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:
August 10, 2022
Item 1
ARCO
2Q
2022
Results
August
10, 2022
FOR IMMEDIATE RELEASE |
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ARCOS
DORADOS REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS
| • | Systemwide comparable sales¹ grew 47.9% year-over-year,
driven primarily by higher sales volume across all divisions |
| • | Digital channels (Delivery, Mobile App and Self-order
Kiosks) set a new quarterly sales record, generating 41% of systemwide sales, with Delivery sales up over 23% in constant currency |
| • | Consolidated Adjusted EBITDA¹ in US dollars reached
a second-quarter record of $92.4 million |
| • | Net Income¹ reached $15.6 million, or $0.07 per share,
up from $0.03 per share in the prior year quarter |
Montevideo,
Uruguay, August 10, 2022 – 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 financial results for the three and six months ended June 30, 2022.
Second
Quarter 2022 Highlights – Excluding Venezuela
| • | Systemwide comparable sales² increased 47.9% versus the
prior year quarter, rising more than three times blended inflation on the back of robust volume growth in all divisions. |
| • | Consolidated¹ revenues totaled $883.9 million, rising 49.5%,
or 54.3% in constant currency², versus the prior year period. |
| • | Consolidated¹ Adjusted EBITDA of $92.4 million almost doubled
versus the prior year. |
| • | Consolidated¹ Adjusted EBITDA margin reached 10.5% in the
quarter, exceeding pre-pandemic EBITDA margin in all divisions. |
| • | Basic net income per share¹ was $0.07, compared to basic
net income per share of $0.03 in the prior year quarter. |
| • | Net Debt to Adjusted EBITDA leverage ratio improved to 1.1x
at the end of the second quarter of 2022. |
| • | Gross restaurant openings reached 14 new units in the quarter,
including 12 freestanding units and 9 new restaurants in Brazil. |
¹Excluding
the results of the Venezuelan operation except Balance Sheet and Debt Ratio information.
²For definitions,
please refer to page 16 of this document.
Message
from Marcelo Rabach, Chief Executive Officer
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We
have recaptured the operating momentum we built before the pandemic and leveraged the strength of the McDonald’s Brand, our unmatched
free-standing restaurant portfolio and the Three D’s Strategy to sustain strong sales and profitability trends over the last several
quarters.
We
started building the foundation for these results fifteen years ago, when Arcos Dorados began operating on August 3, 2007. Since then,
our restaurant foot print has grown to almost 2,300 locations across twenty countries and territories. We have generated consistent unit
sales growth in local currency, navigated some very challenging economic periods and improved operating results, even in the face of
stiffer competition in the region’s underpenetrated QSR industry.
Today
we have the industry’s leading Digital platform, which generated more than 40% of our sales in the most recent quarter. It includes
the most downloaded and used Mobile App, almost 900 Experience of the Future locations offering guests the convenience of self-order
kiosks and a Delivery segment that continues to grow, despite the normalization of on-premise channels.
The
McDonald’s Brand is as strong as it has ever been, with more than double the market share of the nearest competitor brands in our
operating footprint. Both Favorite Brand and Top of Mind indicators also place the McDonald’s Brand at the top of the list, including
an expanding favorable gap versus our nearest competitor in Brazil.
There
were no shortcuts to getting here, and keeping the momentum going will require us to further improve our execution. We have a saying
that “It’s not real, if it’s not real in the restaurants.” In my view, that is what it means to execute well
– making it real in the restaurants. Today we offer the best restaurant experience in Latin America and the Caribbean with great
service, delicious food and plenty of options for guests to order and enjoy their favorite McDonald’s menu items.
We
have always believed in operating responsibly for the benefit of Latin American and Caribbean societies. This includes the current menu
price architecture we are using to avoid contributing to the problem of high consumer inflation in the region. Instead of significant
price increases, we chose to offer our guests a good value proposition to build long-term loyalty while using other tools to manage through
a challenging cost environment.
Our
Recipe for the Future ESG platform consolidates all our efforts to have a positive impact on the environment and the communities we serve.
During the second quarter, we were recognized for initiatives and workplaces that promote diversity and inclusion in Argentina, Ecuador
and Uruguay. During the quarter, we also became the first QSR operator in the world to issue a Sustainability Linked Bond, aligning our
financial strategy with our long-term targets for greenhouse gas emission reduction in our business and that of our suppliers.
We
remain confident about the future growth of our business because we believe there are still many opportunities to improve execution and
generate additional value for our people, communities and shareholders for years to come.
Consolidated
Results
Consolidated
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Figure
1. AD Holdings Inc Consolidated: Key Financial Results
(In millions of U.S. dollars, except as noted)
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2Q21
(a) |
Currency
Translation - Excl. Venezuela (b) |
Constant
Currency
Growth - Excl. Venezuela
(c) |
Venezuela
(d) |
2Q22
(a+b+c+d) |
%
As Reported |
Total
Restaurants (Units) |
2,255 |
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|
2,286 |
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Sales by Company-operated Restaurants |
566.1 |
(29.4) |
309.4 |
2.3 |
848.4 |
49.9% |
Revenues from franchised restaurants |
26.6 |
0.9 |
11.8 |
0.3 |
39.5 |
48.6% |
Total Revenues |
592.7 |
(28.5) |
321.1 |
2.6 |
887.9 |
49.8% |
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Adjusted EBITDA |
47.2 |
(2.2) |
46.3 |
0.1 |
91.4 |
93.7% |
Adjusted EBITDA Margin |
8.0% |
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10.3% |
2.3% |
Net income (loss) attributable to
AD |
4.9 |
(5.7) |
16.0 |
(0.7) |
14.5 |
193.6% |
No. of shares outstanding (thousands) |
210,360 |
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210,540 |
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EPS
(US$/Share) |
0.02 |
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0.07 |
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2Q22
= 2Q21 + 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 both at the Consolidated level as well as for the South Latin American Division.
Second
quarter net income attributable to the Company totaled $14.5 million, compared to net income of $4.9 million in the same period of 2021.
Arcos Dorados’ recorded earnings of $0.07 per share in the second quarter of 2022 compared to $0.02 per share in the corresponding
2021 period. Total weighted average shares for the second quarter of 2022 amounted to 210,539,537 compared to 210,359,930 in the prior
year’s quarter.
Consolidated
- excluding Venezuela
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Figure
2. AD Holdings Inc Consolidated - Excluding Venezuela: Key Financial Results
(In
millions of U.S. dollars, except as noted)
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2Q21
(a) |
Currency
Translation
(b) |
Constant
Currency
Growth
(c) |
2Q22
(a+b+c) |
%
As Reported |
%
Constant Currency |
Total
Restaurants (Units) |
2,151 |
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2,186 |
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Sales by Company-operated Restaurants |
564.9 |
(29.4) |
309.4 |
844.8 |
49.6% |
54.8% |
Revenues from franchised restaurants |
26.4 |
0.9 |
11.8 |
39.1 |
48.0% |
44.6% |
Total Revenues |
591.3 |
(28.5) |
321.1 |
883.9 |
49.5% |
54.3% |
Systemwide Comparable Sales |
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47.9% |
Adjusted EBITDA |
48.3 |
(2.2) |
46.3 |
92.4 |
91.3% |
95.8% |
Adjusted EBITDA Margin |
8.2% |
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10.5% |
2.3% |
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Net income (loss) attributable to
AD |
5.3 |
(5.7) |
16.0 |
15.6 |
193.5% |
300.5% |
No. of shares outstanding (thousands) |
210,360 |
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210,540 |
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EPS
(US$/Share) |
0.03 |
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0.07 |
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Total
revenues rose 49.5% in US dollars, or 54.3% in constant currency, versus the prior year period, reaching $883.9 million. Systemwide comparable
sales grew over three times blended inflation in all divisions, increasing 47.9% year-over-year, and the Company’s Three D’s
Strategy across Digital, Delivery and Drive-thru channels continued to support strong top-line growth.
Digital channels
generated 41% of systemwide sales in the quarter, growing 62% versus the prior year and reaching their highest-ever quarterly sales in
US dollars. As of the end of June, the Company’ Mobile App had accumulated over 70 million downloads and sales generated through
the App also reached a new quarterly record. Self-Order Kiosks captured between 60% and 90% of on-premise sales volume in the Company’s
Experience of the Future (EOTF) restaurants, depending on the market.
Delivery
sales set a new US dollar record for a single quarter, which included 23% growth in constant currency, on top of robust growth in the
prior two years. Drive-thru also remained sticky, especially in NOLAD and SLAD, with sales up 13% in constant currency, demonstrating
the resiliency of the off-premise channels even as on-premise segments continue normalizing. Together, the off-premise channels contributed
45% of systemwide sales in the quarter.
On-premise
sales at the front counter, dessert centers and McCafé, doubled prior year sales in constant currency, generating 55% of systemwide
sales in the quarter.
Importantly,
the strong revenue growth was driven primarily by higher restaurant volume with a responsible menu price architecture and the industry’s
best restaurant experience offering a compelling value to the Company’s guests.
Adjusted
EBITDA – Excluding Venezuela ($million)
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Breakdown
of main variations contributing to 2Q22 Adjusted EBITDA
Consolidated
Adjusted EBITDA excluding Venezuela reached $92.4 million, a record for a second quarter, with strong contributions from all divisions.
Notably, the trailing-four-quarter Adjusted EBITDA now includes the highest result for a third, fourth, first and second quarter in the
Company’s history.
Sales
growth across all divisions was supported primarily by higher guest traffic and, together with effective cost and expense management,
generated significant operating leverage in the period. As a result, consolidated Adjusted EBITDA margin was up 230 basis points versus
the prior year quarter, or 430 basis points excluding a tax credit in Brazil from the prior year result.
Strong
revenue growth diluted consolidated General & Administrative (G&A) expenses, which were 190 basis points lower as a percentage
of revenue versus the prior year quarter.
Notable
items in the Adjusted EBITDA reconciliation
Included
in Adjusted EBITDA: The negative variation in other operating income / (expense) is mainly explained by an $11.9 million net tax
credit in Brazil in the prior year period.
Excluded
from Adjusted EBITDA: There were no material variations.
Non-operating
Results - excluding Venezuela
Arcos
Dorados’ non-operating results for the second quarter included non-cash foreign currency exchange loss of $7.5 million,
related to the depreciation of the Brazilian Real in the period, and a $1.1 million loss from Derivative Instruments.
Net
interest expense totaled $21.9 million in the quarter. This included $10.6 million in expenses related to the liability management transaction
executed during the quarter when the Company issued the QSR industry’s first Sustainability Linked Bond (SLB). The Company recorded
an income tax expense of $15.6 million in the second quarter, compared to an income tax expense of $10.3 million in the prior-year period.
Second
quarter net income attributable to the Company totaled $15.6 million, compared to net income of $5.3 million in the prior-year period.
Earnings per share were $0.07 in the second quarter of 2022, up from $0.03 per share in the prior year quarter.
Divisional
Results
Brazil
Division
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Figure
3. Brazil Division: Key Financial Results
(In
millions of U.S. dollars, except as noted)
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2Q21
(a) |
Currency
Translation
(b) |
Constant
Currency
Growth
(c) |
2Q22
(a+b+c) |
%
As Reported |
%
Constant Currency |
Total
Restaurants (Units) |
1,044 |
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|
1,070 |
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Total Revenues |
225.7 |
26.2 |
106.1 |
358.1 |
58.6% |
47.0% |
Systemwide Comparable Sales |
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37.4% |
Adjusted EBITDA |
33.8 |
4.1 |
14.7 |
52.7 |
55.8% |
43.6% |
Adjusted
EBITDA Margin |
15.0% |
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14.7% |
-0.3% |
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As
reported revenue reached $358.1 million, increasing 58.6% year-over-year. Guest traffic rose strongly compared with the prior year quarter
when government-imposed operating restrictions impacted results, primarily in April 2021. The appreciation of the Brazilian real versus
the US dollar also contributed to US dollar revenue growth in the period. On a constant currency basis, revenues grew 47.0%, supported
by 37.4% higher systemwide comparable sales.
Second
quarter marketing activities focused on investments to strengthen the McDonald’s brand, including the continuity of the “Méquizices”
campaign, featuring some of Brazil’s most popular celebrities and influencers describing their favorite McDonald’s orders.
The Company also launched the McCrispy Chicken lineup in Brazil with very encouraging early results. Among the marketing initatives to
support Three D sales channels was the “Méqui Fest”, a temporary couponing campaign available exclusively via the
McDonald’s Mobile App. Notably, both Top of Mind and Favorite Brand measurements3 have expanded significantly
since the beginning of 2021, standing at more than double the nearest competitor’s levels in the second quarter of 2022. This brand
preference is also reflected in the McDonald’s brand’s consistent market share gains within a consolidating restaurant industry
in the country.
Digital channels
generated 52% of systemwide sales in Brazil, while Delivery set a new quarterly sales record in absolute terms, increasing 25% in constant
currency versus the prior year quarter. Strong operational execution, including lower delivery service times and improved order accuracy,
leveraged Arcos Dorados’ structural competitive advantages and brand preference among guests.
As reported
Adjusted EBITDA in the division reached $52.7 million in the quarter. Adjusted EBITDA margin in the second quarter 2021 benefited from
an $11.9 million net tax credit due to the exclusion of ICMS from the Pis/Cofins calculation base. Excluding this effect, Brazil’s
Adjusted EBIDTA margin in the second quarter 2022 rose 500 basis points versus the prior year quarter.
Food &
Paper costs in the division were lower as a percentage of sales versus the prior year despite ongoing cost pressures. The margin improvement
reflects operating leverage generated by a favorable sales mix and strong volume growth.
3 Source: Kantar,
Company research.
North
Latin American Division (NOLAD)
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Figure
4. NOLAD Division: Key Financial Results
(In
millions of U.S. dollars, except as noted)
|
2Q21
(a) |
Currency
Translation
(b) |
Constant
Currency
Growth
(c) |
2Q22
(a+b+c) |
%
As Reported |
%
Constant Currency |
Total
Restaurants (Units) |
626 |
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|
628 |
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Total Revenues |
193.3 |
(6.4) |
35.8 |
222.7 |
15.2% |
18.5% |
Systemwide Comparable Sales |
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|
20.9% |
Adjusted EBITDA |
19.0 |
(1.0) |
5.2 |
23.3 |
22.2% |
27.6% |
Adjusted
EBITDA Margin |
9.9% |
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|
10.4% |
0.6% |
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As reported
revenues were $222.7 million, up 15.2% in US dollars and 18.5% in constant currency versus the prior year quarter. Systemwide comparable
sales rose 20.9%, more than three times the division’s blended inflation, thanks mostly to higher guest traffic versus the prior
year. Mexico, Costa Rica and the French West Indies markets delivered the strongest comparable sales growth. NOLAD’s sales performance
also reflects the increase of on-premise sales in most markets as well as sustained Drive-thru sales volume growth.
Marketing
activities in Mexico included the “Más sabor, más diversión” campaign that drove guest excitement by
leveraging the iconic Big Mac, while in Costa Rica the McCrispy Chicken line-up was launched in its three versions (Classic, Spicy and
Deluxe) to boost the chicken category. The family business registered a very solid sales quarter for the Company and in NOLAD, driven
by the exclusive rights to Disney properties in the Happy Meal. Finally, the Company took another step toward increasing Digital channel
penetration in the division by rolling-out the Order Ahead functionality across NOLAD markets.
As reported
Adjusted EBITDA reached $23.3 million in the second quarter compared with $19.0 million in the prior year quarter, representing a year-over-year
increase of 22.2%, or 27.6% on a constant currency basis. Adjusted EBITDA margin rose by 50 basis points against 2021, with lower Occupancy
& Other operating and G&A expenses offsetting higher Food & Paper costs as a percentage of sales.
South Latin American Division (SLAD)
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Figure
5. SLAD Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
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2Q21
(a) |
Currency
Translation - Excl. Venezuela
(b) |
Constant
Currency
Growth - Excl. Venezuela
(c) |
Venezuela
(d) |
2Q22
(a+b+c+d) |
%
As Reported |
Total
Restaurants (Units) |
585 |
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|
588 |
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Total Revenues |
173.7 |
(48.4) |
179.2 |
2.6 |
307.1 |
76.8% |
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Adjusted EBITDA |
11.1 |
(7.5) |
29.3 |
0.1 |
32.9 |
197.1% |
Adjusted
EBITDA Margin |
6.4% |
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10.7% |
4.3% |
Figure
6. SLAD Division – Excluding Venezuela: Key Financial Results
(In millions of U.S. dollars, except as
noted)
|
2Q21
(a) |
Currency
Translation
(b) |
Constant
Currency
Growth
(c) |
2Q22
(a+b+c) |
%
As Reported |
%
Constant Currency |
Total
Restaurants (Units) |
481 |
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|
488 |
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Total Revenues |
172.3 |
(48.4) |
179.2 |
303.1 |
75.9% |
104.0% |
Systemwide Comparable Sales |
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|
98.8% |
Adjusted EBITDA |
12.2 |
(7.5) |
29.3 |
34.0 |
177.6% |
239.2% |
Adjusted
EBITDA Margin |
7.1% |
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11.2% |
4.1% |
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Revenues
in SLAD, excluding Venezuela, increased 75.9% in US dollars, driven by a 98.8% increase in systemwide comparable sales. Systemwide comparable
sales more than tripled the division’s blended inflation in the period. Argentina, Colombia and Chile were among the main contributors
to topline growth in the quarter. Drive-thru and Delivery sales rose 59% and 22% in constant currency, respectively, despite strong
normalization trends in on-premise sales channels.
Second quarter
marketing activities were a key factor in building sales and traffic growth in the division. SLAD’s initiatives centered on strong,
premium menu innovations including the “Grand Tasty Turbo Bacon” in Argentina, the “Signature American BBQ” in
Chile and the “Signature Premium Tasty” in Uruguay. The Company strengthened its chicken credentials in Colombia, Ecuador
and Peru, with the launch of the delicious, craveable and juicy Spicy McNuggets.
As
reported Adjusted EBITDA reached $34.0 million, compared with $12.2 million in the prior-year quarter. Adjusted EBITDA margin was 11.2%,
or 410 basis points higher than the prior year quarter, benefiting from sales growth above inflation and significant operating leverage.
New
Unit Development
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Figure
7. Total Restaurants (eop)*
|
June
2022 |
March
2022 |
December
2021 |
September
2021 |
June
2021 |
Brazil |
1,070 |
1,061 |
1,051 |
1,052 |
1,044 |
NOLAD |
628 |
625 |
625 |
626 |
626 |
SLAD |
588 |
587 |
585 |
585 |
585 |
TOTAL |
2,286 |
2,273 |
2,261 |
2,263 |
2,255 |
*Considers
Company-operated and franchised restaurants at period-end
Figure
8. Footprint as of June 30, 2022
|
Store
Type* |
Total
Restaurants |
Ownership |
McCafes |
Dessert
Centers |
|
FS
& IS |
MS
& FC |
Company
Operated |
Franchised |
|
|
Brazil |
610 |
460 |
1,070 |
644 |
426 |
109 |
1,971 |
NOLAD |
434 |
194 |
628 |
458 |
170 |
15 |
532 |
SLAD |
365 |
223 |
588 |
500 |
88 |
163 |
703 |
TOTAL |
1,409 |
877 |
2,286 |
1,602 |
684 |
287 |
3,206 |
FS:
Free-Standing; IS: In-Store; MS: Mall Store; FC: Food Court.
Arcos
Dorados opened 14 restaurants during the second quarter of 2022, including 12 free-standing units. In Brazil, the Company opened 9 restaurants,
including 8 free-standing locations in the period. For the year-to-date, the Company opened 30 new restaurants, including 26 free-standing
units. This included 21 restaurant openings in Brazil, with 18 free-standing units opened during the first half of 2022 in that division.
As
of the end of June 2022, there were 871 Experience of the Future Restaurants across the Company’s footprint.
Balance Sheet & Cash Flow Highlights
|
|
Figure
9. Consolidated Debt and Financial Ratios
(In
thousands of U.S. dollars, except ratios)
|
June 30, |
December 31, |
|
2022 |
2021 |
Cash & cash equivalents (i) |
289,418 |
278,830 |
Total Financial Debt (ii) |
691,561 |
657,896 |
Net Financial Debt (iii) |
402,143 |
379,066 |
Total Financial Debt / LTM Adjusted EBITDA ratio |
1.9 |
2.4 |
Net Financial Debt / LTM Adjusted EBITDA ratio |
1.1 |
1.4 |
| (i) | Cash &
cash equivalents includes short-term investments. |
| (ii) | Total financial
debt includes long-term debt, short-term debt, accrued interest payable and derivative instruments
(including the asset portion of derivatives amounting to $99.3 million and $120.4 million
as a reduction of financial debt as of June 30, 2022 and December 31, 2021, respectively). |
| (iii) | Total financial
debt less cash and cash equivalents. |
Cash and
cash equivalents were $289.4 million and total financial debt (including the value of derivative instruments) was $691.6 million, as
of June 30, 2022. Net debt was $402.1 million, up from $379.1 million at the end of 2021, largely due to a decrease in the value of Brazilian
real linked derivative instruments.
As mentioned
in its first quarter 2022 earnings release, on April 27, 2022, the Company issued a Sustainability-Linked Bond for an aggregate principal
amount of $350 million, maturing on May 27, 2029. The proceeds of this liability management transaction were used to re-purchase most
of the Company’s outstanding 2023 Senior Notes and to fund a tender offer of $150 million of its outstanding 2027 Senior Notes.
The net debt
to Adjusted EBITDA leverage ratio ended the quarter at a healthy 1.1x as record trailing-twelve-month Adjusted EBITDA more than offset
the modest increase in net debt.
Net cash
generated from operating activities for the six months ended June 30 totaled $121.9 million, up from $34.6 million last year, while cash
used in net investing activities totaled $84.0 million, with capital expenditures of $69.0 million. Net cash used in financing activities
was $25.6 million, which included $16.8 million corresponding to the payment of the first two installments of the 2022 dividend declared
by the Company’s Board of Directors.
Recent
Developments
Appointment
of New Divisional President for Brazil
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|
Effective
July 1, 2022, Rogerio Barreira became President of the Brazil Division, replacing Paulo Camargo who decided to leave the Company to pursue
another opportunity. Mr. Barreira was serving as the Brazil Division’s Vice President of Operations since April 2021 and has more
than thirty-eight years of experience with the Company. He began his career in 1984 as a crew member in São Paulo, Brazil, and
has held various leadership positions in operations, including five years as the President of the NOLAD Division from 2015 to 2020.
Second
Quarter 2022 Earnings Webcast
A
webcast to discuss the information contained in this press release will be held today, August 10, 2022, at 10:00 a.m. ET. In order to
access the webcast, members of the investment community should follow this link Arcos
Dorados Second Quarter 2022 Results Webcast.
A
replay of the webcast will be available later today through November 2022 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:
Definitions
|
|
Systemwide
comparable sales growth: 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).
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. 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, equity
method investments, 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. Figures 10 and 11 of this earnings release include 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.
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 06/30/2022). 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 affordable platform, its expectation for revenue generation and its outlook
and guidance for growth and investments in 2022. 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.
Second Quarter 2022 Consolidated Results
|
|
Figure
10. Second Quarter 2022 Consolidated Results
(In
thousands of U.S. dollars, except per share data)
|
For
Three-Months ended |
|
For
Six-Months ended |
|
June
30, |
|
June
30, |
|
2022 |
2021 |
|
2022 |
2021 |
REVENUES |
|
|
|
|
|
Sales by Company-operated restaurants |
848,350 |
566,092 |
|
1,603,644 |
1,103,981 |
Revenues
from franchised restaurants |
39,545 |
26,604 |
|
74,932 |
49,831 |
Total
Revenues |
887,895 |
592,696 |
|
1,678,576 |
1,153,812 |
OPERATING
COSTS AND EXPENSES |
|
|
|
|
|
Company-operated restaurant expenses: |
|
|
|
|
|
Food and paper |
(301,028) |
(203,355) |
|
(564,436) |
(396,014) |
Payroll and employee
benefits |
(169,441) |
(109,845) |
|
(321,669) |
(224,265) |
Occupancy and other operating
expenses |
(244,747) |
(182,740) |
|
(464,874) |
(360,933) |
Royalty fees |
(44,061) |
(29,236) |
|
(82,677) |
(56,898) |
Franchised restaurants - occupancy expenses |
(16,855) |
(12,152) |
|
(32,863) |
(23,979) |
General and administrative expenses |
(54,996) |
(49,352) |
|
(110,534) |
(94,318) |
Other
operating income |
3,879 |
11,801 |
|
7,470 |
13,604 |
Total
operating costs and expenses |
(827,249) |
(574,879) |
|
(1,569,583) |
(1,142,803) |
Operating
income |
60,646 |
17,817 |
|
108,993 |
11,009 |
Net
interest expense |
(21,923) |
(13,425) |
|
(32,582) |
(25,707) |
Loss
from derivative instruments |
(1,144) |
(4,232) |
|
(12,836) |
(5,381) |
Foreign
currency exchange results |
(7,283) |
15,167 |
|
8,544 |
5,819 |
Other
non-operating (expenses) |
(83) |
(77) |
|
(108) |
(220) |
Income
/ (loss) before income taxes |
30,213 |
15,250 |
|
72,011 |
(14,480) |
Income
tax expense |
(15,638) |
(10,259) |
|
(32,807) |
(10,188) |
Net
income / (loss) |
14,575 |
4,991 |
|
39,204 |
(24,668) |
Less:
Net income attributable to non-controlling interests |
(94) |
(58) |
|
(220) |
(112) |
Net
income / (loss) attributable to Arcos Dorados Holdings Inc. |
14,481 |
4,933 |
|
38,984 |
(24,780) |
Earnings
per share information ($ per share): |
|
|
|
|
|
Basic net income / (loss) per common share |
$ 0.07 |
$ 0.02 |
|
$ 0.19 |
$ (0.12) |
Weighted-average
number of common shares outstanding-Basic |
210,539,537 |
210,359,930 |
|
210,509,099 |
210,293,682 |
Adjusted
EBITDA Reconciliation |
|
|
|
|
|
Operating
income |
60,646 |
17,817 |
|
108,993 |
11,009 |
Depreciation and amortization |
30,504 |
29,796 |
|
60,640 |
60,162 |
Operating
charges excluded from EBITDA computation |
212 |
(457) |
|
227 |
(84) |
Adjusted
EBITDA |
91,362 |
47,156 |
|
169,860 |
71,087 |
Adjusted
EBITDA Margin as % of total revenues |
10.3% |
8.0% |
|
10.1% |
6.2% |
Second Quarter 2022 Consolidated Results Excluding Venezuela
|
|
Figure
11. Second Quarter 2022 Consolidated Results - Excluding Venezuela
(In
thousands of U.S. dollars, except per share data)
|
For
Three-Months ended |
|
For
Six-Months ended |
|
June
30, |
|
June
30, |
|
2022 |
2021 |
|
2022 |
2021 |
REVENUES |
|
|
|
|
|
Sales by Company-operated restaurants |
844,781 |
564,852 |
|
1,597,060 |
1,101,618 |
Revenues
from franchised restaurants |
39,097 |
26,424 |
|
74,119 |
49,495 |
Total
Revenues |
883,878 |
591,276 |
|
1,671,179 |
1,151,113 |
OPERATING
COSTS AND EXPENSES |
|
|
|
|
|
Company-operated restaurant expenses: |
|
|
|
|
|
Food and paper |
(299,769) |
(203,029) |
|
(562,083) |
(395,500) |
Payroll and employee
benefits |
(168,716) |
(109,642) |
|
(320,062) |
(223,828) |
Occupancy and other operating
expenses |
(243,036) |
(182,004) |
|
(461,571) |
(359,413) |
Royalty fees |
(44,061) |
(29,236) |
|
(82,677) |
(56,898) |
Franchised restaurants - occupancy expenses |
(16,764) |
(12,115) |
|
(32,643) |
(23,841) |
General and administrative expenses |
(53,913) |
(48,573) |
|
(108,367) |
(92,854) |
Other
operating income |
4,367 |
11,638 |
|
7,968 |
14,604 |
Total
operating costs and expenses |
(821,892) |
(572,961) |
|
(1,559,435) |
(1,137,730) |
Operating
income |
61,986 |
18,315 |
|
111,744 |
13,383 |
Net
interest expense |
(21,924) |
(13,426) |
|
(32,583) |
(25,708) |
Loss
from derivative instruments |
(1,144) |
(4,232) |
|
(12,836) |
(5,381) |
Foreign
currency exchange results |
(7,518) |
15,047 |
|
8,245 |
5,487 |
Other
non-operating (expenses) |
(83) |
(77) |
|
(106) |
(220) |
Income
/ (loss) before income taxes |
31,317 |
15,627 |
|
74,464 |
(12,439) |
Income
tax expense |
(15,643) |
(10,260) |
|
(32,812) |
(10,172) |
Net
income / (loss) |
15,674 |
5,367 |
|
41,652 |
(22,611) |
Less:
Net income attributable to non-controlling interests |
(94) |
(58) |
|
(220) |
(112) |
Net
income / (loss) attributable to Arcos Dorados Holdings Inc. |
15,580 |
5,309 |
|
41,432 |
(22,723) |
Earnings
per share information ($ per share): |
|
|
|
|
|
Basic net income / (loss) per common share |
$ 0.07 |
$ 0.03 |
|
$ 0.20 |
$ (0.11) |
Weighted-average
number of common shares outstanding-Basic |
210,539,537 |
210,359,930 |
|
210,509,099 |
210,293,682 |
Adjusted
EBITDA Reconciliation |
|
|
|
|
|
Operating
income |
61,986 |
18,315 |
|
111,744 |
13,383 |
Depreciation and amortization |
30,245 |
29,809 |
|
60,114 |
59,825 |
Operating
charges excluded from EBITDA computation |
155 |
179 |
|
170 |
(159) |
Adjusted
EBITDA |
92,386 |
48,303 |
|
172,028 |
73,049 |
Adjusted
EBITDA Margin as % of total revenues |
10.5% |
8.2% |
|
10.3% |
6.3% |
Second Quarter
2022 Results by Division
|
|
Figure
12. Second Quarter 2022 Consolidated Results by Division
(In
thousands of U.S. dollars)
|
2Q |
|
YTD |
|
Three-Months
ended |
As |
Constant |
|
Six-Months
ended |
As |
Constant |
|
June
30, |
reported |
Currency |
|
June
30, |
reported |
Currency |
|
2022 |
2021 |
Incr/(Decr)% |
Incr/(Decr)% |
|
2022 |
2021 |
Incr/(Decr)% |
Incr/(Decr)% |
Revenues |
|
|
|
|
|
|
|
|
|
Brazil |
358,069 |
225,740 |
58.6% |
47.0% |
|
670,048 |
428,990 |
56.2% |
46.6% |
NOLAD |
222,726 |
193,272 |
15.2% |
18.5% |
|
426,578 |
367,026 |
16.2% |
19.0% |
SLAD |
307,100 |
173,685 |
76.8% |
106.3% |
|
581,950 |
357,796 |
62.6% |
88.7% |
SLAD - Excl. Venezuela |
303,083 |
172,265 |
75.9% |
104.0% |
|
574,553 |
355,097 |
61.8% |
85.6% |
TOTAL |
887,895 |
592,697 |
49.8% |
55.1% |
|
1,678,576 |
1,153,812 |
45.5% |
50.9% |
TOTAL - Excl. Venezuela |
883,878 |
591,277 |
49.5% |
54.3% |
|
1,671,179 |
1,151,113 |
45.2% |
49.9% |
|
|
|
|
|
|
|
|
|
|
Operating Income
(loss) |
|
|
|
|
|
|
|
|
|
Brazil |
38,024 |
19,995 |
90.2% |
74.7% |
|
70,045 |
20,174 |
247.2% |
223.6% |
NOLAD |
14,854 |
8,921 |
66.5% |
75.1% |
|
28,087 |
14,061 |
99.8% |
108.5% |
SLAD |
26,845 |
5,626 |
377.2% |
515.3% |
|
50,671 |
7,478 |
577.6% |
738.6% |
SLAD - Excl. Venezuela |
28,185 |
6,124 |
360.2% |
486.7% |
|
53,422 |
9,852 |
442.2% |
580.1% |
Corporate and Other |
(19,077) |
(16,724) |
-14.1% |
-28.8% |
|
(39,810) |
(30,706) |
-29.6% |
-43.6% |
TOTAL |
60,646 |
17,818 |
240.4% |
257.3% |
|
108,993 |
11,007 |
890.2% |
928.8% |
TOTAL - Excl. Venezuela |
61,986 |
18,316 |
238.4% |
254.7% |
|
111,744 |
13,381 |
735.1% |
778.4% |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Brazil |
52,706 |
33,819 |
55.8% |
43.6% |
|
98,744 |
47,357 |
108.5% |
94.9% |
NOLAD |
23,258 |
19,039 |
22.2% |
27.6% |
|
44,660 |
32,874 |
35.9% |
40.9% |
SLAD |
32,937 |
11,085 |
197.1% |
262.8% |
|
63,253 |
20,690 |
205.7% |
257.9% |
SLAD - Excl. Venezuela |
33,961 |
12,232 |
177.6% |
239.3% |
|
65,421 |
22,652 |
188.8% |
245.5% |
Corporate and Other |
(17,539) |
(16,785) |
-4.5% |
-17.8% |
|
(36,797) |
(29,834) |
-23.3% |
-36.4% |
TOTAL |
91,362 |
47,158 |
93.7% |
97.8% |
|
169,860 |
71,087 |
138.9% |
141.9% |
TOTAL -
Excl. Venezuela |
92,386 |
48,305 |
91.3% |
95.8% |
|
172,028 |
73,049 |
135.5% |
141.2% |
Figure
13. Average Exchange Rate per Quarter*
|
Brazil |
Mexico |
Argentina |
2Q22 |
4.92 |
20.02 |
117.88 |
2Q21 |
5.30 |
20.03 |
94.02 |
*Local
$ per 1 US$
Summarized
Consolidated Balance Sheets
|
|
Figure
14. Summarized Consolidated Balance Sheets
(In
thousands of U.S. dollars)
|
June
30, |
December
31, |
|
2022 |
2021 |
ASSETS |
|
Current assets |
|
|
Cash and cash equivalents |
276,078 |
278,830 |
Short-term investment |
13,340 |
- |
Accounts and notes receivable, net |
86,668 |
82,180 |
Other current assets (1) |
165,737 |
179,106 |
Total
current assets |
541,823 |
540,116 |
Non-current assets |
|
|
Property and equipment, net |
767,445 |
743,533 |
Net intangible assets and goodwill |
42,935 |
38,808 |
Deferred income taxes |
77,892 |
67,802 |
Derivative instruments |
99,265 |
120,371 |
Equity method investments |
13,887 |
13,105 |
Leases right of use assets, net |
778,116 |
763,580 |
Other non-current assets (2) |
81,328 |
73,942 |
Total
non-current assets |
1,860,868 |
1,821,141 |
Total
assets |
2,402,691 |
2,361,257 |
LIABILITIES AND EQUITY |
|
|
Current liabilities |
|
|
Accounts payable |
257,651 |
269,215 |
Taxes payable (3) |
138,853 |
137,362 |
Accrued payroll and other liabilities |
114,431 |
89,923 |
Other current liabilities (4) |
22,533 |
27,316 |
Provision for contingencies |
2,109 |
2,140 |
Financial debt (5) |
13,334 |
12,787 |
Operating lease liabilities |
79,197 |
79,120 |
Total
current liabilities |
628,108 |
617,863 |
Non-current liabilities |
|
|
Accrued payroll and other liabilities |
24,908 |
21,900 |
Provision for contingencies |
38,088 |
31,946 |
Financial debt (6) |
767,739 |
754,097 |
Deferred income taxes |
5,136 |
7,170 |
Operating lease liabilities |
724,474 |
707,119 |
Total
non-current liabilities |
1,560,345 |
1,522,232 |
Total
liabilities |
2,188,453 |
2,140,095 |
Equity |
|
|
Class A shares of common stock |
389,393 |
388,369 |
Class B shares of common stock |
132,915 |
132,915 |
Additional paid-in capital |
9,174 |
10,101 |
Retained earnings |
323,577 |
316,180 |
Accumulated other comprehensive losses |
(621,957) |
(607,768) |
Common stock in treasury |
(19,367) |
(19,367) |
Total
Arcos Dorados Holdings Inc shareholders’ equity |
213,735 |
220,430 |
Non-controlling
interest in subsidiaries |
503 |
732 |
Total
equity |
214,238 |
221,162 |
Total
liabilities and equity |
2,402,691 |
2,361,257 |
| (1) | Includes "Other receivables",
"Inventories", "Prepaid expenses and other current assets", "McDonald's Corporation's indemnification for contingencies",
and "Derivative Instruments”. |
| (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". |
Thank
you!
|
|
|