• ARKO Corp. Reports Third Quarter 2023 Results

    المصدر: Nasdaq GlobeNewswire / 06 نوفمبر 2023 15:30:01   America/Chicago

    RICHMOND, Va., Nov. 06, 2023 (GLOBE NEWSWIRE) -- ARKO Corp. (Nasdaq: ARKO) (“ARKO” or the “Company”), a Fortune 500 company and one of the largest convenience store operators in the United States, today announced financial results for the quarter ended September 30, 2023.

    Third Quarter 2023 Key Highlights1

    • Net income for the quarter was $21.5 million, compared to $25.0 million for the prior year quarter.
    • Adjusted EBITDA for the quarter was $91.2 million, compared to $99.5 million for the prior year quarter, primarily due to reduced fuel contribution at same stores, with retail cents per gallon (“CPG”) of 40.3 in the current quarter compared to retail CPG of 44.8 in Q3 2022.
    • Same store merchandise sales excluding cigarettes increased 1.0% for the quarter compared to the prior year period; same store merchandise sales for the quarter increased 0.1% compared to the prior year period, and were impacted by approximately $2 million in increased loyalty investments in customer acquisition related to expanding membership in the fas REWARDS® loyalty program, other loyalty promotions, and growth in the total loyalty membership base - a long-term goal of the Company. This caused a reduction in same store merchandise sales of approximately 0.4%, and same store merchandise sales excluding cigarettes of approximately 0.6%.
    • Merchandise gross profit contribution grew by $21.8 million for the quarter, or 15.7%, as compared to the prior year period.
    • Merchandise margin expanded, increasing approximately 50 basis points to 31.7% for the quarter compared to 31.2% for the prior year period, due to execution of key marketing and merchandising initiatives.
    • Total retail gallons increased 14.8% in Q3 2023 compared to Q3 2022.

    Other Key Highlights

    • The Company closed its 25th acquisition, marking five closed acquisitions since the beginning of Q3 2022, increasing the total number of locations by approximately 720.
    • Added more than 365,000 enrolled fas REWARDS® members during Q3 2023, while offering a special $10 enrollment promotion commencing in mid-May 2023 through September 2023. As of the end of Q3, 2023, the Company had 1.85 million total enrolled fas REWARDS® members, representing a 50% increase in enrolled members since the end of Q3 2022.
    • Announced the expansion of the executive ranks at our subsidiary, GPM Investments, LLC (“GPM”), with the hiring of Richard Guidry as GPM’s Senior Vice President of Food Service, who was hired to expand its food strategy and scale it to the Family of Community Brands.
    • Current available liquidity for future acquisitions of more than $2 billion, including cash, lines of credit and availability under the Oak Street program agreement.
    • ARKO Corp.’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on December 1, 2023, to stockholders of record as of November 17, 2023.

    “I am very pleased with our third quarter performance, which we believe compares favorably to what was a strong prior year quarter,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “In the third quarter, our entire team continued to execute on our three key marketing and merchandise pillars including, significantly expanding the number of enrolled members in our fas REWARDS loyalty program, which we designed to enhance our relationship with our customers and provide them with extraordinary value. We continue to implement the ARKO way in the five acquisitions closed over the last year, adding merchandise assortment and growing sales in these stores’ core destination categories while capturing synergies. Our retail fuel margin was lower than the prior year quarter’s elevated fuel margins, which we expected, and we continue to execute our strategy of optimizing retail fuel gross profit dollars.”

    1 See Use of Non-GAAP Measures below.


    Third Quarter 2023 Segment Highlights

    Retail

     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands) 
    Fuel gallons sold 300,796   262,010   843,286   754,811 
    Same store fuel gallons sold decrease (%) 1 (5.3%)  (9.7%)  (4.5%)  (8.0%)
    Fuel margin, cents per gallon 2 40.3   44.8   38.7   41.3 
    Merchandise revenue$506,425  $445,822  $1,391,274  $1,244,558 
    Same store merchandise sales increase(decrease) (%) 1 0.1%  0.7%  1.4%  (1.8%)
    Same store merchandise sales excluding cigarettes increase (%) 1 1.0%  4.3%  3.9%  2.0%
    Merchandise contribution 3$160,726  $138,892  $438,349  $378,448 
    Merchandise margin 4 31.7%  31.2%  31.5%  30.4%
                
    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 divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 
                
    3 Calculated as merchandise revenue less merchandise costs. 
                
    4 Calculated as merchandise contribution divided by merchandise revenue. 
      

    The table below shows financial information and certain key metrics of recent acquisitions in the Retail Segment that do not have comparable information for the prior periods.

     For the Three Months Ended September 30, 2023 
     Pride 1  TEG 2  Uncle's
    (WTG) 3    		  Speedy 4  Total 
     (in thousands) 
    Date of Acquisition:Dec 6, 2022  Mar 1, 2023  Jun 6, 2023  Aug 15, 2023    
    Revenues:              
    Fuel revenue$73,019  $104,850  $21,927  $3,138  $202,934 
    Merchandise revenue 16,078   39,776   9,625   1,400   66,879 
    Other revenues, net 1,386   1,391   203   23   3,003 
    Total revenues 90,483   146,017   31,755   4,561   272,816 
    Operating expenses:              
    Fuel costs 65,818   96,593   18,797   2,798   184,006 
    Merchandise costs 10,523   27,218   6,258   949   44,948 
    Store operating expenses 10,152   18,373   5,147   696   34,368 
    Total operating expenses 86,493   142,184   30,202   4,443   263,322 
    Operating income$3,990  $3,833  $1,553  $118  $9,494 
    Fuel gallons sold 18,486   30,126   5,809   830   55,251 
    Merchandise contribution 5 5,555   12,558   3,367   451   21,931 
    Merchandise margin 6 34.6%  31.6%  35.0%  32.2%   


     For the Nine Months Ended September 30, 2023 
     Pride  TEG  Uncle's
    (WTG) 3    		  Speedy 4  Total 
     (in thousands) 
    Date of Acquisition:Dec 6, 2022  Mar 1, 2023  Jun 6, 2023  Aug 15, 2023    
    Revenues:              
    Fuel revenue$212,444  $236,052  $28,025  $3,138  $479,659 
    Merchandise revenue 45,221   92,100   12,471   1,400   151,192 
    Other revenues, net 4,170   3,122   257   23   7,572 
    Total revenues 261,835   331,274   40,753   4,561   638,423 
    Operating expenses:              
    Fuel costs 191,117   217,210   23,817   2,798   434,942 
    Merchandise costs 29,906   63,344   8,185   949   102,384 
    Store operating expenses 30,182   41,949   6,372   696   79,199 
    Total operating expenses 251,205   322,503   38,374   4,443   616,525 
    Operating income$10,630  $8,771  $2,379  $118  $21,898 
    Fuel gallons sold 55,764   70,183   7,523   830   134,300 
    Merchandise contribution 5 15,315   28,756   4,286   451   48,808 
    Merchandise margin 6 33.9%  31.2%  34.4%  32.2%   
                   
    1 Acquisition of Pride Convenience Holdings, LLC ("Pride") 
                   
    2 Acquisition from Transit Energy Group and affiliates ("TEG"); includes only the retail stores acquired in the TEG acquisition. 
                   
    3 Acquisition from WTG Fuels Holdings, LLC ("WTG"); includes only the retail stores acquired in the WTG acquisition. 
                   
    4 Acquisition of seven Speedy's retail stores. 
                   
    5 Calculated as merchandise revenue less merchandise costs. 
                   
    6 Calculated as merchandise contribution divided by merchandise revenue. 
      

    For the third quarter, retail fuel profitability (excluding intercompany charges by the Company’s wholesale fuel distribution subsidiary, GPM Petroleum LP (“GPMP”)) increased $3.8 million to $121.3 million compared to the prior year period, with resilient fuel margin capture of 40.3 cents per gallon, a decrease of 4.5 cents per gallon for the third quarter of 2023 compared to the prior year period. Same store fuel profit was $99.4 million (excluding intercompany charges by GPMP), compared to $116.1 million for the prior year quarter. This decrease in same store fuel profit was fully offset by approximately $21.7 million incremental fuel profit from recent acquisitions.

    Same store merchandise sales excluding cigarettes increased 1.0% for the quarter compared to the third quarter of 2022. Same store merchandise sales increased 0.1% compared to the strong prior year period, which were impacted by increased loyalty investments. Same store sales were positively impacted as revenue from the Company’s six core destination categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks and beer) continued to grow. Total merchandise contribution for the quarter increased $21.8 million, or 15.7%, compared to the third quarter of 2022, due to $21.9 million in merchandise contribution from the businesses we acquired in 2023, as well as the Pride Acquisition, and an increase in merchandise contribution at same stores of approximately $1.2 million. Merchandise margin increased 50 basis points, to 31.7% from 31.2% in the third quarter of 2022, primarily due to execution of key marketing and merchandising initiatives.

    Wholesale

     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands) 
    Fuel gallons sold – fuel supply locations 205,836   189,537   601,399   563,642 
    Fuel gallons sold – consignment agent locations 45,365   41,145   127,861   115,138 
    Fuel margin, cents per gallon1 – fuel supply locations 6.4   6.9   6.1   7.0 
    Fuel margin, cents per gallon1 – consignment agent locations 28.9   32.7   26.9   31.4 
                
    1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes 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 do not have (or have only partial) comparable information for the prior periods.

     For the Three Months Ended September 30, 2023  For the Nine Months Ended September 30, 2023 
     Quarles 1  TEG 2  WTG 3  Total  Quarles 1  TEG 2  WTG 3  Total 
     (in thousands)    
    Date of Acquisition:Jul 22, 2022  Mar 1, 2023  Jun 6, 2023     Jul 22, 2022  Mar 1, 2023  Jun 6, 2023    
    Revenues:                       
    Fuel revenue$20,381  $92,575  $2,796  $115,752  $57,708  $214,629  $3,444  $275,781 
    Other revenues,net 275   645   5   925   863   1,499   6   2,368 
    Total revenues 20,656   93,220   2,801   116,677   58,571   216,128   3,450   278,149 
    Operating expenses:                       
    Fuel costs 19,693   88,503   2,556   110,752   55,757   208,282   3,178   267,217 
    Store operating expenses 493   833   64   1,390   1,430   1,927   81   3,438 
    Total operating expenses 20,186   89,336   2,620   112,142   57,187   210,209   3,259   270,655 
    Operating income$470  $3,884  $181  $4,535  $1,384  $5,919  $191  $7,494 
    Fuel gallons sold 5,861   31,666   789   38,316   17,304   77,653   1,007   95,964 
                            
    1 Acquisition from Quarles Petroleum, Incorporated ("Quarles"); includes only the wholesale business acquired in the Quarles acquisition.    
                            
    2 Includes only the wholesale business acquired in the TEG acquisition.    
                            
    3 Includes only the wholesale business acquired in the WTG acquisition.    
         

    In wholesale, fuel contribution from fuel supply locations (excluding intercompany charges by GPMP) increased by $0.1 million for the quarter compared to the prior year quarter, while margin decreased, primarily due to decreased prompt pay discounts related to lower fuel costs and lower volumes at legacy wholesale sites, which was partially offset by the incremental contribution from recent acquisitions.

    Fuel contribution from consignment agent locations (excluding intercompany charges by GPMP) decreased approximately $0.3 million for the quarter compared to the prior year quarter and margin also decreased, 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, neither the three nor nine months ended September 30, 2022 reflects the operations of this segment for the entirety of such period, which affects period-over-period comparability.

     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands)    
    Fuel gallons sold – proprietary cardlock locations 34,277   26,064   97,710   26,064 
    Fuel gallons sold – third-party cardlock locations 2,985   1,297   6,631   1,297 
    Fuel margin, cents per gallon1 – proprietary cardlock locations 39.4   41.8   42.5   41.8 
    Fuel margin, cents per gallon1 – third-party cardlock locations 26.6   4.8   14.6   4.8 
                
    1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed fee charged by GPMP to sites in the fleet fueling segment. 
      

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

     For the Three Months Ended September 30, 2023  For the Nine Months Ended September 30, 2023 
     Quarles 1  WTG 2  Total  Quarles 1  WTG 2  Total 
     (in thousands)    
    Date of Acquisition:Jul 22, 2022  Jun 6, 2023     Jul 22, 2022  Jun 6, 2023    
    Revenues:                 
    Fuel revenue$127,305  $18,191  $145,496  $370,785  $23,351  $394,136 
    Other revenues, net 1,309   1,266   2,575   3,900   1,302   5,202 
    Total revenues 128,614   19,457   148,071   374,685   24,653   399,338 
    Operating expenses:                 
    Fuel costs 117,228   15,809   133,037   336,522   20,181   356,703 
    Store operating expenses 5,255   951   6,206   14,960   1,079   16,039 
    Total operating expenses 122,483   16,760   139,243   351,482   21,260   372,742 
    Operating income$6,131  $2,697  $8,828  $23,203  $3,393  $26,596 
    Fuel gallons sold 32,522   4,740   37,262   98,136   6,205   104,341 
                      
    1 Includes only the fleet fueling business acquired in the Quarles acquisition. 
                      
    2 Includes only the fleet fueling business acquired in the WTG acquisition. 
      

    The Company recognized strong cash flow from the fleet fueling segment during the third quarter of 2023. Fuel profitability (excluding intercompany charges by GPMP) increased by $3.3 million compared to the prior year quarter, and was approximately $14.3 million for the quarter.

    Store Operating Expenses

    For the third quarter of 2023, convenience store operating expenses increased $30.2 million, or 17.2% as compared to the prior year period, primarily due to $34.4 million of expenses related to recent acquisitions, partially offset by a decrease of $1.7 million in expenses at same stores, mainly driven by lower credit card fees. Same store personnel expenses were similar to the prior year period, increasing by only $0.1 million, or 0.1%, as the Company has continued to appropriately balance labor expenses and providing superior customer service. The total increase in store operating expenses was partially offset by underperforming retail stores that the Company closed or converted to dealer locations.

    Long-Term Growth Strategy Updates

    Food and Beverage

    On October 3, 2023, the Company announced that GPM expanded its leadership team and named Richard Guidry in the newly created role of Senior Vice President of Food Service. This expansion tracks the Company’s commitment to growing its food service offering.

    Acquisitions and M&A

    The Company is currently well-positioned to continue executing its long-term growth strategy with a deep pipeline of potential acquisition opportunities and the liquidity to pursue deals. ARKO believes its successful track record of making disciplined and accretive acquisitions will continue to enhance value for stockholders. 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.

    Liquidity

    As of September 30, 2023, the Company’s total liquidity was approximately $827 million, consisting of cash and cash equivalents of approximately $204 million and approximately $623 million of availability under lines of credit. Outstanding debt was $828 million, resulting in net debt, excluding financing leases, of approximately $624 million. Capital expenditures were approximately $25.6 million for the quarter.

    Sustainability Report

    On September 5, 2023, ARKO published its 2022 Sustainability Report, highlighting information about its Environmental, Social and Governance priorities. This report shows the progress the Company has made since publishing its first report, covering the year ended December 31, 2021, in 2022. To read the 2022 Sustainability Report, visit this link: https://www.arkocorp.com/company-information/responsibility.

    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 December 1, 2023, to stockholders of record as of November 17, 2023.

    During the quarter, the Company repurchased approximately 1.5 million shares of common stock under the repurchase program for approximately $11.6 million, or an average share price of $7.53. There was approximately $37 million remaining under the expanded share repurchase program as of September 30, 2023.

    Company-Operated Retail Store Count and Segment Update

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

     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
    Retail Segment2023  2022  2023  2022 
    Number of sites at beginning of period 1,547   1,388   1,404   1,406 
    Acquired sites 7   —   166   — 
    Newly opened or reopened sites 1   —   4   — 
    Company-controlled sites converted to           
    consignment or fuel supply locations, net (2)  (2)  (13)  (9)
    Closed, relocated or divested sites (1)  (3)  (9)  (14)
    Number of sites at end of period 1,552   1,383   1,552   1,383 


     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
    Wholesale Segment 12023  2022  2023  2022 
    Number of sites at beginning of period 1,824   1,620   1,674   1,628 
    Acquired sites —   46   190   46 
    Newly opened or reopened sites 2 34   20   58   60 
    Consignment or fuel supply locations           
    converted from Company-controlled sites, net 2   2   13   9 
    Closed, relocated or divested sites (35)  (18)  (110)  (73)
    Number of sites at end of period 1,825   1,670   1,825   1,670 
                
    1 Excludes bulk and spot purchasers. 
    2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date. 


     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
    Fleet Fueling Segment2023  2022  2023  2022 
    Number of sites at beginning of period 293   —   183   — 
    Acquired sites —   184   111   184 
    Newly opened or reopened sites 4   —   4   — 
    Closed, relocated or divested sites (2)  (1)  (3)  (1)
    Number of sites at end of period 295   183   295   183 


    Conference Call and Webcast Details

    The Company will host a conference call to discuss these results at 10:00 a.m. Eastern Time on November 7, 2023. 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,” “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 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. 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.

    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, 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.


     Condensed consolidated statements of operations 
          
     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands) 
    Revenues:           
    Fuel revenue$2,086,392  $1,979,574  $5,705,156  $5,648,954 
    Merchandise revenue 506,425   445,822   1,391,274   1,244,558 
    Other revenues, net 29,237   24,251   83,141   69,209 
    Total revenues 2,622,054   2,449,647   7,179,571   6,962,721 
    Operating expenses:           
    Fuel costs 1,923,869   1,824,437   5,262,854   5,250,105 
    Merchandise costs 345,699   306,930   952,925   866,110 
    Store operating expenses 226,698   189,582   637,383   534,197 
    General and administrative expenses 44,116   35,954   127,192   100,695 
    Depreciation and amortization 33,713   26,061   94,949   75,050 
    Total operating expenses 2,574,095   2,382,964   7,075,303   6,826,157 
    Other expenses, net 3,885   951   11,561   3,269 
    Operating income 44,074   65,732   92,707   133,295 
    Interest and other financial income 9,371   2,676   18,897   2,509 
    Interest and other financial expenses (23,950)  (22,472)  (67,238)  (45,619)
    Income before income taxes 29,495   45,936   44,366   90,185 
    Income tax expense (7,993)  (20,898)  (10,849)  (31,060)
    Loss from equity investment (14)  (44)  (77)  (7)
    Net income$21,488  $24,994  $33,440  $59,118 
    Less: Net income attributable to non-controlling interests 48   51   149   182 
    Net income attributable to ARKO Corp.$21,440  $24,943  $33,291  $58,936 
    Series A redeemable preferred stock dividends (1,449)  (1,449)  (4,301)  (4,301)
    Net income attributable to common shareholders$19,991  $23,494  $28,990  $54,635 
    Net income per share attributable to common shareholders - basic$0.17  $0.20  $0.24  $0.45 
    Net income per share attributable to common shareholders - diluted$0.17  $0.17  $0.24  $0.43 
    Weighted average shares outstanding:           
    Basic 118,389   120,074   119,505   121,950 
    Diluted 120,292   130,388   120,602   123,527 




     Condensed consolidated balance sheets 
          
     September 30, 2023  December 31, 2022 
     (in thousands) 
    Assets     
    Current assets:     
    Cash and cash equivalents$204,237  $298,529 
    Restricted cash 16,203   18,240 
    Short-term investments 3,375   2,400 
    Trade receivables, net 179,529   118,140 
    Inventory 266,061   221,951 
    Other current assets 116,835   87,873 
    Total current assets 786,240   747,133 
    Non-current assets:     
    Property and equipment, net 760,391   645,809 
    Right-of-use assets under operating leases 1,408,208   1,203,188 
    Right-of-use assets under financing leases, net 179,490   182,113 
    Goodwill 278,261   217,297 
    Intangible assets, net 212,807   197,123 
    Equity investment 2,847   2,924 
    Deferred tax asset 47,107   22,728 
    Other non-current assets 44,433   36,855 
    Total assets$3,719,784  $3,255,170 
    Liabilities     
    Current liabilities:     
    Long-term debt, current portion$15,947  $11,944 
    Accounts payable 249,406   217,370 
    Other current liabilities 187,943   154,097 
    Operating leases, current portion 65,433   57,563 
    Financing leases, current portion 9,213   5,457 
    Total current liabilities 527,942   446,431 
    Non-current liabilities:     
    Long-term debt, net 812,166   740,043 
    Asset retirement obligation 80,442   64,909 
    Operating leases 1,414,609   1,218,045 
    Financing leases 228,424   225,907 
    Other non-current liabilities 269,401   178,945 
    Total liabilities 3,332,984   2,874,280 
          
    Series A redeemable preferred stock 100,000   100,000 
          
    Shareholders' equity:     
    Common stock 12   12 
    Treasury stock (65,554)  (40,042)
    Additional paid-in capital 243,271   229,995 
    Accumulated other comprehensive income 9,119   9,119 
    Retained earnings 99,965   81,750 
    Total shareholders' equity 286,813   280,834 
    Non-controlling interest (13)  56 
    Total equity 286,800   280,890 
    Total liabilities, redeemable preferred stock and equity$3,719,784  $3,255,170 


     Condensed consolidated statements of cash flows 
                
     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands) 
    Cash flows from operating activities:           
    Net income$21,488  $24,994  $33,440  $59,118 
    Adjustments to reconcile net income to net cash provided by operating activities:           
    Depreciation and amortization 33,713   26,061   94,949   75,050 
    Deferred income taxes 10,087   18,057   (4,028)  20,728 
    Loss on disposal of assets and impairment charges 2,265   1,418   5,543   3,389 
    Foreign currency loss 72   13   130   241 
    Amortization of deferred financing costs and debt discount 644   632   1,857   1,894 
    Amortization of deferred income (2,373)  (1,977)  (6,302)  (7,269)
    Accretion of asset retirement obligation 572   430   1,690   1,259 
    Non-cash rent 3,860   1,977   10,418   5,714 
    Charges to allowance for credit losses 448   122   1,021   473 
    Loss from equity investment 14   44   77   7 
    Share-based compensation 4,614   3,145   13,238   9,027 
    Fair value adjustment of financial assets and liabilities (6,379)  2,742   (11,627)  (3,848)
    Other operating activities, net 1,303   148   2,279   855 
    Changes in assets and liabilities:           
    Increase in trade receivables (44,314)  (28,376)  (62,487)  (59,867)
    (Increase) decrease in inventory (9,178)  21,377   (17,386)  (14,570)
    Increase in other assets (17,464)  (14,974)  (28,429)  (7,367)
    Increase (decrease) in accounts payable 15,087   (8,914)  29,667   37,493 
    Increase in other current liabilities 16,643   18,955   8,992   7,631 
    (Decrease) increase in asset retirement obligation —   (60)  46   (94)
    Increase in non-current liabilities 1,719   1,787   5,719   9,899 
    Net cash provided by operating activities 32,821   67,601   78,807   139,763 
    Cash flows from investing activities:           
    Purchase of property and equipment (25,565)  (27,734)  (75,603)  (72,902)
    Purchase of intangible assets (10)  (51)  (45)  (176)
    Proceeds from sale of property and equipment 10,621   133,119   307,106   140,380 
    Business acquisitions, net of cash (13,268)  (179,350)  (494,904)  (191,203)
    Decrease in investments, net —   31,825   —   58,934 
    Repayment of loans to equity investment —   —   —   174 
    Net cash used in investing activities (28,222)  (42,191)  (263,446)  (64,793)
    Cash flows from financing activities:           
    Receipt of long-term debt, net 4,600   51,450   78,833   51,450 
    Repayment of debt (6,006)  (36,279)  (16,517)  (42,372)
    Principal payments on financing leases (1,325)  (1,710)  (4,237)  (5,014)
    Proceeds from sale-leaseback —   —   80,397   — 
    Payment of Additional Consideration —   —   —   (2,085)
    Payment of Ares Put Option —   —   (9,808)  — 
    Common stock repurchased (11,636)  (4)  (25,199)  (40,042)
    Dividends paid on common stock (3,559)  (2,402)  (10,775)  (7,291)
    Dividends paid on redeemable preferred stock (1,449)  (1,449)  (4,301)  (4,301)
    Distributions to non-controlling interests —   (60)  —   (180)
    Net cash (used in) provided by financing activities (19,375)  9,546   88,393   (49,835)
    Net (decrease) increase in cash and cash equivalents and restricted cash (14,776)  34,956   (96,246)  25,135 
    Effect of exchange rate on cash and cash equivalents and restricted cash (62)  12   (83)  (109)
    Cash and cash equivalents and restricted cash, beginning of period 235,278   262,601   316,769   272,543 
    Cash and cash equivalents and restricted cash, end of period$220,440  $297,569  $220,440  $297,569 




     Reconciliation of EBITDA and Adjusted EBITDA 
                
     For the Three Months
    Ended September 30,    		  For the Nine Months
    Ended September 30,    		 
     2023  2022  2023  2022 
     (in thousands) 
    Net income$21,488  $24,994  $33,440  $59,118 
    Interest and other financing expenses, net 14,579   19,796   48,341   43,110 
    Income tax expense 7,993   20,898   10,849   31,060 
    Depreciation and amortization 33,713   26,061   94,949   75,050 
    EBITDA 77,773   91,749   187,579   208,338 
    Non-cash rent expense (a) 3,860   1,977   10,418   5,714 
    Acquisition costs (b) 1,127   1,673   7,980   3,177 
    Loss on disposal of assets and impairment charges (c) 2,265   1,418   5,543   3,389 
    Share-based compensation expense (d) 4,614   3,145   13,238   9,027 
    Loss from equity investment (e) 14   44   77   7 
    Adjustment to contingent consideration (f) 952   (1,550)  (672)  (2,076)
    Internal entity realignment and streamlining (g) —   408   —   408 
    Other (h) 558   604   726   637 
    Adjusted EBITDA$91,163  $99,468  $224,889  $228,621 
                
    (a) Eliminates the 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 can vary 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, while for more mature leases, rent expense recognized is typically less than our cash rent payments. 
                
    (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 (gain) from the sale of property and equipment, the loss (gain) 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 loss attributable to our unconsolidated equity investment. 
                
    (f) Eliminates fair value adjustments to the contingent consideration owed to the seller for the 2020 acquisition of Empire. 
                
    (g) Eliminates non-recurring charges related to our internal entity realignment and streamlining. 
                
    (h) Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance. 

     


    Investor and Media Contact
Ross Parman
ARKO Corp.
investors@gpminvestments.com

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