Arcos Dorados (US:ARCO)2025-05-14 15:02Financial 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]