Arcos Dorados Holdings Inc (NYSE:ARCO) Q3 2019 Earnings Conference Call - Final Transcript

Nov 13, 2019 • 10:00 am ET

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Arcos Dorados Holdings Inc (NYSE:ARCO) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Marcelo Rabach

end of the year, we will bring EOTF to a total of 10 countries. Delivery and Digital, two other key components of our omnichannel guest experience also contributed to our top-line growth in the quarter. And we continued expanding our already dominant footprint with the addition of 70 new restaurants over the last 12 months.

With regards to profitability, our adjusted EBITDA margin expanded further. Excluding the one-time tax benefit that we recorded in last year's quarter, our margin increased 120 basis points at the consolidated level. In addition to operating leverage generated through top-line growth, our margin benefited from continued efficiency gains in payroll and many other cost lines.

Before turning the call over to Mariano to discuss our performance in more detail, a brief word about our operations in Chile. Unfortunately, a number of our restaurants were affected by the recent protest across the country. While we are working to normalize operations again at the damaged restaurants, our main priority right now is the safety of our colleagues and customers. In Ecuador and Peru, our operations were also affected by last month protest, although only for a brief period and operations resumed back to normal.

Mariano, please go ahead.

Executive
Mariano Tannenbaum

Thanks, Marcelo. Please turn to slide 4. As Marcelo mentioned, we are very encouraged by the solid performance we again delivered in this quarter. These strong results are a testament to the efforts of our entire team, our operational excellence and the successful execution of our strategic plan. Despite continued macro headwinds, we were able to outperform the industry in a number of our key markets. And strong top-line growth is driving efficiencies across our core operating cost lines.

I would like to reinforce that we delivered our third consecutive quarter of double-digit system-wide comparable sales growth, reaching 12.7% in this quarter. This was above blended inflation for the company with strong contribution from our Brazilian division where we sell both average check and traffic growth. Importantly, we grew revenues almost 4% in dollar terms. These results more than offset the translation impact from the depreciation of the Argentine and Colombian peso. Revenues also benefited from the acceleration of restaurant openings throughout the year. In accordance with our plans to pick up the pace of the rollout of EOTF.

Please turn to slide 5 for more details on our divisional top-line. In Brazil, we achieved comparable sales growth of 10.8%, well above inflation. Again, this quarter outperformed the food service sector by three times, according to data from the Brazilian Food Service Institute. Moreover, revenues in dollar terms increased 11.6% as we saw a more stable Brazilian real. Strong traffic growth continued to be driven by the successful execution of our marketing campaigns. The rollout of EOTF, the expansion of our dessert centers and the sustained growth of our delivery channel.

Moving to SLAD, comparable sales increased 28.9% below the division's blended inflation. Traffic continued to be impacted by the weak consumer environment in Argentina. However, it was partially