• ARKO Corp. Reports Fourth Quarter and Full Year 2023 Results

    Source: Nasdaq GlobeNewswire / 27 Feb 2024 17:00:01   America/New_York

    RICHMOND, Va., Feb. 27, 2024 (GLOBE NEWSWIRE) -- ARKO Corp. (Nasdaq: ARKO) (“ARKO” or the “Company”), a Fortune 500 company and one of the largest convenience store operators in the United States, today announced financial results for the quarter and full year ended December 31, 2023.

    Fourth Quarter and Full Year 2023 Key Highlights1,2

    • Net income for the quarter was $1.1 million, compared to $12.9 million for the prior year quarter. For the year, net income was $34.6 million, compared to $72.0 million for the prior year.
    • Adjusted EBITDA for the quarter was $65.5 million, compared to $72.4 million for the prior year quarter, primarily due to reduced fuel contribution at same stores, with retail cents per gallon (“CPG”) of 39.2 in the fourth quarter of 2023 compared to retail CPG of 41.4 in the fourth quarter of 2022. For the year, adjusted EBITDA was $290.4 million, compared to $301.1 million for the prior year, primarily due to reduced fuel contribution at same stores, with retail CPG of 38.8 in 2023 compared to retail CPG of 41.4 in 2022.
    • Merchandise revenue for the fourth quarter of 2023 was $446.7 million, an increase of $43.6 million compared to the prior year period. Merchandise revenue for 2023 was $1.84 billion, an increase of $190.4 million compared to 2022.
    • Merchandise contribution increased by $24.0 million for the fourth quarter of 2023, or 19.6%, and increased by $83.9 million for the year ended December 31, 2023, or 16.7%, as compared to the respective prior year periods. Merchandise margin expanded, increasing approximately 240 basis points to 32.9% for the quarter and 140 basis points for the full year, primarily due to execution of key marketing and merchandising initiatives.
    • Retail fuel contribution increased 4.8% for the fourth quarter of 2023 to $109.3 million and increased 4.6% for the full year to $435.3 million. Retail same store fuel gallons sold decreased 7.5% for the fourth quarter of 2023 and 5.3% for the year.

    1 See Use of Non-GAAP Measures below.
    2 All references to fuel contribution and fuel margin per gallon are excluding the estimated fixed margin or fixed fee paid to the Company’s wholesale fuel distribution subsidiary, GPM Petroleum LP (“GPMP”) for the cost of fuel (intercompany charges by GPMP).

    Other Key Highlights

    • Completed five acquisitions in the last eighteen months, with the largest one in March 2023.
    • Ended 2023 with more than two million enrolled loyalty members.
    • In January 2024, the Company launched a new pizza program, the culmination of over one year of development, which is currently offered at more than 1,000 of the Company’s stores as take-and-bake from the freezer, offering a great quality whole pizza at a value price for enrolled loyalty members, and as a fresh, hot pizza, either whole or by the slice, at approximately 225 of those stores.
    • ARKO’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on March 21, 2024, to stockholders of record as of March 11, 2024.
    • Welcomed Robb Giammatteo to the Company to serve as Executive Vice President and Chief Financial Officer, recognizing his experience in relevant financial and transformation roles in retail and convenience.

    “Reflecting on our first three years as a public company, we have significantly broadened our geographic footprint through acquisitions, and have delivered approximately $166 million in net income and approximately $850 million in cumulative adjusted EBITDA over this period,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “For the full year 2023, we delivered $290.4 million in adjusted EBITDA, holding performance within 3.5% of 2022, which was a record retail CPG year of over 41 cents per gallon, in the context of a 3.4% decline in national OPIS fuel gallon demand, with a more pronounced decline in the fourth quarter. As we move into 2024, we are focusing more of our management’s time on driving organic growth and unlocking the value of our retail segment, and I believe we have many levers to pull. Our team is focused on improving the experience of our customers and the productivity of our stores, and later this year, we are planning to host an investor day during which we will share with you our multi-year roadmap and specific milestones to enhance organic performance and drive shareholder value. We continue to execute on our three key merchandise and marketing pillars, including our fas REWARDS loyalty program, which we designed to enhance our relationship with our customers and provide them with extraordinary value, focus on our core destination categories and our food service offering." 

    Fourth Quarter and Full Year 2023 Segment Highlights

    Retail

     For the Three Months
    Ended December 31,
     For the Year
    Ended December 31,
     2023
     2022
     2023 2022
     (in thousands) 
    Fuel gallons sold 279,035   251,658   1,122,321   1,006,469 
    Same store fuel gallons sold decrease (%) 1 (7.5%)  (8.3%)  (5.3%)  (8.1%)
    Fuel contribution 2$109,336  $104,304  $435,322  $416,228 
    Fuel margin, cents per gallon 3 39.2   41.4   38.8   41.4 
    Same store fuel contribution 1,2$86,183  $99,778  $360,141  $406,262 
    Same store merchandise sales (decrease)
    increase (%) 1
     (2.8%)  1.2%  0.4%  (1.0%)
    Same store merchandise sales excluding
    cigarettes (decrease) increase (%) 1
     (1.8%)  4.3%  2.5%  2.6%
    Merchandise revenue$446,727  $403,084  $1,838,001  $1,647,642 
    Merchandise contribution 4$146,773  $122,771  $585,122  $501,219 
    Merchandise margin 5 32.9%  30.5%  31.8%  30.4%
    Same store merchandise contribution 1,4$125,050  $120,346  $513,112  $492,537 
    Same store store operating expenses 1$164,925  $162,019  $660,082  $647,396 
                
    1 Same store is a common metric used in the convenience store industry. We consider a store a same store beginning in the first quarter in which the store had a full quarter of activity in the prior year. Refer to Use of Non-GAAP Measures below for discussion of this measure. 
    2 Calculated as fuel revenue less fuel costs; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 
    3 Calculated as fuel contribution divided by fuel gallons sold. 
    4 Calculated as merchandise revenue less merchandise costs. 
    5 Calculated as merchandise contribution divided by merchandise revenue. 


    Same store merchandise sales excluding cigarettes decreased 1.8% for the fourth quarter of 2023 compared to the fourth quarter of 2022, reflecting macroeconomic headwinds. Same store merchandise sales decreased 2.8% for the fourth quarter of 2023 compared to the prior year period. Penetration of the Company’s core destination categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks and beer) as a percent of same store merchandise sales increased 90 basis points for the quarter. Total merchandise contribution for the fourth quarter of 2023 increased $24.0 million, or 19.6%, compared to the fourth quarter of 2022, due to $19.7 million in incremental merchandise contribution from the businesses acquired in 2023, and the acquisition of Pride (the “Pride Acquisition”), and an increase in merchandise contribution at same stores of approximately $4.7 million. Merchandise margin increased 240 basis points, to 32.9% for the fourth quarter of 2023 from 30.5% in the fourth quarter of 2022, primarily due to execution of key marketing and merchandising initiatives.

    Same store merchandise sales excluding cigarettes increased 2.5% for the year ended December 31, 2023 compared to 2022. Same store merchandise sales increased 0.4% for 2023 compared to the prior year. Total merchandise contribution for 2023 increased $83.9 million or 16.7%, compared to 2022, due to $68.6 million in incremental merchandise contribution from the businesses acquired in 2023, and the Pride Acquisition, and an increase in merchandise contribution at same stores of approximately $20.6 million. Merchandise margin increased 140 basis points, to 31.8% for the year ended December 31, 2023 from 30.4% in 2022, primarily due to execution of key marketing and merchandising initiatives.

    For the fourth quarter of 2023, retail fuel contribution increased $5.0 million to $109.3 million compared to the prior year period, with resilient fuel margin capture of 39.2 cents per gallon, a decrease of 2.2 cents per gallon for the fourth quarter of 2023 as compared to the fourth quarter of 2022. Same store fuel contribution was $86.2 million for the fourth quarter of 2023, compared to $99.8 million for the prior year quarter. This decrease in same store fuel contribution was fully offset by approximately $19.3 million of incremental fuel contribution from recent acquisitions.

    For the year ended December 31, 2023, retail fuel contribution increased $19.1 million to $435.3 million compared to the prior year, with fuel margin of 38.8 cents per gallon, a decrease of 2.6 cents per gallon compared to the prior year. Same store fuel contribution was $360.1 million for the year ended December 31, 2023, compared to $406.3 million for the prior year. This decrease in same store fuel contribution was fully offset by approximately $70.7 million of incremental fuel contribution from recent acquisitions.

    Wholesale

     For the Three Months
    Ended December 31,
     For the Year
    Ended December 31,
     2023 2022 2023 2022
     (in thousands) 
    Fuel gallons sold – fuel supply locations 199,861   182,871   801,260   746,513 
    Fuel gallons sold – consignment agent locations 40,144   40,921   168,005   156,059 
    Fuel contribution1 – fuel supply locations$11,499  $11,379  $48,396  $51,065 
    Fuel contribution1 – consignment agent locations$10,101  $10,966  $44,512  $47,092 
    Fuel margin, cents per gallon2 – fuel supply locations 5.8   6.2   6.0   6.8 
    Fuel margin, cents per gallon2 – consignment agent locations 25.2   26.8   26.5   30.2 
                
    1 Calculated as fuel revenue less fuel costs; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 
    2 Calculated as fuel contribution divided by fuel gallons sold. 


    In wholesale, total fuel contribution was approximately $21.6 million for the fourth quarter of 2023 and $92.9 million for the year. Fuel contribution from fuel supply locations increased by $0.1 million for the quarter and decreased by $2.7 million for the full year compared to the prior year periods, while fuel margin decreased, primarily due to decreased prompt pay discounts related to lower fuel costs and lower volumes at wholesale sites not part of the 2023 and 2022 acquisitions, which was partially offset by the incremental contribution from recent acquisitions.

    Fuel contribution from consignment agent locations decreased by $0.9 million for the fourth quarter of 2023 and $2.6 million for the full year compared to the prior year periods. Fuel margin also decreased for the quarter and for the year ended December 31, 2023, compared to the prior year periods, primarily due to lower rack-to-retail margins and decreased prompt pay discounts related to lower fuel costs, which was partially offset by the incremental contribution from recent acquisitions.

    Fleet Fueling

    The fleet fueling segment commenced operations on July 22, 2022; therefore, the year ended December 31, 2022 does not reflect the operations of this segment for the entirety of such period, which affects period-over-period comparability.

     For the Three Months
    Ended December 31,
      For the Year
    Ended December 31,
     
     2023  2022  2023  2022 
     (in thousands) 
    Fuel gallons sold – proprietary cardlock locations 33,285   31,040   130,995   57,104 
    Fuel gallons sold – third-party cardlock locations 3,201   1,585   9,832   2,882 
    Fuel contribution1 – proprietary cardlock locations$13,146  $16,742  $54,685  $27,632 
    Fuel contribution1 – third-party cardlock locations$245  $124  $1,215  $189 
    Fuel margin, cents per gallon2 – proprietary
    cardlock locations
     39.5   53.9   41.7   48.4 
    Fuel margin, cents per gallon2 – third-party
    cardlock locations
     7.6   7.8   12.4   6.5 
                
    1 Calculated as fuel revenue less fuel costs; excludes the estimated fixed fee paid to GPMP for the cost of fuel. 
    2 Calculated as fuel contribution divided by fuel gallons sold. 


    Fuel contribution was approximately $13.4 million for the fourth quarter of 2023 and $55.9 million for the year, a decrease of $3.5 million for the quarter and an increase of $28.1 million for the year, compared to the prior year periods reflecting a full year of operations from the Quarles Acquisition, which closed in July 2022, as compared to a partial year of operations in the prior year, and the WTG Acquisition, which closed in June 2023. At proprietary cardlocks, fuel margin per gallon decreased as compared to 2022, which year was impacted by historically high rack-to-retail margins and fuel price volatility.

    Store Operating Expenses

    For the fourth quarter of 2023, convenience store operating expenses increased $31.0 million, or 18.2% as compared to the prior year period, primarily due to $31.5 million of incremental expenses related to recent acquisitions. Same store expenses were up less than 2%, with increases in repairs and maintenance expenses, rent and personnel expenses partially offset by lower credit card fees. At same stores, personnel expenses for the fourth quarter of 2023 were up $0.7 million from the prior year period, or 1.1%, with wage increases partially offset by reduced overtime and incentives. The total increase in store operating expenses was partially offset by underperforming retail stores that the Company closed or converted to dealer locations.

    For the year ended December 31, 2023, convenience store operating expenses increased by $109.6 million, or 16.4%, as compared to the prior year, primarily due to $110.7 million of incremental expenses related to recent acquisitions and an increase in expenses at same stores, including approximately $11.1 million, or 4.1%, of higher personnel costs. The increase in store operating expenses was partially offset by lower credit card fees at same stores and underperforming retail stores that the Company closed or converted to dealer locations.

    Long-Term Growth Strategy Updates

    Acquisitions and M&A

    The Company continued to execute its long-term growth strategy, closing three transactions in 2023, marking 25 total acquisitions since 2013. In December 2022, the Company completed its acquisition of Pride, which operated 31 Pride retail convenience stores at closing and had one store under construction that is now opened. Since closing the Pride Acquisition, the Company has earned back in Adjusted EBITDA approximately 65% of its consideration paid for that transaction. 

    Liquidity and Capital Expenditures

    As of December 31, 2023, the Company’s total liquidity was approximately $831 million, consisting of approximately $218 million of cash and cash equivalents and approximately $613 million of availability under lines of credit. Outstanding debt was $845 million, resulting in net debt, excluding lease related financing liabilities, of approximately $627 million. On May 2, 2023, the Company amended its program agreement (the “Program Agreement”) with affiliates of Oak Street, a division of Blue Owl Capital (“Oak Street”). This amendment extended the term of the Program Agreement and provides for an aggregate up to $1.5 billion of capacity, almost all of which is currently available to the Company through September 30, 2024. Capital expenditures were approximately $111.2 million for the year ended December 31, 2023, including the purchase of certain fee properties, upgrades to fuel dispensers and other investments in stores.

    Quarterly Dividend and Share Repurchase Program

    The Company’s ability to return cash to its stockholders through its cash dividend program and share repurchase program is consistent with its capital allocation framework and reflects the Company’s confidence in the strength of its cash generation ability and financial position.

    The Company’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on March 21, 2024 to stockholders of record as of March 11, 2024.

    During the quarter, the Company repurchased approximately 1.1 million shares of common stock under the repurchase program for approximately $8.5 million, or an average share price of $7.49. There was approximately $29 million remaining under the expanded share repurchase program as of December 31, 2023.

    Company-Operated Retail Store Count and Segment Update

    The following tables present certain information regarding changes in the retail, wholesale and fleet fueling segments for the periods presented:

     For the Three Months
    Ended December 31,
     For the Year
    Ended December 31,
    Retail Segment2023 2022 2023 2022
    Number of sites at beginning of period 1,552   1,383   1,404   1,406 
    Acquired sites    32   166   32 
    Newly opened or reopened sites       4    
    Company-controlled sites converted to           
    consignment or fuel supply locations, net (3)  (8)  (16)  (17)
    Closed, relocated or divested sites (6)  (3)  (15)  (17)
    Number of sites at end of period 1,543   1,404   1,543   1,404 


     For the Three Months
    Ended December 31,
     For the Year
    Ended December 31,
    Wholesale Segment 12023 2022 2023 2022
    Number of sites at beginning of period 1,825   1,670   1,674   1,628 
    Acquired sites       190   46 
    Newly opened or reopened sites 2 25   14   83   74 
    Consignment or fuel supply locations converted           
    from Company-controlled or fleet fueling sites, net 2   8   15   17 
    Closed, relocated or divested sites (27)  (18)  (137)  (91)
    Number of sites at end of period 1,825   1,674   1,825   1,674 
                
    1 Excludes bulk and spot purchasers. 
    2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date. 


     For the Three Months
    Ended December 31,
     For the Year
    Ended December 31,
    Fleet Fueling Segment2023 2022 2023 2022
    Number of sites at beginning of period 295   183   183    
    Acquired sites       111   184 
    Newly opened or reopened sites 2      6    
    Fleet fueling locations converted from fuel supply
    locations, net
     1      1    
    Closed, relocated or divested sites       (3)  (1)
    Number of sites at end of period 298   183   298   183 


    2024 Full Year Guidance Range

    The following table provides the Company’s guidance for the year ending December 31, 2024, including a reconciliation of net income to EBITDA and Adjusted EBITDA:

     For the Year Ending December 31, 2024 (E) 
     Low  High 
     (in millions) 
    Net income$2  $29 
    Interest and other financing expenses, net 1 89   89 
    Income tax expense 2 1   10 
    Depreciation and amortization 134   134 
    EBITDA 226   262 
    Non-cash rent expense 3 13   13 
    Share-based compensation expense 4 11   15 
    Adjusted EBITDA$250  $290 
          
    1 Excludes fair value adjustments of financial assets and liabilities. For variable rate debt, assumes that SOFR remains at 5.34% 
    2 Assumes an effective tax rate of 25% 
    3 Eliminates the expected non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeds (or is less than) our cash rent payments. The GAAP rent expense adjustment varies depending on the terms of our lease portfolio, which has been impacted by our recent acquisitions. For newer leases, our rent expense recognized typically exceeds our cash rent payments, whereas, for more mature leases, rent expense recognized is typically less than our cash rent payments. 
    4 Eliminates expected non-cash share-based compensation expense related to the equity incentive program in place to incentivize, retain, and motivate our employees, certain non-employees and members of our Board. 


    The 2024 full year earnings guidance assumes a range of average retail fuel margin from 36 CPG to 40 CPG. 

    Based on quarter-to-date trends, the Company expects its first quarter to contribute less to the full year Adjusted EBITDA than in prior years, representing 12% to 14% of the 2024 full year rather than the approximately 16.5% historical contribution to the full year. The Company’s full year guidance framework anticipates current trends to normalize coming out of the first quarter of 2024. The first quarter guidance corresponds to a range of average retail fuel margin from 35 CPG to 39 CPG.

    Conference Call and Webcast Details

    The Company will host a conference call to discuss these results at 10:00 a.m. Eastern Time on February 28, 2024. Investors and analysts interested in participating in the live call can dial 877-605-1792 or 201-689-8728.

    A simultaneous, live webcast will also be available on the Investor Relations section of the Company’s website at https://www.arkocorp.com/news-events/ir-calendar. The webcast will be archived for 30 days.

    About ARKO Corp.

    ARKO Corp. (Nasdaq: ARKO) is a Fortune 500 company that owns 100% of GPM Investments, LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. Based in Richmond, VA, we operate A Family of Community Brands that offer delicious, prepared foods, beer, snacks, candy, hot and cold beverages, and multiple popular quick serve restaurant brands. Our high value fas REWARDS® loyalty program offers exclusive savings on merchandise and gas. We operate in four reportable segments: retail, which includes convenience stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; GPM Petroleum, which sells and supplies fuel to our retail and wholesale sites and charges a fixed fee, primarily to our fleet fueling sites; and fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites. To learn more about GPM stores, visit: www.gpminvestments.com. To learn more about ARKO, visit: www.arkocorp.com

    Forward-Looking Statements

    This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, the Company’s expected financial and operational results and the related assumptions underlying its expected results. These forward-looking statements are distinguished by use of words such as “anticipate,” “aim,” “believe,” “continue,” “could,” “estimate,” “expect,” “guidance,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and the negative of these terms, and similar references to future periods. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to, among other things, changes in economic, business and market conditions; the Company’s ability to maintain the listing of its common stock and warrants on the Nasdaq Stock Market; changes in its strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; expansion plans and opportunities; changes in the markets in which it competes; changes in applicable laws or regulations, including those relating to environmental matters; market conditions and global and economic factors beyond its control; and the outcome of any known or unknown litigation and regulatory proceedings. Detailed information about these factors and additional important factors can be found in the documents that the Company files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. The Company does not undertake an obligation to update forward-looking information, except to the extent required by applicable law.

    Use of Non-GAAP Measures

    The Company discloses certain measures on a “same store basis,” which is a non-GAAP measure. Information disclosed on a “same store basis” excludes the results of any store that is not a “same store” for the applicable period. A store is considered a same store beginning in the first quarter in which the store had a full quarter of activity in the prior year. The Company believes that this information provides greater comparability regarding its ongoing operating performance. Neither this measure nor those described below should be considered an alternative to measurements presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

    The Company defines EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets, impairment charges, acquisition costs, other non-cash items, and other unusual or non-recurring charges. Each of Operating Income, as adjusted, EBITDA and Adjusted EBITDA is a non-GAAP financial measure.

    At the segment level, the Company defines Operating Income, as adjusted as operating income excluding the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel.

    The Company uses EBITDA and Adjusted EBITDA for operational and financial decision-making and believe these measures are useful in evaluating its performance because they eliminate certain items that it does not consider indicators of its operating performance. Additionally, the Company believes Operating Income, as adjusted provides greater comparability regarding its ongoing segment operating performance by eliminating intercompany charges at the segment level. EBITDA and Adjusted EBITDA are also used by many of its investors, securities analysts, and other interested parties in evaluating its operational and financial performance across reporting periods. The Company believes that the presentation of EBITDA and Adjusted EBITDA provides useful information to investors by allowing an understanding of key measures that it uses internally for operational decision-making, budgeting, evaluating acquisition targets, and assessing its operating performance.

    Operating Income, as adjusted, EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income or any other financial measure presented in accordance with GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of its results as reported under GAAP. The Company strongly encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

    Because non-GAAP financial measures are not standardized, same store measures, Operating Income, as adjusted, EBITDA and Adjusted EBITDA, as defined by the Company, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare the Company’s use of these non-GAAP financial measures with those used by other companies.



     Consolidated Statements of Operations 
          
     For the Three Months Ended December 31,  For the Year Ended December 31, 
     2023  2022  2023  2022 
     (in thousands) 
    Revenues:           
    Fuel revenue$1,759,216  $1,752,136  $7,464,372  $7,401,090 
    Merchandise revenue 446,727   403,084   1,838,001   1,647,642 
    Other revenues, net 27,217   24,858   110,358   94,067 
    Total revenues 2,233,160   2,180,078   9,412,731   9,142,799 
    Operating expenses:           
    Fuel costs 1,613,230   1,606,546   6,876,084   6,856,651 
    Merchandise costs 299,954   280,313   1,252,879   1,146,423 
    Store operating expenses 222,751   186,977   860,134   721,174 
    General and administrative expenses 38,102   39,274   165,294   139,969 
    Depreciation and amortization 32,648   26,702   127,597   101,752 
    Total operating expenses 2,206,685   2,139,812   9,281,988   8,965,969 
    Other expenses, net 1,168   6,547   12,729   9,816 
    Operating income 25,307   33,719   118,014   167,014 
    Interest and other financial income 2,197   2,721   20,273   3,178 
    Interest and other financial expenses (25,099)  (19,016)  (91,516)  (62,583)
    Income before income taxes 2,405   17,424   46,771   107,609 
    Income tax expense (1,317)  (4,497)  (12,166)  (35,557)
    Income (loss) from equity investment 38   (67)  (39)  (74)
    Net income$1,126  $12,860  $34,566  $71,978 
    Less: Net income attributable to non-controlling interests 48   49   197   231 
    Net income attributable to ARKO Corp.$1,078  $12,811  $34,369  $71,747 
    Series A redeemable preferred stock dividends (1,449)  (1,449)  (5,750)  (5,750)
    Net (loss) income attributable to common
    shareholders
    $(371) $11,362  $28,619  $65,997 
    Net (loss) income per share attributable to common shareholders - basic$(0.00) $0.09  $0.24  $0.54 
    Net (loss) income per share attributable to common shareholders - diluted$(0.00) $0.09  $0.24  $0.53 
    Weighted average shares outstanding:           
    Basic 116,638   120,074   118,782   121,476 
    Diluted 116,638   121,508   119,605   123,224 



     Consolidated Balance Sheets 
          
     December 31, 2023  December 31, 2022 
     (in thousands) 
    Assets     
    Current assets:     
    Cash and cash equivalents$218,120  $298,529 
    Restricted cash 23,301   18,240 
    Short-term investments 3,892   2,400 
    Trade receivables, net 134,735   118,140 
    Inventory 250,593   221,951 
    Other current assets 118,472   87,873 
    Total current assets 749,113   747,133 
    Non-current assets:     
    Property and equipment, net 742,610   645,809 
    Right-of-use assets under operating leases 1,384,693   1,203,188 
    Right-of-use assets under financing leases, net 162,668   182,113 
    Goodwill 292,173   217,297 
    Intangible assets, net 214,552   197,123 
    Equity investment 2,885   2,924 
    Deferred tax asset 52,293   22,728 
    Other non-current assets 49,377   36,855 
    Total assets$3,650,364  $3,255,170 
    Liabilities     
    Current liabilities:     
    Long-term debt, current portion$16,792  $11,944 
    Accounts payable 213,657   217,370 
    Other current liabilities 179,536   154,097 
    Operating leases, current portion 67,053   57,563 
    Financing leases, current portion 9,186   5,457 
    Total current liabilities 486,224   446,431 
    Non-current liabilities:     
    Long-term debt, net 828,647   740,043 
    Asset retirement obligation 84,710   64,909 
    Operating leases 1,395,032   1,218,045 
    Financing leases 213,032   225,907 
    Other non-current liabilities 266,602   178,945 
    Total liabilities 3,274,247   2,874,280 
          
    Series A redeemable preferred stock 100,000   100,000 
          
    Shareholders' equity:     
    Common stock 12   12 
    Treasury stock (74,134)  (40,042)
    Additional paid-in capital 245,007   229,995 
    Accumulated other comprehensive income 9,119   9,119 
    Retained earnings 96,097   81,750 
    Total shareholders' equity 276,101   280,834 
    Non-controlling interest 16   56 
    Total equity 276,117   280,890 
    Total liabilities, redeemable preferred stock and equity$3,650,364  $3,255,170 



     Consolidated Statements of Cash Flows 
     For the Three Months Ended December 31,  For the Year
    Ended December 31,
     
     2023  2022  2023  2022 
     (in thousands) 
    Cash flows from operating activities:           
    Net income$1,126  $12,860  $34,566  $71,978 
    Adjustments to reconcile net income to net cash provided by operating activities:           
    Depreciation and amortization 32,648   26,702   127,597   101,752 
    Deferred income taxes (652)  1,572   (4,680)  22,300 
    Loss on disposal of assets and impairment charges 660   2,342   6,203   5,731 
    Foreign currency (gain) loss (101)  (14)  29   227 
    Amortization of deferred financing costs, debt discount and premium 661   620   2,518   2,514 
    Amortization of deferred income (1,840)  (2,455)  (8,142)  (9,724)
    Accretion of asset retirement obligation 709   574   2,399   1,833 
    Non-cash rent 3,750   2,189   14,168   7,903 
    Charges to allowance for credit losses 244   186   1,265   659 
    (Income) loss from equity investment (38)  67   39   74 
    Share-based compensation 1,777   3,134   15,015   12,161 
    Fair value adjustment of financial assets and liabilities 842   452   (10,785)  (3,396)
    Other operating activities, net 352   (80)  2,631   775 
    Changes in assets and liabilities:           
    Decrease (increase) in trade receivables 44,550   9,638   (17,937)  (50,229)
    Decrease (increase) in inventory 15,373   7,720   (2,013)  (6,850)
    (Increase) decrease in other assets (957)  8,843   (29,386)  1,476 
    (Decrease) increase in accounts payable (35,836)  (5,848)  (6,169)  31,645 
    (Decrease) increase in other current liabilities (8,002)  (747)  990   6,884 
    Decrease in asset retirement obligation (69)  (1)  (23)  (95)
    Increase in non-current liabilities 2,090   1,739   7,809   11,638 
    Net cash provided by operating activities 57,287   69,493   136,094   209,256 
    Cash flows from investing activities:           
    Purchase of property and equipment (35,561)  (25,693)  (111,164)  (98,595)
    Purchase of intangible assets       (45)  (176)
    Proceeds from sale of property and equipment 3,134   147,521   310,240   287,901 
    Business acquisitions, net of cash 33   (228,523)  (494,871)  (419,726)
    Prepayment for acquisitions (1,000)  (4,000)  (1,000)  (4,000)
    Decrease in investments          58,934 
    Loans to equity investment, net 18      18   174 
    Net cash used in investing activities (33,376)  (110,695)  (296,822)  (175,488)
    Cash flows from financing activities:           
    Receipt of long-term debt, net 20,810   19,446   99,643   70,896 
    Repayment of debt (5,640)  (3,576)  (22,157)  (45,948)
    Principal payments on financing leases (1,260)  (1,529)  (5,497)  (6,543)
    Proceeds from sale-leaseback    54,988   80,397   54,988 
    Payment of Additional Consideration (3,505)  (3,828)  (3,505)  (5,913)
    Payment of Ares Put Option       (9,808)   
    Common stock repurchased (8,495)     (33,694)  (40,042)
    Dividends paid on common stock (3,497)  (3,602)  (14,272)  (10,893)
    Dividends paid on redeemable preferred stock (1,449)  (1,449)  (5,750)  (5,750)
    Distributions to non-controlling interests    (60)     (240)
    Net cash (used in) provided by financing activities (3,036)  60,390   85,357   10,555 
    Net increase (decrease) in cash and cash equivalents and restricted cash 20,875   19,188   (75,371)  44,323 
    Effect of exchange rate on cash and cash equivalents and restricted cash 106   12   23   (97)
    Cash and cash equivalents and restricted cash, beginning of period 220,440   297,569   316,769   272,543 
    Cash and cash equivalents and restricted cash, end of period$241,421  $316,769  $241,421  $316,769 



    Supplemental Disclosure of Non-GAAP Financial Information

     Reconciliation of EBITDA and Adjusted EBITDA 
     For the Three Months
    Ended December 31,
      For the Year
    Ended December 31,
     
     2023  2022  2023  2022  2021 
     (in thousands)    
    Net income$1,126  $12,860  $34,566  $71,978  $59,427 
    Interest and other financing expenses, net 22,902   16,295   71,243   59,405   71,207 
    Income tax expense 1,317   4,497   12,166   35,557   11,634 
    Depreciation and amortization 32,648   26,702   127,597   101,752   97,194 
    EBITDA 57,993   60,354   245,572   268,692   239,462 
    Non-cash rent expense 1 3,750   2,189   14,168   7,903   6,359 
    Acquisition costs 2 1,099   4,985   9,079   8,162   5,366 
    Loss on disposal of assets and impairment charges 3 660   2,342   6,203   5,731   1,384 
    Share-based compensation expense 4 1,777   3,134   15,015   12,161   5,804 
    (Income) loss from equity investment 5 (38)  67   39   74   (186)
    Adjustment to contingent consideration 6 68   (128)  (604)  (2,204)  (1,740)
    Internal entity realignment and streamlining 7    67      475    
    Other 8 230   (577)  956   60   126 
    Adjusted EBITDA$65,539  $72,433  $290,428  $301,054  $256,575 
                   
    Eliminates the non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeded (or was less than) our cash rent payments. The GAAP rent expense adjustment varies depending on the terms of our lease portfolio, which has been impacted by our recent acquisitions. For newer leases, our rent expense recognized typically exceeds our cash rent payments, whereas, for more mature leases, rent expense recognized is typically less than our cash rent payments. 
                   
    Eliminates costs incurred that are directly attributable to business acquisitions and salaries of employees whose primary job function is to execute our acquisition strategy and facilitate integration of acquired operations. 
                   
    3 Eliminates the non-cash loss from the sale of property and equipment, the loss recognized upon the sale of related leased assets, and impairment charges on property and equipment and right-of-use assets related to closed and non-performing sites. 
                   
    Eliminates non-cash share-based compensation expense related to the equity incentive program in place to incentivize, retain, and motivate our employees, certain non-employees and members of the Board. 
                   
    5 Eliminates our share of (income) loss attributable to our unconsolidated equity investment. 
                   
    6 Eliminates fair value adjustments to the contingent consideration owed to the seller for the 2020 acquisition of Empire. 
                   
    7 Eliminates non-recurring charges related to our internal entity realignment and streamlining. 
                   
    8 Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance. 



    Supplemental Disclosures of Segment Information

    Retail Segment

     For the Three Months
    Ended December 31,
      For the Year
    Ended December 31,
     
     2023  2022  2023  2022 
     (in thousands) 
    Revenues:           
    Fuel revenue$913,534  $886,710  $3,858,777  $3,887,549 
    Merchandise revenue 446,727   403,084   1,838,001   1,647,642 
    Other revenues, net 17,104   17,638   74,406   67,280 
    Total revenues 1,377,365   1,307,432   5,771,184   5,602,471 
    Operating expenses:           
    Fuel costs 818,125   794,986   3,479,531   3,521,648 
    Merchandise costs 299,954   280,313   1,252,879   1,146,423 
    Store operating expenses 200,952   169,956   779,448   669,848 
    Total operating expenses 1,319,031   1,245,255   5,511,858   5,337,919 
    Operating income 58,334   62,177   259,326   264,552 
    Intercompany charges by GPMP 1 13,927   12,580   56,076   50,327 
    Operating income, as adjusted$72,261  $74,757  $315,402  $314,879 
                
    1 Represents the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 



    The tables below shows financial information and certain key metrics of recent acquisitions in the Retail Segment that do not have (or have only partial) comparable information for the prior periods.

     For the Three Months Ended December 31, 2023 
     Pride 1  TEG 2  Uncle's
    (WTG) 3
      Speedy's 4  Total 
     (in thousands) 
    Date of Acquisition:Dec 6, 2022  Mar 1, 2023  Jun 6, 2023  Aug 15, 2023    
    Revenues:              
    Fuel revenue$66,952  $88,309  $20,802  $4,412  $180,475 
    Merchandise revenue 14,219   36,628   9,156   2,349   62,352 
    Other revenues, net 1,351   1,367   207   51   2,976 
    Total revenues 82,522   126,304   30,165   6,812   245,803 
    Operating expenses:              
    Fuel costs 58,066   81,122   17,011   3,924   160,123 
    Merchandise costs 9,315   24,803   5,851   1,583   41,552 
    Store operating expenses 10,372   18,202   4,611   1,249   34,434 
    Total operating expenses 77,753   124,127   27,473   6,756   236,109 
    Operating income 4,769   2,177   2,692   56   9,694 
    Intercompany charges by GPMP 5 884   1,402   293   69   2,648 
    Operating income, as adjusted$5,653  $3,579  $2,985  $125  $12,342 
    Fuel gallons sold 17,688   28,045   5,859   1,372   52,964 
    Fuel contribution 6$9,770  $8,589  $4,084  $557  $23,000 
    Merchandise contribution 7$4,904  $11,825  $3,305  $766  $20,800 
    Merchandise margin 8 34.5%  32.3%  36.1%  32.6%   



     For the Year Ended December 31, 2023 
      Pride 1   TEG 2   Uncle's
    (WTG) 3
       Speedy's 4   Total 
                      (in thousands) 
    Date of Acquisition: Dec 6, 2022   Mar 1, 2023   Jun 6, 2023   Aug 15, 2023     
    Revenues:                   
    Fuel revenue$279,396  $324,361  $48,827  $7,550  $660,134 
    Merchandise revenue 59,440   128,728   21,627   3,749   213,544 
    Other revenues, net 5,521   4,489   464   74   10,548 
    Total revenues 344,357   457,578   70,918   11,373   884,226 
    Operating expenses:                   
    Fuel costs 249,183   298,332   40,828   6,722   595,065 
    Merchandise costs 39,221   88,147   14,036   2,532   143,936 
    Store operating expenses 40,554   60,151   10,983   1,945   113,633 
    Total operating expenses 328,958   446,630   65,847   11,199   852,634 
    Operating income$15,399  $10,948  $5,071  $174  $31,592 
    Intercompany charges by GPMP 5 3,673   4,911   669   111   9,364 
    Operating income, as adjusted$19,072  $15,859  $5,740  $285  $40,956 
    Fuel gallons sold 73,452   98,228   13,382   2,202   187,264 
    Fuel contribution 6$33,886  $30,940  $8,668  $939  $74,433 
    Merchandise contribution 7$20,219  $40,581  $7,591  $1,217  $69,608 
    Merchandise margin 8 34.0%  31.5%  35.1%  32.5%    
                        
    1 Acquisition of Pride Convenience Holdings, LLC. 
    2 Acquisition from Transit Energy Group and affiliates ("TEG"); includes only the retail stores acquired in the TEG acquisition. 
    3 Acquisition from WTG Fuels Holdings, LLC ("WTG"); includes only the retail stores acquired in the WTG acquisition. 
    4 Acquisition of seven Speedy's retail stores. 
    5 Represents the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 
    6 Calculated as fuel revenue less fuel costs; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 
    7 Calculated as merchandise revenue less merchandise costs. 
    8 Calculated as merchandise contribution divided by merchandise revenue. 



    Wholesale Segment

     For the Three Months
    Ended December 31,
      For the Year
    Ended December 31,
     
     2023  2022  2023  2022 
     (in thousands) 
    Revenues:           
    Fuel revenue$700,026  $712,578  $3,039,904  $3,234,145 
    Other revenues, net 6,909   6,303   25,775   23,451 
    Total revenues 706,935   718,881   3,065,679   3,257,596 
    Operating expenses:           
    Fuel costs 690,300   701,571   2,995,398   3,181,189 
    Store operating expenses 10,400   11,104   39,703   42,543 
    Total operating expenses 700,700   712,675   3,035,101   3,223,732 
    Operating income 6,235   6,206   30,578   33,864 
    Intercompany charges by GPMP 1 11,874   11,338   48,402   45,201 
    Operating income, as adjusted$18,109  $17,544  $78,980  $79,065 
                
    1 Represents the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 



    The tables below shows financial information and certain key metrics of recent acquisitions in the Wholesale Segment that do not have (or have only partial) comparable information for prior periods.

     For the Three Months Ended December 31, 2023 
     Quarles 1  TEG 2  WTG 3  Total 
     (in thousands) 
    Date of Acquisition:Jul 22, 2022  Mar 1, 2023  Jun 6, 2023    
    Revenues:           
    Fuel revenue$17,252  $91,340  $3,050  $111,642 
    Other revenues, net 240   730   9   979 
    Total revenues 17,492   92,070   3,059   112,621 
    Operating expenses:           
    Fuel costs 16,600   90,500   2,899   109,999 
    Store operating expenses 454   871   72   1,397 
    Total operating expenses 17,054   91,371   2,971   111,396 
    Operating income$438  $699  $88  $1,225 
    Intercompany charges by GPMP 4 284   1,542   43   1,869 
    Operating income, as adjusted$722  $2,241  $131  $3,094 
    Fuel gallons sold 5,521   31,207   862   37,590 



     For the Year Ended December 31, 2023 
     Quarles 1  TEG 2  WTG 3  Total 
     (in thousands) 
    Date of Acquisition:Jul 22, 2022  Mar 1, 2023  Jun 6, 2023    
    Revenues:           
    Fuel revenue$74,960  $335,477  $6,594  $417,031 
    Other revenues, net 1,103   2,229   15   3,347 
    Total revenues 76,063   337,706   6,609   420,378 
    Operating expenses:           
    Fuel costs 72,357   332,129   6,227   410,713 
    Store operating expenses 1,884   2,798   153   4,835 
    Total operating expenses 74,241   334,927   6,380   415,548 
    Operating income$1,822  $2,779  $229  $4,830 
    Intercompany charges by GPMP 4 1,171   5,379   93   6,643 
    Operating income, as adjusted$2,993  $8,158  $322  $11,473 
    Fuel gallons sold 22,825   109,156   1,869   133,850 
                
    1 Acquisition from Quarles Petroleum, Incorporated ("Quarles"); includes only the wholesale business acquired in the Quarles acquisition. 
    2 Includes only the wholesale business acquired in the TEG acquisition. 
    3 Includes only the wholesale business acquired in the WTG acquisition. 
    4 Represents the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 



    Fleet Fueling Segment

     For the Three Months
    Ended December 31,
      For the Year
    Ended December 31,
     
     2023  2022  2023  2022 
     (in thousands) 
    Revenues:           
    Fuel revenue$136,801  $149,857  $530,937  $270,670 
    Other revenues, net 2,616   1,255   7,818   2,178 
    Total revenues 139,417   151,112   538,755   272,848 
    Operating expenses:           
    Fuel costs 125,182   134,571   481,885   245,733 
    Store operating expenses 6,259   4,788   22,298   8,733 
    Total operating expenses 131,441   139,359   504,183   254,466 
    Operating income 7,976   11,753   34,572   18,382 
    Intercompany charges by GPMP 1 1,772   1,580   6,848   2,884 
    Operating income, as adjusted$9,748  $13,333  $41,420  $21,266 
                
    1 Represents the estimated fixed fee paid to GPMP for the cost of fuel. 



    The table below shows financial information and certain key metrics of recent acquisitions in the Fleet Fueling Segment that do not have (or have only partial) comparable information for the prior periods.

     For the Three Months Ended December 31, 2023  For the Year Ended December 31, 2023 
     Quarles 1  WTG 2  Total  Quarles 1  WTG 2  Total 
     (in thousands) 
    Date of Acquisition:Jul 22, 2022  Jun 6, 2023     Jul 22, 2022  Jun 6, 2023    
    Revenues:                 
    Fuel revenue$120,857  $15,944  $136,801  $491,642  $39,295  $530,937 
    Other revenues, net 941   1,675   2,616   4,841   2,977   7,818 
    Total revenues 121,798   17,619   139,417   496,483   42,272   538,755 
    Operating expenses:                 
    Fuel costs 110,815   14,367   125,182   447,010   34,875   481,885 
    Store operating expenses 5,043   1,216   6,259   20,003   2,295   22,298 
    Total operating expenses 115,858   15,583   131,441   467,013   37,170   504,183 
    Operating income$5,940  $2,036  $7,976  $29,470  $5,102  $34,572 
    Intercompany charges by GPMP 3 1,563   209   1,772   6,313   536   6,849 
    Operating income, as
    adjusted
    $7,503  $2,245  $9,748  $35,783  $5,638  $41,421 
    Fuel gallons sold 32,246   4,240   36,486   130,382   10,445   140,827 
                      
    1 Includes only the fleet fueling business acquired in the Quarles acquisition. 
    2 Includes only the fleet fueling business acquired in the WTG acquisition. 
    3 Represents the estimated fixed fee paid to GPMP for the cost of fuel.    

     


    Investor and Media Contact
    Jordan Mann
    ARKO Corp.
    investors@gpminvestments.com

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