Arcos Dorados Holdings Inc. (NYSE:ARCO) Q4 2023 Earnings Call Transcript

Arcos Dorados Holdings Inc. (NYSE:ARCO) Q4 2023 Earnings Call Transcript March 13, 2024

Arcos Dorados Holdings Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Daniel Schleiniger: Good morning, everyone, and thank you for joining our Fourth Quarter and Full Year 2023 Earnings Webcast. With us today are Marcelo Rabach, our Chief Executive Officer; Luis Raganato, our Chief Operating Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation also available in the Investors section of our website, www.arcosdorados.com/ir. As a reminder, to better view the presentation on the webcast platform, please scroll over the upper left-hand part of the screen and click on the arrows to maximize the slides. After we conclude our opening remarks, we will answer your questions, which you can submit using the chat function on the left-hand side of the screen.

You will need to minimize the slides to access the chat function. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with Generally Accepted Accounting Principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in the press release and unaudited financial statements filed today with the SEC on Form 6-K. Marcelo, over to you.

Marcelo Rabach: Thank you, Dan. Good morning, everyone, and thank you for joining us today. I am very pleased to confirm that we had a very strong year in 2023. Our 3D's strategy of Digital, Delivery and Drive-thru continues to evolve, while leveraging the industry’s largest freestanding restaurant portfolio. Digital sales includes mobile app, Delivery and Self-order Kiosk consumptions. The penetration of these channels is expanding throughout footprint. Thanks to a mobile app that has evolved into an ecommerce platform offering incentives and convenience to increase guest loyalty and visit frequency. A delivery sales channel which continues to work strongly in a segment where we are the established industry leaders. On self-order kiosks that are capturing an increasing share of on-premise orders with above 60% of Arcos Dorados restaurants already modernized to the experience of the future format.

Our 3D’s strategy continues to drive sustainable sales growth supported by both restaurant volume and average check. Importantly, we are implementing the strategy in a way we believe we deliver above inflation growth in system-wide comparable sales to then drive operating leverage and profitability growth. Our balance sheet is very strong which allows us to accelerate restaurant openings and capture significant growth opportunities for years to come, all while operating responsibly and supporting the communities we serve. Let’s turn to our consolidated results for the fourth quarter and full year 2023. Total revenue surpassed $1.2 billion in the quarter, and $4.3 billion for the full year, which was the highest U.S. dollar total in our history for each period.

Guest volumes were up mid-single-digits in each division this year helping to drive the 19.7% increase in US dollar revenue in 2023. In line with our strategic approach, adjusted EBITDA grew with revenue reaching almost $133 million in the quarter, and more than $472 million for the full year. These results were also the highest US dollar total in our history for each period. US dollar adjusted EBITDA grew 16.3% in the fourth quarter and 22.2% for the full year on top of the prior year’s record results. This included incremental margin improvements in both periods, thanks mainly to better food and paper costs and G&A expenses. Net income for the quarter was almost $56 million, or $0.26 per share. We generated the best ever full year net income of more than $181 million or $0.86 per share last year.

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