ARKO Corp. Reports Second Quarter 2023 Results

来源: Nasdaq GlobeNewswire / 07 8月 2023 16:30:01 America/New_York

RICHMOND, Va., Aug. 07, 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 June 30, 2023.

Second Quarter 2023 Key Highlights¹

Net income for the quarter was $14.5 million, compared to $31.8 million in the prior year quarter, primarily due to an approximately $15 million increase in depreciation and amortization expenses in connection with recent acquisitions, and favorable fair-value adjustments in the prior year quarter.
Adjusted EBITDA for the quarter was $86.2 million, an increase of $7.2 million, as compared to $79.0 million in the prior year quarter.
Same store merchandise sales excluding cigarettes increased 3.8% for the quarter compared to the prior year period; same store merchandise sales increased 0.7% for the quarter compared to the prior year period.
Merchandise gross profit contribution grew by $6.5 million for the quarter, or 5.0%, on a same store basis, as compared to the prior year period.
Merchandise margin continued to increase by 150 basis points to 31.9% for the quarter compared to 30.4% in the prior year period.
Total retail gallons increased 15.9% in Q2 2023 compared to Q2 2022, while volumes on a same store basis declined 2.6%.

Other Key Highlights

On June 6, 2023, closed the acquisition of the retail, wholesale and fleet fueling assets of WTG Fuels Holdings, LLC (“WTG”), the owner of Uncle’s Convenience Stores and GASCARD fleet fueling operations (the “WTG Acquisition”).
Currently available financing of more than $2 billion, including cash, lines of credit and Oak Street agreement.
- Renewal and increase of GPMP credit line to $800 million, extending maturity to 2028.
- Amended and extended the program agreement with Oak Street, a division of Blue Owl Capital (“Oak Street”), with capacity of up to $1.5 billion (in addition to the funding for the WTG Acquisition).
Ended quarter with 1.48 million total enrolled fas REWARDS^® members, representing a 10.5% increase in enrolled marketable members since the first quarter of 2023.
On June 30, 2023, introduced a new Pride location in South Windsor, Connecticut, boasting almost 5,000 square feet, indoor and outdoor seating, and a drive through for even more convenience.
Named for the second consecutive year to the 2023 Fortune 500 list, ranking 460^th, moving up 38 places from 2022.
ARKO Corp.’s Board of Directors increased the Company’s authorized share repurchase program from $50 million to $100 million.
ARKO Corp.’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on September 1, 2023, to stockholders of record as of August 15, 2023.

“I am very proud of the results and performance that the employees of our company were able to achieve this quarter,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “The team’s key focus is to improve our core convenience store operations through targeted initiatives, like increasing assortment and merchandising mix to give our customers the options and convenience they seek. We always strive to provide the best service and store experience for our customers. We are very pleased with the pace of integration and early results of recent acquisitions. ARKO’s results this quarter demonstrate that our organic initiatives and core M&A and integration capabilities help create long-term stockholder value.”

¹ See Use of Non-GAAP Measures below.

Second Quarter 2023 Segment Highlights

Retail

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
	(in thousands)
Fuel gallons sold		293,584			253,243			542,490			492,801
Same store fuel gallons sold decrease (%) ¹		(2.6	%)		(10.6	%)		(4.2	%)		(7.1	%)
Fuel margin, cents per gallon ²		39.7			41.3			37.7			39.4
Merchandise revenue	$	484,561		$	431,751		$	884,849		$	798,736
Same store merchandise sales increase (decrease) (%) ¹		0.7	%		(2.7	%)		2.1	%		(3.1	%)
Same store merchandise sales excluding cigarettes increase (%) ¹		3.8	%		1.4	%		5.6	%		0.8	%
Merchandise contribution ³	$	154,658		$	131,364		$	277,623		$	239,556
Merchandise margin ⁴		31.9	%		30.4	%		31.4	%		30.0	%

¹Same 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 June 30, 2023											For the Six Months Ended June 30, 2023
	Pride ¹			TEG ²			Uncle’s (WTG) ³			Total		Pride			TEG			Uncle’s (WTG) ³			Total
	(in thousands)
Date of Acquisition:	Dec 6, 2022			Mar 1, 2023			Jun 6, 2023					Dec 6, 2022			Mar 1, 2023			Jun 6, 2023
Revenues:
Fuel revenue	$	71,388		$	99,128		$	6,098		$	176,614	$	139,425		$	131,202		$	6,098		$	276,725
Merchandise revenue		15,629			39,381			2,846			57,856		29,143			52,324			2,846			84,313
Other revenues, net		1,397			1,322			54			2,773		2,784			1,731			54			4,569
Total revenues		88,414			139,831			8,998			237,243		171,352			185,257			8,998			365,607
Operating expenses:
Fuel costs		64,335			90,832			5,020			160,187		125,299			120,617			5,020			250,936
Merchandise costs		10,185			27,189			1,927			39,301		19,383			36,126			1,927			57,436
Store operating expenses		10,495			18,064			1,225			29,784		20,030			23,576			1,225			44,831
Total operating expenses		85,015			136,085			8,172			229,272		164,712			180,319			8,172			353,203
Operating income	$	3,399		$	3,746		$	826		$	7,971	$	6,640		$	4,938		$	826		$	12,404
Fuel gallons sold		19,387			30,165			1,714			51,266		37,278			40,057			1,714			79,049
Merchandise contribution ⁴		5,444			12,192			919			18,555		9,760			16,198			919			26,877
Merchandise margin ⁵		34.8	%		31.0	%		32.3	%				33.5	%		31.0	%		32.3	%

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 Includes only the retail stores acquired in the WTG acquisition.

⁴ Calculated as merchandise revenue less merchandise costs.

⁵ Calculated as merchandise contribution divided by merchandise revenue.

For the second quarter, retail fuel profitability (excluding intercompany charges by the Company’s wholesale fuel distribution subsidiary, GPM Petroleum LP (“GPMP”)) increased approximately $11.9 million to $116.6 million compared to the prior year period, with resilient fuel margin capture of 39.7 cents per gallon, which decreased 1.6 cents per gallon for the second quarter of 2023 compared to the prior year period. Same store fuel profit was $97.5 million (excluding intercompany charges by GPMP), compared to $102.7 million for the prior year quarter. This decrease in same store fuel profit was fully offset by approximately $19.0 million incremental fuel profit from recent acquisitions.

Same store merchandise sales excluding cigarettes increased 3.8% for the quarter compared to the second quarter of 2022. Same store merchandise sales increased 0.7% compared to the prior year period, primarily due to higher revenue from the Company’s six core destination categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks and beer), other tobacco products and franchises as a result of marketing initiatives, including expanded category assortments, new franchise food offerings and investments in coolers and freezers, which was partially offset by lower revenue from cigarettes. Total merchandise contribution for the quarter increased $23.3 million, or 17.7%, compared to the second quarter of 2022, with merchandise margin increasing 150 basis points, to 31.9% from 30.4% in the second quarter of 2022, primarily due to higher contribution from the Company’s six core destination categories and franchises. The increase in merchandise contribution was due to $18.6 million from recent acquisitions, and an increase at same stores of $6.5 million.

Wholesale

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands)
Fuel gallons sold – fuel supply locations		213,136		193,164		395,563		374,105
Fuel gallons sold – consignment agent locations		44,534		37,996		82,496		73,993
Fuel margin, cents per gallon¹ – fuel supply locations		5.9		7.2		6.0		7.1
Fuel margin, cents per gallon¹ – consignment agent locations		25.3		32.3		25.8		30.7

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 comparable information for the prior periods.

	For the Three Months Ended June 30, 2023								For the Six Months Ended June 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	$	19,564	$	93,660	$	648	$	113,872	$	37,327	$	122,054	$	648	$	160,029
Other revenues, net		310		667		1		978		588		854		1		1,443
Total revenues		19,874		94,327		649		114,850		37,915		122,908		649		161,472
Operating expenses:
Fuel costs		18,912		92,267		622		111,801		36,064		119,779		622		156,465
Store operating expenses		488		850		17		1,355		937		1,094		17		2,048
Total operating expenses		19,400		93,117		639		113,156		37,001		120,873		639		158,513
Operating income	$	474	$	1,210	$	10	$	1,694	$	914	$	2,035	$	10	$	2,959
Fuel gallons sold		5,936		35,508		218		41,662		11,443		45,987		218		57,648

¹Acquisition 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.

Wholesale fuel contribution (excluding intercompany charges by GPMP) decreased by approximately $2.5 million for the quarter.

Fuel contribution from fuel supply locations (excluding intercompany charges by GPMP) decreased by $1.5 million for the quarter, 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 contribution from recent acquisitions.

Fuel contribution from consignment agent locations (excluding intercompany charges by GPMP) decreased approximately $1.0 million for the quarter, primarily due to lower rack-to-retail margins and decreased prompt pay discounts related to lower fuel costs, which was partially offset by the contribution from recent acquisitions.

Fleet Fueling

The fleet fueling segment reflects a commencement of operations of such segment on July 22, 2022.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2023		2023
	(in thousands)
Fuel gallons sold – proprietary cardlock locations		32,417		63,433
Fuel gallons sold – third-party cardlock locations		2,036		3,646
Fuel margin, cents per gallon¹ – proprietary cardlock locations		43.9		44.2
Fuel margin, cents per gallon¹ – third-party cardlock locations		7.7		4.9

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 comparable information for the prior periods.

	For the Three Months Ended June 30, 2023						For the Six Months Ended June 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	$	115,986	$	5,160	$	121,146	$	243,480	$	5,160	$	248,640
Other revenues, net		1,640		36		1,676		2,591		36		2,627
Total revenues		117,626		5,196		122,822		246,071		5,196		251,267
Operating expenses:
Fuel costs		104,063		4,372		108,435		219,294		4,372		223,666
Store operating expenses		4,915		128		5,043		9,705		128		9,833
Total operating expenses		108,978		4,500		113,478		228,999		4,500		233,499
Operating income	$	8,648	$	696	$	9,344	$	17,072	$	696	$	17,768
Fuel gallons sold		32,988		1,465		34,453		65,614		1,465		67,079

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 quarter. Fuel profitability (excluding intercompany charges by GPMP) was approximately $14.4 million for the quarter.

Store Operating Expenses

For the second quarter of 2023, convenience store operating expenses increased $29.5 million, or 17.5% as compared to the prior year period, primarily due to $29.8 million of expenses related to recent acquisitions and an increase of $3.2 million in expenses at same stores, mainly driven by $4.2 million, or 6.5% as compared to the prior year period, of higher personnel costs. The 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

Credit Line Increase and Renewal

On May 5, 2023, GPMP renewed and extended its revolving credit facility with a syndicate of banks led by Capital One, National Association. The credit line was increased to $800 million, and its maturity was extended to May 2028.

Extension of Oak Street Program Agreement

On May 2, 2023, the Company and affiliates of Oak Street, entered into a third amendment to the Program Agreement, which, among other things, extended the term of the Program Agreement and the exclusivity period thereunder through September 30, 2024, and provides for up to $1.5 billion of capacity under the Program Agreement from the date of such amendment through September 30, 2024, not including the funding for the WTG Acquisition.

Acquisitions

On June 6, 2023, the Company closed on its acquisition of the assets of WTG, which, at closing, operated 24 company-operated Uncle’s convenience stores across western Texas. As part of this acquisition, the Company also acquired WTG’s GASCARD-branded fleet fueling network, including 68 proprietary fleet fueling cardlock sites strategically located in large industrial areas in Western Texas and Southeastern New Mexico and 43 private cardlock sites. The WTG Acquisition included three land parcels and nine independent dealer locations.

Liquidity and Capital Expenditures

As of June 30, 2023, the Company’s total liquidity was approximately $822 million, consisting of cash and cash equivalents of approximately $220 million and approximately $602 million of availability under lines of credit. Outstanding debt was $824 million, resulting in net debt, excluding financing leases, of approximately $604 million. Capital expenditures were approximately $26.7 million for the quarter.

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 September 1, 2023, to stockholders of record as of August 15, 2023.

On May 16, 2023, the Company’s Board of Directors increased the Company’s previously authorized share repurchase program from $50 million to $100 million. During the quarter, the Company repurchased approximately 1.5 million shares of common stock under the repurchase program for approximately $11.2 million, or an average share price of $7.55. There is approximately $49 million remaining under the expanded share repurchase program as of June 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 June 30,						For the Six Months Ended June 30,
Retail Segment	2023			2022			2023			2022
Number of sites at beginning of period		1,531			1,396			1,404			1,406
Acquired sites		24			—			159			—
Newly opened or reopened sites		2			—			3			—
Company-controlled sites converted to
consignment or fuel supply locations, net		(6	)		(1	)		(11	)		(7	)
Closed, relocated or divested sites		(4	)		(7	)		(8	)		(11	)
Number of sites at end of period		1,547			1,388			1,547			1,388

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Wholesale Segment ¹	2023			2022			2023			2022
Number of sites at beginning of period ²		1,841			1,625			1,674			1,628
Acquired sites ²		9			—			190			—
Newly opened or reopened sites ³		17			21			24			40
Consignment or fuel supply locations
converted from Company-controlled sites, net		6			1			11			7
Closed, relocated or divested sites		(49	)		(27	)		(75	)		(55	)
Number of sites at end of period		1,824			1,620			1,824			1,620

¹ Excludes bulk and spot purchasers.
² As part of our review of the initial accounting for the TEG Acquisition, we have adjusted the number of acquired sites to exclude 11 spot purchasers acquired, consistent with our historical methodology. There was no impact on our previously reported gallons sold or financial results.
³ Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.

	For the Three and Six Months Ended June 30,
Fleet Fueling Segment	2023
Number of sites at beginning of period		183
Acquired sites		111
Closed, relocated or divested sites		(1	)
Number of sites at end of period		293

Conference Call and Webcast Details

The Company will host a conference call to discuss these results at 10:00 a.m. Eastern Time on August 8, 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, 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. 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 June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
	(in thousands)
Revenues:
Fuel revenue	$	1,957,100		$	2,085,854		$	3,618,764		$	3,669,380
Merchandise revenue		484,561			431,751			884,849			798,736
Other revenues, net		27,480			22,658			53,904			44,958
Total revenues		2,469,141			2,540,263			4,557,517			4,513,074
Operating expenses:
Fuel costs		1,801,103			1,955,019			3,338,985			3,425,668
Merchandise costs		329,903			300,387			607,226			559,180
Store operating expenses		218,002			178,077			410,685			344,615
General and administrative expenses		42,660			32,956			83,076			64,741
Depreciation and amortization		32,837			24,353			61,236			48,989
Total operating expenses		2,424,505			2,490,792			4,501,208			4,443,193
Other expenses, net		4,956			1,197			7,676			2,318
Operating income		39,680			48,274			48,633			67,563
Interest and other financial income		2,428			8,997			9,630			6,710
Interest and other financial expenses		(22,588	)		(16,336	)		(43,392	)		(30,024	)
Income before income taxes		19,520			40,935			14,871			44,249
Income tax expense		(5,014	)		(9,157	)		(2,856	)		(10,162	)
(Loss) income from equity investment		(27	)		28			(63	)		37
Net income	$	14,479		$	31,806		$	11,952		$	34,124
Less: Net income attributable to non-controlling interests		48			52			101			131
Net income attributable to ARKO Corp.	$	14,431		$	31,754		$	11,851		$	33,993
Series A redeemable preferred stock dividends		(1,434	)		(1,434	)		(2,852	)		(2,852	)
Net income attributable to common shareholders	$	12,997		$	30,320		$	8,999		$	31,141
Net income per share attributable to common shareholders - basic	$	0.11		$	0.25		$	0.07		$	0.25
Net income per share attributable to common shareholders - diluted	$	0.11		$	0.24		$	0.07		$	0.25
Weighted average shares outstanding:
Basic		119,893			121,529			120,073			122,909
Diluted		121,280			130,558			120,767			123,245

	Condensed consolidated balance sheets

	June 30, 2023			December 31, 2022
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	220,142		$	298,529
Restricted cash		15,136			18,240
Short-term investments		3,319			2,400
Trade receivables, net		135,663			118,140
Inventory		256,116			221,951
Other current assets		101,435			87,873
Total current assets		731,811			747,133
Non-current assets:
Property and equipment, net		748,697			645,809
Right-of-use assets under operating leases		1,418,902			1,203,188
Right-of-use assets under financing leases, net		174,221			182,113
Goodwill		277,795			217,297
Intangible assets, net		219,598			197,123
Equity investment		2,861			2,924
Deferred tax asset		57,007			22,728
Other non-current assets		40,565			36,855
Total assets	$	3,671,457		$	3,255,170
Liabilities
Current liabilities:
Long-term debt, current portion	$	13,369		$	11,944
Accounts payable		233,459			217,370
Other current liabilities		166,056			154,097
Operating leases, current portion		63,811			57,563
Financing leases, current portion		4,916			5,457
Total current liabilities		481,611			446,431
Non-current liabilities:
Long-term debt, net		810,302			740,043
Asset retirement obligation		79,837			64,909
Operating leases		1,422,736			1,218,045
Financing leases		223,871			225,907
Other non-current liabilities		275,584			178,945
Total liabilities		3,293,941			2,874,280

Series A redeemable preferred stock		100,000			100,000

Shareholders’ equity:
Common stock		12			12
Treasury stock		(53,804	)		(40,042	)
Additional paid-in capital		238,617			229,995
Accumulated other comprehensive income		9,119			9,119
Retained earnings		83,533			81,750
Total shareholders’ equity		277,477			280,834
Non-controlling interest		39			56
Total equity		277,516			280,890
Total liabilities, redeemable preferred stock and equity	$	3,671,457		$	3,255,170

	Condensed consolidated statements of cash flows

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
	(in thousands)
Cash flows from operating activities:
Net income	$	14,479		$	31,806		$	11,952		$	34,124
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,837			24,353			61,236			48,989
Deferred income taxes		(3,885	)		5,248			(14,115	)		2,671
Loss on disposal of assets and impairment charges		2,991			1,207			3,278			1,971
Foreign currency loss		24			191			58			228
Amortization of deferred financing costs and debt discount		621			628			1,213			1,262
Amortization of deferred income		(2,069	)		(2,214	)		(3,929	)		(5,292	)
Accretion of asset retirement obligation		627			420			1,118			829
Non-cash rent		3,760			1,791			6,558			3,737
Charges to allowance for credit losses		290			216			573			351
Loss (income) from equity investment		27			(28	)		63			(37	)
Share-based compensation		4,555			3,108			8,624			5,882
Fair value adjustment of financial assets and liabilities		(1,020	)		(7,799	)		(5,248	)		(6,590	)
Other operating activities, net		647			584			976			707
Changes in assets and liabilities:
Increase in trade receivables		(6,991	)		(18,605	)		(18,173	)		(31,491	)
Increase in inventory		(5,363	)		(14,629	)		(8,208	)		(35,947	)
(Increase) decrease in other assets		(14,510	)		(10,608	)		(10,965	)		7,607
Increase in accounts payable		8,640			26,230			14,580			46,407
Decrease in other current liabilities		(7,524	)		(6,763	)		(7,651	)		(11,324	)
(Decrease) increase in asset retirement obligation		(21	)		—			46			(34	)
Increase in non-current liabilities		1,988			6,964			4,000			8,112
Net cash provided by operating activities		30,103			42,100			45,986			72,162
Cash flows from investing activities:
Purchase of property and equipment		(26,658	)		(24,501	)		(50,038	)		(45,168	)
Purchase of intangible assets		(35	)		(125	)		(35	)		(125	)
Proceeds from sale of property and equipment		88,049			328			296,485			7,261
Prepayment for business acquisition		—			—			—			(5,000	)
Business acquisitions, net of cash		(143,294	)		(107	)		(481,636	)		(6,853	)
Decrease in investments, net		—			25,491			—			27,109
Repayment of loans to equity investment		—			174			—			174
Net cash (used in) provided by investing activities		(81,938	)		1,260			(235,224	)		(22,602	)
Cash flows from financing activities:
Receipt of long-term debt, net		19,233			—			74,233			—
Repayment of debt		(4,919	)		(2,936	)		(10,511	)		(6,093	)
Principal payments on financing leases		(1,494	)		(1,652	)		(2,912	)		(3,304	)
Proceeds from sale-leaseback		28,793			—			80,397			—
Payment of Additional Consideration		—			(2,085	)		—			(2,085	)
Payment of Ares Put Option		(9,808	)		—			(9,808	)		—
Common stock repurchased		(11,253	)		(26,954	)		(13,563	)		(40,038	)
Dividends paid on common stock		(3,607	)		(2,415	)		(7,216	)		(4,889	)
Dividends paid on redeemable preferred stock		(1,434	)		(1,434	)		(2,852	)		(2,852	)
Distributions to non-controlling interests		—			(60	)		—			(120	)
Net cash provided by (used in) financing activities		15,511			(37,536	)		107,768			(59,381	)
Net (decrease) increase in cash and cash equivalents and restricted cash		(36,324	)		5,824			(81,470	)		(9,821	)
Effect of exchange rate on cash and cash equivalents and restricted cash		—			(105	)		(21	)		(121	)
Cash and cash equivalents and restricted cash, beginning of period		271,602			256,882			316,769			272,543
Cash and cash equivalents and restricted cash, end of period	$	235,278		$	262,601		$	235,278		$	262,601

	Reconciliation of EBITDA and Adjusted EBITDA

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
	(in thousands)
Net income	$	14,479		$	31,806		$	11,952		$	34,124
Interest and other financing expenses, net		20,160			7,339			33,762			23,314
Income tax expense		5,014			9,157			2,856			10,162
Depreciation and amortization		32,837			24,353			61,236			48,989
EBITDA		72,490			72,655			109,806			116,589
Non-cash rent expense (a)		3,760			1,791			6,558			3,737
Acquisition costs (b)		3,277			823			6,853			1,504
Loss on disposal of assets and impairment charges (c)		2,991			1,207			3,278			1,971
Share-based compensation expense (d)		4,555			3,108			8,624			5,882
Loss (income) from equity investment (e)		27			(28	)		63			(37	)
Adjustment to contingent consideration (f)		(922	)		(526	)		(1,624	)		(526	)
Other (g)		64			15			168			33
Adjusted EBITDA	$	86,242		$	79,045		$	133,726		$	129,153

(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 historical 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 (income) 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 other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance.

Media Contact
Andrew Petro
Matter on behalf of ARKO
(978) 518-4531
apetro@matternow.com

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

ARKO Corp. Reports Second Quarter 2023 Results

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