Top-Line Growth and Record Quarterly Revenue
Total revenue grew ~13% year-over-year and surpassed $1.2 billion for the first time in a first quarter, driven by systemwide comparable sales and favorable currency movements.
Arcos Dorados Holdings
· ARCO
May 20th, 2026
Summary
- Earnings Call Date:
- 2026-05-20
- Change Since:
- -9.00%
- Next Earnings Date:
- 2026-08-19
Earnings Call Sentiment
PositiveThe call highlighted multiple strong operational and financial improvements: double-digit revenue growth (~13%), a 16% rise in systemwide comparable sales, the highest first-quarter adjusted EBITDA (~$118–$119M) with 120 bps of consolidated margin expansion, and a material turnaround to ~ $110M adjusted free cash flow over the trailing 12 months. Digital and loyalty initiatives showed clear traction (digital +21%, loyalty members +62% to ~30M). Offsetting these positives were short-term volume pressure in Brazil (industry volumes down mid- to high-single digits), margin softness in NOLAD excluding one-time items, and ongoing payroll and occupancy cost pressures. Management emphasized disciplined pricing, mix optimization and continued investment discipline. Overall, the favorable revenue, margin expansion and cash flow turnaround materially outweigh the near-term operational headwinds.
Company Guidance
Management's guidance for 2026 emphasized driving sustainable top‑line growth while improving profitability and generating positive adjusted free cash flow, noting LTM adjusted free cash flow of almost $110 million (vs. a negative $3 million prior period) and Q1 adjusted EBITDA of ~$118 million with consolidated EBITDA margin expansion of 120 basis points (roughly +60 bps from food & paper and +60 bps from G&A); they expect underlying margin improvement through the year, an effective tax rate in line with 2025 and net debt/adjusted EBITDA roughly unchanged. Management said Q2 is off to a strong start (April posted the best monthly growth in ~20 months with positive traffic and solid average‑check growth into mid‑May), reiterated the priority on profitable growth and modernization (Q1 capex $36.8M, including $16.7M for 19 new restaurants—13 freestanding), reaffirmed the ~70/30 operated/sub‑franchise mix, plans to reach ~90% Experience‑of‑the‑Future stores (from ~75% today) and to modernize roughly 10% of the base annually, and expressed cautious optimism on food (notably beef) costs while maintaining disciplined pricing and investment returns.
Strong Comparable Sales Performance
Systemwide comparable sales increased ~16% year-over-year, driven mainly by higher average check with improving guest traffic in several markets.
Highest First-Quarter Adjusted EBITDA
Adjusted EBITDA reached $118–$119 million in Q1 2026 (highest Q1 result in U.S. dollars), with consolidated EBITDA margin expanding by 120 basis points year-over-year.
Adjusted Free Cash Flow Turnaround
Adjusted free cash flow for the 12 months ended March 31 reached almost $110 million versus negative $3 million in the prior period, highlighting materially improved cash generation.
Margin Improvements from Cost and G&A Actions
Consolidated margin expansion comprised ~60 bps improvement from food & paper and ~60 bps from G&A (G&A down ~60 bps vs prior year), reflecting restructuring benefits and disciplined cost management.
Regional Division Strength — SLAD and Brazil
SLAD delivered strong U.S. dollar growth and EBITDA margin expansion (~120 bps rise). Brazil delivered the highest growth among divisions, with adjusted EBITDA up >20% in U.S. dollars and a ~30 bps division EBITDA margin expansion to 12.7%.
Digital and Loyalty Momentum
Digital channels (mobile app, delivery, kiosks) grew ~21% year-over-year and accounted for ~64% of systemwide sales. Loyalty registered members reached ~30 million (a 62% increase vs year-end), representing ~25% of sales and driving a 20–25% increase in frequency among 90-day active users.
Disciplined CapEx and Store Growth Efficiency
CapEx invested $36.8 million in Q1 (down from $48.8 million prior-year period) including $16.7 million for new restaurants. The company opened 19 restaurants (vs 10 prior year) while lowering average investment per unit through format and execution efficiencies.
Operational Footprint and Market Position
Added 19 restaurants (13 freestanding), maintained ~70% company-operated / ~30% sub-franchise mix, and reported sustained market-share gains and improved brand metrics (visit share highest since 2022 in Brazil).
Operator
Good morning, and thank you for joining Arcos Dorados' First Quarter 2026 Earnings Webcast. With us today are Luis Raganato, Chief Executive Officer; and Mariano Tannenbaum, our Chief Financial Officer. Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a slide presentation that is also available on the Investors section of our website, ir.arcosdorados.com. To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the street. After we conclude our opening remarks, we will answer your questions. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to [indiscernible] new or changed events or circumstances.
In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today's earnings press release and conference call presentation as well the unaudited financial statements filed today with the SEC on Form 6-K. I will now turn the call over to Luis.
Luis Raganato
Thank you, Dan, and good morning, everyone. Over the last several...
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