ARCO

• Crisis Response: Late-June 2026 earthquakes impacted Venezuela and Colombia. In Venezuela, 2 locations were converted to a medical center and shelter; all other restaurants remain open, with recovery ongoing. In Colombia, the company prioritized employee safety and is still assessing full operational damage.
• Core Operational Performance: Arcos Dorado delivered record Q2 2026 results, with total revenue of $1.3 billion, up 14% year-over-year, and adjusted EBITDA of $126.8 million, up more than 20% year-over-year. Adjusted net income and EPS doubled year-over-year, driven by strong operating performance, lower net interest from capital structure optimization, and a reduced effective tax rate. The company gained ~0.5 percentage points of guest traffic-based market share year-over-year across its footprint, now holding twice the share of its closest competitor.
• Digital and Loyalty: Digital sales grew over 25% year-over-year, reaching 66% of total sales, with strong growth from self-order kiosks and delivery. Identified sales surpassed 28% of total sales, an all-time high, driven by growing loyalty program membership. Active loyalty members visit 5x more frequently than non-members, positioning this as a key long-term value driver.
• FIFA World Cup Sponsorship: The exclusive regional sponsorship drove strong traffic growth, premium product sales, and all-time high brand favorability, particularly in core markets of Argentina, Brazil, Colombia, and Mexico. Management leveraged pre-tournament activation starting 3 months ahead of kickoff to build consumer excitement.
• Balance Sheet and Capital Deployment: In July 2026, the company completed its second liability management transaction of the year, fully repaying 2029 senior notes. It previously issued the first QSR industry sustainability-linked bond, and exceeded its ESG targets by the 2025 measurement date. Net leverage improved to a healthy 1.1x trailing 12 months adjusted EBITDA at quarter end. Trailing 12 months adjusted free cash flow improved sequentially on higher operating cash flow and lower capex. 16 new restaurants were opened in Q2, bringing H1 2026 total openings to 35, with 77% of the existing restaurant portfolio now modernized. Capex per new store has been reduced 15-20% to improve investment returns.

• Management maintained confidence in its full-year 2026 plans despite continued mixed and challenging consumer spending conditions across the region, and expects the operating model and financial discipline to deliver solid results and strengthen the foundation for future growth.
• Early third quarter 2026 trends across all segments are in line with management expectations, with the QSR industry in Brazil starting a positive volume turnaround that management expects to continue.
• The streamlined G&A structure from 2025 restructuring is expected to continue supporting underlying margin expansion through the end of 2026.
• Arcos Dorado will present its long-term strategic initiatives centered on three core growth pillars at its Investor Day on October 1, 2026 in New York.

1. Brazil: Revenue grew more than 25% year-over-year in U.S. dollar terms, driven by post-Carnival rebound, FIFA World Cup campaigns, a stronger local currency, and new restaurant openings. Adjusted EBITDA grew over 40% year-over-year, with an 180 basis point margin expansion to 14.6% from disciplined cost management, lower food/paper costs, streamlined G&A, and currency appreciation. Brazil contributed the strongest profitability growth among all segments in the quarter. 2. NOLA (North Latin America, including Mexico): Margin contracted 110 basis points year-over-year when excluding 2025 restaurant transaction income. This was driven by reduced operating leverage and wage-driven payroll pressure that offset improved food and paper costs. Despite a challenging macroeconomic environment and consumer spending pressure in Mexico, Arcos Dorado outperformed the broader QSR industry and gained market share, with early Q3 2026 trends in line with management expectations. 3. SLAT (South Latin America, including Argentina, Chile, Colombia, Uruguay): Adjusted EBITDA grew 6.6% year-over-year to ~$48 million, in line with revenue growth, with a stable margin of around 10%. Streamlined G&A from 2025 restructuring offset slightly higher food/paper, occupancy, and other operating expenses. Argentina faced headwinds from food/paper cost pressures and prudent pricing in a weak consumption environment, but still delivered positive sales growth with nearly flat guest counts and all-time high market share from a successful FIFA World Cup campaign.

• Challenging consumer spending pressure across most of the region, driven by macroeconomic uncertainty, particularly in Mexico and Argentina, which continues to pressure top-line growth.
• Unfavorable year-over-year comparison bases in Q2 2026, including an extra holiday week and the very high-performing 2025 Minecraft promotion, which suppressed comparable sales growth in the quarter.
• Commodity price volatility and foreign exchange rate uncertainty create risk for future food and paper cost margins, particularly in import-reliant markets.
• Recent earthquakes in Venezuela and Colombia create near-term operational disruption and uncertainty around full recovery timelines.
• Intense competitive promotional activity across the region requires balancing traffic growth, affordability, and margin maintenance.

Q: Is the recent sales rebound in Brazil sustainable? / A: Management states the rebound is driven by sustainable structural levers, including the popular Economeki value platform (offering a 4-item combo for under $4), targeted digital campaigns like Megifest, and strong operational execution rather than temporary factors. With the QSR industry in Brazil returning to volume growth, management expects the positive trend to continue, supported by the existing solid strategic plan. (198 characters)

Q: As commodity and FX tailwinds in Brazil normalize, what will drive future margin expansion? / A: Management notes the past three quarters of margin improvement came not just from lower beef costs, but also broad-based cost controls across dairy, potatoes, and other inputs, and G&A efficiency from restructuring. Going forward, future margin expansion will be driven by market share gains, sales growth above inflation that leverages fixed costs, continued disciplined cost management, and incremental gains from revenue management initiatives that balance promotional activity and gross margin. (312 characters)

Q: How do you explain recent targeted promotions on delivery aggregators in Brazil, and what is your overall pricing strategy? / A: Management explains that channel-specific targeted promotions are a standard part of a data-driven revenue management strategy, with promotional intensity varying by time of year and business needs. The strategy uses advanced elasticity analysis to balance traffic growth, consumer affordability, and overall profitability, rather than representing a shift in long-term pricing approach. (267 characters)

Q: What portion of recent traffic and market share gains is temporary from the FIFA World Cup versus structural, and can gains be sustained in H2 2026? / A: Management states FIFA campaigns primarily served to strengthen brand engagement and improve core brand attributes, which are structural advantages that support long-term market share. While World Cup activity did temporarily boost volume, pre-tournament activation spread impact across multiple months, and existing structural levers including value platforms, solid marketing plans, and prudent pricing will support sustained share gains. Early Q3 trends are in line with expectations. (321 characters)

Q: What is the split of new restaurant openings between corporate and franchise, and how much has capex per store improved? / A: Corporate-operated restaurants represented over 65% of H1 2026 openings, up from ~60% in H1 2025, so the lower overall capex in the period is not driven by a mix shift. Management has achieved a 15-20% reduction in average capex per new store, with the core goal of improving overall return on investment by cutting costs while also boosting new store sales and profitability. (247 characters)