Exhibit 99.1
ARKO Corp. Reports Fourth Quarter and Full Year 2023 Results
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
Other Key Highlights
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).
“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 |
|
|
For the Year |
|
||||||||||
|
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) |
|
(2.8 |
%) |
|
|
1.2 |
% |
|
|
0.4 |
% |
|
|
(1.0 |
%) |
Same store merchandise sales excluding |
|
(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 |
|
|
For the Year |
|
||||||||||
|
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 |
|
|
For the Year |
|
||||||||||
|
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 |
|
39.5 |
|
|
|
53.9 |
|
|
|
41.7 |
|
|
|
48.4 |
|
Fuel margin, cents per gallon2 – third-party |
|
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 |
|
|
For the Year |
|
||||||||||
Retail Segment |
2023 |
|
|
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 |
|
|
For the Year |
|
||||||||||
Wholesale Segment 1 |
2023 |
|
|
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 |
|
|
For the Year |
|
||||||||||
Fleet Fueling Segment |
2023 |
|
|
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 |
|
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.
Investor and Media Contact
Jordan Mann
ARKO Corp.
investors@gpminvestments.com
|
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 |
|
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 |
$ |
(371 |
) |
|
$ |
11,362 |
|
|
$ |
28,619 |
|
|
$ |
65,997 |
|
Net (loss) income per share attributable to |
$ |
(0.00 |
) |
|
$ |
0.09 |
|
|
$ |
0.24 |
|
|
$ |
0.54 |
|
Net (loss) income per share attributable to |
$ |
(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 |
|
||||||||||
|
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 |
|
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
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 |
|
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 |
|
20,875 |
|
|
|
19,188 |
|
|
|
(75,371 |
) |
|
|
44,323 |
|
Effect of exchange rate on cash and cash equivalents |
|
106 |
|
|
|
12 |
|
|
|
23 |
|
|
|
(97 |
) |
Cash and cash equivalents and restricted cash, |
|
220,440 |
|
|
|
297,569 |
|
|
|
316,769 |
|
|
|
272,543 |
|
Cash and cash equivalents and restricted cash, end |
$ |
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 |
|
|
For the Year |
|
||||||||||||||
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
1 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 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. |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 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 |
|
|
For the Year |
|
||||||||||
|
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 |
|
|