Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Arko Corp. Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time all participants are in listen only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure your my Mr. now is to host, introduce It Investor Ross President, Parman, Vice Relations. you. Thank Please go ahead.

Ross Parman

morning, to Officer. webcast. and and Good Don President you. Thank welcome Officer; Executive XXXX are Kotler, and conference and call Chief fiscal Chief Arko's earnings call today's and Financial On Bassell, Arie Chairman, year quarter fourth

at and ended XXXX has website filed Our earnings on report on XX, annual arkocorp.com. presentation Form XX-K available the December SEC our press release, for earnings are the year with Arko's

begin, during this we statements unaudited. may quarter XXXX. the that XXXX financial fourth of Before Act of forward-looking please all the Private note information make Reform Securities within meaning is call, And the of Litigation course management

will, references and plan, statements. from and involve and may, estimate, in uncertainties project statements of future only management's to materially could, current expect, expectations described beliefs results to use These by identified as may intend, similar forward-looking be These based these differ on those today the that as actual and statements periods. are could speak cause and such of risks words

to year refer XXXX, any actual December press statements Please detailed a our on in forward-looking annual the SEC, to that discussion results and materially made the filings for ended other with XX, expressed differ implied the or for of release, Form XX-K cause today. those report risks our fiscal our could from

non-GAAP refer and Please measures, note free that to same-store financial flow. measures, on will management adjusted cash call, including EBITDA EBITDA today's

considered to press measures our with measures. presented to a non-GAAP is directly not accordance GAAP investors, GAAP. information measures in useful reconciliations our be for information presentation release these in Please the of financial non-GAAP, the of to as financial this earnings most refer substitute isolation the or believes comparable our for provide company While for intended information

note that our like we're remote locations. call also our from I respective conducting would to today

issues technical other and you We delays, during be your thank cross may minor there talk in brief such, advance this As, patience or for call. understanding.

the turn over And now Arie. call to to would I like

Arie Kotler

Good you, And everyone. you thank joining us. Thank Ross. morning, for

started, is get Don hear we partner Don will announced distinguished career. a will love to Before all resource. retire great sure after that XX-year and that I'm a he you

convenience business. reported results is in in several more strong with time company stores. year Arko team expansion. quarters, was the remain And replacement the been he our growth Don’s we As underway. It generated are is our majority continued important remember will to has and for while core, the on finance for a significant search excellent of store marked results position performance leading retail the another our and XXXX by is our his that in operator. at This emphasize profits of that the

in year $XX.X XXXX XX.X% in $XX.X QX XX.X% increased in million operating quarter. to compared EBITDA $XXX.X Arko XX.X% increased or fourth million versus year-over-year QX million and XXXX. by prior the increased Adjusted income XXXX, to QX XXXX

in balance million by very free activities and cash the net in sheet to strong. QX million continued cash In provided $XX.X $XX.X company Our operating flow. be recorded

in we in For $XXX.X executing of $XXX.X many direct operating core cash in year, our in XXXX, both the million our In by in to net stores. strategy, cash continue a results successfully This Arko the initiatives million in-stores provided generated is cells flow. activities free and across business. and fuel invest

expansion expand to continue stores. their inside we gross past and the four successfully contribution XX.X%. merchandise profit Compared team, have realigned and Over our led has have our merchandising initiative years XXXX strategic grown marketing to by

alternative beverages, loyalty our like packaged product share general during includes wine, stores foods, our marketing beer, merchandise. dollar key snacks string the categories outpaced to assortment, favourable in frozen the This total and XXXX, and According packaged IRI of sales programs. sweet market snacks, in

QX cigarettes merchandise increased XXXX. year excluding compared points a points same-store two-years merchandise tax margin XX.X% expanded on from XXX Fourth basis to sales to basis. quarter XXXX for XX.X% QX X.X% to XX increased in margin Merchandise by full XX.X% basis XX% in XXXX.

due market maintain of XX.X% IRI of XX.X% XX declined QX we tobacco data grew share excluding of also in products. quarter that concentration to the X.X%. our in from shows QX cigarettes competitive that increased It including area including in sales same-store noting store Fourth behaviour, XXXX is optimization in XXXX strategy. retailer and consumer sales our same-store XXXX, in points sales basis to in-store change sales and by worth margin cigarettes cigarette

products to and in price beverage customers on relevant store in lead programs food tobacco focus with our categories. service, items to dispense is main attract consumers assortment adult to to margin our developing competitively tobacco and continue We higher however, like our an

Our in-stores growth on key three strategy is pillars. based

sites, destination sales first We for we meet detail we stores. acquired new core in know will The of shortly a to case with pillar benefits is this our the brief we I key today's customers. to our on items hundreds that add decision When resonate often categories grow of acquire in data study customers March need. Andy focused driven of merchandise the acquisition. that

strengthen is The second key loyalty the rewards our relationship program pillar customers. to fast with and using develop our

ended incrementally while initiatives loyalty response the the to to consumer million replaced inside total drive over to exceptional continue current stores the the with members value. grow of enrolled that more year their the by almost year. spend customers X.X is objective course We our Our providing trips loyalty

marketing with them. and apparently resonating loyalty is Our

purchase XXXX, more results, For example, coffee enrolled in members then coffee a for $X. members strong in our XXXX. XX XXX,XXX program of cups as at over very enrolled

a rolling of exciting new benefits out has loyalty value We for features the customers. the of loyalty many high process existing new new app are and in our which

stages We our are app new soon. it in store available our be preparing will in the of app, stores activation final loyalty for and of the

pricing, and information rewards customer fuel and Our balance. to like with goal is enrolment increase engagement, real customer new enhanced time

in-store deals, for their app able with high We our target will customers value or numbers in growing be by to relevant members. and primary store

We delivery of provide at third-party order facilitated our through stores. the XXXX expect capitalizing and partnership on will services over that that delivery be app, with our

will to able special age make to years XX We older. an verified customers, be offers adult also

pillar to third this other expanding sandwiches, our and and many Since establishing other food QSR franchise pillar. borrow of we options, including prepared location. and is offering chicken component our fresh offering package relationship, XX pizza, Our like this now have are

we our and are We use that at variety a that we food continue offering to with and progress stores. resonate customers identifying point of making food can options. our in across food expand And price offering implement will our

in we basket markets, increase significantly know expand We meet trips, runway that category food margin as to to we size. our to We our our have average value create long destination. a increase to is believe goal stores position a Our margin we can needs. proposition important and as customer that this

of continued up. nice and offerings great in through Unit improvement drink deliver has to food been believe We coffee continuous work have our results. store increased sales our areas pillar, in a are X.X% for well positioned and well business store with is convenience to us. trending that XXXX, Updating to cup core each

is analysing our profit gross when the metric important performance. fuel most to Turning

while We XXXX, they with and have profit decline, in as QX itself market the volatile believe fuel results in We our volatility June their gross environment. has QX, as gallons strategy decline. maximize from peak a believe to as competitive some strong consistently maintaining market our strategy in through pricing and enables proven price total

stores. into We a to our compete have we using market attract fuel designed customers fuel on in market a approach based by also driven data that strategy

fuel In profit. have same in X.X% in significantly prior gross on year decline market XXXX, and we L the one This retail in gallon while dollar to X.X% led the quarter, in share qX, for to store hand, decreasing same improving X.X% a our merchandise compared competitive declined compared to gallon X.X% year, store and areas, decline by XXXX.

increase groups profitability $XX.X fuelled to XXXX. $XXX.X the retail fourth to the compared XX.X% end, other the of million, in quarter million a On

overall million, likely in based to For lower $XXX.X is XXXX we XX% XXXX. retail We in remain the in by markets all gross volumes, XXXX. demand fuel year, $XXX.X compared fuel to to million national believe, that on increased than profits

was to been We continue also operating market pressures wage environment. industry. labour and The the per is in than past, that our cents strong competitive, structurally it nationally. growth has higher across OPEX still the across increase is believe given gallon

believe We shown. is our had strategy resilient price environments, across results our as many

allocation deploy Capital to M&A. think always many to one capital. of areas is things we Turning and the best the about

We growth, company's have We M&A that of effective that invested is of will capital many to acquisition return proven and track EBITDA underscores acquisition drive on capital. across consistent discipline continue our continue use records growth. an believe

ability and an to with ability Street Oak get continue done. Our deals financing in financial strength, advantage agreement quickly move our to give us and

debt manageable and with balance is interest Our strong, sheet favourable rates.

industry continues highly to be Our fragmented.

strategy. expect the to strong, As pipeline convenience business is deal our still we expand core our overall acquisition store a result, and through

opportunity. make opportunities for or opportunity acquire will There grow create an investment and the unique can and to there's we are will accretive grow areas closely offerings. believe complementary We that their our proposition can our the we interesting believe also food stores examine enhance business. that stores value expertise our deals If in customers,

which announced XXXX, in acquisition to already four of and accretive we Pride. highly close We Quarles

November Handy drive acquisition. We further items. XX mix closed to progress I'd acquisitions. Mart the bring XXXX fully our monitor like walk merchandise all into to XXX increasing is customers we demand I new getting details new through Quarter-over-Quarter, in stores XXXX. that to want reset our we of value Before This of in our over the items. that how we illustrate growth performance of adding acquisition within

pricing our fuel implemented also We system.

against due from these months trailing when May our diligence. For comparing we XX numbers, XXXX, am I provided figures seller conducted

In-store to grown X.X% Merchandise margin contribution has XX.X% XX.X%. increased XX.X%. from has

we XXXX, gallon As of December $X.X. cent XX average per increase by

return adding $X to in by in reduced year. approximately Oak the to full increased one Street, one store resets. time Most quarters approximately In it's XX%. just two The was we've investment from X.X% rent compared multiple level our reset, quarters prior X.X importantly, XX% increased two following about an to the sales and although merchandise to the times purchase on million EBITDA

of an part in this drive capital industry. successful. important our allocation strategy capital essential. not our effective makes what business competitive us what is underscores But Execution in operation is study alone Being forward. case an allocator highly This is

newly acquired Our effective have offering improving at teams stores. at and sales our marketing, to very mix, drive in-store been

curious XXX day. you're year. add we network of afforded similar approximately of market undertake half two announced to Once compete company convenience this We us expect first scale, store by the by store in to plan efficiencies in XXXX. stores close If in market measures by acquisitions the we our operated to remaining the scale, our value us added and allow our to every

acquisition Group retail and convenience add approximately Energy territory ourselves XXX transit into expand The will and Alabama and stores Mississippi.

the first quarter. enhanced acquisition is with in close in company This footprint will close to acquisition to quarter. The the Texas. transaction across second unfilled Basin attractive market, company's WT in expected the We operated western convenience TG stores anticipated significantly XX Permian the

The company XX and in Private XX sites. flip will also of card Southeast base and a located acquired like looks in Mexico strategically service customers. West large diverse sites Texas, industrial New areas Carlo These billing proprietary

The Quarles our and from acquisition acquired WTG rapid XXXX. timing the have builds business acquisition could that and we believe better. on model been our fleet Quarles not fits the well the excellent fuelling business We very in is in and an July fleet integration fuelling of business

contributes closed cash on fuel $XX our expectation which on This half second Quarles the of adjusted price exceeds July since closing. The strong XXXX XXXX XXXX realize because flow volatility of EBITDA based in modelling. XX our of million. acquisition in incremental We

price the July to industry territory New plus closed We This store convenience into for stores, XXXX. deal acquisition can We X. our on the expand our ground England that was broke December This in strategic holding at new acquisition Massachusetts. XX convenience second XXXX.

forward the Page to and efforts to with larger assortment stores We for integration are a on look and new promotions. value three adding

the Texas. to and this remodelled acquisition planning addition an Atlanta, NDI engineering stores, in In XXXX, we of and six fully in store started phase

be completed in of to expect project We construction XXXX. that

five with also XX our The acquisition network installed are EV across increase network. stores expanding charger in our total Massachusetts. We EV Pride charging

put awarded grants of to markets. its number Importantly, EV availabilities these Massachusetts, our these was grants capacity in charging Pride expand expand which prior has to chargers EV EV to a in aggressive targets. use plan acquisition to to We

pursue charging subsidies our EV our overall strategy, across footprints grants As we to our and expand capacity. part of

currently We EV projects Marysville, of On our in top in phases chargers, Michigan. various Bertrand Ohio, have active other six development. in place of and

footprint. We continue course opportunities identify EV to charging, to potential install of our

potential home charging from Our at demand. areas their identify they goal and is EV away where to we drivers offer sufficient convenience seek amenities in destination

note, XXXX. in we Sustainability, Corporate more year One Governance December, for released Responsibility, Social and Report Environmental our the

sustainability currently long-term of We value implementation on the a with focus our on creation. working work plans are

it turn Don. will I that With to over

Donald Bassell

Arie, a a words. to every colleagues and you, kind company the And fanatic. reasons peers I'm and store the great great enjoy is are that great for. for Thank convenience I work share industry. my who no at thank Arko It's a you secret This and a my day. This is company, coming to passion work

performance, list inclusion is the and proud the strong professional XXX company's I'll growth in culminating of be life that Our a in always part Fortune of. my

continued to has company The excellent record results.

company. as continues making, for great which is We're with in-store excellent our numerous our Our traction. integration gain initiatives performance the progress capabilities,

benefit capital Our generate allocation. other segments our have continue writable flows cash that to stable

balance continues Our strong. to be sheet

We have good very a well. as position liquidity

debt, equivalents $XXX leases approximately in debt net and outstanding cash had excluding we resulting million, $XXX million. million, XXXX, capital XX December at of approximately our cash was As of $XXX

realize We excellent cash flow. continue to

quarter the our will $XX.X the there operating fourth Oak of closings for activities $XXX.X the the approximately million year. and and After the the remaining of be by million WTG provided acquisitions, versus $XXX was XXXX Street million quarter under net expected year, for prior million TEG agreement. and For $XX.X cash million for $XXX.X

for results prior $XXX.X quarter. versus to of increased Merchandize in into million million our of the revenue Getting convenience stores. year fourth the quarter $XXX.X XXXX

for For result the the increased XXXX. $XX certainty $X.XX This dispensers increased properties including and stores. to unnecessary which for year, paid to from fuel proceeds and of models other by six for year, $XXX.X our by of accounted Street Margin percentage merchandize expenditures other both purchase nearly coffee other is net million cup and increase of to net to leasebacks certainty XXX which of points and XXXX, the for sale ending approximately expenditures Oak deemed a capital included Capital purchase X% of the our fullstory upgrades stores, initiatives as million spending composed $X.XX of basis were compared the billion upgrades. million Total capital investments being $XXX.X in in prior million December in our year XX.X%. our of of transactions is billion investments the equipment, two revenue XX $XX.X expenditures year-over-year supporting properties.

behind fees, while the strategy that labor. maintaining operating is expense company. We given In client, margin we have believe to to fuel, continue managing increased margins credit card competitive moved of our of higher structurally optimizing volume key pricing higher industry profitability cost growing and believe to as a

of quarter, profitability, fuel the was excluding XXXX fourth million million. $XXX.X Retail quarter grew $XX.X XXXX. XX.X% versus QX, this totaling intercompany increase charges This for a

XXXX. expenses XXXX. X.X% in per compared operating or incremental stores. increased expenses gallon Quarter expenses, retail the Fourth store the million to to XX% for fuel For The $XXX.X increased the $XX.X due retail prior convenience related margin fuel million product company position, year, to to million same $X.XXX versus year per year $X.XXX the $XXX.X profitability increased in to from gallon increased

million by X.X%, wages to quarter while both and Same or credit fees increased compared the card XX.X% or million $X $X.X increased for salaries by XXXX. QX by store

retail of by same store higher of higher expenses personnel The we independent XX.X% are stores, including offset expenses increased XX acquisitions, $XX.X to For costs of that XXXX December approximately and operating store dealers. stores that the credit to XXXX. underperforming This year in acquisitions product XX.X%, $XX December XX, are increase to retail million as closed an $XX.X million, increased was operating the related due XX.X% year compared of ended million and XXXX, ended was and higher or fees expenses incremental due $XX partially the prices. million converted to expenses card

to charges offset for year-over-year. year. was excluding Moving fuel which with Wholesale increased X.X% per down $X.X gallon, contribution, XX.X% decline volume, X.X%, fuel due primarily approximately to overall intercompany gallons gallons partially a This cents locations the margin increase million. fuel wholesale by in from was supply and in

contributions, fuel decreased the million. including For $X.X wholesale intercompany quarter charges

quarter year. flow Last in second has of happy price half the million very acquisition business locks size on because the revenues by generated in for pleased gallon acquisition strong We're fourth million of million the intercompany was million which the EBITDA added the volatility. Quarles with per a per locations. margin Fuel At integration fleet closed for excellent and business. $XXX.X $X.XXX for highly million acquisition and adjusted the fuel fueling third per from the Quarles, contribution approximately quarter, of year. car Fuel We're the July very the with done $XXX.X XX. of we excluding This intercompany $XX.X produced for the cash cents Quarles primarily discussed fleet quarter this gallon. $XX.X team. fourth for skilled fueling the gallon and fuel for the charges year. excluding $XX $X.XXX work The The quarter charges rapid was approximately party proprietary

For excluding Quarles at the and year, cents at margin intercompany per fuel charges X.X% was $X.XXX third-party gallon locations locations. proprietary the gallon gallon per per

interest the year million. decreased million the financial by and other million versus other prior to Net financial $XX.X $XX.X and quarter million, $XX.X interest compared to were Net year expenses full was for $XX.X increased Net for $XX.XX for income expenses $XX.X the the prior the prior for million from $XX.XX Net million, quarter. year million XX.X% period. for year year $XX prior to million the versus the compared to year. for income quarter the

an EBITDA million, Adjusted fourth increase of XXXX. compared $XX.X to the million, $XX.X was of quarter

of of has showing was incremental increased XX.X% net pace progress. $XXX.X the bonuses adjusted number Since This year, our XXXX, the million. For rapid

company. another for the been year has great This

stock $X.XX of of As desire record a returns declared on XXXX stockholders Arko's March to stockholders, common results and a our be paid for per directors result as share enhance X XXXX. dividend strong to March XX, of of quarterly board

back turn over to I'll now the call Arie. And

Arie Kotler

the we the by that will I Don. execution strategy as deliver in to term saying that we close believe right Thanks, for capabilities as long place have growth well long-term.

company tailwind and for a XX,XXX are for and that year our XXXX their mark hard employees growth the work thank the to want excellent great quarter the I of I and at decade believe start over we results for as dedication. company. a the rapid

take Now will your we questions.

Operator

first floor of is for Bobby Please now coming James. open Raymond ahead. go The question The [Operator questions. you. Griffin from Instructions] Thank is today

Unidentified Analyst

morning. on Thank Bobby for our for Good Griffin. [Indiscernible] taking is This you questions.

the of XXXX. wanted of I touch for initiatives to just First, some kind on main

partnership Street rate given rate change more interest XXXX. on Does focus Oak a May the the other current will little Given M&A focused trends. that cap the renews initiatives the assuming store and that increase the in some for growth within for in EBITDA of to

Donald Bassell

bit to There you, hello think is continue to a our question rates I think just given But, is be a cap anything. No, going Thank that might this -- given that I our our of continued I say and move to little that rise. economy interest question, rates don't transaction scale, change I think lucrative. very don't Bobby. great to size it's no saying

the you XX%. we we this right return past basically showed in our showing past. on presentation, in XX% As the capital And in now, remember,

basically here. can worst us. we return is for will a happen on don't great return the still which think So, anything the on But change go dramatically is I over back capital, to XX% capital

include on store. people grow And I at time I the think through continue we're we inside have to the all the describe opportunities the of which same that other the going call, acquisition. to

Unidentified Analyst

on to cost Okay, a costs the currently little in the that's to or better? cost then for starting just environment see our And behave bit helpful. little year-over-year pressures very box Are a us, you touch bit. OpEx continuing store secondly, significant maybe

Donald Bassell

OpEx the settle bit. actually start little think I cost to a

which $XX a see can almost inside the bit way, by of dollars OpEx increase outside the the million higher gross or little environment. what what, CPG, an year-over-year, increase stores, that's given we in you in store, the million drove As profit have $XX the the

in in we're but to of see increase, to XXXX. still as see maybe assuming we saw But increase see continue settled, enter we're XXXX. XXXX to into think we'll going going as that I some those kind things I'm not we and significant, XXXX,

Unidentified Analyst

thank of so And luck much. XXXX. Okay, best here you in

Donald Bassell

time. your for you Thank

Operator

Thank The of Hogan next [ph] from Barclays. coming Hill question you. go ahead. is Please

Unidentified Analyst

I Hi, guess three morning. or good questions. two

fourth maybe given the The independence, on your heard on first cost you being one environment of a pretty margins they in but pretty I structurally on higher, is $X.XX comments fuel year range was basis a us high. the you high they quarter. And could still or for for were go be the two a just just where give forward next thought because retail might

Donald Bassell

So really $X.XX I of increasing gets dollars. profit think our gross a of demonstration basically capability the of

As environment, talk dollars. anymore, people talk this in CPG don't I tell I gross profit I

That's mentioned from to I the for the there, we to mean, pay. earlier, increase increase is inside increase the million As tell people, XXXX. and up just that to outside $XX not way out possible. you is in a basically to only $XX not for I I from XX% margin are pay almost have presentation million need way order And actually store. it's OpEx, which in the to possible, you OpEx only pay store, the

by in So same believe going issues. have that way, supported rates supply as towards the of Arko the as reasons same inflation increases be not towards this the think that, the go going we the the all cost interest up, rising I same basically particular, just margin cycle, here, It's because actually rising, everybody everybody to over we're those basically has, wages, basically issues. it's of I

the inside flexible. But And I said, sales as be I we little can think CPG and given more in stores. a not and of gross the was was I demonstrate the up, only that see up we that bit our we that profit, the size, it didn't outside one things world QX, basically impact mean, probably

of profit see think rise, forward. stores can by this see were CPG reasons. to that the all demonstrate I dollar the to rise because our And And continue same store outside we those sales cigarettes continue just X.X%. up as will moving of way store trend, across you that inside to the continue As

Unidentified Analyst

it's volume of with you I how decline And it. forward? that sort stabilization tricky then act, balance the quarter fuel Got a in think. mean, I like the going do

Donald Bassell

And it's one say, tools have always end sweet the Well that and between We have getting margin. we great losing as given right that I a always try place. tools find to we the in spot in we basically And on believe question. right the we place. gallons believe

gallons So dollars, was were X.X%. the really yes, gross gross dollars down for that our if gross year But you on XX%. profit you'll almost see profit, looking profit

spot. to So you you competitive. a, have find making same And at and the careful you time, this be have sure sweet continue need to to very be you that

see. that's additional operated think of an than small operators, to I we XX% is you're others, our the to people of cities, XX% one different are that and the XX,XXX very some XX,XXX. population or XX,XXX of things And but between accolades have probably in to less, the stores similar

gallon up are rural and belief else we of lot a lost someone the the X% is that So we're pick X% not And in our there. It's we locations. the gallon. of just that gallons, not of

We think there. over were people case the not just that That's driving last.

we to Almost the recycling year, down in of prices war XXXX. you saw And year And now, basically now. really now March from increasing least last gallons last now that. see compared are prices, to However of because we right of of volatility we beginning we now right start dramatically the they at fuel what when beginning started the recycling remember we if are February last the right year. right at are

Unidentified Analyst

a looking script it. you adjacent at last M&A in And question on was, adjacencies made the my reference categories. Got then or

could give accretive Just us an of wondering that to thinking you where of if example sort be the might you quarter? were

Arie Kotler

the continue core. Well, our is stores. on to and a And our we our our wholesale really buy -- on us, of for of really mean, profits, which operated you're now opportunity we which businesses company XX% core continue we come our I mentioned, grow, great is to opportunity, have operated operating you're main have looking a That's an retail is, main from course, grow to our if stores. us. I of unbelievable company continue XX% opportunity company, I if opportunity, mean, as as segment. a Cardlock basically for we looking

we the deliver mean, we deliver for to I months, EBITDA basically mean, five the I see year. the that, in results, we you basically deliver full underwrote

year going our great said is flow, to while us. company we're I stores, because great And continue is the business to to retail the and to continue just deliver like operated same a the on coming see, this us again, adjacent at then, for that profits where majority concentrate of opportunity So this for from. time, cash we

Handymark, think description have We we Handymark, those in start and Pride I doors. the were as assortment, mentioned, bigger. XXX the three XXX closed And Pride, about items what in opportunity And and the almost to adding just reset then we acquisitions. Handymark, believe the did I acquisition, added in just I the is much

those results now, going better to, thing to given going I that wide, after than fuel. I able stores. be over using quarter. given same strategies. to those think we're goes are continue Handymark We're bigger going quarter better our strategy same added that to use XXX be and use in our And The there, more right company to to use deliver think size items think it's going I we to we're

implement we here. strategy Given our over

freezers. And there opportunity pizza, again, go for service service, about is food opportunities, a sit that food in of and hours great a us. service. about I lot believe I grab for those more of food opportunities and talk we talking talk environment this mean, I I'm can When down is especially all five

stores. add in We have additional freezers XXX opportunity to

coffee we're going We reset are Pride adding Stores. close We're into bean to those TG cup acquisition the doors. machines to and getting the ready to

ahead So us. here runaway have again, we of a over big

Unidentified Analyst

it. appreciate I much. so you Thank Great.

Arie Kotler

the Appreciate question.

Operator

Thank Alok ahead. you. The go next from Please Patel question of is coming Stifel.

Alok Patel

less talk categories as reduced This from everyone. regarding activity you in through benefit which follow about from to potential on pricing Mark or pricing? are I and elastic? Ollie is up How just or the about higher Astrachan. merchandise, short you promotional more move Hi can wanted think Patel line you XXXX

Arie Kotler

sure. Sure,

big a knows categories touch up. we all, I or first couple of mean, of I the maybe countrywide is of First there. candy. very increase mean, one, nice everybody that candy, over increase course, can candy saw were a very, I basically, that

for continue So increasing a hit candy. big to nice us. be Frozen foods

you to X.X% this grow. increase. The As XXXX, up and XXX know, mean into quarter XX%, guys over freezers sweet over you remember snacks, continue our to I quarter, beginning this XX.X%. Bevs I grow from just same the continue goes thing we increase, foods frozen of was Pack to stores, mean, package, implemented

to as for and opportunity So the us their we more I big our only think often. our great great, customers, that they're basically that mean, will I believe we stores. we increase, the really inside continue as profitability promotions drive to grow, coming it's not And that, continue to offer baskets loyalty. loyal And

one XX.X%. was I XXXX, XXXX, able of is and sales we focus basket better that's is to mentioned. margin today, of the the difference, to remember, other started more want The cigarettes is is inside course, touch to products all just margin their categories that the it's increase were with item include on the means increase times same the or concentration items, This that probably than thing foodservice the which And sales of QX focus other margin two and around almost X% of to store sell cigarettes our three the And continue inside year. high I The cigarettes. we X% that of around our box, XX.X%, XX%. which a

mean, to see cigarettes it very, inside excluding mean, the very already, QX be to by way continue XXXX. QX the what sales, we And similar I QX, I in we saw strong, in

Alok Patel

or to February, margins, of up compared into how was whether then has January you. that October. any had for color on And level on follow Got And a be on that that or stacking rates up commentary momentum margin carried will I just November over quick December exit any and great.

Arie Kotler

talking you Are the store? inside

Alok Patel

No, referring to I was margins. fuel

Arie Kotler

about the that's But a Fuel of one margin? in happened, can well. is that can't you, I way that little happened Well, in the no by strong really QX thing saw That's I very The in about thing bit very, soft I only no rest QX can nothing you tell QX. Q comment qX. the the year, we what to changed. significantly was compared think question maybe question XXXX that. as I There really tell

QX everybody's was here. a a CPG the bit over memory, for lower And we see same than Just little QX XXXX. thing XXXX the

cue drive it's always outside. here. it's think great is of kind less, But demonstrate don't this provide don't think I anything. is Remember, wise, the really be people that QX, demonstration QX I to weather to over to any QX that not going

see. thing that basically we compared prior picking one you is gallons that one in we tell up thing can The to see That's year. I February, basically

Alok Patel

Got it, thanks.

Arie Kotler

you. Thank

Operator

next from is Thank you. go Please question coming of ahead. Karru Martinson Jefferies. The

Karru Martinson

CapEx adding Good in the here? or morning, when at of of pizza, boxes like, and and the grab look there kind the is philosophy a change needed you go the freezers things that in investment

Arie Kotler

and mean, on example. Like box, really else, use there inside we everything we no view an on I the the and don't we philosophy when capital. change. No, changes, usually was that give we make when usually we add I'll items return those same you those

week capital coffee basically When we added a be you machines you hours, almost because people come important, days are the that. investment, that you're because a to selling items, assume they're of is need or to selling a over not going bakery of up you we on fresh other last hours some the a to you destination for you very assume the going items going want And coffee. want this that must pick same to and you're XX the get and but to only of XXX, to become said the business in, stores is XX tell make coffee, to that coffee, in day, to XXX if with yes, at and return cup year, market same bean investment, time, that the you cup coffee seven

service the item. as investment. be rest have as this you same the thing that is to food So the sold coffee, to The of with same actually goes goes and an the pizza, long will item, thing

remodel, he's way We're you is a drink, in grab a minute this that. means how need the within which grab going in that really increase is actually a other to also can inside that. functional how thinking And impact sales. basket, we the that increase invest And And and call someone, the going in maybe and we're are chips we some to the about freezers, areas invest actually basically thinking that's basically goes. areas can invest it I stores. the the grab that you with assumption about sandwich, You to

Karru Martinson

and Okay, people you're the yet private sales, what the stores getting and markets? and food you how is the What's you're your do that disconnect, XX% seeing, increase headlines we local we're on consumers front. are a down insides in to and the your trading shop the the in back, of label, reconcile, pulling that journal, reading we're seeing consumers have not

Arie Kotler

are size, an our of that is almost, for and, chains implement label, you're small There for industry, can XX given sitting XX%, those really yeah, imagine, I that about as or consumers. to for small those of or the is very of XX, XX% items consumer given I cities to the are chain some bring that, the question very can XX% that, some the those given industry, stores chains it's less, you that And mentioned, as talking market to the basically of the with population imagine, difficult a actually less, of private Well, small given you our value, is store the to of -- for difficult industry XX% valuable as XX,XXX XX,XXX, looking value. about that. and people consumer in areas, looking in said, no

merchandising make to with and consumer. we course And we the think, that around to cigarettes. I and that. to item a going the I -- clock such of to think valuable other basically, that our reason the those way, soon was QX almost, over strong That's bring size, than item sure the team, given know our X,XXX have over the stores scale, have we I stores, of we work economy X,XXX that capability the have size and we that that's Q, other reason keep saying the by

very tell trend to continue stronger and And pleased it I categories. basically be can, than right that now comes QX you now those right than when the be to

and those products. I is you will the scale, the and So that this sell looking right as team as mean, have of the consumer now. size economy you is long have merchandising what

for The looking value. is value consumer is basically brand moment. relevant the correct, The very where not anymore. is given, absolutely we very, important, You're are at the

Karru Martinson

Thank you very it. much. Appreciate

Arie Kotler

you. Thank

Operator

question Thank is America. next you. Please William of Bank coming of from go The ahead. Reuter

William Reuter

I on mentioned about terms kind us is anything side in you they these you there talking that be attributes how share have of And strong, Are same Hi, general historical the big with retail acquisitions the continues are? to size been? guess can of pipeline M&A I'm guess here? the I that

Arie Kotler

as mean, think really three did in terms guys size I four acquisition, the involve we saw, size. changed of of it's the I nothing basically retail. them you same

changed So I don't terms think size. in of anything's

lot going nicely two. to signed to we're see acquisition. but acquisition what a And back what XXXX, We multiples, purchaser, seeing here, you're We very, higher base disciplined right now, double didn't still think and grow maybe that people multiples. XX, don't to think we our I I comes are paid it's to disciplined when close basically XX guys overpaid, close I here. you coming to since say want a very digit getting very see over store of over was basically ready purchaser. I another it saying our what very, that's a very And

is refinance. to think continue those what we're rates have that going try some I to folks are interest going As to to of rise, see to

we So in before environment. operate chain, pandemic. size to the -- going be saw interest small medium basically become a their little businesses able to try rate they're that they're it's given and bit this difficult to more to going not why refinance that's sell And in a to versus what

William Reuter

follow And relatively about Okay, have two, just there smaller operators of that at margins year not how large been that's that profitability all rural Have locations stores have or have the then locations. talked are you outside helpful. stores store over building as been that population or one up, fuel strong? your seen and last then of in XX% the Historically, been so -- change many there. you given

Arie Kotler

than at people of this probably see big, a I cost only what in hard, lot also I And see Nope, don't actually of because it's -- I lot the stores think stores before we it's pandemic. XX% entered our basically the a don't building construction is we big all. being don't I see environment. in because markets of a lot of not saw higher built

any here provide even this see over Now actually that is concern kind not of to I us. something that

William Reuter

Good to hear.

Okay. Thank you.

Arie Kotler

Thank you.

Operator

Please Anthony next The you. Bonadio question Fargo. from Wells ahead. coming Thank of is go

Anthony Bonadio

Don your congrats on Thanks, and guys, retirement.

ask remarks. lot example, well, acquisition a the in wanted think you I Handymart opening of guys So I illustrated just in about to this synergies. And your

EBITDA I see that are still you refine in XX% things gave numbers the growing, the prepared could go approach the But loyalty acquisition. help you to high think how something the food, of we transit higher on that model over Obviously, creeping in then there. synergies range of as guys continues And you're finding refining our and to over evolve like and time program? your merchandising, you time?

Arie Kotler

take this. mute. I on will lost believe We probably let you Don, I Don, Don. you're

And say acquisition I scale, the only in and can refer happen it's provide back can't closed. absolutely it's the that is only question There's not no the mentioned and future. also scale, have But thing the we our The we size, also, So again, already that as to acquisition given this of going it's matter, of matter. on go economy And the only I execution. economy what's just call, Pride or, acquisition I that Handymark Anthony. guidance out to and there.

and merchandise we stores. old a mean, that in this brand. had XXX the Handymark, products basically this opportunity those XXX those year bought add the were In guys And for or is November, is there brand to I over years. to

experience, them. bring of merchandisers. those of we what is that think on wholesaler. team merchandisers the and I table don't experienced really companies marketing over they're to it's And Most here, quality behind really sitting small actually relying the the have

XXX items Given and adding come our huge. mean, I we the team size we and to have this is stores, and when have it, think about store, marketing merchandising the the we I the in team, XX and mean, given that company, behind

very And stores mean, the planogram work that mean, June. see all you short you on are within to way, coming the around we went from and started June. basically I the I see months, to literally order, XX.X And six can you the the I tell of by results, to increase. we the results around a just in XX.

can we we an points saw So actually see, tremendous. which over increase XXX on margin. basis And it, added by And as increased actually here. EBITDA in actually to XX% you of the the sales, we to top level was store

So are midsize we the think the skills that bring I other think there. It's it's think I again, to The bigger the size. deal, just expertise and their going opportunity. execution opportunities given be smaller deal, the just I the of companies don't have some

Donald Bassell

me Hey, you hear Arie, can now?

Arie Kotler

Yes.

Donald Bassell

Yeah.

I So I was thought off mute.

like get, that. as things just we're, also looking to like It And structure One of same bigger there's waiting we're more obviously on you obviously did I well-defined important, saw, the all in comes three well, We're synergies is, platform, operating G&A think just and store not Handymark, we're we and come the and more our as not synergies lower with obviously, more segments. and the different only the too. at to now Anthony, come. the that's also do naturally. looking we're And think I we the level, to to things there's we the cost resets get efficient the the

to the but and as get focus So lead I to that, possible even which realize synergies to see more. grow there resets just quickly, soon these think we'll will big start us, really is do these as and

expectations the our it. we like note, when we looked acquisition, expectations I if on expectations, think with Corals one their, we to with our Empire. percentage don't you our at give a I exceeded we the Handymark, we exceeded I things want with exceeded So of think But

a operators, And internal so do make that part we things they down, facing do how as for formula the completely. the can customer do comes make in gotten just we really how now time, better processes? where start we not at do we're we've easier synergies, -- the on what fun that. won't do our even think say can I But focusing where now and we but it I like have point really more

the with So but standpoint own the synergies also only our grow. from will sites with organic sites, acquire not an

Operator

time. additional for this Thank in Mr. up like the comments. you. to queue over Kotler at back turn to questions showing for closing floor I'd I'm

Arie Kotler

Thank you very much.

anniversary we to a see, year call. all we a to are as And this Great a second had EBITDA a over from of had ready First, is getting hell I public of last This we're have would year. second grew $XXX close. lot like the of million -- quarter, being million year we that We to company here. joining $XXX this of another EBITDA you acquisitions can is questions you We two our that hell for a question, thank a which a time, year, again. great. grew

time very, numbers perform continue our And those well, continue we numbers. actually think we to to investors, Don I put of in front when beat very every earlier, mentioned we as execute.

great Thank to for everybody great have over trying conservative And XXXX I'm forward we're So a here. day. ultra you and for be participate, a looking

Operator

event. concludes This Ladies participation. and your today's you gentlemen, thank for

lines time and the the enjoy of webcast or You may this lock at disconnect your rest off day. your

Arko (ARKO) 28 Feb 232022 Q4 Earnings call transcript