Agenda ARCOS DORADOS€¦ · +20.2% constant currency revenue growth o Comparable sales grew 26.1%...
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Agenda ARCOS DORADOS 2Q 2016 Conference Call Presentation August 3, 2016
Transcript of Agenda ARCOS DORADOS€¦ · +20.2% constant currency revenue growth o Comparable sales grew 26.1%...
Agenda ARCOS DORADOS
2Q 2016 Conference Call Presentation
August 3, 2016
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.
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2Q16 CEO’s Opening Remarks
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Operating margins are improving as a result of technology upgrades and other management
actions
We are delivering our G&A reduction target ahead of schedule, while we continue to identify
and realize additional G&A savings opportunities
We successfully refinanced our Brazilian real denominated debt within challenging capital
market conditions
The asset monetization initiative has delivered more than $90 million in cash proceeds,
which we have used to reduce our total debt levels
We continued the positive trend in our consolidated EBITDA margin, despite a difficult
operating environment
We expect challenging conditions to through the end of the year, while market consensus
points to a rebound beginning in 2017
We are executing on our three-year strategic plan and have made solid
progress against the key components
2Q16 Results & Highlights
The tough consumer environment that we saw in some of our key
markets continued into the second quarter
3
2Q16 as reported revenues declined 9.4%, impacted by:
o The depreciation of local currencies, mainly in Argentina
and Brazil
o Tough consumer environment
Constant currency revenues increased 10.1% and comparable sales
grew 9.5%, driven by:
o Average check growth outpacing blended inflation
o Partially offset by a mid single-digit decline in traffic
We continue to leverage our affordability platform, and the success of the Happy Meal,
across all markets
31 new restaurants (TTM), bringing restaurant count to 2,135 (June 2016)
2Q16 Performance: Brazil
Retail sales and consumer spending faced additional pressure in the
second quarter
4
The economic recession, political instability, declining employment and real wages,
all drove consumption down
As reported revenues decreased 11.8%
o Impacted by the 14% y-o-y average
depreciation of the BRL
+0.6% constant currency revenue growth
o Comparable sales rose 0.2%
Average check growth
Offset by a decline in traffic
Tough comp with the Monopoly
promotion during 2Q15
Key marketing drivers
o Almoço Completo
o Grand Big Mac
o Angry Birds
2Q16 Performance: NOLAD
Ongoing trend of solid performance
5
Strong performance supported by results in Costa Rica and Panama
As reported revenues declined 3.3%
o Impacted by the 18% y-o-y average
depreciation of the Mexican peso
+4.7% constant currency revenue growth
o Comparable sales rose 0.6%
Average check growth
Partially offset by a modest decline in traffic
Key marketing drivers
o McNífica campaign
o BBQ Bourbon
o Angry Birds
2Q16 Performance: SLAD
Achieved double-digit growth in both revenue and comparable sales on
a constant currency basis, despite a tough environment in Argentina
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Results were impacted by economic contraction and a decline in consumption in
Argentina
As reported revenues were down 13.5%
o Heavily impacted by the 59% year-over-year
average depreciation of the Argentine peso
o Depreciation of other currencies in the division
+22.9% constant currency revenue growth
o Comparable sales growth of 24.4%
Average check growth
Modest decline in traffic
Key marketing drivers
o Almuerzos Imperdibles
o Angry Birds
o McFlurry Milka Nuss
& Nougat Creme
2Q16 Performance: Caribbean
Results were supported by the continued strong performance of our
Colombian operations
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As reported results impacted by the remeasurement of the Venezuelan operation at
a weaker y-o-y average FX rate as well as the depreciation of the Colombian peso
+20.2% constant currency revenue growth
o Comparable sales grew 26.1%
Inflation-driven average check growth
more than offset a decrease in traffic
Excluding Venezuela:
o As reported revenues mainly impacted by the
depreciation of the Colombian peso
o Constant currency revenues increased 3.2%
o Comparable sales rose 2.2%
Key marketing drivers
o ClubHouse burger
o Almuerzos Colombianos
o McFlurry Cheesecake
Mexico
Colombia
Brazil
Argentina
NOLAD
Costa Rica, Mexico,
Panama
BRAZIL
SLAD
Argentina, Chile,
Ecuador, Peru,
Uruguay
CARIBBEAN
Aruba, Colombia, Curaçao, French Guyana,
Guadeloupe, Martinique, Puerto Rico, St.
Croix, St. Thomas, Trinidad & Tobago,
Venezuela
13 Restaurant Additions LTM (net)
33 Re-imagings LTM
-1 Restaurant Additions LTM (net)
14 Re-imagings LTM
5 Restaurant Additions LTM (net)
2 Re-imagings LTM
-2 Restaurant Additions LTM (net)
10 Re-imagings LTM
2Q16 New Unit Development & Re-imaging
SLAD
Brazil
Caribbean
NOLAD
Number of systemwide
restaurants(1)
382
884
353
516
18%
41%
17%
24%
2,135 100%
8(1) As of June 30, 2016; does not include McCafé units (318) & Dessert Centers (2,666)
2Q16 Adjusted EBITDA Bridge
As reported Adjusted EBITDA variations ($ Million)
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*Net impact of: Currency Translation (-$6.5 million) and Constant Currency Growth ($7.9 million).
$ 41.1 $ 1.4
$ 6.4 - $ 8.1
$ 40.8
0
10
20
30
40
50
60
EBITDA 2Q2015 Venezuela ConsolidatedImpacts*
Constant Currency Growth -Excl. Venezuela
Currency Translation - Excl.Venezuela
EBITDA 2Q2016
0
5
10
15
20
25
30
35
40
45
Brazil NOLAD SLAD CaribbeanEx.Vza
US
$ M
illio
n
2Q15 2Q16
41.5%
0
50
100
150
200
250
300
350
400
Brazil NOLAD SLAD CaribbeanEx.Vza
US
$ M
illio
n
2Q15 2Q16
0.6%
4.7%
22.9%6.2%
*Excludes currency variations10
Revenues
US$: As reported% growth: Constant Currency basis*
Adjusted EBITDA
US$: As reported% growth: Constant Currency basis*
Consolidated (Ex-Vza) 2Q16 Revenues: +7.9% Consolidated (Ex-Vza) 2Q16 Adj. EBITDA: +14.2%
2Q16 Divisional Results
9.7%
3.2%
EBITDA MARGIN 2Q16 vs 2Q15
Consolidated Brazil NOLAD SLAD Caribbean
+50bps -130bps +100bps -120bps +190bps
39.6%
2Q16 Non-Operating Results
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$15.5 million FX gain compared with a gain of $3.7 million last year
o Stronger sequential Brazilian real appreciation this year
o Increased BRL net exposure
Net interest expense increased $3.9 million year-over-year to $20.8 million
o Interest payments on the loan agreement signed in March 2016, which offset
lower interest expenses on the remainder of the 2016 notes
Net income of $43.4 million, compared to net income of $7.0 million in 2Q15
o Stronger operating results coupled with a positive variance in FX results
o Partially offset by higher net interest and income tax expenses
2Q16 operating results included $50.1 million of proceeds from the Company’s asset
monetization initiative
1Total financial debt includes short-term debt, long-term debt and derivative instruments (including the asset portion
of derivatives amounting to nil and $6.7 million as a reduction of financial debt as of June 30, 2016 and December
31, 2015, respectively).2Total financial debt less cash and cash equivalents.3McDonald’s granted a limited waiver through and including June 30, 2016.
2Q16 Financial Indicators
Our deleveraging strategy is on track
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As of As of
June 30, December 31,
(In millions of U.S. dollars, except ratios) 2016 2015
Cash & Cash Equivalents 136.8 112.5
Total Financial Debt1 686.8 650.5
Net Financial Debt2 550.0 537.9
Total Financial Debt / LTM Adjusted EBITDA ratio 2.9x 2.8x
Net Financial Debt / LTM Adjusted EBITDA ratio 2.3x 2.3x
Covenants under the Master Franchise Agreement (MFA)3
Fixed Charge Coverage ratio (>1.50x) 1.64x 1.56x
Leverage ratio (<4.25x) 4.40x 4.40x
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2Q16 CEO’s Closing Remarks
We have made meaningful reductions to our G&A base as well as restaurant level
cost structure
We have strengthened our balance sheet through our asset monetization strategy
and subsequent debt reduction
We have reformulated the affordability platform, introduced new and innovate menu
items
We are investing in the customer experience with technology upgrades and other
steps aligned with McDonald’s global plans for offering modern and progressive
restaurant environments
We have a clear strategy and are taking the necessary steps to strengthen our
leadership position
WE HAVE MADE IMPORTANT PROGRESS ON THE TARGETS SET IN OUR THREE-YEAR STRATEGIC PLAN
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IR Contact
For additional information:
Daniel Schleiniger
Sr. Director of Corporate Communications & IR
+54.11.4711.2675
Patricio Iñaki Esnaola
IR Sr. Manager
+54.11.4711.2561
www.arcosdorados.com/ir
