Arko (ARKO) 8-KARKO Corp. Reports Third Quarter 2024 Results

ARKO Corp. Reports Third 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 third quarter ended September 30, 2024.

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

Other Key Highlights

“As our customers continue to face macroeconomic pressure related to inflation and elevated prices for everyday goods, we continue to focus on delivering essential value to our customers,” said Arie Kotler, Chairman, President, and CEO of ARKO.

Mr. Kotler continued: “Our focus on operational excellence, improving customer offerings, and strengthening store-level performance remains a top priority. We believe that we are well-positioned to manage near-term macroeconomic challenges, and we remain confident in ARKO’s long-term potential for sustained growth. We believe the improvements in our operations and investments in our stores will guide us through the current environment and build the foundation for our multi-year transformation.”

Third Quarter 2024 Segment Highlights

Retail

Total merchandise contribution for the third quarter of 2024 decreased $6.7 million, or 4.2%, compared to the third quarter of 2023, primarily due to a decrease in same store merchandise contribution of approximately $7.5 million and a decrease from underperforming retail stores that were closed or converted to dealers, which was partially offset by approximately $2.7 million in incremental

merchandise contribution from recent acquisitions. Same store merchandise contribution decreased primarily due to lower same store sales caused by a decline in customer transactions reflecting the challenging macro-economic environment. The impact of the same store sales decline was partially offset by an increase in same store merchandise margin rate, which increased 100 basis points as compared to the year-ago period.

For the third quarter of 2024, retail fuel contribution decreased $4.2 million to $117.1 million compared to the prior year period, with gallon demand declines reflecting the challenging macro-economic environment. The impact of the gallon demand decline was partially offset by resilient fuel margin capture of 41.3 cents per gallon, which was up 1.0 cent per gallon compared to the third quarter of 2023. The decline in retail fuel contribution was caused by a reduction in same store fuel contribution of $5.1 million and a decrease from underperforming retail stores that were closed or converted to dealers, which was partially offset by incremental fuel contribution from recent acquisitions of approximately $2.2 million.

Wholesale

In wholesale, total fuel contribution was approximately $23.4 million for the third quarter of 2024 compared to $26.3 million for the third quarter of 2023. Fuel contribution for the third quarter of 2024 at fuel supply locations decreased by $1.2 million, and fuel contribution at consignment agent locations decreased by $1.8 million, compared to the prior year period, with corresponding decreases in fuel margin per gallon, primarily due to decreased prompt pay discounts related to lower fuel costs and lower volumes. For the third quarter of 2024, site operating expenses decreased by $0.2 million compared to the prior year period.

Fleet Fueling

In fleet fueling, fuel contribution increased by $1.9 million compared to the third quarter of 2023. At proprietary cardlocks, fuel contribution increased by $2.2 million, and fuel margin per gallon also increased for the third quarter of 2024 compared to the third quarter of 2023. At third-party cardlock locations, fuel contribution decreased by $0.3 million, and fuel margin per gallon also decreased for the third quarter of 2024 compared to the third quarter of 2023. These changes were primarily due to differing market conditions impacting the third quarters of 2024 and 2023.

Site Operating Expenses

For the quarter ended September 30, 2024, convenience store operating expenses decreased $3.1 million, or 1.5%, as compared to the prior year period, primarily due to a decrease in same store expenses of $2.8 million, or 1.4%, and a decrease from underperforming retail stores that were closed or converted to dealers. This decline in same store expenses was primarily related to lower personnel costs and lower credit card fees. These decreases were partially offset by $3.8 million of incremental expenses related to recent acquisitions.

Liquidity and Capital Expenditures

As of September 30, 2024, the Company’s total liquidity was approximately $869 million, consisting of approximately $292 million of cash and cash equivalents and approximately $577 million of availability under lines of credit. Outstanding debt was $885 million, resulting in net debt, excluding lease related financing liabilities, of approximately $593 million. Capital expenditures were approximately $29.3 million for the quarter ended September 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 December 3, 2024 to stockholders of record as of November 19, 2024.

There was approximately $25.7 million remaining under the share repurchase program as of September 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:

Fourth Quarter and Full Year 2024 Guidance

The Company currently expects fourth quarter 2024 Adjusted EBITDA to range between $53 million and $63 million, with an assumed range of average retail fuel margin from 38 to 42 cents per gallon. This outlook translates to a full year 2024 Adjusted EBITDA range of $245 million to $255 million.

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 to discuss these results at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the live call can dial 800-343-4136 or 203-518-9848.

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 and divestiture costs, share-based compensation expense, other non-cash items, and other unusual or non-recurring charges.

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. Each of Operating Income, as adjusted, EBITDA and Adjusted EBITDA is a non-GAAP financial measure.

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.

Company Contact

Jordan Mann

ARKO Corp.

investors@gpminvestments.com

Investor Contact

Sean Mansouri, CFA

Elevate IR

(720) 330-2829

ARKO@elevate-ir.com

Supplemental Disclosure of Non-GAAP Financial Information

Supplemental Disclosures of Segment Information

Retail Segment

The table 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 any of the prior periods.