Arcos Dorados (ARCO) 15 Mar 232022 Q4 Earnings call transcript

Good morning, everyone, and thank you for joining our Fourth Quarter and Full Year 2022 Earnings Webcast. With us today are Marcelo Rabach, our Chief Executive Officer; Luis Raganato, our Chief Operating Officer; and Mariano Tannenbaum, our Chief Financial Officer.

Today’s webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation, also available in the Investors section of our website, www.arcosdorados.com/ir.

As a reminder, to better view the presentation on the webcast platform, please scroll over the upper left-hand part of the screen and click on the arrows to maximize the slides. After we conclude our opening remarks, we will answer your questions, which you can submit using the chat function on the left-hand side of the screen.

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and the call and to reflect section or forward-looking release statements, contain update of changed filings refer earnings Today’s forward-looking forward-looking new the or I revise will statements no We SEC. assume you any to our events recent obligation circumstances. with to statements or

we to report accordance accounting with addition generally in reporting results non-GAAP certain principles, financial financial results. In accepted

non-GAAP and to financial results, with encouraged Investors statements X-K. review Form with found of these filed on as the GAAP results, are which in reconciliation compared the audited today be can SEC press the release financial

the the discussion operation, as the both SLAD excludes at for level division. results Our today of Venezuelan consolidated as the well

we statement, For earnings included with today’s to income Marcelo, a Venezuela full release. excluding over you. your reference,

and you morning, XXXX the you for Dan. continue remind and and in everyone, us you, these results feel we beyond. improving take best thank Thank will on Today, in through we results confident today. of reasons you can the history we Dorados' Good joining Arcos

were in Let's from highest single only start redevelopment highlights of EBITDA year XXXX. income our quarter included for the ever key to the income program. of Fourth quarter quarter fourth with was quarter. non-operating and the adjusted quarter Net and a revenue which significant fourth the full the second XXXX,

reached XXXX, new More importantly, our in income year. EBITDA adjusted records the net year full margin full and EBITDA best-ever including for

across event As XXXX was ago, strong system-wide divisions. you weeks comparable six and growth update very investor the sales throughout saw during all

ever McDonald's in sales market still in sales XD digital, and growth last channels by the with delivered set far. our share with drive-through, delivery the normalizing, gains well. performing continued highest more growth with all And records come. volumes strategy much year to sales The industry strongest our brand show Restaurant

in including Brazil, XX XX% year, promised growth We for freestanding XX our opened, also delivered restaurants the units. with unit on

margin. the QSR freestanding the portfolio America a restaurant largest have in Latin and We wide industry by

this preferences. with able approach the leveraged region, This ever digital guests' in main competitive as these in trends advantage we our platform, needs as industry's future. I and an much omnichannel continue were the foreseeable share structural and is robust most We fully gain is why to brand markets. all McDonald's market meet our so to to our for the strong expect taking

divisional Luis, a the level. let's performance take at look sales at

inflation sales times XX% X.X Thanks, channels with inflation Marcelo and and comparable were hello, full the market's in of year. XX% up In comparable in in Brazil, XXXX growth Mac MOP and Systemwide of times included everyone. delivery. for blended blended grew sales digital quarter, X.X channels. the times This fourth fourth the quarter own again, the from inflation X.X coming sales

World are traction, being As all for an record a digital in a app FIFA gaining second the quarter the well. just celebrities [ph] global as local partnered leveraged with and not personalities Cup with restaurant industry. achieved of in McDonald's on single example sports around designed drive the digital apps sponsorship in in with McDonald's country, of Campaigns the Black we the the in to day, downloaded that in sales of Friday we this most the Brazil, sales and

the themed Cup drive inflation region a the with in launch In blended World of sandwiches sales NOLAD, in Panama Mexico, Costa Rica. of times the at Menu comparable sales across grew X.X have quarter. and rate innovation,

single Best the Mexican Pérez, implementation special the year-over-year, sales driver campaign for the Formula growing the highest In Beef Costa partnered sales with of with quarter. Grand Prix X popular achieving a with October. market's Mexico, activations #McDonaldsMéxicoMeEncanta And Checo Mexico’s the with strengthened XX% Sergio during brand in building Burger segment Rica

in the outstanding inflation year In best times SLAD, versus Digital and XX% X.X grew ever most period, affinity. brand the quarter comparable markets the and sales achieved scores achieved an love their and digital to-date. blended penetration prior for sales rose highest

Chicken as the of McCrispy taste Cup FIFA several the perception. as sandwiches, and proposition for well Beef in the and This and included reinforce money quality value Selecciones markets. World McDonald’s Chicken campaigns Colombia and the launch sandwiches SLAD Chile in

carried also sales We of first of team. quarter in into we run XXXX as trends Cup quarter digital World well. campaign from national where official sponsors for the a The country's special Champions the the Argentina, fourth are have the

January sales solid divisions. growth very were growing with X.X inflation and comparable fact, February In times all across strong a combined

one for channel are we is seen the very the essence strong, which McDonald's in drive have channels, more help to acceleration much now ahead speaks on-premise with still America off-premise guests especially we expectations. our this growth year. two the expect growth growth coming and the family very brand we to in the of and Latin just love is happy and remains We This lever of sales remain This years, a last As Caribbean. experience very delivery, restaurant restaurant of for visit. a growth a into

show how in as each significant top division now strong you growth well. will the profitability Mariano generated line growth

on and Luis, generated last year. XX.X% an apples-to-apples the of morning, Dorados The in Thanks, EBITDA fourth good operation everyone. basis adjusted Arcos growth quarter versus

a currency growth US sales drive This in generating to constant was through volume adjusted dollars compared For designed XXXX. our to rising very in EBITDA strong, and to almost strategic XX.X% growth. is testament top with XX% approach line the year,

flow we a our and second cash captured ever the even toughest as share result, As of comparisons in faced maximize we market growth half XXXX.

and year second of for the year. with flat the relatively half full remained in margin gross food some pressure expected, paper cost As the

subsidies mainly today's prior but to the in year XXXX, remain should due close slightly versus discontinuation payroll the productive increased of to levels. Payroll very government

on the our rate, Xrd. Additionally, this we effect had year, August final in royalty which took step-up

well operating growth in is which sales in and good as as both inflation, generate G&A. occupancy far operating helped line leverage costs, The our news the outpaced significant that our our fixed in other

highest more margin. EBITDA year adjusted reached As headwinds than full ever result, we a offset our and expense

ahead, NOLAD’s all apples-to-apples EBITDA adjusted almost continuing comparable on are deliver grew EBITDA was XX% margins. we growth quarter more to than while focused Brazil's up healthy strong when adjusted divisions. maintaining SLAD’s grew the Looking on fourth strong an Profitability results. digits growth basis, we was rate and from a exclude double the up EBITDA XXXX step XX% on royalty also basis. across EBITDA

just mentioned, of in unlock Luis business. strong As and to are a start, rest our for continue the that off our year value XXXX is plans will to confident the we

for Luis update. investor main our highlights back to you of the

our has for one By recording event, covered The that and from each the should from robust download website. would like the to deals we the most for presentation America delivery, update now, it platform drive-thru are the of you and Arcos available through QSR Latin developed digital, during digital I investor in clear Dorados slide our industry. take be development.

period, a sales the versus penetration the Digital sales. year of prior reaching XX% as record quarter fourth total percentage in grew

significant We identified last sales. with also made progress year

During us the fourth to quarter, the shared meaning data. permission use XX% have data of compelling. And importantly, identified, sales given guests results their their and very were are

When increasing to per check higher sale, those we average drive identify frequency use by both communication insights personalized and we guests. with are and user average revenue a able to

have Delivery more the second in D, than since Sales XXXX. tripled

remained strong. XXXX, delivery channels in growth as Even on-premise incredibly normalized sales

up In prior XX% year which ever in an had versus impressive the quarter. highest we delivery total sales the fact, the was fourth quarter,

relatively the the competitors QSR channel, brand led nearly captured the sales growth of most industry significant has seen in delivery flat, McDonald's which has the to remain region. to share gains in main the While relative all sales market our

up the of about structural and D Sales third reflect in volume freestanding not now competitive the though attenuating, since Trends number XX% but it's drive-thru, XXXX portfolio. restaurant of channel our sheer restaurants. this even a are on-premise advantage just is in

customer we satisfaction market driver over to our dominant Guest to that drive-thru We've the experience highs. reducing now than brand sales and made several surprise more It's all-time accuracy frequency and of market half the last drive-thru to see improvements main entire the region. in speed growth. McDonald's times up where is experience accounts no the years took total for share have operational

teams in D and two results Development. and develop to builds. support operator acquire, record presentation, the restaurant in new having also last our knowledge other the and Strong have track has our No benefited one mentioned processes of investigate, managing region We from best-in-class our tools, more years expansion.

return the consumer sales potential Freestanding will most up from XX% companies are investment is with years restaurant from channels the unit three are over is McDonald's normal. benefit underpenetrated this last region. the sales a operate on long-term where openings so confident new why changed our brand in per the in ever. and in of region, we in This habits the have We and dollars multiple since highly than XXXX, US higher

from robust source funding positioned to are year about Back Strong operations to This to growth into be this plans years. tell coming of will our Mariano flow EBITDA investment as translated primary the last how we in and well. the expansion you capture potential. for cash

strong we addition, a In to position cash have support expansion. very

So we some range. leverage we the our net below ratio we may in near as The do to of increase expect remain but gross to not future. cash, well comfort debt the increase deploy modestly, expect excess it

good A received one with notch BB+, we ago, to investment upgraded grade. that stable the weeks debt a news rating couple below Fitch outlook, of our

the performance As strong profile. our debt Fitch noted upgrade, for operating the healthy basis and

Dorados free is other cash diversification flow increased positioned well to recently our challenging impacting mentioned environment navigate also Arcos Latin corporates. outlook. and In macroeconomic they Importantly, American that currency words, is noted, cash Fitch the other positive flow

and portfolio moving XXX with XXXX. growth. capital profitable the openings future are in exceeded remodels guidance of the accelerated also more We of capture to disciplined modernization Last the deployment than existing quickly experience with year's we

related be will XXXX, development go about XX% For should to expenditures to to About our total million. restaurants. CapEx $XXX XX% directly capital

The other IT mostly digital. XX% CapEx, to for be and nondevelopment XX% will

expect On to than to XX restaurants, freestanding. more the side, XX% development we again, XX open

to at format, restaurants exceed modernize XXX least portfolio the will existing the by with of end XX% to We plans of EOTF XXXX. the

required CapEx new the We make will also and investments CapEx base. platforms will in Nondevelopment us capabilities. introduce maintenance digital help our

will these be of Some customer-facing.

in upgrading infrastructure and existing offices. technological digital, invest and also will restaurants other We in

multiple its the provide Board with calendar shareholders Finally, Arcos Directors $X.XX of dividend of ongoing end as share part per be of quarter. each approved in installments of return, has to Dorados four cash of at paid sources a to commitment

be and in The $X.XX will first March, September payments final $X.XX the per share and payment December share. in three per will June be

Marcelo, you. to back

weeks few more visiting lot and website. the investor years, Over the future learn the platform it's six recipe about last We invite a recipe to platform, program by you update, you for pillars. about the reviewed heard our six us I ESG have our the industry-leading the during for and ago, future, talk

in earnings webcast. XXXX meet quarter our the again middle By we the first May for time, of

EUY, and published Once social update our again, We future the will will programs development for initiatives content platform. you XXXX by on have we'll impact report. the our and the and sustainable audited with it for contain progress in recipe commitment

our thoughts last to USR for will two last world's a will the I to wrap supported segment shifted. brand. Pralines And and in excellence Last a historic believe well. off a USR favorite with Arcos XXXX the the Dorados, the platform today business including advantages the certain I of have digital final the strong as operational was on up Latin results harvest's and competitive with in best freestanding America's the come, XXXX. have long-term many year restaurant financial years is This outlook for industry, portfolio year start changed years outstanding and sustainable largest we enjoy few very trends. for by XXXX, over

versus in brand Last markets than Guests increase market as year, of McDonald's to share more choosing in X we The across reinforce these Latin often an has us XXXX XXXX. visit main gained more with never stronger points been average perceptions all percentage by well. America.

last XX XX year, track. we of we fact, on improved brand attributes the In

We with our strategy. XD are capturing today's potential

have destination While we for on adapted meet to business guests the also to their a own be we seek always guests, terms. our

guests their strengthened The never us by competitive McDonald's choose experience. where before. to enjoy omni-channel allowed approach This market capture has has and like today's what, position to our allowing potential to how when,

as industry's the in you regions future. world the grow your as is underpenetrated team, best-in-class profitably remains there to our And the in We McDonald's Thank firmly Dorados or tools, and region most Latin QSR processes no will and positioned one we for believe, as other company of brand ongoing for see the QSR development with foreseeable tomorrow's potential America or industry. for the support. Arcos fast

to you start to session. Dan, over the Q&A

that to I In minimize get to one Marcelo. function two the so or presentation order the convey speakers. yourself Thanks, on left-hand them the webcast platform. can questions, that slides side so to can started, chat emit the and you of please read, Please access understand our

We your will now to questions. compile pause briefly

Okay.

The Byun and quarter of question in Omicron are change question, sales first good are today Melissa, considering part America. any the the Marcelo. And Thank is you, performing markets? part Melissa date from trends first How and you morning. seeing Bank of for across in comes Our first to impacts? underlying Carnival two

Comparable grew inflation company. everyone. XXXX, morning, blended to almost first in this strong months remains growth all They year Good sales the Okay. important of the three the of that strong. for notice remain And very times two it's two divisions. growth across

was the it as Just in case XXXX.

growth aggressive which our we comparable of another year then trends, that we based are leverage. in marketing plans markets, will above we So the our recent can these and on sales generate confident operational deliver expect well inflation

program. question there loyalty This indications learnings pilot Thank or that to program? on part and second from the the what our initial with any we share for broader timeline do And the Marcelo. for Thanks, MyMcDonald's rollout the Are you. Rewards can the was of Melissa's Luis. Great. has

Melissa. Yeah. Hello, Thanks Right. for the question.

get We from the our are that, share running what media customers is even surpassing And pilot and a in and our are customers I to Brazil. that feedback the massive is The without Prêto joining to can program objective launch expectations. in Ribeirão validate is assumptions operations. today

we And we from investor increasing frequency start to And be And up an the identified our this exposed they that. once learn the as to update, we're sales. new customers because are experience, increase in introduce those going are now new in program we Dan? see to as we functionalities. said able we to visit

the I Thanks, was that Melissa. so think received we Actually, only question far.

coming submit now. is you one remember questions. your can in Another And please that

your chat function via on submit can questions You webcast. the the

jump in Okay. the the busy here any additional a It looks second in chat food -- function. half and markets, XXXX. of in mentioned the like just [indiscernible]. It's obviously. in we're costs We on the not questions day getting I paper

expectation going How this the are operational Mariano? you pressures our mentioned these we margin or considering expansion XXXX? for one we for from and XXXX? And into seeing in That what's benefit contraction is leverage,

for and Gerono Thank question. you, thank Dan, you, the [ph],

respect focused on input We can line our seeing healthy idea better very cost clear. the of we plan the in we For XXXX, well and are efficiencies sustainable other to start margins maintain in volume business a and environment, capture we with as the believe top this is growth. and remain driving

sales first done have That's in of the in what And as XXXX. and deliver started maintaining and cost healthy in have to months channels. we we with continue are profile the as in to XXXX and, absolute committed plan already XXXX with we in We a trend, as done two growth a all very mentioned control. we EBITDA U.S. course, disciplined expense margin well a dollar healthy

And have is growth And think answered Marcelo. from does XXXX? actually Martin that. you, asked look have we do driver Great. store and [indiscernible] the Thanks just margins you is [indiscernible] questions, forecast think question of Capital, The for Mariano. I how next for back XXXX, And in main the to openings? I question that's we some any asked a

as case it markets, not plan. plan in and the months XXXX. but the was against revenue XXXX Okay. for in continue the in is our well the Yes, the base been and on through surpassing of our has different of focus plan comparable growth doing with first year, based of base the systemwide in couple are our that we And inflation, year that sales, case of that's the to the our XXXX, competitors existing only volume restaurant building this

of we for of XX% first-time year, XX planning new expansion. opened And to Last XX we XX open investments, both them XXXX, that, of our year peso in restaurants, units we this new on terms accelerated top to restaurants. are

our accelerating peso So, we growth. are of

on are And modernization XXX we of restaurants the format. the accelerating converting to of that, future approximately experience top program, our

And case with accelerated on the that, from be the openings restaurant we gaining year. the existing for and of that this same last new year, So, both traction, we base. restaurant are top will

Antonio one is tougher well year? environment of do a Thanks, as Marcelo. Barclays. the and And where we from competition next you for says, He expect hello, the think I Great. Hernandez throughout

kind environment the half when we the second Well, pandemic. we faced particularly related any of face same in during the we expect XXXX, with restrictions didn't

on and our So, basically McDonald's QSR some research based public industry information, growth brand driven by sales. has been

So, gains the pandemic. QSR in during the general, sector, the is keeping equal

that divisions grow to main important case, in all [indiscernible] within improvements it's And our in this to market in of our terms we markets. three In all mention market have continue and share share. been

all be the maximizes XXXX. across very plan And during experience been have brand built sustain why to value menu. I and preference pricing good the our continues prudent. XXXX, and strategy our the increases that we that proposition market these in been our case think has and brand So, That's the addressable to efforts

Thank And for And Great. the comes from The store you. payback he Mariano. asks next typical a new was follow-up you, what's openings, that [indiscernible]. period? on question

question. payback that related to to can thank openings for And but on-premise to the are on channels is are at improving. the we well is ROI that five Perfect. and the even off-premise you the Typically, as is between what sales also highs, that all the we Jin right the the return sales all-time three channels years, mention and period now --

openings. So are happy we seeing we are returns for very with the the

are sales if improvement Mariano. Thanks, the we're after update modernized. from that from been Yes, seeing [indiscernible]. -- they've restaurants we can follow-up A us on

Luis. So I'll give this one you, to

is counter includes the of to sales is these The impact self-order are seeing average so that above not normal profitability XX seeing well. main modernizations kiosks growth what but sales, that and of front through rest coming the better XX% generate XX% only Hello, restaurants. check, the of today to we're the that better of Okay. kiosks we're The [indiscernible]. that volume here the -- as higher lift

by of footprint our of the Just as OTF. XX% XXXX, reminder, a today, end

Yeah. lift the have Most after restaurants of to single-digit sales a high modernization. the mid-single

So in are made through based frequency. check the before, mainly the yields. orders mentioned improvement Luis as in average the when the And digital increasing

Great.

comes Athena for what I'd you. one the drove a year, and year is Congratulations net stronger great and Mariano. like to Our result interest for next know to Capital. thank for presentation. from the Thank question are? from last what expectations Gabriel you Axel than our you That the

cash for that were Gabriel, seen Perfect. the a XXXX see sheet used to. have we and we income December, rate higher much in Thanks, throughout high but the can the in we you balance interest This from balance benefited question. year, XXXX, at those XXst than favorable environment drove that interest figures

CapEx did our to on we but excess also investing expect as management liability decreasing debt. the initiatives that that income for our cash we We we we in as continue And our our mentioned. in investments, interest invest deploy we already see should XXXX, cash,

Excellent. for the with the Until May the We for us speaking Thanks, us to on today. have everyone, webcast. stay earnings joining look forward of session XXXX end and great to and at Thanks, Mariano. again our day. middle for actually That the again, of safe, Q&A then, interest you a brings today. quarter first