Arcos Dorados 4Q19 conference call presentation March 18, 2020
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
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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
Note: Financial results exclude Venezuela 5
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
4Q18 4Q19 (asreported)
4Q19 (inconstantcurrency)
+6.2% (CC)
+9.4%
187 169230
4Q18 4Q19 (asreported)
4Q19 (inconstantcurrency)
+23.1% (CC)
-9.3%
20.9%
+1.8% (CC)
-1.0%
1.8%
6
100 99102
4Q18 4Q19 (in US$) 4Q19 (inconstantcurrency)
4.7%
Omnichannel Approach & Excellent Hospitality
Continues to drive
improvement in
employee retention
and satisfaction,
which supports
higher customer
satisfaction
7
EOTF, Digital & Delivery enhancing the overall guest experience and differentiating brand
• More than 1,500
restaurants across
11 markets
• Driving comp
sales and check
growth
• Leading app
+ 34 million
downloads
• #1 Android,
#2 Apple in BR
Food & Drink Category
• Now includes Delivery
ordering in Brazil
• 683 EOTF restaurants as
of Dec 31, 2019
• Available in 10 countries
in 2019
• 90 new restaurants in
2019
1,543 1,538 1,541 1,542 1,541 1,537 1,580
648 657 682 683 688 702 713
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Company Operated Sub-Franchised
BRAZIL
NOLAD
SLAD
CARIBBEAN
2019 YEAR-END FOOTPRINT
RESTAURANTS
+6
(*) Restaurant Addition LTM (net)
-1
+55
+10
DIVISIONSTORE TYPE
TOTAL
RESTAURANTSMCCAFES
DESSERT
CENTERSFS & IS MS & FC
BRAZIL 554 469 1,023 81 2,000
NOLAD 324 206 530 13 626
SLAD 239 165 404 128 389
CARIBBEAN 260 76 336 36 311
TOTAL 1,377 916 2,293 258 3,326612 Company Operated
411 Sub-Franchised
353 Company Operated
51 Sub-Franchised
251 Company Operated
85 Sub-Franchised
364 Company Operated
166 Sub-Franchised
2,293
683
8
2019 Restaurant Development
35.2% 35.8%
19.3% 19.6%
27.2% 28.0%
5.5% 5.5%
4Q18 4Q19F&P Payroll and employee benefits Occupancy and other operating exp Royalty Fees
6054
4Q18 4Q19
G&A expensesCompany operated restaurant expenses
87.3% 88.9%
($ M and as a % of Total Revenues)(As a % of sales by Company operated restaurants)
8.1% 7.2%
Note: Financial results exclude Venezuela 9
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 $10.0 million
bad debt reserve
reversal in Puerto Rico
• Successful marketing
strategy boosted traffic
and topline growth
• G&A decreased 10%
YoY in US dollars and
90 bps as a % of
revenues
11.7
0.5 0.3 0.0
0.11.3
0.6
1.7 13.5
Adj EBITDA Mg4Q18
Food & Paper Payroll Occupancy &other operating
expenses
Royalty Fees Franchisedrestaurants -occupancyexpenses
G&A Other Op Income(expense)
Adj EBITDA Mg4Q19
• Strong Adjusted EBITDA margin expansion in Brazil, NOLAD and Caribbean
(including the bad debt reserve reversal in Puerto Rico)
• Achieved record high Adjusted EBITDA in Mexico
• Full Year Adjusted EBITDA Margin expansion of 120 basis points from 2017 to 2019
68 79 85
4Q18 4Q19 (asreported)
4Q19 (inconstantcurrency)
BRAZIL
+26.0% (CC)
19.1% 21.5%
($ million)
+17.2%
9 13 12
4Q18 4Q19 (asreported)
4Q19 (inconstantcurrency)
NOLAD
+34.2% (CC)
8.6% 11.0%
+39.5%
($ million)
17 14 21
4Q18 4Q19 (asreported)
4Q19 (inconstantcurrency)
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
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• 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
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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
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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
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Closing Remarks
IR Contact
Patricio Iñaki Esnaola
Director of Investor Relations
+54.11.4711.2561
Dan Schleiniger
Vice President of Investor Relations
+54.11.4711.2535