Arcos Dorados Holdings Inc. (NYSE:ARCO) reported first-quarter results on Wednesday that exceeded earnings expectations, although revenue came in slightly below Wall Street forecasts.
Shares of the Latin American McDonald’s franchise operator rose 4.09% in pre-market trading following the announcement.
Earnings Top Expectations as Sales Grow
The company posted adjusted earnings per share of $0.17, beating the analyst consensus estimate of $0.13 by $0.04.
Revenue totaled $1.2 billion, missing expectations of $1.23 billion, but still representing year-over-year growth of 12.9%.
Systemwide comparable sales increased 16.0% during the quarter, supported by positive guest traffic trends in the SLAD and NOLAD divisions, along with higher average customer spending in Brazil and SLAD markets.
Record First-Quarter EBITDA Performance
Consolidated adjusted EBITDA reached $118.0 million, rising 29.3% from the prior year and marking the strongest first-quarter adjusted EBITDA result in the company’s history.
Adjusted EBITDA margin expanded by 120 basis points to 9.7%.
The margin improvement was primarily driven by lower food and paper costs as a percentage of revenue, which improved by roughly 60 basis points year over year, led by strong operational performance in Brazil.
“We are pursuing strategies that capitalize on the Brand to monetize the significant market share advantage we hold in the region,” said Luis Raganato, Chief Executive Officer. “Marketing campaigns focused on offering value platforms that appeal to lower income consumers and core menu items that drive Brand love as well as licenses and partnerships that keep McDonald’s culturally relevant.”
Profitability and Expansion Continue
Net income totaled $36.1 million, or $0.17 per share, compared with earnings of $0.07 per share during the same period last year.
Net income margin increased by 170 basis points year over year to 3.0%.
During the quarter, Arcos Dorados opened 19 new restaurants, expanding its regional footprint to 2,536 locations across Latin America and the Caribbean.
Digital and Loyalty Platforms Show Strong Growth
Sales generated through digital channels increased approximately 21% and accounted for 64% of total systemwide sales during the quarter.
The company also reported continued growth in its loyalty program, which reached 30.4 million registered members.