
1Q 2024
Results
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_002.jpg)
May 15, 2024
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![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_003.jpg) |
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_005.jpg)
ARCOS DORADOS
REPORTS STRONG FIRST QUARTER FINANCIAL RESULTS
| • | Total revenues of $1.1 billion in the first quarter, up 9.1% versus
the prior year. |
| • | Systemwide comparable sales¹ grew 38.6% in the first quarter,
supported by the twelfth consecutive quarter of guest volume growth. |
| • | Digital channels (Mobile App, Delivery and Self-order Kiosks) generated
55% of systemwide sales in the period, including 22% identified sales. |
| • | Loyalty Program reached 8 million registered members, more than double
the year-end 2023 total. |
| • | Consolidated Adjusted EBITDA¹ was $108.9 million, rising 8.4%
year-over-year. |
| • | Net Income was $28.5 million in the first quarter, or $0.14 per share. |
Montevideo, Uruguay,
May 15, 2024 – Arcos Dorados Holdings Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”), Latin America
and the Caribbean’s largest restaurant chain and the world’s largest independent McDonald’s franchisee, today reported
unaudited results for the three months ended March 31, 2024.
First Quarter 2024 Highlights
|
| • | Consolidated revenues totaled $1.1 billion, up 9.1% in US dollars versus
the prior year period. |
| • | Systemwide comparable sales¹ increased 38.6% versus the first quarter
of 2023, supported by positive guest traffic at the consolidated level, which grew for the twelfth consecutive quarter. |
| • | Consolidated Adjusted EBITDA¹ of $108.9 million, grew 8.4% in US dollars
versus the prior year period, with strong performances in both Brazil and the North Latin American Division (NOLAD). |
| • | Adjusted EBITDA margin expanded 90 basis points in Brazil and 30 basis points
in NOLAD. |
| • | Net income was $ 28.5 million in the quarter, or $0.14 per share. |
| • | Net Debt to Adjusted EBITDA leverage ratio ended the first quarter at 1.2x. |
| • | The Company opened 22 restaurants in the quarter, including 19 free-standing
locations. |
| 1 | For definitions, please refer to
pages 15 and 16 of this document. |
Message from Marcelo Rabach, Chief Executive Officer
The strength of these results demonstrate
how far we have come as a company over the last decade. The Arcos Dorados business model delivered solid US dollar growth to start 2024,
despite a challenging economic environment in one of our main markets. Importantly, by operating responsibly and managing the business
with a long-term mindset, we built our strongest ever Brand reputation among Latin America’s quick service restaurant (QSR) customers.
Over the last ten years we diversified
our business to reduce our exposure to any single country. While Brazil remains our biggest market, both NOLAD and SLAD now contribute
significantly to sales and EBITDA. NOLAD generates results in hard or very stable currencies while high growth potential markets in SLAD,
such as Chile, Colombia and Uruguay, have also increased their contributions to consolidated results.
The business model and the Three-D’s
strategy (Digital, Delivery and Drive-thru) are working well together. We are focused on generating sustainable profitability growth over
the long term. Our balanced approach to managing pricing, product mix and guest volumes is driving above-inflation comparable sales growth
throughout our operations. Guest volumes are key to driving sustainable sales growth, and the McDonald’s Brand captures the highest
volume per restaurant in our region.
We see significant growth potential
in Latin America and the Caribbean, and we are accelerating restaurant openings. We expect investments in the McDonald’s Brand to
foster a virtuous cycle of growth in our communities and local economies. A more robust local economy should, in turn, support our long-term
expansion plans while insulating the business from short-term volatility.
Before closing, I want to express how
saddened we are by the severe flooding in Brazil's southernmost state: Rio Grande do Sul. Since this is an ongoing situation, it is too
early to estimate the long-term human and environmental impacts of this natural disaster. In the meantime, we are actively supporting
our people, suppliers, sub-franchisees and the communities we serve.
Our efforts are focused on our employees
and their families, including by providing basic necessities and by guaranteeing their job security during this difficult period. We have
also begun distributing food within the communities we serve as well as to first responders. Our restaurant spaces have been made available
to people seeking shelter, food or even just a place to charge their cell phones. Moving forward we will be working on several initiatives,
in coordination with local governments and NGO’s to continue supporting our people and to aid in reconstruction.
Finally, as we think about the future
of Arcos Dorados, we believe all the levers we pulled to generate the strong results of the first quarter and, indeed, the last several
years, will continue to drive results into the future. This is why we are confident we will be able to generate significant shareholder
value for many more years to come.
Thank you for your continued support
of Arcos Dorados.
Consolidated
Results
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_007.jpg)
Consolidated Results
Figure
1. AD Holdings Inc Consolidated: Key Financial Results
(In millions of U.S. dollars, except as
noted)
|
1Q23
(a) |
Currency Translation
(b) |
Constant
Currency
Growth
(c) |
1Q24
(a+b+c) |
% As Reported |
% Constant Currency |
Total Restaurants (Units) |
2,312 |
|
|
2,381 |
|
|
|
|
|
|
|
|
|
Sales by Company-operated Restaurants |
946.4 |
(365.5) |
450.5 |
1,031.4 |
9.0% |
47.6% |
Revenues from franchised restaurants |
44.4 |
(8.1) |
13.6 |
49.9 |
12.4% |
30.6% |
Total Revenues |
990.8 |
(373.6) |
464.1 |
1,081.4 |
9.1% |
46.8% |
Systemwide Comparable Sales |
|
|
|
|
|
38.6% |
Adjusted EBITDA |
100.5 |
6.9 |
1.6 |
108.9 |
8.4% |
1.6% |
Adjusted EBITDA Margin |
10.1% |
|
|
10.1% |
- |
|
Net income (loss) attributable to AD |
37.4 |
1.8 |
(10.7) |
28.5 |
-23.8% |
-28.7% |
No. of shares outstanding (thousands) |
210,595 |
|
|
210,656 |
|
|
EPS (US$/Share) |
0.18 |
|
|
0.14 |
|
|
Arcos Dorados’ total revenues
reached $1.1 billion, up 9.1% in US dollars versus the prior year quarter. Systemwide comparable sales in the first quarter rose 38.6%,
with nearly all the Company’s markets growing sales above local inflation. Importantly, consolidated guest volume grew for the twelfth
consecutive quarter. The Company’s systemwide comparable sales grew 2.2x blended inflation for the period, excluding Argentina.
Off-premise sales (Delivery and Drive-thru)
increased 14% in US dollars versus the prior year, and generated 44% of systemwide sales in the first quarter of 2024. On-premise sales
(front counter, dessert centers and McCafé) grew 7% in US dollars versus the prior year, accounting for 56% of systemwide sales
in the quarter.
Digital channel sales rose 30% versus
the prior year and represented 55% of systemwide sales. The Company’s Digital platform continued to drive topline performance in
the first quarter, boosted by the strong penetration of sales through Self-order kiosks and the Own Delivery and Mobile Order and Pay
functionalities on the Mobile App.
The Company’s Digital platform
drove visit frequency by offering an increasingly personalized experience to guests. As of the end of March 2024, Arcos Dorados’
Customer Relationship Management platform had about 85 million unique registered users and the Company’s Mobile App surpassed 123
million cumulative downloads, reaching more than 19 million monthly active users in the quarter. During the quarter, identified sales
represented 22% of total sales.
Notably, in the first quarter of 2024
the Company signed an agreement to become a regional sponsor of Formula One in Latin America. The sport has become very popular with families
throughout the region, bridging all demographic, gender and socioeconomic groups. This agreement is expected to provide significant brand
presence and the sponsorship will focus on further leveraging the Company's successful Three-D’s strategy, especially the Drive-thru
segment with its precision, teamwork and speed of service.
Adjusted
EBITDA
|
1Q24
Adjusted EBITDA Bridge
($ million)
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_035.jpg)
First quarter consolidated Adjusted
EBITDA reached $108.9 million, up 8.4% in US dollars over the prior year quarter, with strong performances in Brazil and NOLAD more than
offsetting the decline in the South Latin American Division (SLAD). The significant devaluation of the Argentine peso in December 2023
and a weaker consumption environment in Argentina impacted SLAD’s results in the quarter. Consolidated Adjusted EBITDA margin remained
flat at 10.1% versus the prior year, with margin expansion in Brazil (90 basis points) and NOLAD (30 basis points) offsetting a margin
contraction in SLAD.
Consolidated margin performance included
lower Food and Paper (F&P) costs as a percentage of revenue, driven by a better gross margin in Brazil, coupled with operating leverage
in General and Administrative expenses (G&A) when compared with the prior year. Payroll expenses were flat as a percentage of revenue
compared with the prior year quarter. These effects were offset by moderately higher Occupancy & Other Operating expenses in the first
quarter as a percentage of revenue, primarily explained by a decline in operating leverage due to below inflation sales growth in Argentina.
Notable items in the Adjusted EBITDA reconciliation
|
Included in Adjusted EBITDA:
There were no notable items included in Adjusted EBITDA in either the first quarter of 2024 or the first quarter of 2023.
Excluded from Adjusted EBITDA:
There were no notable items excluded from Adjusted EBITDA in either the first quarter of 2024 or the first quarter of 2023.
Non-operating Results
|
Arcos Dorados’ non-operating
results for the first quarter included net interest expenses of $16.4 million and a non-cash foreign exchange loss of $1.0 million. The
Company recorded an income tax expense of $19.0 million in the quarter.
Net income attributable to the Company
totaled $28.5 million, or $0.14 per share, in the first quarter of 2024. Total weighted average shares for the first quarter of 2024 amounted
to 210,655,747 compared to 210,594,545 in the prior year’s quarter.
Divisional
Results
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_009.jpg)
Brazil Division
Figure
2. Brazil Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
|
1Q23
(a) |
Currency Translation
(b) |
Constant
Currency
Growth
(c) |
1Q24
(a+b+c) |
% As Reported |
% Constant Currency |
Total Restaurants (Units) |
1,091 |
|
|
1,141 |
|
|
|
|
|
|
|
|
|
Total Revenues |
374.2 |
20.8 |
54.0 |
448.9 |
20.0% |
14.4% |
Systemwide Comparable Sales |
|
|
|
|
|
9.4% |
Adjusted EBITDA |
59.5 |
3.5 |
12.5 |
75.4 |
26.9% |
21.0% |
Adjusted EBITDA Margin |
15.9% |
|
|
16.8% |
0.9 p.p. |
|
Brazil’s revenues increased 20.0%
in US dollars versus the first quarter 2023, reaching $448.9 million. Systemwide comparable sales rose 9.4% year-over-year, or 2.2x the
country’s inflation in the period.
Guest traffic and sales growth were
driven by a strong performance of Digital channels. Digital sales rose 38% versus the prior year and contributed more than 65% of the
division’s systemwide sales in the period, including 26% identified sales. Delivery sales grew 44% in US dollars versus the prior
year and reached a new quarterly sales record for this channel in the country. Off-premise channel sales represented 42% of Brazil’s
systemwide sales in the quarter.
The Loyalty program “Meu Méqui”
continues to grow and had more than 8 million registered members at the end of April 2024, up from 3.2 million at the end of 2023. The
program continued driving improvements in guest frequency, average check and redemption rates.
Brazil’s marketing plans and
campaigns included the continuation of the successful “Méqui Me Pega” campaign and the launch of the “Big Tasty
Turbo Cheese” sandwich. The market engaged with Generation Z customers by continuing its sponsorship of the region’s most
popular music festival, Lollapalooza, in São Paulo as well as the country’s most popular primetime television program, Big
Brother Brazil. The division also drove brand excitement and customer engagement across all sales channels by bringing back the McFish
sandwich as a limited time offer, selling out in a short time. In the dessert category, Brazil introduced the McFlurry “Chocrocante”
with a popular local chocolate known as “Diamante Negro”.
The Brazil division continued to strengthen
its brand leadership position, achieving an all-time-high visit share score over the trailing 12 months. The market share gain in Brazil
was accompanied by record high scores in brand equity, including Top of Mind and Favorite Brand, which were 4.0x and 2.0x the main competitor’s
scores, respectively, according to the Company’s proprietary research. In fact, all brand attributes tracked by the Company presented
favorable gaps compared with the nearest competitor in the market.
As reported Adjusted EBITDA in the
division reached $75.4 million in the quarter, rising 26.9% versus the prior year in US dollars. Adjusted EBITDA margin was 16.8%, up
90 basis points versus the prior year period, including lower F&P costs as a percentage of revenue and operating leverage in both
Payroll and G&A due to strong sales growth in the division.
North Latin American Division (NOLAD)
|
Figure
3. NOLAD Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
|
1Q23
(a) |
Currency Translation
(b) |
Constant
Currency
Growth
(c) |
1Q24
(a+b+c) |
% As Reported |
% Constant Currency |
Total Restaurants (Units) |
639 |
|
|
647 |
|
|
|
|
|
|
|
|
|
Total Revenues |
259.3 |
14.9 |
28.6 |
302.7 |
16.8% |
11.0% |
Systemwide Comparable Sales |
|
|
|
|
|
8.0% |
Adjusted EBITDA |
23.7 |
1.5 |
3.4 |
28.6 |
20.7% |
14.3% |
Adjusted EBITDA Margin |
9.1% |
|
|
9.4% |
0.3 p.p. |
|
As reported revenues in NOLAD reached
$302.7 million, up 16.8% in US dollars versus the prior year quarter. Systemwide comparable sales rose 8.0% year-over-year, or 3.1x the
division’s blended inflation in the period, with sales increasing above inflation in all markets. The result also included particularly
strong traffic growth in Mexico, Costa Rica, Panama and the French West Indies. Additionally, the quarter benefitted from the extra trading
day on February 29 and a positive impact from Holy Week, particularly in Mexico.
Digital channels drove topline growth
in the first quarter as the Company continued to invest in the modernization of its restaurants and the digitalization of the division.
Digital sales reached 38% of systemwide sales in the quarter, compared with just 25% in the prior year quarter, boosted by a significant
expansion of sales through self-order kiosks and Delivery versus the previous year.
NOLAD’s key marketing activities
included the launch of a new value platform “Elige tu Fav” in Mexico, which allows guests to choose between delicious beef
or chicken combos at an attractive price. Also in Mexico, Digital channel sales doubled versus last year and the McDonald’s App
is now the most downloaded, and used, App across the country’s QSR industry. Panama implemented a strong value platform, coupled
with one of the highest brand equity scores in the region, to accelerate the business in that country. In Puerto Rico, the Company gained
significant visit share as the new brand campaign “Saca tu Encanto” resonated well with guests. Each of these three important
markets also achieved significant visit and sales share growth during the quarter.
As reported Adjusted EBITDA in the
division reached $28.6 million in the quarter, rising 20.7% versus the prior year in US dollars. Adjusted EBITDA margin increased by 30
basis points in the quarter benefiting from operating leverage in Occupancy & Other Operating expenses as well as G&A due to the
strong sales growth. These more than offset a modest increase in Payroll expenses as a percentage of revenue.
South Latin American Division (SLAD)
|
Figure
4. SLAD Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
|
1Q23
(a) |
Currency Translation
(b) |
Constant
Currency
Growth
(c) |
1Q24
(a+b+c) |
% As Reported |
% Constant Currency |
Total Restaurants (Units) |
582 |
|
|
593 |
|
|
|
|
|
|
|
|
|
Total Revenues |
357.3 |
(409.2) |
381.6 |
329.7 |
-7.7% |
106.8% |
Systemwide Comparable Sales |
|
|
|
|
|
103.0% |
Adjusted EBITDA |
40.7 |
(28.4) |
12.5 |
24.7 |
-39.2% |
30.6% |
Adjusted EBITDA Margin |
11.4% |
|
|
7.5% |
-3.9 p.p. |
|
As reported revenues in SLAD totaled
$329.7 million in the first quarter, down 7.7% year-over-year. Systemwide comparable sales, which includes the impact of Argentina and
Venezuela’s high inflation rates, rose 103.0% versus the prior year. SLAD’s systemwide comparable sales grew 1.8x blended
inflation, excluding Argentina.
The division’s results were primarily
impacted by the ongoing hyperinflationary environment in Argentina, which caused a material reduction of consumption in this market, as
well as the significant devaluation of the country’s currency at the end of 2023. The devaluation of the Chilean peso and the social
unrest in Ecuador also contributed to offset strong sales performances in other markets such as Colombia, Peru and Uruguay.
Digital sales, which accounted for
53% of systemwide sales in SLAD, benefited from the improving performance of the Mobile Order and Pay and Own Delivery functionalities
in the Mobile App, which led to an increase in identified sales across the division.
The SLAD division strengthened brand
affinity among younger consumers, by sponsoring the most relevant music festivals in the region, including Lollapalooza in Argentina and
Chile, as well as Estereo Picnic in Colombia. The Company brought menu innovation to SLAD’s markets with the launch of the “Quarter
Pounder Western BBQ” in Chile and Uruguay, “Quarter Pounder Cheesy Jalapeño” in Ecuador and the “Grand
Tasty Spicy” in Argentina, among others. These new product launches helped drive restaurant traffic and average check growth. SLAD
continued making inroads in the chicken category, with the launch of the “McCrispy Chicken” platform in Uruguay and the “McCrispy
Chicken Legend” in Colombia, with the latter quickly becoming a guest favorite.
Despite some challenging economic conditions,
many of SLAD’s main markets continued gaining market share against their main competitors, a clear reflection of consumer preference
for the McDonald’s Brand across the division. This includes Argentina, where the Company’s brand attributes strengthened,
and market share increased strongly.
As reported Adjusted EBITDA totaled
$24.7 million in the quarter and Adjusted EBITDA margin contracted 390 basis points versus the prior year quarter. The division’s
Adjusted EBITDA reflects reduced operating leverage in all cost and expense line items due to the below-inflation sales growth in the
first quarter, mostly in Argentina and Ecuador.
New Unit Development
|
Figure 5. Total Restaurants (end of
period)*
|
March
2024 |
December
2023 |
September
2023 |
June
2023 |
March
2023 |
Brazil |
1,141 |
1,130 |
1,113 |
1,098 |
1,091 |
NOLAD |
647 |
647 |
638 |
639 |
639 |
SLAD |
593 |
584 |
588 |
580 |
582 |
TOTAL |
2,381 |
2,361 |
2,339 |
2,317 |
2,312 |
*Considers Company-operated and franchised
restaurants at period-end
Figure
6. Footprint as of March 31, 2024
|
Store Type* |
Total Restaurants |
Ownership |
McCafes |
Dessert Centers |
|
FS |
IS |
MS & FC |
Company Operated |
Franchised |
Brazil |
589 |
91 |
461 |
1,141 |
699 |
442 |
108 |
2,011 |
NOLAD |
406 |
48 |
193 |
647 |
494 |
153 |
19 |
518 |
SLAD |
247 |
125 |
221 |
593 |
503 |
90 |
199 |
726 |
TOTAL |
1,242 |
264 |
875 |
2,381 |
1,696 |
685 |
326 |
3,255 |
*FS: Free-Standing; IS: In-Store; MS: Mall
Store; FC: Food Court.
During the first quarter of 2024, the
Company opened 22 Experience of the Future (EOTF) restaurants, including 19 free-standing units. The Brazil division opened 11 EOTF restaurants
in the quarter, with 10 new free-standing units.
At the end of the quarter, 52% of Arcos
Dorados’ restaurant footprint was made up of free-standing units and the Company plans to continue focusing its investments on this
format to offer guests the most complete McDonald’s restaurant experience while leveraging the incrementality of Drive-thru and
Delivery sales.
Arcos Dorados also continued the modernization
of its existing restaurants in the quarter and, as of the end of March 2024, there were 1,430 EOTF restaurants making up 60% of the total
footprint.
Balance Sheet & Cash Flow Highlights
|
Figure
7. Consolidated Debt and Financial Ratios
(In thousands of U.S. dollars, except
ratios)
|
March 31, |
December 31, |
2024 |
2023 |
Total Cash & cash equivalents (i) |
162,473 |
246,767 |
Total Financial Debt (ii) |
740,015 |
728,093 |
Net Financial Debt (iii) |
577,542 |
481,326 |
LTM Adjusted EBITDA |
480,735 |
472,304 |
Total Financial Debt / LTM Adjusted EBITDA ratio |
1.5 |
1.5 |
Net Financial Debt / LTM Adjusted EBITDA ratio |
1.2 |
1.0 |
| (i) | Total
cash & cash equivalents include short-term investment. |
| (ii) | Total
financial debt includes short-term debt, long-term debt, accrued interest payable and derivative
instruments (including the asset portion of derivatives amounting to $49.0 million and $46.5
million as a reduction of financial debt as of March 31, 2024 and December 31, 2023, respectively). |
| (iii) | Net
financial debt equals total financial debt less total cash & cash equivalents. |
As of March 31, 2024, total cash and
cash equivalents were $162.5 million and total financial debt (including the net derivative instrument position) was $740.0 million. Net
debt (total financial debt minus total cash and cash equivalents) was $577.5 million, up from $481.3 million at the end of 2023, due to
the lower cash balance.
The net debt to Adjusted EBITDA leverage
ratio ended the quarter at a healthy 1.2x.
Net cash used in operating activities
for the three months ended March 31, 2024, totaled $9.4 million. Cash used in net investing activities totaled $49.2 million, including
capital expenditures of $61.2 million. Net cash used in financing activities was $8.0 million in the first quarter 2024.
Recent
Developments
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_013.jpg)
![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_012.jpg)
2024 Annual General Shareholders Meeting
(AGM)
The Company held its AGM on April 26,
2024. All proposals were approved at the meeting.
Moody’s Rating Action
|
In May 2024, Moody’s re-affirmed
Arcos Dorados’ corporate and senior debt rating at Ba2 and upgraded the outlook from Stable to Positive based on the Company's liquidity
condition and latest operating performance, following Brazil’s sovereign rating action.
First Quarter 2024 Earnings Webcast
|
A webcast to discuss the information contained in this
press release will be held today, May 15, 2024, at 10:00 a.m. ET. In order to access the webcast, members of the investment community
should follow this link: Arcos
Dorados First Quarter 2024 Earnings Webcast.
A
replay of the webcast will be available later today in the investor section of the Company’s website: www.arcosdorados.com/ir.
Investor
Relations Contact
Dan
Schleiniger
VP
of Investor Relations
Arcos
Dorados
daniel.schleiniger@mcd.com.uy
Media Contact
David Grinberg
VP of Corporate Communications
Arcos Dorados
david.grinberg@mcd.com.uy
Follow
us on: ![](https://www.sec.gov/Archives/edgar/data/1508478/000095010324006681/image_034.gif)
Definitions
In analyzing business trends, management
considers a variety of performance and financial measures which are considered to be non-GAAP including: Adjusted EBITDA, Constant Currency
basis, Systemwide sales, and Systemwide comparable sales growth.
Adjusted EBITDA: In addition
to financial measures prepared in accordance with the general accepted accounting principles (GAAP), this press release and the accompanying
tables use a non-GAAP financial measure titled ‘Adjusted EBITDA’. Management uses Adjusted EBITDA to facilitate operating
performance comparisons from period to period.
Adjusted EBITDA is defined as the Company’s
operating income plus depreciation and amortization plus/minus the following losses/gains included within other operating income (expenses),
net, and within general and administrative expenses on the statement of income: gains from sale or insurance recovery of property and
equipment, write-offs of long-lived assets, and impairment of long-lived assets.
Management believes Adjusted EBITDA
facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations such as capital
structures (affecting net interest expense and other financing results), taxation (affecting income tax expense) and the age and book
depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons
unrelated to operating performance. Figure 8 of this earnings release includes a reconciliation for Adjusted EBITDA. For more information,
please see Adjusted EBITDA reconciliation in Note 9 – Segment and geographic information – of our financial statements (6-K
Form) filed today with the S.E.C.
Constant Currency basis: refers
to amounts calculated using the same exchange rate over the periods under comparison to remove the effects of currency fluctuations from
this trend analysis. To better discern underlying business trends, this release uses non-GAAP financial measures that segregate year-over-year
growth into two categories: (i) currency translation and (ii) constant currency growth. (i) Currency translation reflects the impact on
growth of the appreciation or depreciation of the local currencies in which the Company conducts its business against the US dollar (the
currency in which the Company’s financial statements are prepared). (ii) Constant currency growth reflects the underlying growth
of the business excluding the effect from currency translation. The Company also calculates variations as a percentage in constant currency,
which are also considered to be non-GAAP measures, to provide a more meaningful analysis of its business by identifying the underlying
business trends, without distortion from the effect of foreign currency fluctuations.
Systemwide sales: Systemwide
sales represent measures for both Company-operated and sub-franchised restaurants. While sales by sub-franchisees are not recorded as
revenues by the Company, management believes the information is important in understanding its financial performance because these sales
are the basis on which it calculates and records sub-franchised restaurant revenues and are indicative of the financial health of its
sub-franchisee base.
Systemwide comparable sales growth:
this non-GAAP measure, refers to the change, on a constant currency basis, in Company-operated and sub-franchised restaurant sales in
one period from a comparable period for restaurants that have been open for thirteen months or longer (year-over-year basis) including
those temporarily closed. Management believes it is a key performance indicator used within the retail industry and is indicative of the
success of the Company’s initiatives as well as local economic, competitive and consumer trends. Sales by sub-franchisees are not
recorded as revenues by the Company.
About Arcos Dorados
|
Arcos
Dorados is the world’s largest independent McDonald’s franchisee, operating the largest quick service restaurant chain in
Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20
Latin American and Caribbean countries and territories with more than 2,350 restaurants, operated by the Company or by its sub-franchisees,
that together employ over 100 thousand people (as of 03/31/2024). The Company is also committed to the development of the communities
in which it operates, to providing young people their first formal job opportunities and to utilize its Recipe
for the Future to achieve a positive environmental
impact. Arcos Dorados is listed for trading on the New York Stock Exchange (NYSE: ARCO). To learn more about the Company, please visit
the Investors section of our website: www.arcosdorados.com/ir.
Cautionary Statement on Forward-Looking
Statements
|
This press release contains forward-looking statements.
The forward-looking statements contained herein include statements about the Company’s business prospects, its ability to attract
customers, its expectation for revenue generation and its outlook and guidance for 2024. These statements are subject to the general risks
inherent in Arcos Dorados' business. These expectations may or may not be realized. Some of these expectations may be based upon assumptions
or judgments that prove to be incorrect. In addition, Arcos Dorados' business and operations involve numerous risks and uncertainties,
many of which are beyond the control of Arcos Dorados, which could result in Arcos Dorados' expectations not being realized or otherwise
materially affect the financial condition, results of operations and cash flows of Arcos Dorados. Additional information relating to the
uncertainties affecting Arcos Dorados' business is contained in its filings with the Securities and Exchange Commission. The forward-looking
statements are made only as of the date hereof, and Arcos Dorados does not undertake any obligation to (and expressly disclaims any obligation
to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the
occurrence of unanticipated events.
First Quarter 2024 Consolidated Results
|
Figure
8. First Quarter 2024 Consolidated Results
(In thousands of U.S. dollars, except
per share data)
|
For Three-Months ended |
|
March 31, |
|
2024 |
2023 |
REVENUES |
|
|
Sales by Company-operated restaurants |
1,031,422 |
946,354 |
Revenues from franchised restaurants |
49,934 |
44,438 |
Total Revenues |
1,081,356 |
990,792 |
OPERATING COSTS AND EXPENSES |
|
|
Company-operated restaurant expenses: |
|
|
Food and paper |
(360,987) |
(333,866) |
Payroll and employee benefits |
(201,960) |
(185,317) |
Occupancy and other operating expenses |
(299,053) |
(263,723) |
Royalty fees |
(65,003) |
(56,739) |
Franchised restaurants - occupancy expenses |
(21,990) |
(18,209) |
General and administrative expenses |
(68,658) |
(65,592) |
Other operating income (expense), net |
3,846 |
(1,061) |
Total operating costs and expenses |
(1,013,805) |
(924,507) |
Operating income |
67,551 |
66,285 |
Net interest expense and other financing results |
(16,438) |
(9,859) |
Loss from derivative instruments |
(1,933) |
(4,929) |
Foreign currency exchange results |
(998) |
7,283 |
Other non-operating expenses, net |
(429) |
(110) |
Income before income taxes |
47,753 |
58,670 |
Income tax expense, net |
(18,961) |
(21,026) |
Net income |
28,792 |
37,644 |
Less: Net income attributable to non-controlling interests |
(283) |
(237) |
Net income attributable to Arcos Dorados Holdings Inc. |
28,509 |
37,407 |
Earnings per share information ($ per share): |
|
|
Basic net income per common share |
$ 0.14 |
$ 0.18 |
Weighted-average number of common shares outstanding-Basic |
210,655,747 |
210,594,545 |
Adjusted EBITDA Reconciliation |
|
|
Operating income |
67,551 |
66,285 |
Depreciation and amortization |
43,091 |
33,520 |
Operating charges excluded from EBITDA computation |
(1,707) |
699 |
Adjusted EBITDA |
108,935 |
100,504 |
Adjusted EBITDA Margin as % of total revenues |
10.1 % |
10.1 % |
First Quarter 2024 Results by Division
|
Figure
9. First Quarter 2024 Consolidated Results by Division
(In thousands of U.S. dollars)
|
For Three-Months ended |
as
reported |
Constant Currency |
|
March 31, |
|
2024 |
2023 |
Incr/(Decr)% |
Incr/(Decr)% |
Revenues |
|
|
|
|
Brazil |
448,937 |
374,198 |
20.0 % |
14.4% |
NOLAD |
302,721 |
259,266 |
16.8 % |
11.0% |
SLAD |
329,698 |
357,328 |
-7.7% |
106.8% |
TOTAL |
1,081,356 |
990,792 |
9.1 % |
46.8% |
|
|
|
|
|
Operating Income (loss) |
|
|
|
|
Brazil |
57,042 |
44,090 |
29.4 % |
23.4% |
NOLAD |
17,983 |
13,947 |
28.9% |
21.5% |
SLAD |
14,442 |
33,462 |
-56.8% |
-6.6% |
Corporate and Other |
(21,916) |
(25,214) |
13.1% |
-109.9% |
TOTAL |
67,551 |
66,285 |
1.9 % |
-25.0% |
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
Brazil |
75,446 |
59,473 |
26.9 % |
21.0% |
NOLAD |
28,602 |
23,700 |
20.7 % |
14.3% |
SLAD |
24,741 |
40,716 |
-39.2% |
30.6% |
Corporate and Other |
(19,854) |
(23,385) |
15.1% |
-114.5% |
TOTAL |
108,935 |
100,504 |
8.4 % |
1.6 % |
Figure
10. Average Exchange Rate per Quarter*
|
Brazil |
Mexico |
Argentina |
1Q24 |
4.95 |
16.97 |
834.32 |
1Q23 |
5.19 |
18.66 |
192.33 |
* Local $ per 1 US$
Summarized Consolidated Balance Sheet
|
Figure
11. Summarized Consolidated Balance Sheet
(In thousands of U.S. dollars)
|
|
March
31, |
December
31, |
|
|
2024 |
2023 |
ASSETS |
|
|
Current assets |
|
|
|
Cash
and cash equivalents |
|
127,496 |
196,661 |
Short-term
investments |
|
34,977 |
50,106 |
Accounts
and notes receivable, net |
|
148,745 |
147,980 |
Other
current assets (1) |
|
237,329 |
210,531 |
Derivative
instruments |
|
45 |
— |
Total current
assets |
|
548,592 |
605,278 |
Non-current
assets |
|
|
|
Property
and equipment, net |
|
1,124,925 |
1,119,885 |
Net
intangible assets and goodwill |
|
71,073 |
70,026 |
Deferred
income taxes |
|
101,184 |
98,163 |
Derivative
instruments |
|
48,993 |
46,486 |
Equity
method investments |
|
19,031 |
18,111 |
Leases
right of use asset |
|
953,139 |
954,564 |
Other
non-current assets (2) |
|
106,490 |
106,725 |
Total non-current
assets |
|
2,424,835 |
2,413,960 |
Total assets |
|
2,973,427 |
3,019,238 |
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts
payable |
|
322,753 |
374,986 |
Taxes
payable (3) |
|
161,929 |
163,143 |
Accrued
payroll and other liabilities |
|
167,246 |
142,487 |
Royalties
payable to McDonald’s Corporation |
|
22,007 |
21,292 |
Provision
for contingencies |
|
1,480 |
1,447 |
Interest
payable |
|
18,342 |
7,447 |
Financial
debt (4) |
|
40,145 |
37,361 |
Operating
lease liabilities |
|
93,146 |
93,507 |
Total current
liabilities |
|
827,048 |
841,670 |
Non-current
liabilities |
|
|
|
Accrued
payroll and other liabilities |
|
27,891 |
27,513 |
Provision
for contingencies |
|
51,015 |
49,172 |
Financial
debt (5) |
|
730,566 |
729,771 |
Deferred
income taxes |
|
1,598 |
1,166 |
Operating
lease liabilities |
|
848,784 |
853,107 |
Total non-current
liabilities |
|
1,659,854 |
1,660,729 |
Total liabilities |
|
2,486,902 |
2,502,399 |
Equity |
|
|
|
Class
A shares of common stock |
|
389,923 |
389,907 |
Class
B shares of common stock |
|
132,915 |
132,915 |
Additional
paid-in capital |
|
8,703 |
8,719 |
Retained
earnings |
|
544,140 |
566,188 |
Accumulated
other comprehensive loss |
|
(571,554) |
(563,081) |
Common
stock in treasury |
|
(19,367) |
(19,367) |
Total Arcos
Dorados Holdings Inc shareholders’ equity |
|
484,760 |
515,281 |
Non-controlling
interest in subsidiaries |
|
1,765 |
1,558 |
Total equity |
|
486,525 |
516,839 |
Total
liabilities and equity |
|
2,973,427 |
3,019,238 |
| (1) | Includes "Other receivables",
"Inventories" and "Prepaid expenses and other current assets”. |
| (2) | Includes
"Miscellaneous" and "Collateral deposits". |
| (3) | Includes
"Income taxes payable" and "Other taxes payable". |
| (4) | Includes
"Short-term debt”, “Current portion of long-term debt" and "Derivative instruments”. |
| (5) | Includes
"Long-term debt, excluding current portion" and "Derivative instruments". |
Thank
you!
|
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