Market Overview

Arcos Dorados Reports Third Quarter 2017 Financial Results


Achieved strong comparable sales and Adjusted EBITDA growth. Positive
volume trends continued across key markets. Improved operating result
drove Adjusted EBITDA margin expansion and positive net income in the

Arcos Dorados Holdings, Inc. (NYSE:ARCO) ("Arcos Dorados" or the
"Company"), Latin America's largest restaurant chain and the world's
largest independent McDonald's franchisee, today reported unaudited
results for the third quarter ended September 30, 2017.

Third Quarter 2017 Key Results

  • As reported consolidated revenues increased 8.6% to $842.5 million
    versus the third quarter of 2016. On a constant currency basis1,
    consolidated revenues grew 17.5%, or 9.7% excluding Venezuela.
  • Systemwide comparable sales1 rose 20.3% year-over-year, or
    10.4% excluding Venezuela.
  • Adjusted EBITDA1 increased 17.5% to $74.2 million compared
    with the prior-year quarter.
  • Consolidated Adjusted EBITDA margin expanded 70 basis points to 8.8%.
  • As reported General and Administrative (G&A) expenses decreased 10
    basis points as a percentage of revenues.
  • As reported net income was $23.4 million, compared to net loss of $1.8
    million in the year-ago period.

"We had a strong third quarter as successful marketing and promotional
activities drove positive guest traffic in most markets, supporting
improved topline and strong consolidated Adjusted EBITDA growth. During
the period, comparable sales grew in real terms and we saw broad-based
strength in our business, as consumer behavior in Brazil and Argentina
continues to improve. Strong topline performance benefited cash
generation in the quarter and, combined with operating leverage we built
into our business, drove improved operating performance. We delivered 70
basis points of Adjusted EBITDA margin expansion and positive net income
of $23.4 million in the quarter. Our plan to expand our footprint and
modernize our base to keep guests coming back to our restaurants more
often remains on track and will see us capture the potential of the
McDonald's brand in the region," said Sergio Alonso, Chief Executive
Officer of Arcos Dorados.

Third Quarter 2017 Results


Figure 1. AD Holdings Inc Consolidated: Key Financial Results

(In millions of U.S. dollars, except as noted)











% As


% Constant

Total Restaurants (Units)       2,140       2,160   0.9 %  
Sales by Company-operated Restaurants 742.8 (63.2 ) 123.8 803.4 8.2 % 16.7 %
Revenues from franchised restaurants 32.9 (5.6 ) 11.9 39.1 18.9 % 36.1 %
Total Revenues 775.7 (68.9 ) 135.7 842.5 8.6 % 17.5 %
Systemwide Comparable Sales 20.3 %
Adjusted EBITDA 63.2 -20.5 31.5 74.2 17.5 % 49.9 %
Adjusted EBITDA Margin 8.1 % 8.8 %
Net income (loss) attributable to AD (1.8 ) (20.5 ) 45.7 23.4 1376.2 % 2494.2 %
No. of shares outstanding (thousands) 210,711 211,072
EPS (US$/Share)       (0.01 )           0.11          

(3Q17 = 3Q16 + Currency Translation + Constant Currency
Growth). Refer to "Definitions" section for further detail.


Arcos Dorados' third quarter as reported revenues increased 8.6%, driven
by constant currency revenue growth of 17.5%, which was partially offset
by the negative impact of currency translation. The currency translation
impact mainly reflected the year-over-year average depreciation of the
Venezuelan bolivar and the Argentine peso, which was partially offset by
the appreciation of the Brazilian real. Constant currency revenue growth
reflected a 20.3% expansion in systemwide comparable sales, driven by
average check growth combined with positive traffic in most markets.

Third quarter consolidated as reported Adjusted EBITDA increased 17.5%,
supported by revenue growth and margin expansion. Brazil was the key
contributor to Adjusted EBITDA during the quarter, followed by SLAD. The
results were partially offset by a decline in NOLAD and the Caribbean

The Adjusted EBITDA margin expanded by 70 basis points to 8.8%, with
margin improvements in Brazil and SLAD, partially offset by margin
declines in NOLAD and the Caribbean divisions. Continued leverage in
Food and Paper (F&P) drove the consolidated margin expansion. As part of
the Company plan, refranchising activity was lower in 3Q17 than in 3Q16.
Excluding the refranchising inflows, consolidated Adjusted EBITDA margin
increased by about 120 basis points.

As a percentage of revenues, G&A decreased 10 basis points. As reported,
consolidated G&A increased by 7.9% year-over-year.

Consolidated – excluding Venezuela

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