Arko Corporation

05/08/2025 | Press release | Distributed by Public on 05/08/2025 14:00

ARKO Corp. Reports First Quarter 2025 Results (Form 8-K)

ARKO Corp. Reports First Quarter 2025 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 first quarter ended March 31, 2025.

First Quarter 2025 Key Highlights (vs. Year-Ago Quarter) 1,2

Net loss for the quarter was $12.7 million compared to a net loss of $0.6 million.
Adjusted EBITDA for the quarter was $30.9 million compared to $33.2 million.
Merchandise margin for the quarter increased to 33.2% compared to 32.5%.
Merchandise contribution for the quarter was $117.6 million compared to $134.9 million; more than half of the merchandise contribution decline for the quarter was associated with the Company's accretive dealerization program.
Retail fuel margin for the quarter was 37.9 cents per gallon compared to 36.4 cents per gallon.
Retail fuel contribution for the quarter was $85.3 million compared to $92.9 million; more than half of the retail fuel contribution decline for the quarter was associated with the Company's accretive dealerization program.

Other Key Highlights

As part of the Company's developing transformation plan, the Company converted 59 retail stores to dealer sites during the three months ended March 31, 2025. In April of 2025, the Company converted 18 additional retail stores to dealer sites and plans to convert a meaningful number of additional stores throughout 2025. The Company continues to expect that, at scale, this channel optimization will yield a cumulative annualized operating income benefit in excess of $20 million.
The Company advanced its store remodeling initiative, which is expected to include an expanded and refined merchandise assortment with an enhanced in-store experience and a focus on food. These remodels are designed to elevate the customer experience through improved store layout and convenience. The Company began construction of the first of its seven planned pilot remodels in early May 2025 and expects to begin construction on the second pilot remodel in mid-May 2025.
In the first quarter of 2025, the Company opened a new Dunkin' store and a fastmarket(R) location. Additionally, the Company expects to open four NTI (new-to-industry) stores in the second half of 2025. Three of these NTIs have started construction, with one store awaiting a final permit.
On March 12, 2025, the Company started its Fueling America's Future campaign in its stores, centered around providing enrolled loyalty customers with both value promotions inside the store and significant discounts at the pump.
The Board declared a quarterly dividend of $0.03 per share of common stock to be paid on May 30, 2025 to stockholders of record as of May 19, 2025.

"Despite a pressured consumer environment, we effectively navigated ongoing macroeconomic headwinds in the first quarter," said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. "We delivered results above the midpoint of our guidance, underscoring our commitment to execution with discipline and remaining focused on what we can control. This quarter, we also faced incremental pressure from adverse weather conditions in January and

1 See Use of Non-GAAP Measures below.

2 All figures for fuel costs, fuel contribution and fuel margin per gallon exclude 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).

February, which impacted sales and increased snow removal expenses across key regions, and from lapping of a leap day in the first quarter of the prior year. We also continued to advance key elements of our transformation strategy - converting company-operated retail stores to dealer sites, advancing our NTI store rollout, and enhancing customer engagement through food service and targeted loyalty initiatives both in-store and at the pump. We remain focused on executing across the business while keeping our long-term strategic priorities firmly in view."

Mr. Kotler continued: "As we move forward in 2025, we remain committed to driving shareholder returns. We repurchased 1.3 million shares during the first quarter, with substantially all of those repurchases executed in March. We are focused on using all available tools to support long-term value creation and taking a disciplined approach to capital deployment. These actions reflect our commitment to shareholders and represent a strategic and thoughtful path to delivering meaningful returns."

First Quarter 2025 Segment Highlights

Retail

For the Three Months
Ended March 31,

2025

2024

(in thousands)

Fuel gallons sold

225,063

255,464

Same store fuel gallons sold decrease (%) 1

(6.2

%)

(6.7

%)

Fuel contribution 2

$

85,273

$

92,933

Fuel margin, cents per gallon 3

37.9

36.4

Same store fuel contribution 1,2

$

83,027

$

86,275

Same store merchandise sales decrease (%) 1

(6.9

%)

(4.1

%)

Same store merchandise sales excluding cigarettes decrease (%) 1

(5.2

%)

(3.0

%)

Merchandise revenue

$

354,485

$

414,655

Merchandise contribution 4

$

117,570

$

134,918

Merchandise margin 5

33.2

%

32.5

%

Same store merchandise contribution 1,4

$

114,046

$

120,666

Same store site operating expenses 1

$

169,994

$

172,325

1 Same store is a common metric used in the convenience store industry. The Company considers 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.

Merchandise contribution for the first quarter of 2025 decreased $17.3 million, or 12.9%, compared to the first quarter of 2024, while merchandise margin increased to 33.2% in the first quarter of 2025 compared to 32.5% in the prior year period. The decrease in merchandise contribution was due to a decrease of $12.8 million related to retail stores that were closed or converted to dealers in the trailing 12 month period and a decrease in same store merchandise contribution of $6.6 million, primarily caused by a decline in customer transactions reflecting the challenging macroeconomic environment as well as severe weather conditions in January and February 2025 in certain of the markets in which the Company operates. These decreases were partially offset by an increase in merchandise contribution of $1.8 million from the SpeedyQ acquisition that closed in April 2024. Merchandise contribution at same stores decreased in the first quarter of 2025 primarily due to lower contribution from several core destination categories and cigarettes.

Fuel contribution for the first quarter of 2025 decreased $7.7 million, or 8.2%, compared to the first quarter of 2024, with a same store fuel contribution decrease of $3.2 million attributable to gallon demand declines, reflecting the challenging macroeconomic environment as well as severe weather conditions in January and February 2025 in certain of the markets in which the Company operates. Fuel margin of 37.9 cents per gallon was up 1.5 cents per gallon compared to the first quarter of 2024. In addition, a decrease in retail fuel contribution of $5.8 million was related to retail stores that were closed or converted to dealers in the trailing 12 month period, partially offset by incremental fuel contribution from the SpeedyQ acquisition of approximately $1.3 million.

Wholesale

For the Three Months
Ended March 31,

2025

2024

(in thousands)

Fuel gallons sold - fuel supply locations

191,077

186,731

Fuel gallons sold - consignment agent locations

36,515

37,504

Fuel contribution 1 - fuel supply locations

$

11,453

$

11,562

Fuel contribution 1 - consignment agent locations

$

8,594

$

9,168

Fuel margin, cents per gallon 2 - fuel supply locations

6.0

6.2

Fuel margin, cents per gallon 2 - consignment agent locations

23.5

24.4

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.

Note: Comparable wholesale sites exclude retail stores converted to dealers, until the first quarter in which these sites had a full quarter of wholesale activity in the prior year.

For the first quarter of 2025, wholesale operating income increased $0.3 million, compared to the first quarter of 2024. Additional operating income from retail sites converted to dealers in the trailing 12 month period more than offset reduced operating income at comparable wholesale sites.

Fuel contribution was $20.0 million for the first quarter of 2025 compared to $20.7 million for the first quarter of 2024. Fuel contribution for the first quarter of 2025 at fuel supply locations decreased by $0.1 million, and fuel contribution at consignment agent locations decreased by $0.6 million, as compared to the prior year period, with fuel margin decreases of 0.2 cents per gallon and 0.9 cents per gallon, respectively, due principally to lower volumes at comparable wholesale sites primarily due to severe weather conditions in January and February 2025 in certain of the markets in which the Company operates, which was partially offset by incremental contribution from retail stores converted to dealers. For the first quarter of 2025, other revenues, net increased by approximately $3.5 million, and site operating expenses increased by $2.5 million in each case as compared to the first quarter of 2024, resulting primarily from retail stores which converted to dealers in the trailing 12 month period.

Fleet Fueling

For the Three Months
Ended March 31,

2025

2024

(in thousands)

Fuel gallons sold - proprietary cardlock locations

31,918

33,449

Fuel gallons sold - third-party cardlock locations

3,175

3,199

Fuel contribution 1 - proprietary cardlock locations

$

14,706

$

13,669

Fuel contribution 1 - third-party cardlock locations

$

596

$

247

Fuel margin, cents per gallon 2 - proprietary cardlock locations

46.1

40.9

Fuel margin, cents per gallon 2 - third-party cardlock locations

18.7

7.7

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 for the first quarter of 2025 increased by $1.4 million compared to the first quarter of 2024. At proprietary cardlocks, fuel contribution increased by $1.0 million, and fuel margin per gallon also increased for the first quarter of 2025 compared to the first quarter of 2024 primarily due to favorable diesel margins. At third-party cardlock locations, fuel contribution increased by $0.4 million, and fuel margin per gallon also increased for the first quarter of 2025 compared to the first quarter of 2024, primarily due to the closure of underperforming third-party locations.

Site Operating Expenses

For the three months ended March 31, 2025, convenience store operating expenses decreased $20.8 million, or 10.5%, compared to the prior year period primarily due to a decrease of $22.2 million from retail stores that were closed or converted to dealers and a decrease in same store operating expenses of $2.3 million, or 1.4%, related to lower personnel costs and credit card fees, partially offset by higher snow removal expenses resulting from severe weather conditions in certain of the markets in which the Company operates. These decreases were partially offset by $3.3 million of incremental expenses related to the SpeedyQ acquisition that closed in April 2024.

Liquidity and Capital Expenditures

As of March 31, 2025, the Company's total liquidity was approximately $847 million, consisting of approximately $265 million of cash and cash equivalents and approximately $582 million of availability under lines of credit. Outstanding debt was $880 million, resulting in net debt, excluding lease related financing liabilities, of approximately $615 million. Capital expenditures were approximately $27.4 million for the quarter ended March 31, 2025, including the purchase of a fee property, investments in NTI stores, EV chargers, 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 strong financial position.

The Board declared a quarterly dividend of $0.03 per share of common stock to be paid on May 30, 2025 to stockholders of record as of May 19, 2025.

During the quarter, the Company repurchased approximately 1.3 million shares of common stock under its previously announced repurchase program for approximately $5.2 million, or an average price of $4.01 per share. There was approximately $20.5 million remaining under the share repurchase program as of March 31, 2025.

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 March 31,

Retail Segment

2025

2024

Number of sites at beginning of period

1,389

1,543

Newly opened or reopened sites

2

1

Company-controlled sites converted to

consignment or fuel supply locations, net

(59

)

-

Sites closed, divested or converted to rentals

(3

)

(4

)

Number of sites at end of period

1,329

1,540

For the Three Months
Ended March 31,

Wholesale Segment 1

2025

2024

Number of sites at beginning of period

1,922

1,825

Newly opened or reopened sites 2

6

9

Consignment or fuel supply locations converted

from Company-controlled sites, net

59

-

Closed or divested sites

(26

)

(18

)

Number of sites at end of period

1,961

1,816

1 Excludes bulk and spot purchasers.

2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.

For the Three Months
Ended March 31,

Fleet Fueling Segment

2025

2024

Number of sites at beginning of period

280

298

Newly opened or reopened sites

1

-

Closed or divested sites

(1

)

(2

)

Number of sites at end of period

280

296

Full Year and Second Quarter 2025 Guidance Range

The Company currently expects second quarter 2025 Adjusted EBITDA to range between $70 million and $80 million, with an assumed range of average total retail fuel margin from 42.5 to 44.5 cents per gallon. The Company is maintaining its full year 2025 Adjusted EBITDA range of $233 million to $253 million, with an assumed range of average total retail fuel margin from 40 to 42 cents per gallon.

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 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, May 8, 2025, to discuss these results at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the live call can dial 888-396-8049 or 416-764-8646.

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, our highly recognizable Family of Community Brands offers delicious, prepared foods, beer, snacks, candy, hot and cold beverages, and multiple popular quick serve restaurant brands. 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; 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; and GPM Petroleum, which sells and supplies fuel to our retail and wholesale sites and charges a fixed fee, primarily to our fleet fueling sites. To learn more about GPM stores, visit: www.gpminvestments.com. To learn more about ARKO, visit: www.arkocorp.com.

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