Arcos Dorados Holdings Inc. - Q1 2026 Financial Summary
Business Context and Reporting Period
Arcos Dorados Holdings Inc. (NYSE: ARCO), the world's largest independent McDonald's franchisee, reported unaudited results for the three months ended March 31, 2026. The filing, submitted on May 20, 2026, covers operations across 21 Latin American and Caribbean countries with a total restaurant count of 2,536 units as of the period end.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Change (YoY) |
|---|---|---|---|
| Total Revenue | $1.22 billion | $1.08 billion | +12.9% |
| Systemwide Comparable Sales | 16.0% | 11.1% | +4.9 p.p. |
| Adjusted EBITDA | $118.0 million | $91.3 million | +29.3% |
| Adjusted EBITDA Margin | 9.7% | 8.5% | +120 bps |
| Net Income (Attributable to AD) | $36.1 million | $13.9 million | +159.4% |
| Diluted EPS | $0.17 | $0.07 | +142.9% |
| Net Income Margin | 3.0% | 1.3% | +170 bps |
| Adjusted Free Cash Flow (LTM) | $109.2 million | $(3.1) million | Significant Improvement |
| Total Financial Debt | $975.1 million | $1.10 billion (Dec 2025) | -11.5% (QoQ) |
| Net Financial Debt / LTM Adj. EBITDA | 1.2x | 1.2x | Unchanged |
Material Changes vs. Prior Period
- Revenue Growth: Driven by a 16.0% increase in systemwide comparable sales, supported by higher guest volume in NOLAD and SLAD, and increased average checks in Brazil and SLAD.
- Margin Expansion: Adjusted EBITDA margin expanded 120 basis points, primarily due to a 60 basis point improvement in Food & Paper costs (led by Brazil) and lower G&A expenses.
- Profitability: Net income more than doubled year-over-year, aided by higher EBITDA, favorable foreign currency exchange results ($7.2M gain vs. $2.0M loss), and gains from derivative instruments.
- Digital Performance: Digital channel sales rose approximately 21%, representing 64% of systemwide sales. The Loyalty Program reached 30.4 million registered members.
- Store Count: The company opened 19 new restaurants in the quarter, bringing the total to 2,536.
Outlook, Commentary, and Risks
- Management Commentary: CEO Luis Raganato highlighted that 2026 is off to a strong start with record Q1 revenue and Adjusted EBITDA. Strategies focus on value platforms for lower-income consumers, menu innovation, and digital expansion.
- Unusual Items: Q1 2026 Adjusted EBITDA included $5.8 million in gains from restaurant transactions with sub-franchisees. It excluded $1.7 million related to a reorganization plan finalized in the quarter.
- Debt Management: The company completed a liability management transaction in March 2026. Net leverage remained stable at 1.2x.
- Sustainability: Arcos Dorados achieved its 2029 Senior Notes sustainability targets, reducing absolute Scope 1 & 2 GHG emissions by 26.5% and Scope 3 intensity by 16.1% versus 2021 baselines.
- Forward-Looking Events: An Investor Day is scheduled for October 1, 2026, in New York City.
- Risks: The filing includes standard cautionary statements regarding economic conditions, currency fluctuations, and competitive pressures in the Latin American and Caribbean markets.
Investor Verification Checklist
- Verify the sustainability of the 16.0% systemwide comparable sales growth, particularly the 47.7% surge in SLAD.
- Confirm the impact of the $5.8 million gain from restaurant transactions on future Adjusted EBITDA comparability.
- Monitor the trajectory of Food & Paper costs in Brazil, which drove significant margin improvement.
- Assess the cash flow conversion given the shift from negative to positive Adjusted Free Cash Flow over the last twelve months.
- Review the details of the liability management transaction completed in March 2026 to understand future interest expense implications.