Financial Performance - Total revenue reached $1.1 billion[12] - Systemwide comparable sales grew by 12.1%[12] - Adjusted EBITDA was $110.1 million with a 9.6% margin[12] - Net income was $22.6 million, or $0.11 per share[12] Digital Sales & Loyalty Program - Digital sales contributed approximately 60% of total sales[12] - Loyalty program registered members increased to 21.5 million[23] - Loyalty program generated about 17% of total sales in Argentina, Colombia, Ecuador and Uruguay[29] Divisional Performance - Brazil's sales were $415.4 million, with systemwide comparable sales growth of 0.3%[27] - NOLAD (North Latin America Division) sales were $317.8 million, with systemwide comparable sales growth of 4.4%[28] - SLAD (South Latin America Division) sales were $409.1 million, with systemwide comparable sales growth of 38.2%[28] Development & Capital Allocation - Opened 20 new restaurants, including 18 freestanding locations[12] - Capital expenditures totaled $55.3 million[59] - Dividend payment was $12.6 million[59]

Company Performance - Arcos Dorados reported quarterly earnings of $0.11 per share, exceeding the Zacks Consensus Estimate of $0.05 per share, but down from $0.13 per share a year ago, representing an earnings surprise of +120.00% [1] - The company posted revenues of $1.14 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.67% and up from $1.11 billion year-over-year [2] - Over the last four quarters, Arcos Dorados has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Outlook - The stock has underperformed the market, losing about 4.5% since the beginning of the year compared to the S&P 500's gain of 9.6% [3] - The current consensus EPS estimate for the coming quarter is $0.17 on revenues of $1.2 billion, and for the current fiscal year, it is $0.62 on revenues of $4.64 billion [7] - The estimate revisions trend for Arcos Dorados was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Retail - Restaurants industry, to which Arcos Dorados belongs, is currently in the bottom 25% of over 250 Zacks industries, suggesting a challenging environment [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

[FORM 6-K Filing Information](index=1&type=section&id=FORM%206-K) This section identifies Arcos Dorados Holdings Inc. as a foreign private issuer filing under Form 6-K for August 2025 - The registrant is **Arcos Dorados Holdings Inc.**, a foreign private issuer, filing under Form 20-F[2](index=2&type=chunk) - The report is for the month of **August 2025**[2](index=2&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheet, cash flows, and changes in equity [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Arcos Dorados Holdings Inc. reported a decrease in net income attributable to the company for the six-month period ended June 30, 2025, falling to $36,517 thousand from $55,141 thousand in the prior year, primarily due to lower operating income and higher income tax expense | Metric | 2025 (Thousands of US dollars) | 2024 (Thousands of US dollars) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | 2,218,888 | 2,192,257 | | Total operating costs and expenses | (2,111,281) | (2,050,487) | | Operating income | 107,607 | 141,770 | | Income before income taxes | 67,756 | 92,673 | | Income tax expense, net | (30,991) | (37,106) | | Net income | 36,765 | 55,567 | | Net income attributable to Arcos Dorados Holdings Inc. | 36,517 | 55,141 | | Basic and Diluted EPS | 0.17 | 0.26 | - Net income attributable to Arcos Dorados Holdings Inc. decreased by **33.78%** year-over-year[11](index=11&type=chunk) - Basic and Diluted net income per common share decreased by **34.62%** year-over-year[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company experienced a significant increase in comprehensive income attributable to Arcos Dorados Holdings Inc. for the six-month period ended June 30, 2025, reaching $122,718 thousand, a substantial improvement from $4,625 thousand in the prior year, largely driven by positive foreign currency translation | Metric | 2025 (Thousands of US dollars) | 2024 (Thousands of US dollars) | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net income | 36,765 | 55,567 | | Foreign currency translation | 87,806 | (55,105) | | Cash flow hedges (net of deferred income taxes) | (1,083) | 3,458 | | Securities available for sale (net of deferred income taxes) | (484) | 1,075 | | Total other comprehensive income (loss) | 86,239 | (50,572) | | Comprehensive income | 123,004 | 4,995 | | Comprehensive income attributable to Arcos Dorados Holdings Inc. | 122,718 | 4,625 | - Foreign currency translation shifted from a loss of **$(55,105) thousand** in 2024 to a gain of **$87,806 thousand** in 2025, significantly impacting comprehensive income[14](index=14&type=chunk) [Consolidated Balance Sheet](index=7&type=section&id=Consolidated%20Balance%20Sheet) As of June 30, 2025, Arcos Dorados Holdings Inc. reported an increase in total assets to $3,372,420 thousand from $2,892,654 thousand at December 31, 2024, primarily driven by growth in current assets and property and equipment. Total liabilities also increased, leading to a higher total equity | Metric | June 30, 2025 (Thousands of US dollars) | December 31, 2024 (Thousands of US dollars) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total current assets | 623,679 | 468,403 | | Total non-current assets | 2,748,741 | 2,424,251 | | Total assets | 3,372,420 | 2,892,654 | | Total current liabilities | 778,581 | 765,924 | | Total non-current liabilities | 2,012,197 | 1,617,301 | | Total liabilities | 2,790,778 | 2,383,225 | | Total equity | 581,642 | 509,429 | - Total assets increased by **16.59%** from December 31, 2024, to June 30, 2025[17](index=17&type=chunk) - Total liabilities increased by **17.10%** over the same period[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six-month period ended June 30, 2025, net cash provided by operating activities decreased to $57,706 thousand from $63,707 thousand in 2024. Investing activities saw a higher net cash outflow, while financing activities shifted from a net outflow in 2024 to a significant net inflow in 2025, largely due to debt refinancing | Metric | 2025 (Thousands of US dollars) | 2024 (Thousands of US dollars) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | 57,706 | 63,707 | | Net cash used in investing activities | (202,250) | (134,031) | | Net cash provided by (used in) financing activities | 159,062 | (17,566) | | Increase (decrease) in cash and cash equivalents | 11,988 | (92,445) | | Cash and cash equivalents at the end of the period | 147,052 | 104,216 | - Net cash provided by operating activities decreased by **9.39%** year-over-year[19](index=19&type=chunk) - Net cash from financing activities swung from an outflow of **$(17,566) thousand** in 2024 to an inflow of **$159,062 thousand** in 2025, primarily due to the issuance of 2032 Senior Notes and the tender of 2027 Senior Notes[19](index=19&type=chunk) [Consolidated Statement of Changes in Equity](index=9&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Arcos Dorados Holdings Inc.'s total equity increased from $509,429 thousand at the beginning of the fiscal year to $581,642 thousand by June 30, 2025, primarily driven by net income and other comprehensive income, despite dividend payments | Metric | Balance at Dec 31, 2024 (Thousands of US dollars) | Net income for the period (Thousands of US dollars) | Other comprehensive income (Thousands of US dollars) | Cash Dividends (Thousands of US dollars) | Balance at June 30, 2025 (Thousands of US dollars) | | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------- | :----------------------------------- | :--------------------------------------- | :------------------------------------------------ | | Total Arcos Dorados Holdings Inc. shareholders' equity | 508,080 | 36,517 | 86,201 | (50,560) | 580,238 | | Non-controlling interests in subsidiaries | 1,349 | 248 | 38 | (231) | 1,404 | | Total equity | 509,429 | 36,765 | 86,239 | (50,791) | 581,642 | - Total equity increased by **14.18%** from December 31, 2024, to June 30, 2025[17](index=17&type=chunk)[21](index=21&type=chunk) - Net income attributable to Arcos Dorados Holdings Inc. for the six-month period ended June 30, 2025, was **$36,517 thousand**[21](index=21&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies, debt structures, derivative instruments, equity changes, and other significant financial disclosures [1. Organization and nature of business](index=11&type=section&id=1.%20Organization%20and%20nature%20of%20business) Arcos Dorados Holdings Inc. operates and franchises McDonald's restaurants across twenty territories in Latin America and the Caribbean. The company recently renewed its Master Franchise Agreements (MFAs) with McDonald's Corporation, extending the term for most territories to 20 years, effective January 1, 2025 - The Company operates and franchises McDonald's restaurants in **twenty territories** across Latin America and the Caribbean[27](index=27&type=chunk) - New Master Franchise Agreements (MFAs) with McDonald's Corporation became effective **January 1, 2025**, extending the term to **20 years** for most territories[28](index=28&type=chunk) [2. Basis of presentation and principles of consolidation](index=11&type=section&id=2.%20Basis%20of%20presentation%20and%20principles%20of%20consolidation) The condensed consolidated financial statements are prepared in accordance with US GAAP for interim financial information, are unaudited, and include all necessary normal recurring adjustments for fair presentation. They should be read in conjunction with the consolidated annual financial statements as of December 31, 2024 - The financial statements are prepared in accordance with **US GAAP** for interim financial information and include the accounts of the Company and its subsidiaries[29](index=29&type=chunk) - The condensed consolidated financial statements are **unaudited** and include all adjustments considered necessary for fair presentation[31](index=31&type=chunk) [3. Summary of significant accounting policies](index=12&type=section&id=3.%20Summary%20of%20significant%20accounting%20policies) This section outlines key accounting policies, including the use of estimates, foreign currency translation for highly inflationary economies like Venezuela and Argentina, and the capitalization and amortization of intangible assets such as computer software and initial franchise fees. It also details the company's accounts payable outsourcing arrangement and discusses recent accounting pronouncements related to income tax and expense disaggregation disclosures - Venezuela (since 2010) and Argentina (since 2018) are considered **highly inflationary economies**, requiring financial statements to be remeasured in US dollars with remeasurement gains and losses recognized in earnings[36](index=36&type=chunk) - Intangible assets include computer software costs (amortized over **three years**) and initial franchise fees, with **$67,592 thousand** related to initial franchise fees for franchised restaurants as of June 30, 2025, payable from August 2027[39](index=39&type=chunk)[40](index=40&type=chunk) - The Company utilizes an accounts payable services arrangement, with amounts under this arrangement totaling **$15,878 thousand** as of June 30, 2025, and **$14,849 thousand** as of December 31, 2024[42](index=42&type=chunk)[43](index=43&type=chunk) - Recent accounting pronouncements include ASU 2023-09 (Income Taxes) effective for fiscal years beginning after **December 15, 2024**, and ASU 2024-03 (Expense Disaggregation) effective for fiscal years beginning after **December 15, 2026**[44](index=44&type=chunk)[45](index=45&type=chunk) [4. Short-term debt](index=14&type=section&id=4.%20Short-term%20debt) Short-term debt significantly decreased to $27,836 thousand as of June 30, 2025, from $60,251 thousand at December 31, 2024, primarily due to payments of short-term bank loans in various territories. The company maintains revolving credit facilities totaling $75,000 thousand and was in compliance with all associated financial covenants as of June 30, 2025 | Short-term Debt Component | June 30, 2025 (Thousands of US dollars) | December 31, 2024 (Thousands of US dollars) | | :------------------------ | :------------------------------------ | :------------------------------------ | | Bank overdrafts | — | 686 | | Short-term bank loans | 27,836 | 55,065 | | Revolving Credit Facility | — | 4,500 | | Total | 27,836 | 60,251 | - Short-term bank loans decreased by **49.45%** from **$55,065 thousand** at December 31, 2024, to **$27,836 thousand** at June 30, 2025[48](index=48&type=chunk) - The Company maintains three revolving credit facilities totaling **$75,000 thousand**, with maturities in April 2026, February 2026, and October 2026[51](index=51&type=chunk) - As of June 30, 2025, the Company was in compliance with all consolidated net indebtedness to EBITDA ratios required by its revolving credit facilities (e.g., **1.44** against a maximum of **3.00** for J.P. Morgan and Banco Santander)[52](index=52&type=chunk)[53](index=53&type=chunk) [5. Long-term debt](index=16&type=section&id=5.%20Long-term%20debt) Long-term debt, excluding the current portion, increased to $944,456 thousand as of June 30, 2025, from $715,974 thousand at December 31, 2024. This increase is primarily due to the issuance of $600,000 thousand in 2032 Senior Notes, the proceeds of which were used to tender and redeem all outstanding 2027 Notes | Long-term Debt Component | June 30, 2025 (Thousands of US dollars) | December 31, 2024 (Thousands of US dollars) | | :----------------------- | :------------------------------------ | :------------------------------------ | | 2032 Notes | 600,000 | — | | 2029 Notes | 334,200 | 334,200 | | 2027 Notes | — | 379,265 | | Finance lease obligations | 11,668 | 9,087 | | Long-term bank loans | 10,000 | — | | Other long-term borrowings | 6,804 | 2,791 | | Subtotal | 962,672 | 725,343 | | Long-term debt, excluding current portion | 944,456 | 715,974 | - On January 29, 2025, the Company's subsidiary ADBV issued **$600,000 thousand** in 2032 Senior Notes with an interest rate of **6.375%** per annum[58](index=58&type=chunk)[61](index=61&type=chunk) - Proceeds from the 2032 Notes were used to fund a cash tender offer and redeem all outstanding 2027 Notes, totaling **$379,265 thousand**[59](index=59&type=chunk)[61](index=61&type=chunk) | Note Type | 2025 Interest Expense (Thousands of US dollars) | 2024 Interest Expense (Thousands of US dollars) | | :-------- | :-------------------------------------------- | :-------------------------------------------- | | 2032 Notes | 16,150 | — | | 2029 Notes | 10,235 | 10,235 | | 2027 Notes | 4,193 | 11,141 | [6. Derivative instruments](index=17&type=section&id=6.%20Derivative%20instruments) The company uses various derivative instruments, both designated for hedge accounting (cash flow hedges) and not designated for hedge accounting, to manage foreign exchange risk and variability in future cash flows. The fair value of derivative assets decreased to $67,962 thousand as of June 30, 2025, from $82,383 thousand at December 31, 2024, while derivative liabilities increased to $7,323 thousand from $1,292 thousand over the same period | Derivative Type | Balance Sheets Location | June 30, 2025 (Thousands of US dollars) | December 31, 2024 (Thousands of US dollars) | | :---------------------- | :---------------------- | :------------------------------------ | :------------------------------------ | | **Assets** | | | | | Cash Flow hedge | Derivative instruments | 66,542 | 82,335 | | Non-hedging derivatives | Derivative instruments | 1,420 | 48 | | Total derivative assets | | 67,962 | 82,383 | | **Liabilities** | | | | | Cash Flow hedge | Derivative instruments | (7,323) | (1,006) | | Non-hedging derivatives | Derivative instruments | — | (286) | | Total derivative liabilities | | (7,323) | (1,292) | - Derivative assets decreased by **17.51%** from **$82,383 thousand** at December 31, 2024, to **$67,962 thousand** at June 30, 2025[69](index=69&type=chunk) - Derivative liabilities increased by **466.79%** from **$1,292 thousand** at December 31, 2024, to **$7,323 thousand** at June 30, 2025[69](index=69&type=chunk) - The Company uses various cash flow hedges, including forward contracts, principal only swaps, call spreads, coupon-only swaps, cross-currency interest rate swaps, and sustainability-linked ESG principal only swaps, to reduce exposure to foreign exchange risk and variability in future cash flows[70](index=70&type=chunk)[71](index=71&type=chunk) [7. Share-based compensation](index=21&type=section&id=7.%20Share-based%20compensation) The company operates a Phantom RSU Award plan to reward employees, with compensation expense recognized on a straight-line basis over the vesting period. Total compensation expense for the six-month period ended June 30, 2025, was $2,992 thousand, a significant increase from $241 thousand in the prior year - Total compensation expense for the six-month period ended June 30, 2025, was **$2,992 thousand**, a substantial increase from **$241 thousand** in the prior year[81](index=81&type=chunk) | Phantom RSU Plan Metric | June 30, 2025 (Thousands of US dollars) | | :---------------------- | :------------------------------------ | | Number of units outstanding | 2,036,707 | | Share price | 7.89 | | Total fair value of the plan | 16,070 | | Accrued liability | 5,605 | | Compensation expense not yet recognized | 10,465 | [8. Commitments and contingencies](index=22&type=section&id=8.%20Commitments%20and%20contingencies) The company has commitments under its Master Franchise Agreements (MFAs), including restaurant opening plans, initial and monthly royalty fees, and marketing expenditures. It also maintains standby letters of credit totaling $80,000 thousand and was in compliance with all related financial covenants as of June 30, 2025. The provision for contingencies increased to $33,240 thousand as of June 30, 2025, from $30,356 thousand at December 31, 2024, primarily due to tax and labor contingencies in Brazil - MFAs require the Company to open **90-100 restaurants** in 2025 and reimage at least **10%** of eligible restaurants[86](index=86&type=chunk) - Monthly royalties to McDonald's Corporation commence at **6%** of gross sales for the first 10 years, increasing to **6.25%** and **6.5%** for subsequent five-year periods[86](index=86&type=chunk) - The Company maintains standby letters of credit totaling **$80,000 thousand** in favor of McDonald's Corporation[87](index=87&type=chunk) | Ratio | Required Maximum Ratio | June 30, 2025 (Unaudited) | | :---------------------- | :--------------------- | :------------------------ | | Fixed Charge Coverage Ratio | 1.50 | 2.05 | | Leverage Ratio | 4.25 | 3.53 | - The provision for contingencies increased by **9.50%** to **$33,240 thousand** as of June 30, 2025, from **$30,356 thousand** at December 31, 2024, with tax contingencies in Brazil being the largest component at **$28,430 thousand**[89](index=89&type=chunk) [9. Segment and geographic information](index=24&type=section&id=9.%20Segment%20and%20geographic%20information) The company manages its business across three geographic segments: Brazil, NOLAD (North Latin American division), and SLAD (South Latin American division). For the six-month period ended June 30, 2025, total revenues increased to $2,218,888 thousand, but Adjusted EBITDA decreased to $201,390 thousand from $227,717 thousand in 2024, primarily due to a significant decline in Brazil's Adjusted EBITDA - The Company's operations are divided into three geographic segments: **Brazil**, **NOLAD** (North Latin American division), and **SLAD** (South Latin American division)[92](index=92&type=chunk) | Segment | Revenues 2025 (Thousands of US dollars) | Revenues 2024 (Thousands of US dollars) | Adjusted EBITDA 2025 (Thousands of US dollars) | Adjusted EBITDA 2024 (Thousands of US dollars) | | :------ | :------------------------------------ | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Brazil | 815,689 | 890,927 | 102,523 | 161,614 | | NOLAD | 599,529 | 612,926 | 67,478 | 54,763 | | SLAD | 803,670 | 688,404 | 79,593 | 55,312 | | Total | 2,218,888 | 2,192,257 | 249,594 | 271,689 | - Brazil's Adjusted EBITDA decreased by **36.57%** year-over-year, while NOLAD's increased by **23.22%** and SLAD's increased by **43.89%**[94](index=94&type=chunk) - Total Adjusted EBITDA decreased by **11.56%** year-over-year to **$201,390 thousand**[94](index=94&type=chunk) [10. Shareholders' equity](index=28&type=section&id=10.%20Shareholders'%20equity) As of June 30, 2025, Arcos Dorados Holdings Inc. had 210,663,057 shares outstanding, consisting of Class A and Class B shares, with Class B shares carrying five votes per share. The company approved a cash dividend distribution of $0.24 per share for 2025, payable in four installments, with $25,280 thousand paid by June 30, 2025. Accumulated other comprehensive loss improved significantly, reducing from $(668,484) thousand at December 31, 2024, to $(582,283) thousand at June 30, 2025, primarily due to positive foreign currency translation - As of June 30, 2025, the Company had **210,663,057 shares outstanding**, comprising **130,663,057 Class A shares** and **80,000,000 Class B shares**[102](index=102&type=chunk) - Class A shares are entitled to **one vote per share**, while Class B shares are entitled to **five votes per share**[103](index=103&type=chunk) - A cash dividend distribution of **$0.24 per share** was approved for 2025, with **$25,280 thousand** paid by June 30, 2025[105](index=105&type=chunk) - Accumulated other comprehensive loss decreased by **12.90%** from **$(668,484) thousand** at December 31, 2024, to **$(582,283) thousand** at June 30, 2025, driven by an **$87,768 thousand** gain from foreign currency translation[107](index=107&type=chunk) [11. Earnings per share](index=30&type=section&id=11.%20Earnings%20per%20share) Basic and diluted net income attributable to Arcos Dorados Holdings Inc. per common share decreased to $0.17 for the six-month period ended June 30, 2025, from $0.26 in the prior year, reflecting a decline in net income | Metric | June 30, 2025 (Unaudited) | June 30, 2024 (Unaudited) | | :------------------------------------------------ | :------------------------ | :------------------------ | | Net income attributable to Arcos Dorados Holdings Inc. available to common shareholders | $36,517 | $55,141 | | Weighted-average number of common shares outstanding - Basic and Diluted | 210,663,057 | 210,658,096 | | Basic and Diluted net income attributable to Arcos Dorados Holdings Inc. per common share | $0.17 | $0.26 | - Basic and Diluted net income per common share decreased by **34.62%** year-over-year[108](index=108&type=chunk) [12. Related party transactions](index=30&type=section&id=12.%20Related%20party%20transactions) The company engages in arm's length transactions with Axionlog, a company under common control, for distribution, inventory, storage, and transportation services across several countries. For the six-month period ended June 30, 2025, food and paper expenses related to Axionlog increased to $172,108 thousand from $168,216 thousand in 2024 - The Company has a master commercial agreement with **Axionlog**, a company under common control, for distribution, inventory, storage, and transportation services in **15 territories**[109](index=109&type=chunk) | Transaction Type | June 30, 2025 (Thousands of US dollars) | June 30, 2024 (Thousands of US dollars) | | :--------------- | :------------------------------------ | :------------------------------------ | | Food and paper | (172,108) | (168,216) | | Occupancy and other operating expenses | (5,805) | (5,366) | - Food and paper expenses related to Axionlog increased by **2.31%** year-over-year for the six-month period ended June 30, 2025[110](index=110&type=chunk) [13. Disclosures about fair value of financial instruments](index=31&type=section&id=13.%20Disclosures%20about%20fair%20value%20of%20financial%20instruments) The company categorizes its financial instruments measured at fair value into Level 1, Level 2, and Level 3 inputs. As of June 30, 2025, total assets measured at fair value were $203,506 thousand, and total liabilities were $7,323 thousand. The fair value of short-term and long-term debt was estimated at $969,573 thousand, compared to a carrying amount of $996,671 thousand | Fair Value Category | June 30, 2025 (Thousands of US dollars) | December 31, 2024 (Thousands of US dollars) | | :------------------ | :------------------------------------ | :------------------------------------ | | Total Assets | 203,506 | 147,491 | | Total Liabilities | 7,323 | 1,292 | - Total assets measured at fair value increased by **37.98%** from December 31, 2024, to June 30, 2025[118](index=118&type=chunk) - The fair value of the Company's short-term and long-term debt was estimated at **$969,573 thousand** as of June 30, 2025, compared to a carrying amount of **$996,671 thousand**[119](index=119&type=chunk) [14. Subsequent events](index=32&type=section&id=14.%20Subsequent%20events) In July 2025, the company acquired three restaurants and exclusive operating rights in Saint Martin, expanding its NOLAD segment. Additionally, it completed short-term debt payments and renewals, and signed new long-term bank loans totaling $15,000 thousand, maturing in January 2027 - In July 2025, the Company acquired **three restaurants** and exclusive rights to operate or sub-franchise McDonald's restaurants in **Saint Martin**, which will be part of the NOLAD operating segment[121](index=121&type=chunk) - During July 2025, the Company paid outstanding short-term bank loans with Banco de Chile and Banco Itau Chile, and renewed **$9.7 million** of a loan with Banco Itau Chile, maturing in January 2027[122](index=122&type=chunk) - The Company signed two new long-term bank loans totaling **$15,000 thousand** with Banco Itau Uruguay S.A. and Banco Bilbao Vizcaya Argentaria Uruguay S.A., both maturing in January 2027[123](index=123&type=chunk) [Signatures](index=3&type=section&id=SIGNATURE) This section confirms the official signing of the report by the Chief Legal Counsel of Arcos Dorados Holdings Inc. on August 13, 2025 - The report was signed by **Juan David Bastidas**, Chief Legal Counsel of Arcos Dorados Holdings Inc., on **August 13, 2025**[7](index=7&type=chunk)

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1: Investment Philosophy - The investment approach is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1]. Group 2: Market Focus - The investment strategy encompasses markets in the US, Canada, and Europe, indicating a broad geographical focus for potential investment opportunities [1].

Core Viewpoint - Arcos Dorados Holdings Inc. (ARCO) reported mixed results for Q1 2025, with earnings missing estimates while revenues exceeded expectations. Year-over-year, the bottom line improved, but the top line declined [1][4]. Financial Performance - Adjusted earnings per share (EPS) for Q1 2025 were 7 cents, falling short of the Zacks Consensus Estimate of 13 cents by 46.2%. This compares to an adjusted EPS of 14 cents in the same quarter last year [4]. - Quarterly revenues reached $1.08 billion, surpassing the consensus mark of $1.07 billion by 0.9%, but declined 0.4% year over year. On a constant currency basis, revenues grew 14.1% compared to the previous year [4]. Operational Highlights - Systemwide comparable sales increased by 11.1% year over year, a decrease from the 21.5% growth reported in the prior-year quarter. Digital sales rose by 6.3% year over year [5]. - Food and paper costs amounted to $366.6 million, up from $360.9 million in the prior-year quarter. General and administrative expenses increased by 6.8% year over year to $73.3 million. Operating income was $45.1 million, down from $67.6 million in the previous year [6]. - Adjusted EBITDA for the quarter was $91.3 million, compared to $108.9 million in the prior-year quarter, with the adjusted EBITDA margin contracting by 160 basis points to 8.5% [7]. Balance Sheet - As of March 31, 2025, Arcos Dorados had total cash and cash equivalents of $404.6 million, a significant increase from $135.1 million at the end of 2024. Total financial debt rose to $1.16 billion from $707.6 million at the end of 2024 [8]. Store Development - In Q1 2025, Arcos Dorados added 12 new Experience of the Future (EOTF) restaurants, including 10 free-standing units, bringing the total to 1,669 EOTF restaurants, which represent 68% of its overall portfolio. The company aims to open 90 to 100 new locations throughout the year [9].

Financial Performance - Total revenue reached $1.1 billion[13] - Systemwide comparable sales grew by 11.1%[13, 17] - Adjusted EBITDA was $91.3 million with a margin of 8.5%[13, 16] - Net income was $13.9 million, or $0.07 per share[13] Digital Sales & Off-Premise Channels - Digital sales contributed 59% to total sales[13] - Off-premise channels accounted for approximately 43% of total systemwide sales[17] - Loyalty program had 18.8 million registered members[16] Divisional Performance - Brazil division systemwide comparable sales grew by 2.9%[24] - North Latin American Division (NOLAD) systemwide comparable sales decreased by 0.4%[27] - South Latin American Division (SLAD) systemwide comparable sales grew by 39.1%[33] Development & Capital Allocation - Opened 12 new restaurants, with 10 being free-standing locations[13, 75] - Capital expenditures totaled $48.8 million, including $21.4 million for growth[75]

Financial Data and Key Metrics Changes - Total revenue for the first quarter of 2025 reached $1.1 billion, approximately equal to the previous year [5] - Consolidated adjusted EBITDA was $91.3 million, down from the previous year primarily due to weaker local currencies and margin pressure in Brazil [6][17] - Constant currency revenue remained solid, supported by a 11.1% increase in system-wide comparable sales, aligning with blended inflation for the period [6] Business Line Data and Key Metrics Changes - Brazil's total revenue in constant currency grew by 5.5% in the first quarter, despite a challenging operating environment [10] - NOLAD's total revenue was flat in constant currency but declined in US dollars due to the depreciation of the Mexican peso [11] - SLAD's comparable sales rose by 38.7% in the first quarter, with Argentina showing strong recovery [13] Market Data and Key Metrics Changes - Digital sales accounted for nearly 60% of system-wide sales in the first quarter, with significant growth in loyalty and mobile order channels [8][21] - In Brazil, digital channels generated almost 70% of system-wide sales, supported by marketing activities [10] - The loyalty program had 18.8 million registered members across five markets by the end of the first quarter [8] Company Strategy and Development Direction - The company aims to provide an omnichannel experience for guests, allowing flexibility in how they enjoy McDonald's menu items [7] - Focus on digitalization to enhance guest experience and operational efficiency, with plans to expand the loyalty program across all main markets by the end of 2025 [23][29] - The company is committed to sustainability and will publish its annual social impact and sustainable development report [30] Management's Comments on Operating Environment and Future Outlook - Management views the first quarter of 2025 as the low point of the year, with expectations for improved operating conditions in subsequent quarters [4][16] - The company remains cautiously optimistic about sales performance improving as the year progresses, driven by a robust marketing plan [28] - Management acknowledges the challenges posed by weaker currencies and reduced consumer purchasing power but believes in the brand's strong market position [31] Other Important Information - The company added 12 new restaurants during the quarter and plans to accelerate openings to meet annual guidance [27] - The capital structure remains strong, with an investment-grade rating from Fitch and no material debt maturities until 2029 [26] Q&A Session Summary Question: Sales trends in early second quarter 2025, especially in Brazil and NOLAD - Management noted reduced traffic in the QSR industry, particularly in Mexico, with calendar effects significantly impacting sales [34][36] - April showed strong recovery in Mexico, indicating positive trends moving forward [38] Question: Impact of beef prices on Brazil's margins and recovery expectations - Management confirmed that beef prices negatively impacted margins in Brazil, but they expect stabilization through pricing adjustments and supplier negotiations [42][45] Question: Recent consumption trends in Argentina and SLAD's outlook - Management reported strong sales growth in Argentina, with expectations for continued positive performance throughout the year [56] Question: Royalty expense expectations and midterm EBITDA margin outlook - Management explained that royalty rates have changed, leading to a small positive impact on EBITDA margins, with expectations for similar margins to 2024 [59][60]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 reached $1.1 billion, approximately equal to the previous year [5] - Consolidated adjusted EBITDA was $91.3 million, down from last year primarily due to weaker local currencies and margin pressure in Brazil [6][16] - Constant currency revenue remained solid, supported by an 11.1% increase in system-wide comparable sales, aligning with blended inflation for the period [6] Business Line Data and Key Metrics Changes - Brazil's total revenue in constant currency grew by 5.5% in Q1 2025, despite a challenging operating environment [10] - NOLAD's total revenue was flat in constant currency but declined in USD due to the depreciation of the Mexican peso [11] - SLAD's comparable sales rose by 38.7% in Q1 2025, with Argentina rebounding strongly [13] Market Data and Key Metrics Changes - Digital sales accounted for nearly 60% of system-wide sales in Q1 2025, with significant growth in loyalty and mobile order channels [8][21] - In Brazil, digital channels generated almost 70% of system-wide sales, supported by marketing activities [10] - The loyalty program had 18.8 million registered members across five markets by the end of Q1 2025 [23] Company Strategy and Development Direction - The company aims to provide an omnichannel experience for guests, allowing flexibility in how they enjoy McDonald's menu items [7] - Focus on digitalization to enhance guest experience and operational efficiency, with plans to expand the loyalty program across all main markets by the end of 2025 [29][30] - The company is committed to maintaining a strong balance sheet while investing in growth opportunities [27][29] Management's Comments on Operating Environment and Future Outlook - Management views Q1 2025 as the low point of the year, with expectations for improved operating conditions in Q2 [4][16] - The company remains cautiously optimistic about sales performance improving as the year progresses, driven by a robust marketing plan [28] - Management acknowledges the challenges posed by currency depreciation and inflation but believes in the long-term growth potential of the McDonald's brand in Latin America [31][32] Other Important Information - The company added 12 new restaurants during the quarter, with plans to accelerate openings to meet annual guidance [27] - The company expects to maintain a net debt to adjusted EBITDA ratio of about 1.4 times throughout the year [26] Q&A Session Summary Question: Comments on sales trends in early Q2 2025, especially in Brazil and NOLAD - Management noted reduced traffic in the QSR industry, particularly in Mexico, with calendar effects significantly impacting sales [34][36] - April showed strong recovery in Mexico, indicating positive trends moving forward [38] Question: Impact of beef prices on Brazil's margins and recovery expectations - Management confirmed that beef prices negatively impacted margins in Q1 but expects stabilization through pricing adjustments and revenue management initiatives [42][46] - The company plans to increase prices in line with inflation while protecting traffic to create shareholder value [52] Question: Recent consumption trends in Argentina and SLAD - Management reported strong sales growth in Argentina, with expectations for continued positive performance throughout the year [56][58] Question: Clarification on royalty expenses and their impact on EBITDA margin - Management explained that the new royalty structure would lead to a slight reduction in consolidated royalty fees, positively impacting EBITDA margins [60][62]

Core Viewpoint - Arcos Dorados reported quarterly earnings of $0.07 per share, missing the Zacks Consensus Estimate of $0.13 per share, representing a 46.15% earnings surprise [1] - The company posted revenues of $1.08 billion for the quarter, matching year-ago revenues and surpassing the Zacks Consensus Estimate by 0.86% [2] Financial Performance - The earnings of $0.07 per share compare to $0.14 per share a year ago, indicating a decline in profitability [1] - Over the last four quarters, Arcos Dorados has surpassed consensus EPS estimates two times and topped revenue estimates four times [2] Stock Performance - Arcos Dorados shares have increased approximately 12.1% since the beginning of the year, outperforming the S&P 500's gain of 0.1% [3] - The current Zacks Rank for the stock is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the coming quarter is $0.22 on revenues of $1.12 billion, and for the current fiscal year, it is $0.71 on revenues of $4.69 billion [7] - The outlook for the Retail - Restaurants industry is currently in the bottom 20% of Zacks industries, which may impact stock performance [8]

Financial Performance - Total revenues for Q1 2025 were $1,076,592, a slight decrease of 0.3% from $1,081,356 in Q1 2024[10] - Net income attributable to Arcos Dorados Holdings Inc. for Q1 2025 was $13,930, down 51.1% from $28,509 in Q1 2024[10] - Basic and diluted net income per share decreased to $0.07 in Q1 2025 from $0.14 in Q1 2024[10] - Comprehensive income attributable to Arcos Dorados Holdings Inc. for Q1 2025 was $57,727, compared to $20,036 in Q1 2024, representing a significant increase[13] - For the three-month period ended March 31, 2024, Arcos Dorados Holdings Inc. reported a net income of $28,509 thousand, compared to a net income of $13,930 thousand for the same period in the previous year, representing a year-over-year increase of approximately 104%[23] - Adjusted EBITDA for the same period was $91,279, down from $108,935 year-over-year, reflecting a decrease of approximately 16.3%[94] - Net income attributable to Arcos Dorados Holdings Inc. for the three-month period was $13,930, down from $28,509 in the prior year, a decrease of approximately 51.1%[94] Assets and Liabilities - Total current assets increased significantly to $860,809 in Q1 2025 from $468,403 at the end of 2024, representing an increase of 83.5%[16] - Total assets increased to $3,467,020 in Q1 2025 from $2,892,654 at the end of 2024, reflecting a growth of 20%[16] - Total liabilities also increased to $2,950,257 in Q1 2025 from $2,383,225 at the end of 2024, an increase of 23.7%[16] - The total shareholders' equity at the end of the reporting period was $486,525 thousand, reflecting a decrease from the previous period due to comprehensive losses[23] - The retained earnings at the end of the period were $544,140 thousand, down from $566,188 thousand at the beginning of the fiscal year[23] - As of March 31, 2025, the total short-term debt amounted to $38,366, a decrease of 36.3% from $60,251 as of December 31, 2024[47] - Long-term debt increased to $1,175,408 as of March 31, 2025, compared to $718,598 as of December 31, 2024, reflecting a significant rise of 63.5%[57] - The fair value of the company's short-term and long-term debt was estimated at $1,195,979,000, compared to a carrying amount of $1,235,647,000 as of March 31, 2025[120] Cash Flow and Financing Activities - Net cash used in operating activities was $13,436 in Q1 2025, compared to $9,388 in Q1 2024, indicating a decline in cash flow from operations[18] - Net cash provided by financing activities was $418,675 in Q1 2025, a substantial increase compared to a net cash used of $8,045 in Q1 2024[18] - The Company issued Senior Notes for an aggregate principal amount of $600 million maturing in 2032, with an interest rate of 6.375% per annum[58] - The proceeds from the 2032 Notes were used to redeem 35.27% of the outstanding principal of the 2027 Notes for $136,145 plus accrued interest[59] - The Company maintained revolving credit facilities totaling $75 million, with interest rates ranging from 2.65% to 4.85%[50] Operational Highlights - The company operates and franchises McDonald's restaurants across 20 territories in Latin America and the Caribbean, with rights granted by McDonald's Corporation through Master Franchise Agreements[27] - Effective January 1, 2025, the company entered into new Master Franchise Agreements with McDonald's Corporation, extending the operational terms for most territories to 20 years[28] - The Company expects to open 90-100 new restaurants in 2025, with a commitment to reimage at least 10% of its eligible restaurants[79] Derivatives and Risk Management - The Company has entered into various derivatives, including sustainability-linked ESG principal only swaps, to hedge against foreign exchange risks[63] - The Company reported a net derivative loss of $(14,835) recognized in accumulated other comprehensive income for the three-month period ended March 31, 2025[68] - The total fair value of derivative instruments as of March 31, 2025, was $75,539, down from $82,383 as of December 31, 2024, indicating a decrease of about 8.8%[64] - The notional amount of forward contracts designated as cash flow hedges increased to $58,414 as of March 31, 2025, from $48,799 as of December 31, 2024[67] Shareholder Information - The Company declared cash dividends of $0.24 per share, totaling $50,557 thousand distributed to shareholders during the period[23] - The Company approved a cash dividend distribution of $0.24 per share, to be paid in four installments of $0.06 each on March 27, June 27, September 26, and December 26, 2025[103] - The Company’s cash dividends paid as of March 31, 2025, totaled $12,640,000[103] - As of March 31, 2025, the Company had 210,663,057 shares outstanding, including 130,663,057 Class A shares and 80,000,000 Class B shares[100] Accounting and Compliance - The Company is currently assessing the impact of new accounting standards on its consolidated financial statement disclosures[44] - The company’s total assets and liabilities are reported in accordance with US GAAP, with significant intercompany balances eliminated in consolidation[29] - The Company’s total liabilities must not exceed its assets for dividend distributions to be made[102] - No material fair value adjustments were required for non-financial assets or liabilities as of March 31, 2025[121] - The company’s derivative contracts were valued using pricing models that incorporate observable market parameters, indicating a robust valuation approach[119]