Arcos Dorados 3Q19 conference call presentation November ......• Leading app + 34 million...

Arcos Dorados

4Q19 conference call presentationMarch 18, 2020

This presentation contains forward-looking statements that represent our beliefs, projections and predictions about future events or

our future performance. Forward-looking statements can be identified by terminology such as “may,” “will,” “would,” “could,”

“should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms

or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and

unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or

industry results to differ materially from any future results, performance or achievement described in or implied by such 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. 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.

2

Disclaimer

3

Agenda

➢ Strong Results from Operations – 4Q and Full Year 2019

➢ 2020 to 2022 Openings and Reinvestment Plan

➢ Coronavirus (COVID-19) Update

4Q19 Key Highlights

Comparable Sales

+10.4%+9.5% in Brazil

Adjusted EBITDA

$ 101.7 m+16.8% YoY

+24.9% YoY (in CC)

Restaurant

Openings

90Dec 31, 2019 (LTM)

Revenues

$752.3 m+1.0% YoY

+12.9% YoY (in CC)

Adj. EBITDA margin

13.5% +180 bps

+50 bps (ex-one time)

EOTF restaurants

683as of Dec 31, 2019

➢ Comparable sales +10.4% (+11.8% for FY 2019)✓ 4th consecutive quarter of double-digit growth

✓ Gaining market share in most markets

✓ Delivery and Digital contributing to growth

➢ Strong performance in Brazil✓ +9.5% comp sales (+9.7% for FY 2019), about

double Brazilian Food Service Industry

➢ Scale and efficiency driving margin expansion✓ +180 bps, including a bad debt reserve reversal in

Puerto Rico

✓ +50 bps, excluding the bad debt reserve reversal

➢ EOTF still driving substantial sales lift✓ Available in 10 countries

✓ 683 total at year-end, beating target of 650 units

➢ Ambitious 2020-2022 Openings & Reinvestment Plan

Note: Financial results exclude Venezuela 4

6.1%

9.6%10.6%

7.6%

11.8%

7.5%

10.4%

FY2015 FY2016 FY2017 FY2018 FY2019 4Q2018 4Q2019

COMPARABLE SALES GROWTH (%)

709 714

79937 39

42

4Q18 4Q19 (in US$) 4Q19 (in constantcurrency)

Sales by company operated restaurants Revenues from franchised restaurants

841

745 752

TOTAL REVENUE ($ M)

• Strong constant currency revenue growth of 12.9%

• Comp sales of +10.4% backed by both growth in guest counts and higher average check

• Revenues also benefitted from accelerating restaurant openings and roll-out of EOTF


4Q19 Consolidated Topline

• Brazil outpaced the industry by ~2x in 2019, including comp sales growth of 9.5% in 4Q19

• NOLAD posted 9.4% revenue growth in dollar terms, with solid performance across all countries

• Comp sales growth well above inflation in Brazil & NOLAD

• SLAD impacted by consumer environment in Argentina and social unrest in Chile

• Caribbean faced tough comps in Colombia but had strong performances in Puerto Rico and the FWI

• Full Year Adjusted EBITDA margin of 10.0% was the highest since the Company went public in 2011

BRAZIL($ million)

SLAD($ million)

NOLAD($ million)

CARIBBEAN (Ex-Vzla)($ million)

4Q19 Divisional Topline

Comparable sales growth %

354 369399

4Q18 4Q19 (asreported)

4Q19 (inconstantcurrency)

+12.7% (CC)

9.5%

+4.4%

105114 111



+6.2% (CC)

+9.4%

187 169230



+23.1% (CC)

-9.3%

20.9%

+1.8% (CC)

-1.0%

1.8%

6

100 99102

4Q18 4Q19 (in US$) 4Q19 (inconstantcurrency)

4.7%

Omnichannel Approach & Excellent Hospitality

Continues to drive

improvement in

employee retention

and satisfaction,

which supports

higher customer

satisfaction

7

EOTF, Digital & Delivery enhancing the overall guest experience and differentiating brand

• More than 1,500

restaurants across

11 markets

• Driving comp

sales and check

growth

• Leading app

+ 34 million

downloads

• #1 Android,

#2 Apple in BR

Food & Drink Category

• Now includes Delivery

ordering in Brazil

• 683 EOTF restaurants as

of Dec 31, 2019

• Available in 10 countries

in 2019

• 90 new restaurants in

2019

1,543 1,538 1,541 1,542 1,541 1,537 1,580

648 657 682 683 688 702 713

2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Company Operated Sub-Franchised

BRAZIL

NOLAD

SLAD

CARIBBEAN

2019 YEAR-END FOOTPRINT

RESTAURANTS

+6

(*) Restaurant Addition LTM (net)

-1

+55

+10

DIVISIONSTORE TYPE

TOTAL

RESTAURANTSMCCAFES

DESSERT

CENTERSFS & IS MS & FC

BRAZIL 554 469 1,023 81 2,000

NOLAD 324 206 530 13 626

SLAD 239 165 404 128 389

CARIBBEAN 260 76 336 36 311

TOTAL 1,377 916 2,293 258 3,326612 Company Operated

411 Sub-Franchised

353 Company Operated

51 Sub-Franchised


85 Sub-Franchised


166 Sub-Franchised

2,293

683

8

2019 Restaurant Development

35.2% 35.8%

19.3% 19.6%

27.2% 28.0%

5.5% 5.5%

4Q18 4Q19F&P Payroll and employee benefits Occupancy and other operating exp Royalty Fees

6054

4Q18 4Q19

G&A expensesCompany operated restaurant expenses

87.3% 88.9%

($ M and as a % of Total Revenues)(As a % of sales by Company operated restaurants)

8.1% 7.2%


4Q19 Operating Costs & Expenses, Adjusted EBITDA

Breakdown of main variations contributing to 4Q19 Adjusted EBITDA margin

(%)

• Adj EBITDA increased

almost 17% in dollars

and 25% in CC

• Adj EBITDA margin

expanded 50 bps

excluding $10.0 million

bad debt reserve

reversal in Puerto Rico

• Successful marketing

strategy boosted traffic

and topline growth

• G&A decreased 10%

YoY in US dollars and

90 bps as a % of

revenues

11.7

0.5 0.3 0.0

0.11.3

0.6

1.7 13.5

Adj EBITDA Mg4Q18

Food & Paper Payroll Occupancy &other operating

expenses

Royalty Fees Franchisedrestaurants -occupancyexpenses

G&A Other Op Income(expense)

Adj EBITDA Mg4Q19

• Strong Adjusted EBITDA margin expansion in Brazil, NOLAD and Caribbean

(including the bad debt reserve reversal in Puerto Rico)

• Achieved record high Adjusted EBITDA in Mexico

• Full Year Adjusted EBITDA Margin expansion of 120 basis points from 2017 to 2019

68 79 85



BRAZIL

+26.0% (CC)

19.1% 21.5%

($ million)

+17.2%

9 13 12



NOLAD

+34.2% (CC)

8.6% 11.0%

+39.5%

($ million)

17 14 21



SLAD

+23.8% (CC)

8.9% 8.3%

-15.6%

($ million)

14.5%

8 14 15

4Q18 4Q19 (in US$) 4Q19 (inconstantcurrency)

CARIBBEAN (Ex-Vzla)

+77.2% (CC)

8.2%

+74.7%

($ million)

Adjusted EBITDA margin %

4Q19 Divisional Adjusted EBITDA

10

11

2020 to 2022 Openings and Reinvestment Plan

285 TO 300 NEW

RESTAURANTS~ $1 BILLION

RESTAURANT

OPENINGSTOTAL CAPEX

Agreement with McDonald’s Corporation for the 3-year openings and reinvestment plan

GROWTH SUPPORT

5.5% AVERAGE EFFECTIVE ROYALTY RATE

• Prioritizing the health and safety of guests and employees while protecting long-term

business results

• Best positioned company in the industry to effectively respond to this pandemic,

while serving guests through Delivery, Drive-Thru and Take-Out

• Cross-functional team managing a Contingency Plan of best practices and learnings

from the Global McDonald’s System along with government and public health officials

• Five Principles

1. We are all in this together

2. We will think and act with a long-term mindset

3. We will be transparent with each other and with all our stakeholders

4. We will lead by example

5. We will stay true to our purpose12

Coronavirus (COVID-19) - Update

13

• Strong momentum in 2019, carried into 2020 with better US dollar results in the first two

months of the year, including the best February ever

• ~90% of F&P suppliers are local, working closely to reduce the risks of disruptions in

the supply chain while ensuring the quality and safety of the food

• ~20% of total F&P costs exposed to FX fluctuations (~16% in Brazil) with rolling hedges

to cover ~50% of estimated exposure over the next 6 to 12 months

• Close and regular communications with sub-franchisees, to ensure implementation of

the same precautionary measures in all restaurants

Facing a Crisis from a Position of Strength

Notes:

1) Total financial debt includes short-term debt, long-term debt and derivative instruments

2) Net Debt = Total financial debt less cash and cash equivalents

3) Leverage ratio = Net financial debt / LTM adjusted EBITDA

$ million

654620 621

590

596

87163

328

197122

567

457

293 392

474

2015 2016 2017 2018 2019

Total Debt Cash & Equivalents Net Debt

1.6x1.0x1.7x2.3x

14

LEVERAGE RATIO

(*) Balance sheet as reported, including Venezuela

• Net leverage ratio of 1.6x, well below target range

• 50% of total debt swapped to BRL (principal & interest)

• $122 million in Cash and Equivalents as of 4Q19 and $50 million in committed credit facilities

• Full discretion on timing of Capex plan and no debt maturities until 2023

Strong and Healthy Balance Sheet *

1.5x

3.2 3.2 3.4 3 2.3 0.1 0.1 0.1

348

265

2020 2021 2022 2023 2024 2025 2026 2027

Other LT Debt 2023 Notes 2027 Notes

DEBT MATURITY PROFILE

$ million

AVERAGE MATURITY

5 YEARS

• We wrote the book on service, quality and cleanliness with long-standing and

industry-leading hygiene practices and food safety protocols

• Implementation of robust Contingency Plan, based on best practices and

learnings from the Global McDonald’s system, including:

✓ Increased frequency of sanitization in all restaurant areas and engagement kiosks

✓ Operating only with Delivery and Drive-Thru, when no longer able to operate restaurant

counter or dining rooms

✓ Establishing protocols for closing and reopening a restaurant if an employee receives a

positive diagnosis for the coronavirus

• Continuously reviewing these measures in accordance with the latest guidelines

from local health officials and global best practices for mitigating the potential

spread of the virus

15

Coronavirus (COVID-19) - Initiatives in Place

✓ Confident in the strength of AD and the McDonald’s System and taking the right

steps to effectively meet this unprecedented global health crisis

✓ Solid strategy in place to continue growing our business once this difficult period

has passed

✓ Excellence in execution with a continued focus on enhancing the guest experience

underpins the business operation

✓ Finalized agreement with McDonald’s on next three-year openings and capex plan

✓ Operational excellence, strong balance sheet and prudent capital allocation support

sales growth, increase in market share and geographic expansion while capturing

the full potential of the McDonald’s brand

16

Closing Remarks

IR Contact

Patricio Iñaki Esnaola

Director of Investor Relations

+54.11.4711.2561

[email protected]

Dan Schleiniger

Vice President of Investor Relations

+54.11.4711.2535

[email protected]

mailto:[email protected]

mailto:[email protected]

Arcos Dorados 3Q19 conference call presentation November ......• Leading app + 34 million...

Documents

Transcript of Arcos Dorados 3Q19 conference call presentation November ......• Leading app + 34 million...