ARKO ARKO Corporation

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 06, 2024

 

 

 

ARKO Corp.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-39828	85-2784337
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
8565 Magellan Parkway Suite 400
Richmond, Virginia				23227-1150
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (804) 730-1568

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		ARKO		The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of Common Stock at an exercise price of $11.50		ARKOW		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On August 6, 2024, ARKO Corp., a Delaware corporation (the “Company”), issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 2.02.

 

Item 7.01 Regulation FD Disclosure.

The information contained in Item 2.02 of this Current Report on Form 8-K is incorporated by reference into this Item 7.01.

The information contained in this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent expressly stated in such filing.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number		Description
99.1		Press Release issued by ARKO Corp. on August 6, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			ARKO CORP.
Date:	August 6, 2024	By:	/s/ Arie Kotler
		Name: Title:	Arie Kotler Chairman of the Board, President and Chief Executive Officer

 

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ARKO Corp. Reports Second Quarter 2024 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 second quarter ended June 30, 2024.

Second Quarter 2024 Key Highlights (vs. Year-Ago Quarter)1,2

 

 

Other Key Highlights

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Additional details of the Company’s multi-year transformation plan will be provided at the Company’s investor day that is being scheduled for the fourth quarter of 2024. Details will be shared at a later date.

 

“This quarter, we continued to navigate a challenging macroeconomic environment alongside our customers,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “We continued to see pressure on consumers as they struggle with inflation and elevated prices for everyday goods, especially in markets with a large percentage of lower income consumers. While this negatively impacted our retail sales, our team worked hard to control same store expenses and leverage our strong vendor partner relationships to deliver another quarter of merchandise margin growth, while providing much-needed value to our customers. When combined with higher fuel margins, we exceeded our Adjusted EBITDA guidance for the second quarter.”

 

Mr. Kotler continued: “Our commitment to strong execution, enhancing customer value, and improving store level economics remain a top priority. We are well positioned to navigate the near-term macro headwinds, and we continue to believe in the long-term opportunities for ARKO. We expect the ongoing enhancements to our operations will guide us through this environment, while also laying the foundation for our multi-year transformation plan.”

 

 

 

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Second Quarter 2024 Segment Highlights

Retail

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Fuel gallons sold		283,481				293,584				538,945				542,490
Same store fuel gallons sold decrease (%) 1		(6.6	%)			(2.6	%)			(6.6	%)			(4.2	%)
Fuel contribution 2	$	117,981			$	116,624			$	210,914			$	204,720
Fuel margin, cents per gallon 3		41.6				39.7				39.1				37.7
Same store fuel contribution 1,2	$	111,433			$	114,746			$	193,481			$	199,578
Same store merchandise sales (decrease)   increase (%) 1		(5.1	%)			0.7	%			(4.6	%)			2.1	%
Same store merchandise sales excluding   cigarettes (decrease) increase (%) 1		(4.0	%)			3.8	%			(3.5	%)			5.6	%
Merchandise revenue	$	474,248			$	484,561			$	888,903			$	884,849
Merchandise contribution 4	$	155,759			$	154,658			$	290,677			$	277,623
Merchandise margin 5		32.8	%			31.9	%			32.7	%			31.4	%
Same store merchandise contribution 1,4	$	148,093			$	152,256			$	266,769			$	270,070
Same store site operating expenses 1	$	192,258			$	193,185			$	364,877			$	360,297
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.

 

Total merchandise contribution for the second quarter of 2024 increased $1.1 million, or 0.7%, compared to the second quarter of 2023, due to $5.6 million in incremental merchandise contribution from recent acquisitions, which was partially offset by a decrease in same store merchandise contribution. Same store merchandise contribution decreased primarily due to lower contribution from certain core destination categories, as well as cigarettes.

Merchandise margin increased 90 basis points to 32.8% for the second quarter of 2024, supported by key marketing and merchandising initiatives.

For the second quarter of 2024, retail fuel contribution increased $1.4 million to $118.0 million compared to the prior year period, with resilient fuel margin capture of 41.6 cents per gallon, an increase of 1.9 cents per gallon compared to the second quarter of 2023. Incremental fuel contribution from recent acquisitions of approximately $5.0 million was partially offset by same store fuel contribution, which decreased to $111.4 million for the second quarter of 2024, compared to $114.7 million for the prior year quarter.

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Wholesale

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Fuel gallons sold – fuel supply locations		203,561				213,136				390,292				395,563
Fuel gallons sold – consignment agent locations		39,338				44,534				76,842				82,496
Fuel contribution 1 – fuel supply locations	$	12,287			$	12,518			$	23,849			$	23,674
Fuel contribution 1 – consignment locations	$	11,699			$	11,266			$	20,867			$	21,305
Fuel margin, cents per gallon 2 – fuel supply locations		6.0				5.9				6.1				6.0
Fuel margin, cents per gallon 2 – consignment agent locations		29.7				25.3				27.2				25.8
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 $24.0 million for the second quarter of 2024. Fuel contribution was similar for the second quarters of 2024 and 2023. Other revenues, net increased by approximately $0.7 million primarily due to vendor rebates. For the second quarter of 2024, site operating expenses decreased $0.6 million compared to the prior year period primarily due to lower credit card fees.

Fleet Fueling

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Fuel gallons sold – proprietary cardlock locations		35,678				32,417				69,127				63,433
Fuel gallons sold – third-party cardlock locations		3,271				2,036				6,470				3,646
Fuel contribution 1 – proprietary cardlock locations	$	17,529			$	14,229			$	31,198			$	28,042
Fuel contribution 1 – third-party cardlock locations	$	331			$	155			$	578			$	177
Fuel margin, cents per gallon 2 – proprietary cardlock   locations		49.1				43.9				45.1				44.2
Fuel margin, cents per gallon 2 – third-party cardlock   locations		10.1				7.7				8.9				4.9
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 increased 24.2% to approximately $17.9 million for the second quarter of 2024 compared to the prior year period. At proprietary cardlocks, fuel margin increased by 5.2 cents per gallon compared to the second quarter of 2023. At third-party cardlock locations, fuel margin increased by 2.4 cents per gallon for the second quarter of 2024 compared to the second quarter of 2023. These changes were primarily due to higher volumes and the cardlocks acquired in the WTG Acquisition.

 

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Site Operating Expenses

For the quarter ended June 30, 2024, convenience store operating expenses increased $4.8 million, or 2.4%, as compared to the prior year period, primarily due to $7.4 million of incremental expenses related to recent acquisitions. Same store expenses were down $0.9 million from the prior year period, or 0.5%, primarily related to lower personnel costs and lower credit card fees. The increase in site operating expenses was partially offset by underperforming retail stores that were closed or converted to dealers.

Liquidity and Capital Expenditures

As of June 30, 2024, the Company’s total liquidity was approximately $806 million, consisting of approximately $232 million of cash and cash equivalents and approximately $574 million of availability under lines of credit. Outstanding debt was $890 million, resulting in net debt, excluding lease related financing liabilities, of approximately $658 million. Capital expenditures were approximately $19.3 million for the quarter ended June 30, 2024.

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 strong financial position.

 

The Board declared a quarterly dividend of $0.03 per share of common stock to be paid on August 30, 2024 to stockholders of record as of August 19, 2024.

During the second quarter, the Board approved the expansion of the Company’s share repurchase program to $125 million, up from $100 million. There was approximately $25.7 million remaining under the share repurchase program as of June 30, 2024.

 

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 June 30,								For the Six Months Ended June 30,
Retail Segment	2024				2023				2024				2023
Number of sites at beginning of period		1,540				1,531				1,543				1,404
Acquired sites		21				24				21				159
Newly opened or reopened sites		—				2				1				3
Company-controlled sites converted to
consignment or fuel supply locations, net		(2	)			(6	)			(2	)			(11	)
Closed, relocated or divested sites		(11	)			(4	)			(15	)			(8	)
Number of sites at end of period		1,548				1,547				1,548				1,547

 

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	For the Three Months Ended June 30,								For the Six Months Ended June 30,
Wholesale Segment 1	2024				2023				2024				2023
Number of sites at beginning of period		1,816				1,841				1,825				1,674
Acquired sites		—				9				—				190
Newly opened or reopened sites 2		11				17				20				24
Consignment or fuel supply locations converted
from Company-controlled or fleet fueling sites, net		2				6				2				11
Closed, relocated or divested sites		(35	)			(49	)			(53	)			(75	)
Number of sites at end of period		1,794				1,824				1,794				1,824
1 Excludes bulk and spot purchasers.
2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.

 

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
Fleet Fueling Segment	2024				2023				2024				2023
Number of sites at beginning of period		296				183				298				183
Acquired sites		—				111				-				111
Closed, relocated or divested sites		(2	)			(1	)			(4	)			(1	)
Number of sites at end of period		294				293				294				293

 

Changes in Non-GAAP Definitions; Third Quarter and Full Year 2024 Guidance

Beginning in the third quarter of 2024, the Company has made certain changes to its definitions for Adjusted EBITDA that impact the comparability of the metric to prior periods. Specifically, the Company will no longer include non-cash rent expense adjustments in its calculation of Adjusted EBITDA. Accordingly, the Company’s third quarter 2024 Adjusted EBITDA and full year 2024 Adjusted EBITDA guidance reflects the Company’s updated definition of Adjusted EBITDA. See “Supplemental Disclosure of Non-GAAP Financial Information” below for a reconciliation of the definitions prior to the third quarter of 2024 to allow for like-for-like comparisons to the new definitions for all periods presented.

 

The Company currently expects third quarter 2024 Adjusted EBITDA, using the revised methodology to calculate Adjusted EBITDA, to range between $70 million and $86 million, with an assumed range of average retail fuel margin from 38 to 44 cents per gallon, and which now includes approximately $3.5 million of non-cash rent expense.

 

The Company currently expects full year 2024 Adjusted EBITDA, using the revised methodology to calculate Adjusted EBITDA, to range between $235 million and $275 million, which now includes approximately $15 million of non-cash rent expense. This guidance translates directly to the Company maintaining its full year Adjusted EBITDA range of $250 million to $290 million using the historical methodology. The Company’s full year Adjusted EBITDA range assumes a range of average retail fuel margin from 37 to 45 cents per gallon for the back half of the year.

 

The Company is not providing guidance on net income at this time due to the volatility of certain required inputs that are not available without unreasonable efforts, including future fair value

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adjustments associated with its stock price, as well as depreciation and amortization related to its capital allocation as part of its focus on accelerating organic growth.

 

Conference Call and Webcast Details

The Company will host a conference call today to discuss these results at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the live call can dial 800-245-3047 or 203-518-9765.

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

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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, share-based compensation expense, 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.

 

 

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Change in Non-GAAP Definitions

Beginning on July 1, 2024, the Company has made certain changes to its calculation of Adjusted EBITDA that impact the comparability of the metrics to prior periods. Specifically, the Company will no longer include non-cash rent expense adjustments in its calculation of Adjusted EBITDA. Accordingly, the Company’s third quarter of 2024 and full year 2024 Adjusted EBITDA guidance reflect the Company’s updated definition of Adjusted EBITDA. See “Supplemental Disclosure of Non-GAAP Financial Information” below for a reconciliation of the definitions prior to July 1, 2024 to allow for like-for-like comparisons to the new definitions for all periods presented.

 

Company Contact

Jordan Mann

ARKO Corp.

investors@gpminvestments.com

 

Investor Contact

Sean Mansouri, CFA

Elevate IR

(720) 330-2829

ARKO@elevate-ir.com

 

 

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	Condensed Consolidated Statements of Operations
	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Revenues:
Fuel revenue	$	1,887,531			$	1,957,100			$	3,518,863			$	3,618,764
Merchandise revenue		474,248				484,561				888,903				884,849
Other revenues, net		26,384				27,480				52,851				53,904
Total revenues		2,388,163				2,469,141				4,460,617				4,557,517
Operating expenses:
Fuel costs		1,726,761				1,801,103				3,229,063				3,338,985
Merchandise costs		318,489				329,903				598,226				607,226
Site operating expenses		223,691				218,002				442,622				410,685
General and administrative expenses		42,436				42,660				84,594				83,076
Depreciation and amortization		33,577				32,837				65,293				61,236
Total operating expenses		2,344,954				2,424,505				4,419,798				4,501,208
Other expenses, net		261				4,956				2,737				7,676
Operating income		42,948				39,680				38,082				48,633
Interest and other financial income		3,384				2,428				25,297				9,630
Interest and other financial expenses		(24,751	)			(22,588	)			(49,121	)			(43,392	)
Income before income taxes		21,581				19,520				14,258				14,871
Income tax expense		(7,546	)			(5,014	)			(839	)			(2,856	)
Income (loss) from equity investment		28				(27	)			50				(63	)
Net income	$	14,063			$	14,479			$	13,469			$	11,952
Less: Net income attributable to   non-controlling interests		—				48				—				101
Net income attributable to ARKO Corp.	$	14,063			$	14,431			$	13,469			$	11,851
Series A redeemable preferred stock dividends		(1,445	)			(1,434	)			(2,859	)			(2,852	)
Net income attributable to common   shareholders	$	12,618			$	12,997			$	10,610			$	8,999
Net income per share attributable to common   shareholders – basic	$	0.11			$	0.11			$	0.09			$	0.07
Net income per share attributable to common   shareholders – diluted	$	0.11			$	0.11			$	0.09			$	0.07
Weighted average shares outstanding:
Basic		115,758				119,893				116,512				120,073
Diluted		116,880				121,280				117,073				120,767

 

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	Condensed Consolidated Balance Sheets
	June 30, 2024				December 31, 2023
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	231,647			$	218,120
Restricted cash		19,392				23,301
Short-term investments		4,860				3,892
Trade receivables, net		155,578				134,735
Inventory		251,142				250,593
Other current assets		107,145				118,472
Total current assets		769,764				749,113
Non-current assets:
Property and equipment, net		740,004				742,610
Right-of-use assets under operating leases		1,418,778				1,384,693
Right-of-use assets under financing leases, net		160,280				162,668
Goodwill		299,972				292,173
Intangible assets, net		194,151				214,552
Equity investment		2,935				2,885
Deferred tax asset		60,822				52,293
Other non-current assets		53,163				49,377
Total assets	$	3,699,869			$	3,650,364
Liabilities
Current liabilities:
Long-term debt, current portion	$	18,184			$	16,792
Accounts payable		239,169				213,657
Other current liabilities		151,434				179,536
Operating leases, current portion		68,725				67,053
Financing leases, current portion		10,856				9,186
Total current liabilities		488,368				486,224
Non-current liabilities:
Long-term debt, net		871,678				828,647
Asset retirement obligation		86,872				84,710
Operating leases		1,434,238				1,395,032
Financing leases		211,760				213,032
Other non-current liabilities		233,852				266,602
Total liabilities		3,326,768				3,274,247
Series A redeemable preferred stock		100,000				100,000
Shareholders' equity:
Common stock		12				12
Treasury stock		(106,123	)			(74,134	)
Additional paid-in capital		270,455				245,007
Accumulated other comprehensive income		9,119				9,119
Retained earnings		99,638				96,097
Total shareholders' equity		273,101				276,101
Non-controlling interest		—				16
Total equity		273,101				276,117
Total liabilities, redeemable preferred stock and equity	$	3,699,869			$	3,650,364

 

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	Condensed Consolidated Statements of Cash Flows
	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Cash flows from operating activities:
Net income	$	14,063			$	14,479			$	13,469			$	11,952
Adjustments to reconcile net income to net   cash provided by operating activities:
Depreciation and amortization		33,577				32,837				65,293				61,236
Deferred income taxes		4,146				(3,885	)			(5,929	)			(14,115	)
Loss on disposal of assets and impairment   charges		721				2,991				3,385				3,278
Foreign currency loss		30				24				57				58
Gain from issuance of shares as payment of   deferred consideration related to business   acquisition		—				—				(2,681	)			—
Gain from settlement related to business   acquisition		—				—				(6,356	)			—
Amortization of deferred financing costs and   debt discount		668				621				1,332				1,213
Amortization of deferred income		(4,423	)			(2,069	)			(6,369	)			(3,929	)
Accretion of asset retirement obligation		627				627				1,243				1,118
Non-cash rent		3,687				3,760				7,171				6,558
Charges to allowance for credit losses		314				290				641				573
(Income) loss from equity investment		(28	)			27				(50	)			63
Share-based compensation		2,784				4,555				6,113				8,624
Fair value adjustment of financial assets and   liabilities		(1,434	)			(1,020	)			(12,206	)			(5,248	)
Other operating activities, net		62				647				686				976
Changes in assets and liabilities:
Decrease (increase) in trade receivables		2,820				(6,991	)			(21,484	)			(18,173	)
Decrease (increase) in inventory		2,584				(5,363	)			2,772				(8,208	)
Decrease (increase) in other assets		748				(14,510	)			5,843				(10,965	)
Increase in accounts payable		5,130				8,640				26,477				14,580
Decrease in other current liabilities		(1,772	)			(7,524	)			(5,924	)			(7,651	)
(Decrease) increase in asset retirement   obligation		(65	)			(21	)			(120	)			46
Increase in non-current liabilities		12,980				1,988				16,611				4,000
Net cash provided by operating activities		77,219				30,103				89,974				45,986
Cash flows from investing activities:
Purchase of property and equipment		(19,284	)			(26,658	)			(48,512	)			(50,038	)
Purchase of intangible assets		—				(35	)			—				(35	)
Proceeds from sale of property and equipment		48,256				88,049				50,295				296,485
Business acquisitions, net of cash		(53,458	)			(143,294	)			(54,458	)			(481,636	)
Loans to equity investment, net		14				—				28				—
Net cash used in investing activities		(24,472	)			(81,938	)			(52,647	)			(235,224	)
Cash flows from financing activities:
Receipt of long-term debt, net		5,968				19,233				47,556				74,233
Repayment of debt		(7,214	)			(4,919	)			(13,849	)			(10,511	)
Principal payments on financing leases		(1,171	)			(1,494	)			(2,306	)			(2,912	)

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Early settlement of deferred consideration   related to business acquisition		—				—				(17,155	)			—
Proceeds from sale-leaseback		—				28,793				—				80,397
Payment of Ares Put Option		—				(9,808	)			—				(9,808	)
Common stock repurchased		(68	)			(11,253	)			(31,989	)			(13,563	)
Dividends paid on common stock		(3,473	)			(3,607	)			(7,069	)			(7,216	)
Dividends paid on redeemable preferred stock		(1,445	)			(1,434	)			(2,859	)			(2,852	)
Net cash (used in) provided by financing   activities		(7,403	)			15,511				(27,671	)			107,768
Net increase (decrease) in cash and cash   equivalents and restricted cash		45,344				(36,324	)			9,656				(81,470	)
Effect of exchange rate on cash and cash   equivalents and restricted cash		(19	)			—				(38	)			(21	)
Cash and cash equivalents and restricted cash,   beginning of period		205,714				271,602				241,421				316,769
Cash and cash equivalents and restricted cash,   end of period	$	251,039			$	235,278			$	251,039			$	235,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Supplemental Disclosure of Non-GAAP Financial Information

		Reconciliation of EBITDA and Adjusted EBITDA
		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2024				2023				2024				2023
		(in thousands)
Net income		$	14,063			$	14,479			$	13,469			$	11,952
Interest and other financing expenses, net			21,367				20,160				23,824				33,762
Income tax expense			7,546				5,014				839				2,856
Depreciation and amortization			33,577				32,837				65,293				61,236
EBITDA			76,553				72,490				103,425				109,806
Non-cash rent expense (a)			3,687				3,760				7,171				6,558
Acquisition costs (b)			1,510				3,277				2,190				6,853
Loss on disposal of assets and impairment charges (c)			721				2,991				3,385				3,278
Share-based compensation expense (d)			2,784				4,555				6,113				8,624
(Income) loss from equity investment (e)			(28	)			27				(50	)			63
Fuel taxes received in arrears (f)			—				—				(565	)			—
Adjustment to contingent consideration (g)			(310	)			(922	)			(292	)			(1,624	)
Other (h)			(1,160	)			64				(971	)			168
Adjusted EBITDA, as defined through June 30, 2024		$	83,757			$	86,242			$	120,406			$	133,726
Non-cash rent expense (a)			(3,687	)			(3,760	)			(7,171	)			(6,558	)
Adjusted EBITDA, as defined beginning July 1, 2024		$	80,070			$	82,482			$	113,235			$	127,168
(a) 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. 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. Beginning July 1, 2024, such expenses will no longer be an adjustment in the definition of Adjusted EBITDA.
(b) 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.
(c) 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.
(d) 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.
(e) Eliminates our share of (income) loss attributable to our unconsolidated equity investment.
(f) Eliminates the receipt of historical fuel tax amounts for multiple prior periods.
(g) Eliminates fair value adjustments to the contingent consideration owed to the seller for the 2020 Empire acquisition.
(h) Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance.

 

 

 

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Supplemental Disclosures of Segment Information

Retail Segment

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Revenues:
Fuel revenue	$	976,372			$	1,015,365			$	1,800,800			$	1,858,838
Merchandise revenue		474,248				484,561				888,903				884,849
Other revenues, net		16,735				18,997				33,414				37,552
Total revenues		1,467,355				1,518,923				2,723,117				2,781,239
Operating expenses:
Fuel costs		872,493				913,437				1,616,734				1,681,245
Merchandise costs		318,489				329,903				598,226				607,226
Site operating expenses		202,550				197,726				400,567				373,280
Total operating expenses		1,393,532				1,441,066				2,615,527				2,661,751
Operating income		73,823				77,857				107,590				119,488
Intercompany charges by GPMP 1		14,102				14,696				26,848				27,127
Operating income, as adjusted	$	87,925			$	92,553			$	134,438			$	146,615
1 Represents the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel.

 

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

	For the Three Months Ended June 30, 2024
	Uncle's (WTG) 1				Speedy's 2				SpeedyQ 3				Total
	(in thousands)
Date of Acquisition:	Jun 6, 2023				Aug 15, 2023				Apr 9, 2024
Revenues:
Fuel revenue	$	20,928			$	5,086			$	13,356			$	39,370
Merchandise revenue		10,204				2,644				6,738				19,586
Other revenues, net		263				54				227				544
Total revenues		31,395				7,784				20,321				59,500
Operating expenses:
Fuel costs		17,373				4,578				11,814				33,765
Merchandise costs		6,505				1,651				4,873				13,029
Site operating expenses		4,603				922				3,058				8,583
Total operating expenses		28,481				7,151				19,745				55,377
Operating income		2,914				633				576				4,123
Intercompany charges by   GPMP 4		294				79				193				566
Operating income, as adjusted	$	3,208			$	712			$	769			$	4,689
Fuel gallons sold		5,872				1,587				3,857				11,316
Fuel contribution 5	$	3,849			$	587			$	1,735			$	6,171
Merchandise contribution 6	$	3,699			$	993			$	1,865			$	6,557
Merchandise margin 7		36.3	%			37.6	%			27.7	%

 

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	For the Six Months Ended June 30, 2024
	Uncle's (WTG) 1				Speedy's 2				SpeedyQ 3				Total
	(in thousands)
Date of Acquisition:	Jun 6, 2023				Aug 15, 2023				Apr 9, 2024
Revenues:
Fuel revenue	$	40,697			$	9,354			$	13,356			$	63,407
Merchandise revenue		19,351				4,909				6,738				30,998
Other revenues, net		491				106				227				824
Total revenues		60,539				14,369				20,321				95,229
Operating expenses:
Fuel costs		34,437				8,473				11,814				54,724
Merchandise costs		12,378				3,093				4,873				20,344
Store operating expenses		9,293				2,112				3,058				14,463
Total operating expenses		56,108				13,678				19,745				89,531
Operating income	$	4,431			$	691			$	576			$	5,698
Intercompany charges by   GPMP 4		585				150				193				928
Operating income, as adjusted	$	5,016			$	841			$	769			$	6,626
Fuel gallons sold		11,693				3,003				3,857				18,553
Fuel contribution 5	$	6,845			$	1,031			$	1,735			$	9,611
Merchandise contribution 6	$	6,973			$	1,816			$	1,865			$	10,654
Merchandise margin 7		36.0	%			37.0	%			27.7	%
1 Acquisition from WTG Fuels Holdings, LLC ("WTG"); includes only the retail stores acquired in the WTG acquisition.
2 Acquisition of seven Speedy's retail stores.
3 Acquisition of 21 SpeedyQ retail stores.
4 Represents the estimated fixed margin paid to GPMP for the cost of fuel.
5 Calculated as fuel revenue less fuel costs; excludes the estimated fixed margin paid to GPMP for the cost of fuel.
6 Calculated as merchandise revenue less merchandise costs.
7 Calculated as merchandise contribution divided by merchandise revenue.

 

 

 

 

 

 

 

 

 

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Wholesale Segment

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Revenues:
Fuel revenue	$	762,693			$	811,139			$	1,427,207			$	1,495,987
Other revenues, net		6,850				6,110				13,708				12,601
Total revenues		769,543				817,249				1,440,915				1,508,588
Operating expenses:
Fuel costs		750,846				800,286				1,405,959				1,474,977
Site operating expenses		9,566				10,196				18,865				19,294
Total operating expenses		760,412				810,482				1,424,824				1,494,271
Operating income		9,131			$	6,767			$	16,091			$	14,317
Intercompany charges by GPMP 1		12,139				12,931				23,468				23,969
Operating income, as adjusted	$	21,270			$	19,698			$	39,559			$	38,286
1 Represents the estimated fixed margin or 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 Wholesale Segment that have only partial comparable information for prior periods.

	For the Three Months Ended June 30, 2024				For the Six Months Ended June 30, 2024
	WTG 1
	(in thousands)
Date of Acquisition:	Jun 6, 2023
Revenues:
Fuel revenue	$	2,882			$	5,966
Other revenues, net		14				29
Total revenues		2,896				5,995
Operating expenses:
Fuel costs		2,741				5,700
Site operating expenses		68				136
Total operating expenses		2,809				5,836
Operating income		87				159
Intercompany charges by GPMP 2		40				84
Operating income, as adjusted	$	127			$	243
Fuel gallons sold		811				1,682
1 Includes only the wholesale business acquired in the WTG acquisition.
2 Represents the estimated fixed margin paid to GPMP for the cost of fuel.

 

 

 

 

 

 

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Fleet Fueling Segment

 

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2024				2023				2024				2023
	(in thousands)
Revenues:
Fuel revenue	$	140,140			$	121,146			$	272,333			$	248,640
Other revenues, net		2,284				1,676				4,669				2,627
Total revenues		142,424				122,822				277,002				251,267
Operating expenses:
Fuel costs		124,149				108,435				244,207				223,666
Site operating expenses		6,442				5,043				12,985				9,833
Total operating expenses		130,591				113,478				257,192				233,499
Operating income		11,833				9,344				19,810				17,768
Intercompany charges by GPMP 1		1,869				1,673				3,650				3,245
Operating income, as adjusted	$	13,702			$	11,017			$	23,460			$	21,013
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 have only partial comparable information for the prior periods.

 

	For the Three Months Ended June 30, 2024				For the Six Months Ended June 30, 2024
	WTG 1
	(in thousands)
Date of Acquisition:	Jun 6, 2023
Revenues:
Fuel revenue	$	18,535			$	34,770
Other revenues, net		1,028				2,198
Total revenues		19,563				36,968
Operating expenses:
Fuel costs		16,065				30,803
Site operating expenses		1,152				2,263
Total operating expenses		17,217				33,066
Operating income		2,346				3,902
Intercompany charges by GPMP 2		250				482
Operating income, as adjusted	$	2,596			$	4,384
Fuel gallons sold		5,177				9,733
1 Includes only the fleet fueling business acquired in the WTG acquisition.
2 Represents the estimated fixed fee paid to GPMP for the cost of fuel.

 

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v3.24.2.u1

Document And Entity Information	Aug. 06, 2024
Document Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 06, 2024
Entity Registrant Name	ARKO Corp.
Entity Central Index Key	0001823794
Entity Emerging Growth Company	false
Entity File Number	001-39828
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	85-2784337
Entity Address, Address Line One	8565 Magellan Parkway
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	Richmond
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23227-1150
City Area Code	(804)
Local Phone Number	730-1568
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Common Stock [Member]
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	ARKO
Security Exchange Name	NASDAQ
Warrants Each Warrant Exercisable For One Share Of Common Stock At An Exercise Price Of 11.50 [Member]
Document Information [Line Items]
Title of 12(b) Security	Warrants, each warrant exercisable for one share of Common Stock at an exercise price of $11.50
Trading Symbol	ARKOW
Security Exchange Name	NASDAQ

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