- Systemwide comparable sales1 grew 56.6% and rose 16.5% on a
2-year basis, including positive 2-year comparable sales growth in
all divisions
- Total Revenues1 reflected a more normalized operating
environment, rising 60.1% in constant currency versus 2020 and
24.0% on a 2-year constant currency basis
- Drive-thru and Delivery together contributed 49% to
systemwide sales1, while Digital generated 36% of total sales even
with improved on-premise sales performance
- Consolidated Adjusted EBITDA1 reached $89.6 million, more
than three times higher than the prior year and up 54.8% versus the
3Q19 in constant currency
- Net Income1 of $25.2 million, or $0.12 per share, compared
with a $(0.14) per share loss in the prior year quarter
- Net Debt to Adjusted EBITDA declined to 2.0x
Arcos Dorados Holdings, Inc. (NYSE: ARCO) (“Arcos Dorados” or
the “Company”), Latin America’s largest restaurant chain and the
world’s largest independent McDonald’s franchisee, today reported
unaudited results for the three and nine month periods ended
September 30, 2021.
Third Quarter 2021 Highlights – Excluding Venezuela
- Systemwide comparable sales increased 56.6% and were up 16.5%
on a 2-year basis, with positive 2-year comparable sales growth in
all divisions.
- Consolidated1 revenues totaled $723.4 million, rising 55.3% in
US dollars or 60.1% on a constant currency basis versus 2020, and
24.0% in constant currency on a 2-year basis.
- Consolidated1 Adjusted EBITDA of $89.6 million more than
tripled the prior-year result and rose 54.8% versus the 3Q19 in
constant currency.
- Consolidated1 Adjusted EBITDA margin reached 12.4% in the
quarter, benefitting from operating leverage in all line items
versus 2020, and up 220 basis points versus 2019.
- Basic net income per share1 was $0.12, compared to a basic net
loss per share1 of $(0.14) in the prior year quarter.
- Net Debt to Adjusted EBITDA leverage ratio declined to 2.0x on
September 30, 2021.
- Gross restaurant openings reached 41 new units through
September, including 36 free-standing units and 34 new restaurants
in Brazil.
1Excluding the results of the Venezuelan operation.
For definitions, please refer to page 14
of this document.
“We are beginning to harvest the results of the long-term,
strategic investments we made over the last several years as well
as the efficiencies we built into the business in the last eighteen
months. This was among the best third quarter results in the
Company’s history, demonstrating once again that McDonald’s is the
region’s favorite QSR brand and Arcos Dorados is its strongest
restaurant operator,” said Marcelo Rabach, Chief Executive Officer
of Arcos Dorados.
“Brand Trust is near its highest-ever levels, thanks to the
efforts we made to take care of our people, guests and the
communities we serve. Whether it was protecting our employees’
sources of income or offering Latin America’s safest restaurant
experience through the McProtegidos (McSafe) protocols, we built
trust with all stakeholders. The Recipe for the Future ESG
(Environmental, Social and Governance) platform will ensure that we
continue using our Scale for the Good of our communities and the
planet.”
“Arcos Dorados operates the region’s largest free-standing
restaurant portfolio, which we built deliberately over the course
of decades, to ensure our ability to adapt to changes in guest
needs and preferences. As we look ahead, we feel confident that we
now enjoy structural competitive advantages that cannot be easily
matched and that will be further leveraged by the Three D’s
strategy of Drive-thru, Delivery and Digital to accelerate sales
and profitability performance for many years to come,” he
concluded.
Third Quarter 2021
Results
Consolidated
Figure 1. AD Holdings Inc Consolidated: Key Financial Results(In
millions of U.S. dollars, except as noted) 3Q20(a)
CurrencyTranslation -Excl.Venezuela(b)
ConstantCurrencyGrowth -Excl.Venezuela(c)
Venezuela(d) 3Q21(a+b+c+d) % As Reported
Total Restaurants (Units)
2,257
2,263
Sales by Company-operated Restaurants
447.0
(23.4)
269.1
1.4
694.1
55.3%
Revenues from franchised restaurants
19.8
0.6
11.2
0.2
31.8
60.2%
Total Revenues
466.8
(22.8)
280.2
1.6
725.8
55.5%
Adjusted EBITDA
25.0
(0.8)
64.6
0.5
89.3
256.6%
Adjusted EBITDA Margin
5.4%
12.3%
Net income (loss) attributable to AD
(29.6)
(1.5)
54.8
0.9
24.7
NM
No. of shares outstanding (thousands)
208,951
210,478
EPS (US$/Share)
(0.14)
0.12
(3Q21 = 3Q20 + Currency Translation Excl.
Venezuela + Constant Currency Growth Excl. Venezuela + Venezuela).
Refer to “Definitions” section for further detail.
Arcos Dorados’ consolidated results may continue to be impacted
by Venezuela’s macroeconomic volatility, including the ongoing
hyperinflationary environment, which has historically led the
Company to record significant non-cash accounting charges to
operations in this market. As such, the discussion of the Company’s
operating performance continues to be focused on consolidated
results that exclude Venezuela.
Notable items in the Adjusted EBITDA reconciliation
Included in Adjusted EBITDA: Other
operating income / (expense) includes a $6.5 million net tax credit
in Brazil in the third quarter of 2021.
Excluded from Adjusted EBITDA:
Reorganization and optimization expenses of $7.2 million within the
Company’s General & Administrative expenses (G&A), as
described in the “Recent Developments” on page 13, are excluded
from the third quarter of 2021 result. Additionally, the third
quarter of 2020 excluded larger sums related to an insurance
recovery in the SLAD division and write-offs of property and
equipment in several markets.
Third quarter net income attributable to the Company totaled
$24.7 million, compared to a net loss of $29.6 million in the same
period of 2020. Arcos Dorados’ recorded earnings of $0.12 per share
in the third quarter of 2021 compared to a loss of $(0.14) per
share in the corresponding 2020 period. Total weighted average
shares for the third quarter of 2021 amounted to 210,478,322
compared to 208,951,412 in the prior year’s quarter.
Consolidated – excluding Venezuela
3Q20(a) CurrencyTranslation(b)
ConstantCurrencyGrowth(c) 3Q21(a+b+c) % US
Dollars % ConstantCurrency Total Restaurants
(Units)
2,143
2,161
Sales by Company-operated Restaurants
446.2
(23.4)
269.1
691.9
55.1%
60.3%
Revenues from franchised restaurants
19.7
0.6
11.2
31.5
59.5%
56.6%
Total Revenues
465.9
(22.8)
280.2
723.4
55.3%
60.1%
Systemwide Comparable SalesSystemwide Comparable Sales, 2-year
basis 56.6%16.5%
Adjusted EBITDA
25.8
(0.8)
64.6
89.6
247.1%
250.2%
Adjusted EBITDA Margin
5.5%
12.4%
Net income (loss) attributable to AD
(28.2)
(1.5)
54.8
25.2
NM
NM
No. of shares outstanding (thousands)
208,951
210,478
EPS (US$/Share)
(0.14)
0.12
Excluding Arcos Dorados’ Venezuelan operation, total revenues in
US dollars increased 55.3%, or 60.1% in constant currency, versus
the prior year period. These results reflect the continued
normalization of operating conditions across Latin America and the
Caribbean as well as the Company’s significant competitive
advantages, including brand trust, operational excellence,
restaurant portfolio, drive-thru and delivery penetration and
digital capabilities, among others.
As of the date of this press release, all the Company’s
restaurants are open and more than 98% are operating all sales
segments, although operating conditions are still not yet fully
normalized.
Systemwide comparable sales for the third quarter increased
56.6% and were up 16.5% on a 2-year basis, including positive
results in all divisions. The Drive-thru and Delivery sales
segments demonstrated strong constant currency growth of about 12%
and 43%, respectively, on top of robust growth in the prior year
and despite the steady recovery in mall stores and the Company’s
on-premise sales segments: front counter, dessert centers and
McCafé. As a result, the contribution from these two segments
remained above the Company’s expectations for 2021. Taken together,
Drive-thru and Delivery generated 49% of systemwide sales in the
third quarter of 2021. Digital sales, which include Delivery,
Mobile App and self-order kiosks, contributed 36% of sales in the
quarter.
Mc Donald’s Brand trust in Latin America and the Caribbean was
at very high levels in the quarter thanks to the ongoing
McProtegidos (McSafe) Program in the Company’s restaurants as well
as its robust Recipe for the Future ESG initiatives. Arcos Dorados
also operates, by a large margin, the most extensive portfolio of
free-standing restaurants in the region, allowing it to not only
quickly adapt to evolving guest preferences but also outperform in
more challenging economic and operating environments in the
future.
Adjusted EBITDA – Excluding Venezuela ($ million)
Consolidated Adjusted EBITDA of $89.6 million reflects the
benefit of normalized sales levels, which generated operating
leverage in all cost and expense line items compared with the prior
year period. Consolidated Adjusted EBITDA margin was up 6.9
percentage points versus the third quarter of 2020, or 6.0
percentage points when adjusted for a $6.5 million net tax credit
in Brazil. All divisions also met or exceeded pre-pandemic margin
levels, with the Company’s Consolidated Adjusted EBITDA margin up
2.2 percentage points, or 1.3 percentage points excluding the net
tax credit, versus the third quarter of 2019.
Consolidated General & Administrative (G&A) expenses
increased by 39.4% versus the third quarter of 2020 primarily due
to the aforementioned reorganization and optimization expenses and
a lower base of comparison in the prior year when the Company
implemented extraordinary cost saving measures to stabilize its
operating cash flow at the beginning of the pandemic. Excluding the
reorganization charges, G&A increased by 20.2% versus the third
quarter of 2020 but was down 9.7% versus the third quarter of
2019.
Non-operating Results – excluding Venezuela
Arcos Dorados’ non-operating results for the third quarter
included a $14.8 million non-cash foreign currency exchange loss,
compared to a non-cash loss of $8.6 million in the same period of
2020. Net interest expense was $1.0 million lower year-over-year.
The Company recorded an income tax benefit of $1.4 million in the
third quarter, compared to income tax expense of $7.1 million in
the prior-year period.
Third quarter net income attributable to the Company totaled
$25.2 million, compared to a net loss of $28.2 million in the prior
year period. Earnings per share were $0.12 in the third quarter
2021 compared to loss per share of $(0.14) in the prior year
quarter.
Analysis by Division:
Brazil Division
3Q20(a) CurrencyTranslation(b)
ConstantCurrencyGrowth(c) 3Q21(a+b+c) % As
Reported % ConstantCurrency Total Restaurants
(Units)
1,023
1,052
Total Revenues
192.4
7.5
75.3
275.2
43.0%
39.1%
Systemwide Comparable SalesSystemwide Comparable Sales, 2-year
basis 36.2%0.7%
Adjusted EBITDA
21.5
1.5
29.2
52.2
142.7%
135.8%
Adjusted EBITDA Margin
11.2%
19.0%
7.8%
Brazil’s revenues reached $275.2 million in the quarter,
supported by 36.2% growth in systemwide comparable sales. On a
2-year basis, systemwide comparable sales in the quarter were up
0.7%, including mid-single-digit growth in September. Restaurant
traffic improved across all formats as mobility increased with the
reduction of government restrictions and this trend continued into
October, which generated almost double-digit, 2-year systemwide
comparable sales growth.
Marketing activities in Brazil during the third quarter
continued to focus on the “Three D’s” strategy around Drive-thru,
Delivery and Digital as the market enters its Full Revival phase.
The Company increased momentum in the Drive-thru and Delivery
segments while building on its market-leading Digital presence. The
McDonald’s App surpassed the 30 million downloads mark in Brazil
and has a nearly 2 to 1 advantage in active users in the country,
according to App Annie. Taken together, Digital channels generated
45% of the division’s systemwide sales in the quarter.
New product launches based on the Brand’s unique flavors
included a new line of McChicken sandwiches and allowing guests to
purchase a bottle of the popular Tasty sauce to take home. Finally,
the Company reinforced its Commitment to Families ESG pillar
through a massive media campaign to communicate the elimination of
all artificial colors and flavors from its kids menu as well as the
first-ever 100% plastic-free Happy Meal toy collection.
As reported Adjusted EBITDA in the division reached $52.2
million in the quarter, resulting in a 7.8 percentage point
improvement in Adjusted EBITDA margin versus the prior year
quarter. Flat F&P costs together with operating leverage in all
other expense line items drove the positive margin performance.
Similar to the second quarter of 2021, this year’s third quarter
result included a net tax credit due to the exclusion of ICMS from
the Pis/Cofins calculation base. Excluding this $6.5 million net
tax credit, the division’s Adjusted EBITDA margin was up 5.4
percentage points versus the same period in 2020 and matched the
16.6% margin generated in the third quarter of 2019.
NOLAD
Figure 4. NOLAD Division: Key Financial Results(In millions of
U.S. dollars, except as noted) 3Q20(a)
CurrencyTranslation(b) ConstantCurrencyGrowth(c)
3Q21(a+b+c) % As Reported % ConstantCurrency
Total Restaurants (Units)
513
507
Total Revenues
68.3
4.0
41.7
114.0
66.9%
61.1%
Systemwide Comparable SalesSystemwide Comparable Sales, 2-year
basis 62.2%5.1%
Adjusted EBITDA
0.7
0.3
10.8
11.7
1489.5%
1460.0%
Adjusted EBITDA Margin
1.1%
10.3%
9.2%
As reported revenues were $114 million, notably already higher
than the $110 million generated in the third quarter of 2019, with
strong performances in Mexico and Panama overcoming tightened
government-imposed operating restrictions in Costa Rica during the
quarter. Systemwide comparable sales rose 62.2% and 5.1% on a
2-year basis, with double-digit 2-year growth in September
2021.
Marketing activities in the quarter continued to focus on core
products. Mexico executed a successful “Quarter Pounder Lovers”
campaign with different versions of this iconic sandwich. The
campaign's communication was built on craving and taste appeal,
growing unit volume by 70% in the quarter. The Happy Meal included
Space Jam: A New Legacy and also benefitted from the Company’s
exclusive access to Disney licenses, including Disney Princesses
and Star Wars, exceeding sales expectations and driving record
sales in the family business. Drive-thru sales remained strong in
the division while Delivery accelerated sales across all three
markets, achieving a sales record in the quarter.
As reported Adjusted EBITDA reached $11.7 million in the third
quarter compared with only $0.7 million in the prior year quarter
and $10.7 million in the third quarter of 2019. Third quarter
Adjusted EBITDA margin rose 920 basis points against 2020 and was
also up 50 basis points versus 2019. The 2019 result included the
refranchising of some restaurants in Mexico, which added 150 basis
points to Adjusted EBITDA margin in the period. Excluding this
benefit, third quarter 2021 Adjusted EBITDA margin was 200 basis
points higher than the same period in 2019.
SLAD
Figure 5. SLAD Division: Key Financial Results(In millions of
U.S. dollars, except as noted) 3Q20(a)
CurrencyTranslation(b) ConstantCurrencyGrowth(c)
3Q21(a+b+c) % As Reported % ConstantCurrency
Total Restaurants (Units)
397
397
Total Revenues
97.8
(33.5)
138.5
202.8
107.3%
141.6%
Systemwide Comparable SalesSystemwide Comparable Sales, 2-year
basis 135.2%56.7%
Adjusted EBITDA
2.7
(4.2)
22.5
21.0
680.6%
837.9%
Adjusted EBITDA Margin
2.8%
10.4%
7.6%
As reported revenues reached $202.8 million, up from $195.3
million in the third quarter of 2019, with a particularly strong
performance in Chile and inflation-aided growth in Argentina. As
reported results were partly offset by the approximately 25%
year-over-year average depreciation of the Argentine peso against
the US dollar. Systemwide comparable sales rose 135.2% and 56.7% on
a 2-year basis.
Third quarter marketing activities in SLAD included the launch
of the Premium Grand Tasty sandwiches in Argentina and Chile,
quickly capturing double-digit share of total meals sold in those
two countries. The dessert category improved its performance in the
quarter, also growing double-digits in sales, with the launch of
the McFlurry Trencito in Chile. The family business benefitted from
the launch of the highly-anticipated movie Space Jam: A New Legacy,
supporting strong Happy Meal sales in all of SLAD’s markets.
The Drive Thru VIP loyalty program, which is executed entirely
through the Company’s Mobile App, drove increased frequency among
its 1.3 million registered users in SLAD, and more than 3.2 million
registered users across all Arcos Dorados markets. The Own Delivery
platform in Argentina also gained traction, with encouraging growth
in average orders per restaurant during the quarter.
As reported Adjusted EBITDA totaled $21.0 million, compared with
$2.7 million in the prior year and $18.9 million in the third
quarter of 2019. Operating leverage in all cost and expense line
items drove the improved profitability, which included a 7.6
percentage points higher margin versus 2020 and 0.7 percentage
points higher versus 2019.
Caribbean Division
Figure 6. Caribbean Division: Key Financial Results(In millions
of U.S. dollars, except as noted) 3Q20(a)
CurrencyTranslation -Excl.Venezuela(b)
ConstantCurrencyGrowth -Excl.Venezuela(c)
Venezuela(d) 3Q21(a+b+c+d) % AsReported
Total Restaurants (Units)
324
307
Total Revenues
108.3
(0.8)
24.7
1.6
133.8
23.6%
Adjusted EBITDA
11.0
(0.1)
4.6
0.5
16.0
44.9%
Adjusted EBITDA Margin
10.2%
11.9%
1.8%
The Caribbean division’s results may continue to be impacted by
Venezuela’s macroeconomic volatility, including the ongoing
hyperinflationary environment, which has historically led the
Company to record significant non-cash accounting charges to
operations in this market. As such, the discussion of the Caribbean
division’s operating performance focuses on results that exclude
the Company’s operations in this country.
Caribbean Division – excluding Venezuela
Figure 7. Caribbean Division - Excluding Venezuela: Key
Financial Results(In millions of U.S. dollars, except as noted)
3Q20(a) CurrencyTranslation(b)
ConstantCurrencyGrowth(c) 3Q21(a+b+c) % US
Dollars % ConstantCurrency Total Restaurants
(Units)
210
205
Total Revenues
107.4
(0.8)
24.7
131.3
22.3%
23.0%
Systemwide Comparable SalesSystemwide Comparable Sales, 2-year
basis 24.2%27.9%
Adjusted EBITDA
11.8
(0.1)
4.6
16.2
37.8%
38.7%
Adjusted EBITDA Margin
11.0%
12.4%
1.4%
Revenues in the Caribbean division, excluding Venezuela,
increased 22.3% in US dollars, boosted by a 24.2% increase in
systemwide comparable sales. Strong, post-pandemic rebounds in
Colombia and Puerto Rico drove the result, again supported by the
Drive-thru and Delivery segments as well as the implementation of a
new eCommerce platform that enhanced the Company’s digital
capabilities in Colombia.
Marketing activities in the Caribbean during the quarter
included the launch of the Signature Chicken Sandwich “Spicyracha”
in Colombia. Two months after the launch, sales remain above
expectations as the Company continues its journey to grow the
chicken category. Strong Happy Meal licenses also helped drive
traffic in the quarter while strengthening the Brand’s bond with
families.
The Caribbean, which already benefits from the Company’s highest
penetration of Drive-thru restaurants, accelerated Delivery sales
with special promotions to support the Own Delivery channel in
Colombia.
As reported Adjusted EBITDA reached $16.2 million, compared with
$11.8 million in the prior-year quarter and $4.9 million in the
third quarter of 2019. Puerto Rico and Colombia were the main
contributors to the year-over-year improvement. F&P costs and
G&A expenses benefitted most from the operational leverage
generated by the higher sales levels. Adjusted EBITDA margin
reached 12.4%, an improvement of 1.4 percentage points versus prior
year quarter, or 7.3 percentage points higher than the third
quarter of 2019.
New Unit Development
Figure 8. Total Restaurants (eop)* September2021
June2021 March2021 December2020
September2020 Brazil
1,052
1,044
1,030
1,020
1,023
NOLAD
507
507
507
507
513
SLAD
397
395
391
391
397
Caribbean
307
309
314
318
324
TOTAL
2,263
2,255
2,242
2,236
2,257
* Considers Company-operated and franchised restaurants at
period-end
Figure 9. Footprint as of September 30, 2021
Store Type* TotalRestaurants Ownership
McCafes DessertCenters FS & IS MS &
FC CompanyOperated Franchised Brazil
589
463
1,052
632
420
91
2,005
NOLAD
315
192
507
354
153
14
543
SLAD
233
164
397
350
47
128
393
Caribbean
244
63
307
265
42
32
310
TOTAL
1,381
882
2,263
1,601
662
265
3,251
* FS: Free-Standing; IS: In-Store; MS: Mall Store; FC: Food Court.
Arcos Dorados opened 12 new restaurants during the third quarter
of 2021, including 10 new free-standing units in Brazil. For the
year-to-date as of September 30, 2021, the Company opened 41 new
restaurants, including 36 free-standing units and 34 new
restaurants in Brazil. During the twelve-month period ended
September 30, 2021, Arcos Dorados opened 42 new restaurants. At the
end of the third quarter, the Company had 807 Experience of the
Future Restaurants.
Balance Sheet & Cash Flow Highlights
Figure 10. Consolidated Financial Ratios(In thousands of U.S.
dollars, except ratios)
September 30
December 31
2021
2020
Cash & cash equivalents (i)
206,904
165,989
Total Financial Debt (ii)
652,477
673,232
Net Financial Debt (iii)
445,573
507,243
Total Financial Debt / LTM Adjusted EBITDA ratio
3.0
9.9
Net Financial Debt / LTM Adjusted EBITDA ratio
2.0
7.4
(i) Cash & cash equivalents includes Short-term investment
(ii)Total financial debt includes long-term debt, short-term debt,
and derivative instruments (including the asset portion of
derivatives amounting to $117.7 million and $122.6 million as a
reduction of financial debt as of September 30, 2021 and December
31, 2020, respectively). (iii) Total financial debt less cash and
cash equivalents.
Cash and cash equivalents were $206.9 million and total
financial debt (including the value of derivative instruments) was
$652.5 million, as of September 30, 2021. Net debt (Total Financial
Debt minus Cash and cash equivalents) was $445.6 million.
During the second quarter of 2021, the Company monetized the
value of certain of its derivative instruments, generating $23.2
million, which it used together with cash on hand during the second
and third quarters of 2021, to repurchase $13.8 million of its
outstanding 2023 Senior Notes and $17.4 million of its outstanding
2027 Senior Notes.
The Net Debt to Adjusted EBITDA leverage ratio improved to 2.0x
as of the end of the quarter, due to the increased
trailing-twelve-month Adjusted EBITDA, higher cash balance and
lower total financial debt. This leverage ratio exceeds the
Company’s guidance for the year-end 2021.
Net cash generated from operating activities for the nine months
ended September 30, totaled $138.6 million, while cash used in net
investing activities totaled $68.5 million. Capital expenditures
totaled $73.1 million, compared with $64.8 million in the previous
year’s period. Net cash used in financing activities was $15.4
million.
Recent Developments
Divisional Reorganization
Effective October 1, 2021, the Company made certain changes in
its internal management structure, in order to gain operational
agility, leading the Company to reorganize its operation into three
geographic divisions, as follows: (i) Brazil (ii) the South Latin
American division, or “SLAD,” which is now comprised of Chile,
Argentina, Colombia, Ecuador, Peru, Uruguay, Venezuela, Trinidad,
Aruba and Curaçao (iii) the North Latin American division, or
“NOLAD,” which is now comprised of Mexico, Puerto Rico, Costa Rica,
Panama, Martinique, Guadeloupe, French Guyana, St. Croix and St.
Thomas. In accordance with ASC 280 Segment Reporting, the Company
will begin providing information based on the revised structure of
its geographic divisions with its report for the annual period
ended December 31, 2021.
Appointment of New Chief Technology
Officer
Effective October 1, 2021, Magdalena Gonzalez Victorica became
the Company’s new Chief Technology Officer (“CTO”). Mrs. Gonzalez
Victorica was previously head of the Company’s Digital Factory
(“ADvance”), which was created to accelerate its digital
transformation, where she led the successful expansion of its
Delivery and Digital capabilities. As CTO, she is now responsible
for the Company’s information technology infrastructure and
data/analytics efforts in addition to continuing to lead ADvance.
Mrs. Gonzalez Victorica originally joined the Company’s Finance
Department in Argentina in September 1999 and has been involved in
or led projects related to Technology and the Shared Services
Center. Prior to her role as head of ADvance, she led the Company’s
Experience of the Future (EOTF) restaurant modernization
initiative. Mrs. Gonzalez Victorica holds a Bachelor’s Degree in
Accounting from the Universidad Católica Argentina.
Third Quarter 2021 Earnings
Webcast
A webcast to discuss the information contained in this press
release will be held today, November 10, 2021, at 10:00 a.m. ET. In
order to access the webcast, members of the investment community
should follow this link Arcos Dorados Third Quarter 2021 Results
Webcast.
A replay of the webcast will be available later today through
February 10, 2022 in the investor section of the Company’s website:
www.arcosdorados.com/ir.
Definitions:
Systemwide comparable sales growth and
Systemwide comparable sales growth 2-year basis: refers to
the change, measured in constant currency, in our Company-operated
and 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) or for twenty-five months or longer
(2-year basis). While sales by our franchisees are not recorded as
revenues by us, we believe the information is important in
understanding our financial performance because these sales are the
basis on which we calculate and record franchised revenues and are
indicative of the financial health of our franchisee base.
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 (in this release, this could be calculated
a one-year basis when comparing with the previous year or on a
2-year basis when comparing with the same period in 2019). 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, (ii) constant
currency growth. (i) Currency translation reflects the impact on
growth of the appreciation or depreciation of the local currencies
in which we conduct our business against the US dollar (the
currency in which our financial statements are prepared). (ii)
Constant currency growth reflects the underlying growth of the
business excluding the effect from currency translation.
Excluding Venezuela basis: due to
the ongoing political and macroeconomic uncertainty prevailing in
Venezuela, and in order to provide greater clarity and visibility
on the Company’s financial and operating overall performance, this
release focuses on the results on an “Excluding-Venezuela” basis,
which is non-GAAP measure.
Adjusted EBITDA: In addition to
financial measures prepared in accordance with the general accepted
accounting principles (GAAP), within this press release and the
accompanying tables, we use a non-GAAP financial measure titled
‘Adjusted EBITDA’. We use Adjusted EBITDA to facilitate operating
performance comparisons from period to period.
Adjusted EBITDA is defined as our 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 in our statement of income:
gains from sale or insurance recovery of property and equipment;
write-offs of property and equipment; impairment of long-lived
assets and goodwill; and reorganization and optimization plan
expenses.
We believe 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 financial charges),
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 11 of this
earnings release includes a reconciliation for Adjusted EBITDA. For
more information, please see Adjusted EBITDA reconciliation in Note
9 of our financial statements (6-K Form) filed today with the
S.E.C.
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
2,250 restaurants, operated by the Company or by its
sub-franchisees, that together employ over 90 thousand people (as
of 09/30/2021). 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 Scale for
Good 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 affordable platform, its expectation for revenue
generation and its outlook and guidance for 2021. 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.
Third Quarter and First Nine Months 2021 Consolidated
Results
Figure 11. Third Quarter 2021 Consolidated Results(In thousands
of U.S. dollars, except per share data) For Three Months
ended For Nine Months ended September 30,
September 30,
2021
2020
2021
2020
REVENUES Sales by Company-operated restaurants
694,079
446,977
1,798,060
1,314,221
Revenues from franchised restaurants
31,757
19,821
81,588
62,606
Total Revenues
725,836
466,799
1,879,648
1,376,827
OPERATING COSTS AND EXPENSES Company-operated restaurant expenses:
Food and paper
(244,527)
(158,289)
(640,541)
(471,791)
Payroll and employee benefits
(125,228)
(95,543)
(349,493)
(301,527)
Occupancy and other operating expenses
(204,293)
(144,338)
(565,226)
(458,060)
Royalty fees
(35,623)
(26,402)
(92,521)
(77,071)
Franchised restaurants - occupancy expenses
(13,342)
(10,825)
(37,321)
(30,776)
General and administrative expenses
(53,522)
(38,561)
(147,840)
(124,608)
Other operating income / (expense), net
1,442
3,100
15,046
(1,466)
Total operating costs and expenses
(675,093)
(470,858)
(1,817,896)
(1,465,299)
Operating income / (loss)
50,743
(4,059)
61,752
(88,472)
Net interest expense
(14,028)
(15,024)
(39,735)
(44,252)
(Loss) / Incomefrom derivative instruments
(809)
79
(6,190)
(383)
Gain from securities
0
5,118
0
18,070
Foreign currency exchange results
(14,909)
(8,555)
(9,090)
(44,995)
Other non-operating income / (expenses), net
2,439
(111)
2,219
(132)
Income / (Loss) before income taxes
23,436
(22,552)
8,956
(160,164)
Income tax expense
1,439
(7,049)
(8,749)
(11,344)
Net income / (loss)
24,875
(29,601)
207
(171,508)
Net (loss) / income attributable to non-controlling interests
(170)
(10)
(282)
20
Net income / (loss) attributable to Arcos Dorados Holdings
Inc.
24,705
(29,611)
(75)
(171,488)
Earnings per share information ($ per share): Basic net
income / (loss) per common share
$ 0.12
$ (0.14)
$ (0.00)
$ (0.83)
Weighted-average number of common shares outstanding-Basic
210,478,322
208,951,412
210,355,905
207,757,910
Adjusted EBITDA Reconciliation Operating income / (loss)
50,743
(4,059)
61,752
(88,472)
Depreciation and amortization
31,032
30,841
91,194
96,463
Operating charges excluded from EBITDA computation
7,512
(1,746)
7,428
2,660
Adjusted EBITDA
89,287
25,036
160,374
10,651
Adjusted EBITDA Margin as % of total revenues
12.3%
5.4%
8.5%
0.8%
Third Quarter and First Nine Months 2021 Consolidated Results
– Excluding Venezuela
Figure 12. Third Quarter 2021 Consolidated Results - Excluding
Venezuela(In thousands of U.S. dollars, except per share data)
For Three Months ended For Nine Months ended
September 30, September 30,
2021
2020
2021
2020
REVENUES Sales by Company-operated restaurants
691,910
446,182
1,793,528
1,311,716
Revenues from franchised restaurants
31,451
19,724
80,944
62,296
Total Revenues
723,361
465,906
1,874,472
1,374,012
OPERATING COSTS AND EXPENSES Company-operated restaurant expenses:
Food and paper
(243,813)
(158,259)
(639,313)
(471,515)
Payroll and employee benefits
(124,966)
(95,374)
(348,794)
(300,714)
Occupancy and other operating expenses
(203,447)
(143,624)
(562,860)
(455,767)
Royalty fees
(35,624)
(26,402)
(92,521)
(77,071)
Franchised restaurants - occupancy expenses
(13,259)
(10,760)
(37,100)
(30,489)
General and administrative expenses
(52,714)
(37,822)
(145,568)
(122,347)
Other operating income / (expense), net
1,577
3,813
16,183
1,207
Total operating costs and expenses
(672,247)
(468,429)
(1,809,973)
(1,456,695)
Operating income / (loss)
51,115
(2,522)
64,499
(82,682)
Net interest expense
(14,030)
(15,024)
(39,738)
(44,255)
(Loss) / Income from derivative instruments
(809)
79
(6,190)
(383)
Gain from securities
0
5,118
0
18,070
Foreign currency exchange results
(14,804)
(8,634)
(9,317)
(45,185)
Other non-operating income / (expenses), net
2,441
(111)
2,221
(132)
Income / (Loss) before income taxes
23,912
(21,095)
11,475
(154,567)
Income tax expense
1,439
(7,123)
(8,733)
(11,403)
Net income / (loss)
25,352
(28,218)
2,742
(165,970)
Net (loss) / income attributable to non-controlling interests
(170)
(10)
(282)
20
Net income / (loss) attributable to Arcos Dorados Holdings
Inc.
25,182
(28,228)
2,460
(165,950)
Earnings per share information ($ per share): Basic net
income / (loss) per common share
$ 0.12
$ (0.14)
$ 0.01
$ (0.80)
Weighted-average number of common shares outstanding-Basic
210,478,322
208,951,412
210,355,905
207,757,910
Adjusted EBITDA Reconciliation Operating income / (loss)
51,115
(2,522)
64,499
(82,682)
Depreciation and amortization
30,912
30,350
90,737
95,284
Operating charges excluded from EBITDA computation
7,541
(2,023)
7,376
1,551
Adjusted EBITDA
89,568
25,805
162,613
14,153
Adjusted EBITDA Margin as % of total revenues
12.4%
5.5%
8.7%
1.0%
Third Quarter and First Nine Months 2021 Results by
Division
Figure 13. Third Quarter 2021 Consolidated Results by
Division(In thousands of U.S. dollars) 3Q YTD
Three Months ended % Incr. Constant Nine
Months ended % Incr. Constant September
30, / Currency September 30, /
Currency
2021
2020
(Decr) Incr/(Decr)%
2021
2020
(Decr) Incr/(Decr)% Revenues Brazil
275,229
192,402
43.0%
39.1%
704,219
609,017
15.6%
21.7%
Caribbean
133,783
108,257
23.6%
NA
369,820
261,110
41.6%
NA Caribbean - Excl. Venezuela
131,307
107,364
22.3%
23.0%
364,644
258,292
41.2%
39.5%
NOLAD
114,047
68,326
66.9%
61.1%
309,989
216,302
43.3%
40.2%
SLAD
202,778
97,814
107.3%
141.6%
495,620
290,398
70.7%
99.1%
TOTAL
725,837
466,799
55.5%
NA
1,879,648
1,376,827
36.5%
NA TOTAL - Excl. Venezuela
723,361
465,906
55.3%
60.1%
1,874,472
1,374,010
36.4%
44.3%
Operating Income
(loss) Brazil
36,925
7,676
381.0%
367.2%
57,100
(2,370)
NM
NM
Caribbean
11,062
4,959
123.1%
NA
21,632
(5,244)
NM
NA Caribbean - Excl. Venezuela
11,437
6,496
76.1%
77.3%
24,379
544
4383.6%
4284.6%
NOLAD
5,409
(5,227)
NM
NM
7,316
(15,736)
NM
NM
SLAD
14,734
463
3080.8%
4052.5%
23,799
(27,846)
NM
NM
Corporate and Other
(17,389)
(11,932)
-45.7%
-63.1%
(48,095)
(37,276)
29.0%
-51.4%
TOTAL
50,741
(4,061)
NM
NA
61,752
(88,472)
NM
NA TOTAL - Excl. Venezuela
51,116
(2,524)
NM
NM
64,499
(82,684)
NM
NM
Adjusted EBITDA
Brazil
52,188
21,507
142.7%
135.8%
99,545
43,578
128.4%
131.0%
Caribbean
15,964
11,018
44.9%
NA
38,786
12,817
202.6%
NA Caribbean - Excl. Venezuela
16,246
11,787
37.8%
38.7%
41,025
16,313
151.5%
147.0%
NOLAD
11,711
737
1489.5%
1460.0%
23,264
1,760
1221.8%
1209.5%
SLAD
21,007
2,691
680.6%
837.9%
40,197
(13,436)
NM
NM
Corporate and Other
(11,583)
(10,919)
-6.1%
-22.9%
(41,418)
(34,068)
21.6%
-44.2%
TOTAL
89,287
25,034
256.6%
NA
160,374
10,651
1405.7%
NA TOTAL - Excl. Venezuela
89,569
25,803
247.1%
250.2%
162,613
14,147
1049.0%
1049.7%
Figure 14. Average Exchange Rate per Quarter* Brazil
Mexico Argentina
3Q21
5.23
20.02
97.22
3Q20
5.38
22.06
73.27
* Local $ per 1 US$
Summarized Consolidated Balance Sheets
Figure 15. Summarized Consolidated Balance Sheets(In thousands
of U.S. dollars) September 30 December 31
2021
2020
ASSETS
Current assets Cash and cash equivalents
206,904
165,989
Accounts and notes receivable, net
75,542
94,249
Other current assets (1)
144,285
155,293
Total current assets
426,731
415,531
Non-current assets Property and equipment, net
747,913
796,532
Net intangible assets and goodwill
36,456
37,046
Deferred income taxes
60,672
55,567
Derivative instruments
117,685
121,901
Leases right of use assets, net
780,388
790,969
Other non-current assets (2)
77,987
76,408
Total non-current assets
1,821,101
1,878,423
Total assets
2,247,832
2,293,954
LIABILITIES AND EQUITY
Current liabilities Accounts payable
212,010
209,535
Taxes payable (3)
99,311
91,284
Accrued payroll and other liabilities
93,233
79,218
Other current liabilities (4)
27,128
56,726
Provision for contingencies
2,053
2,024
Financial debt (5)
9,529
7,856
Operating lease liabilities
55,139
56,828
Total current liabilities
498,403
503,471
Non-current liabilities Accrued payroll and other
liabilities
20,909
21,884
Provision for contingencies
29,831
24,924
Financial debt (6)
760,633
787,979
Deferred income taxes
4,745
5,067
Operating lease liabilities
746,562
752,613
Total non-current liabilities
1,562,680
1,592,467
Total liabilities
2,061,083
2,095,938
Equity Class A shares of common stock
388,369
386,603
Class B shares of common stock
132,915
132,915
Additional paid-in capital
10,019
11,540
Retained earnings
270,619
290,895
Accumulated other comprehensive losses
(596,486)
(584,860)
Common stock in treasury
(19,367)
(39,547)
Total Arcos Dorados Holdings Inc shareholders’ equity
186,069
197,546
Non-controlling interest in subsidiaries
680
470
Total equity
186,749
198,016
Total liabilities and equity
2,247,832
2,293,954
(1) Includes "Other receivables", "Inventories", "Prepaid expenses
and other current assets", "McDonald's Corporation's
indemnification for contingencies", and "Derivative Intruments".
(2) Includes "Miscellaneous", "Collateral deposits", and
"McDonald´s Corporation indemnification for contingencies".
(3) Includes "Income taxes payable" and "Other taxes payable". (4)
Includes "Royalties payable to McDonald´s Corporation" and
"Interest payable". (5) Includes
"Current portion of long-term debt" and
"Derivative instruments". (6) Includes "Long-term debt, excluding
current portion" and "Derivative instruments".
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211110005749/en/
Investor Relations Contact Dan Schleiniger VP of Investor
Relations Arcos Dorados daniel.schleiniger@ar.mcd.com
Media Contact David Grinberg VP of Corporate
Communications Arcos Dorados david.grinberg@mcd.com.uy
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