Arcos Dorados ((ARCO)) has held its Q4 earnings call. Read on for the main highlights of the call.
Arcos Dorados’ recent earnings call painted a picture of robust growth and strategic advancements, tempered by economic challenges in key markets. The sentiment was largely positive, underscoring strong digital and delivery growth, record-high EBITDA, and market share gains, although currency depreciation and economic hurdles in Argentina and Brazil posed significant challenges.
Record Full-Year EBITDA
Arcos Dorados achieved a historic milestone with its adjusted EBITDA reaching $500 million for the first time in the company’s history. This achievement was complemented by an all-time high EBITDA margin for the full year 2024, showcasing the company’s operational efficiency and financial strength.
Strong Digital and Delivery Growth
The company reported an impressive 18% growth in digital sales in U.S. dollars compared to 2023. Mobile App sales surged by 25%, while delivery sales rose by 17%, highlighting the successful expansion of its digital and delivery channels.
Expansion of EOTF Restaurant Penetration
In 2024, Arcos Dorados completed 85 new Experience of the Future (EOTF) restaurant openings, increasing EOTF penetration to 67% of its total footprint. This expansion underscores the company’s commitment to modernizing its restaurant experience.
Market Share Gains
Arcos Dorados made significant strides in market share, outpacing the top three quick-service restaurant operators in the region in 2024. This growth reflects the company’s competitive positioning and strategic market initiatives.
Improved Debt Structure
The company received positive credit rating upgrades from Moody’s and Fitch, with Moody’s assigning a Ba1 rating and Fitch upgrading to BBB-. Arcos Dorados also issued $600 million in new debt due in 2032, strengthening its financial structure.
Currency Depreciation Impact
Despite strong operational performance, the depreciation of the Brazilian real and Mexican peso led to a decline in U.S. dollar revenue, impacting dollar-denominated EBITDA. This highlights the ongoing currency challenges faced by the company.
Challenges in Argentina
Economic corrections in Argentina posed challenges, resulting in reduced U.S. dollar EBITDA. However, the company noted improvements in local performance, indicating resilience in the face of economic adversity.
Pressure from Food Costs
Rising beef costs in Brazil exerted pressure on margins, although these were partially offset by improvements in other divisions. This reflects the ongoing challenges in managing input costs in volatile markets.
Guidance and Future Outlook
Looking ahead, Arcos Dorados remains optimistic, projecting continued growth despite macroeconomic challenges. The company plans to open 90 to 100 new EOTF restaurants in 2025, with capital expenditures between $300 million and $350 million. By 2027, it aims to increase EOTF restaurant penetration to 90%. The company also reported stable net debt-to-adjusted EBITDA ratios and strong digital sales growth, particularly in Brazil.
In summary, Arcos Dorados’ earnings call reflected a positive outlook with significant achievements in digital growth, market share, and financial metrics. Despite facing currency and economic challenges in key markets, the company remains focused on strategic expansion and operational excellence.