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.
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
The strength of these results demonstrate how far we have come as a company over the last decade. The
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
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
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
Thank you for your continued support of
Consolidated Results
Figure 1. AD Holdings Inc Consolidated: Key Financial Results
(In millions of |
||||||
1Q23 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
1Q24 (a+b+c) |
% As Reported |
% Constant Currency |
|
|
2,312 |
2,381 |
||||
Sales by |
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
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
Notably, in the first quarter of 2024 the Company signed an agreement to become a regional sponsor of
Adjusted EBITDA
1Q24
($ million)
First quarter consolidated Adjusted EBITDA reached
Consolidated margin performance included lower Food and Paper (F&P) costs as a percentage of revenue, driven by a better gross margin in
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
Net income attributable to the Company totaled
Divisional Results
Brazil Division
Figure 2. Brazil Division: Key Financial Results (In millions of |
||||||
1Q23 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
1Q24 (a+b+c) |
% As Reported |
% Constant Currency |
|
|
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
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
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
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
As reported Adjusted EBITDA in the division reached
North Latin American Division (NOLAD)
Figure 3. NOLAD Division: Key Financial Results (In millions of |
||||||
1Q23 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
1Q24 (a+b+c) |
% As Reported |
% Constant Currency |
|
|
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
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
As reported Adjusted EBITDA in the division reached
South Latin American Division (SLAD)
Figure 4. SLAD Division: Key Financial Results (In millions of |
||||||
1Q23 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
1Q24 (a+b+c) |
% As Reported |
% Constant Currency |
|
|
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
The division’s results were primarily impacted by the ongoing hyperinflationary environment in
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
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
As reported Adjusted EBITDA totaled
Figure 5. |
||||||
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 |
|
* |
Figure 6. Footprint as of |
|||||||||
Store Type* | Total Restaurants |
Ownership | McCafes | Dessert Centers |
|||||
FS |
|
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; |
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.
Balance Sheet & Cash Flow Highlights
Figure 7. Consolidated Debt and Financial Ratios (In thousands of |
||
|
|
|
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 includes 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 |
||
(iii) Net financial debt equals total financial debt less total cash & cash equivalents. |
As of
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
Recent Developments
2024 Annual General Shareholders Meeting (AGM)
The Company held its AGM on
Moody’s Rating Action
In
First Quarter 2024 Earnings Webcast
A webcast to discuss the information contained in this press release will be held today,
A replay of the webcast will be available later today in the investor section of the Company’s website: www.arcosdorados.com/ir.
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
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
First Quarter 2024 Consolidated Results
Figure 8. First Quarter 2024 Consolidated Results (In thousands of |
||||||
For Three-Months ended |
||||||
|
||||||
|
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 |
|
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 |
||||
For Three-Months ended |
as
|
Constant
|
||
|
||||
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 |
|
|
|
1Q24 |
4.95 |
16.97 |
834.32 |
1Q23 |
5.19 |
18.66 |
192.33 |
* Local $ per |
Summarized Consolidated Balance Sheet
Figure 11. Summarized Consolidated Balance Sheets (In thousands of |
|||
|
|
||
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) |
|
|
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". |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240515698616/en/
Investor Relations Contact
VP of Investor Relations
daniel.schleiniger@mcd.com.uy
Media Contact
VP of Corporate Communications
david.grinberg@mcd.com.uy
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