ARCO — Arcos Dorados Holdings Inc.

Summary of ARCO Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $1.3 billion, up 10.7% year-over-year.
• Comparable Sales Growth: 16%, aligned with blended inflation across 21 markets.
• Adjusted EBITDA: $172.7 million, a 17.2% increase year-over-year, with an 80 basis point margin expansion.
• Full Year 2025 Adjusted EBITDA: Highest in company history, benefiting from tax credits and strong U.S. dollar growth.
• Net Tax Benefit in Brazil: $20.5 million recognized in Q4, contributing significantly to overall financial performance.
• Digital Sales Penetration: 62% of total sales, with digital channels growing 18.7% year-over-year.

2. Strategic Updates and Business Highlights

• Focused on three priorities: optimizing current business performance, maximizing capital investment returns, and preparing for future trends.
• Opened 102 new restaurants in 2025, modernizing 73% of the portfolio.
• Successful marketing campaigns, including collaborations with popular franchises like "Stranger Things," drove consumer engagement.
• Continued investment in digital capabilities and loyalty programs, with 27.2 million registered members.

3. Forward Guidance and Outlook

• 2026 Restaurant Openings: Guidance set for 105 to 115 new openings, with capital expenditures between $275 million and $325 million.
• Anticipated annual cash benefit of around $30 million from tax credits over the next five years.
• Early 2026 trends show positive momentum, with expectations for improved gross margins and comparable sales growth aligning with inflation.

4. Bad News, Challenges, or Points of Concern

• Brazil's Consumption Environment: Faced challenges with declining consumer spending and high beef costs impacting margins.
• Payroll Expenses: Increased as a percentage of revenue, although overall payroll costs improved due to efficiency initiatives.
• NOLAD Margins: Experienced pressure due to sales growth lagging behind inflation, leading to deleverage in fixed costs.
• Market Volatility: Ongoing economic uncertainties and currency fluctuations could impact future performance.

5. Notable Q&A Insights

• Effective Tax Rate (ETR): Full-year ETR for 2025 was 37.7%, with expectations for stability in 2026 despite quarterly variability.
• Brazil's Comparable Sales: Expected to normalize in 2026, driven by strategic pricing and marketing initiatives.
• Headcount Reduction: Aimed at optimizing G&A expenses, resulting in an annualized cost reduction of over $10 million.
• Beef Price Outlook: Sequential improvements in beef costs noted, with a disciplined pricing strategy in place to manage future costs effectively.

Overall, Arcos Dorados Holdings Inc. demonstrated solid financial performance in Q4 2025, with strategic initiatives in place to navigate challenges and capitalize on growth opportunities in 2026.