• Revenue: US dollar revenue set a new high for the third quarter.

• Systemwide Comparable Sales: Increased by more than 32% in the quarter.

• EBITDA: Second highest for the third quarter, with a 50 basis point margin contraction.

• Digital Sales Growth: Increased by 16%, generating 58% of systemwide sales.

• Brazil Comparable Sales: Up 6.8% in the third quarter.

• NOLAD Comparable Sales: Grew by 6.2% in the quarter.

• SLAD Comparable Sales: Increased by 90.4%, including Argentina's high inflation impact.

• Net Debt to Adjusted EBITDA Ratio: Held steady at 1.2 times for the first nine months of the year.

• Cash Flow from Operating Activities: Approximately $96 million in the third quarter.

• Store Openings: Opened 19 Experience of the Future (EOTF) restaurants in the quarter.

• Warning! GuruFocus has detected 2 Warning Sign with ARCO.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arcos Dorados Holdings Inc (NYSE:ARCO) reported strong sales and profitability in Q3 2024, demonstrating the resilience of its business model.

• Guest counts increased for the 14th consecutive quarter, contributing to a 32% rise in system-wide comparable sales.

• Digital, delivery, and drive-thru platforms continue to be a competitive advantage, with digital sales growing 16% and accounting for 58% of system-wide sales.

• The company opened 56 'Experience of the Future' restaurants year-to-date, with a significant number in Brazil, aligning with its growth strategy.

• Arcos Dorados Holdings Inc (NYSE:ARCO) gained significant market share in its largest market, Brazil, and maintained a strong balance sheet with low financial leverage.

Negative Points

• Currency devaluations, particularly in Brazil and Argentina, impacted US dollar EBITDA, leading to a 50 basis point margin contraction.

• Higher food and paper costs, along with increased payroll and occupancy expenses, pressured margins in NOLAD and SLAD divisions.

• Economic challenges in Argentina, including high inflation, continue to affect consumer spending and guest counts.

• The potential end of the six-by-one labor regime in Brazil could lead to increased labor costs, though details are still unclear.

• Despite strong digital sales growth, the company faces ongoing challenges in scaling its own delivery logistics model across different markets.

Q & A Highlights

Q: How does the competitive environment look like in terms of promotional activity this quarter, especially in Brazil? A: Marcelo Rabach, CEO, explained that the competitive landscape remained consistent throughout the year. Arcos Dorados gained significant market share, particularly in Brazil, by focusing on a compelling value proposition and unmatched restaurant experience, driving volume growth and leveraging fixed costs.