3q17 conference call presentation · o “despicable me 3” and “emoji” in happy meal. 3q17...
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Agenda ARCOS DORADOS
3Q17 Conference Call Presentation
November 8, 2017
Disclaimer
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.
1
3Q17 CEO’s Opening Remarks
2
✓ Higher volumes combined with average check growth supported stronger revenues and
expanded consolidated Adjusted EBITDA
✓ 10.4% increase in comparable sales and constant currency revenue growth of 9.7%, both
excluding Venezuela
o Exceeding blended inflation for our business and reflecting the broad-based strength in
our fundamentals
✓ Strong topline performance supported stronger operating result in the Brazil and SLAD
divisions, as well as at the consolidated level
✓ As reported Adjusted EBITDA rose 17.5% in the quarter on the back of topline growth and
leverage in Food and Paper costs and G&A
o 70 basis points of Adjusted EBITDA margin versus the prior year
✓ Net income of $23.4 million in the quarter
Our strategic approach to topline growth drove higher restaurant
volumes in our biggest markets
3Q17 Strategic Initiatives
3
✓ Early results from the roll out of EOTF are in line with expectations and within the range of
results experienced in the McDonald’s system globally
✓ We are transforming our restaurants and delivering a more convenient, personalized and
enjoyable experience to our guests
✓ We remain cautious with respect to our short-term performance given that economic
recoveries are rarely linear
✓ We are facing a tough comparison to our strong fourth quarter of 2016 operating results
✓ In the medium to long-term, we will continue to focus on offering compelling value across our
menu board while updating our restaurant base to deliver an unmatched guest experience
Expanding our footprint as we modernize restaurants to keep customers
coming back to our restaurants
OUR STRATEGY TO DRIVE TOPLINE AND ADJUSTED EBITDA GROWTH WILL GENERATE SHAREHOLDER VALUE AND HELP US TO CONTINUE CAPTURING
THE POTENTIAL OF THE MCDONALD’S BRAND
3Q17 Results and Highlights
Positive restaurant volume trends in most markets and average check
growth drive strong topline results
4
✓ Continued to generate positive business momentum by focusing on
capturing traffic growth
✓ As reported revenues grew 8.6%
✓ Constant currency revenues grew 17.5%
✓ 20.3% expansion in comparable sales
o Average check growth and positive traffic in every division, except the Caribbean
o Comparable sales exceeded blended inflation
✓ Excluding Venezuela:
o As reported revenues increased 8.0%
o Constant currency revenues grew 9.7%
o Systemwide comparable sales increased 10.4%
✓ 39 new restaurants (LTM), bringing restaurant count to 2,160 (September 2017)
3Q17 Performance: Brazil
Growth in average check and restaurant traffic; improving but still soft
consumer environment.
5
✓ As reported revenues grew 6%
o Supported by a 2.7% year-over-year appreciation of the
Brazilian real
✓ Constant currency revenues grew 3.3%
o Result impacted by refranchising of certain
Company-operated restaurants
✓ Constant currency total systemwide sales grew 8.0%
o Comparable sales grew 6.3%
o Average check growth
o Traffic increase
o Above inflation rate
✓ Key marketing drivers
o Duplo Quarterão, Grand Cheddar McMelt
o McFlurry and McShake “Prestígio”
o “Despicable Me 3” and “Emoji” in Happy Meal
3Q17 Performance: NOLAD
Improved traffic and average check growth
6
✓ As reported revenues increased 8.0%
✓ Constant currency revenue growth of 7.0%
✓ 5.9% comparable sales growth
o Average check growth
o Traffic increase in all of the division’s markets
✓ Consumer environment in Mexico remains challenging
amid concerns about the pace of the economic recovery
✓ Key marketing drivers
o Guacamole and BBQ Crispy Onion burgers
o McTrío 3x3
o McFlurry Hershey’s Mini Kisses
o “Despicable Me 3” in Happy Meal
3Q17 Performance: SLAD
Growth in traffic and average check; constant currency growth offsets
peso depreciation
7
✓ As reported revenues grew 13.6%
✓ Constant currency revenue growth of 24.5%
✓ Comparable sales growth of 24.9%
o Average check growth
o Solid traffic increase
o Well above the division’s blended inflation rate
✓ Key marketing drivers
o Guacamole burger
o McCombo del Día
o McFlurry Abuela Goye
o “Despicable Me 3” in Happy Meal
3Q17 Performance: Caribbean
Division’s results were impacted by the effects of hurricanes Irma and
Maria on our businesses in Puerto and the USVI
8
✓ We do not expect our medium to long-term consolidated results to suffer materially
as a result of the hurricanes
✓ Including Venezuela:
o As reported revenues increased 7.5%
o Constant currency revenue grew 61.9%
o Comparable sales increased 87.2%
✓ Excluding Venezuela:
o As reported revenues rose 2.5%
o Constant currency revenue growth of 1.6%
o Comparable sales flat
o Average check growth offset by traffic decline,
primarily in Puerto Rico and the USVI
✓ Key marketing drivers
o Crispy Onion BBQ
o McCombo del Día
o McFlurry Jet Cookies and Cream
o “Despicable Me 3” and “Emoji” in Happy Meal
Mexico
Colombia
Brazil
Argentina
NOLADCosta Rica, Mexico,
Panama
BRAZIL
SLADArgentina, Chile,
Ecuador, Peru,
Uruguay
CARIBBEANAruba, Colombia, Curaçao, French Guyana,
Guadeloupe, Martinique, Puerto Rico, St.
Croix, St. Thomas, Trinidad & Tobago,
Venezuela
20 Restaurant Additions LTM (net)
3 Restaurant Additions LTM (net)
-1 Restaurant Addition LTM (net)
-2 Restaurant Additions LTM (net)
3Q17 New Unit Development
SLAD
Brazil
Caribbean
NOLAD
Number of systemwide
restaurants(1)
386
910
350
514
18%
42%
16%
24%
2,160 100%
9(1) As of September 30, 2017; does not include McCafé units (317) & Dessert Centers (2,791)
3Q17 Adjusted EBITDA Bridge
As reported Adjusted EBITDA variations ($ Million)
10
*Net impact of: Constant Currency Growth ($20.1 million) and Currency Translation (-$20.2 million).
$ 63.2 $ 0.1
$ 11.4 $ 0.3 $ 74.2
0
10
20
30
40
50
60
70
80
EBITDA 3Q2016 Venezuela Consolidated
Impacts*
Constant Currency Growth -
Excl. Venezuela
Currency Translation - Excl.
Venezuela
EBITDA 3Q2017
0
10
20
30
40
50
60
Brazil NOLAD SLAD CaribbeanEx.Vza
US
$ M
illio
n
3Q16 3Q17
22.5%
0
50
100
150
200
250
300
350
400
Brazil NOLAD SLAD CaribbeanEx.Vza
US
$ M
illio
n
3Q16 3Q17
7.0%
3.3%
24.5%
27.2%
1Excludes currency variations 11
Revenues
US$: As reported% growth: Constant Currency basis1
Adjusted EBITDA
US$: As reported% growth: Constant Currency basis1
Constant Currency Consolidated (Ex-Vza) 3Q17 Revenues: +9.7% Constant Currency Consolidated (Ex-Vza) 3Q17 Adj. EBITDA: +18.2%
3Q17 Divisional Results
-12.2%1.6%
EBITDA MARGIN 3Q17 vs 3Q16
Consolidated Ex. Vza Brazil NOLAD SLAD Caribbean Ex. Vza
+70bps +200bps -140bps +10bps -70bps
3Q17 Non-Operating Results
12
✓ $5.6 million foreign currency exchange non-cash gain, versus non-cash loss of $3.3
million in 3Q16
o The net gain related to intercompany balances was mainly due to the
appreciation of the Brazilian real from the previous quarter-end, compared to
depreciation last year
✓ Net interest expense decreased $3.2 million year-over-year to $15.0 million given the
lower financing cost of the Company’s restructured long-term debt
✓ Income tax expense of $15.5 million in the quarter, compared to an income tax
expense of $18.0 million in 3Q16
✓ Net income of $23.4 million, compared to net loss of $1.8 million in 3Q16
o Higher year-over-year operating results, combined with positive variance in non-
cash foreign exchange results, lower net interest expenses, and lower income
tax expense
1Total financial debt includes short-term debt, long-term debt and derivative instruments.2Total financial debt less cash and cash equivalents.
3Q17 Financial Indicators
Healthy financial indicators
13
As of As of
September 30, December 31,
(In millions of U.S. dollars, except ratios) 2017 2016
Cash & Cash Equivalents 269.8 194.8
Total Financial Debt1 645.0 610.2
Net Financial Debt2 375.2 415.4
Total Financial Debt / LTM Adjusted EBITDA ratio 2.3x 2.6x
Net Financial Debt / LTM Adjusted EBITDA ratio 1.3x 1.7x
Covenants under the Master Franchise Agreement (MFA)
Fixed Charge Coverage ratio (>1.50x) 1.69x 1.64x
Leverage ratio (<4.25x) 4.02x 4.21x
14
3Q17 CEO’s Closing Remarks
✓ Executed on key components of our turnaround plan by achieving efficiencies in our restaurant
operations as well as meaningfully reducing our G&A
✓ Our growth strategy in the years to come will include expanding and modernizing our
restaurant base by adding digital capabilities and enhancing the use of technology
✓ We are improving operational excellence and customer satisfaction as part of our Service
Coolture program, which helps employees personalize guest experiences
✓ Our compelling menu, unmatched customer service and investment plan that is modernizing
our restaurants uniquely position us to benefit from an expected improvement in consumer
trends in the region
✓ Highlights from our ongoing social engagement initiatives:
o McDia Feliz in Brazil raised record funds for the Ronald McDonald Institute
o Further progress in our efforts to support youth employment initiatives
WE WILL CONTINUE TO LEVERAGE THE STRONG POTENTIAL OF THE MCDONALD’S BRAND TO DRIVE GROWTH AND
GENERATE SHAREHOLDER VALUE
15
IR Contact
For additional information:
Daniel Schleiniger Patricio Iñaki Esnaola
VP of Corporate Communications & IR IR Sr. Manager
+54.11.4711.2675 +54.11.4711.2561