ARKO - Earnings call transcript Q4 2024

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Operator

Greetings, and welcome to the Arko Corp. Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce our host, Jordan Mann, Senior Vice President of Corporate Strategy and Investor Relations.

Jordan Mann

Thank you. to Call Quarter and welcome XXXX Full and Conference Earnings Webcast. afternoon, Arko's and Fourth Year Good On today's President call Chief Officer. Executive are Arie Kotler, and Giammatteo, Chairman, Rob Executive Vice and Financial Officer; Chief President and

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

same otherwise call management will the today, to unless stated, period our XXXX. During results in compare

is information that all fourth we Before please financial begin, note quarter unaudited.

to EBITDA of our with December measures Form these in XXXX. adjusted reconciliations for law. on both this this share to on as management XXXX. call, statements cautionary and a statements revise update our the call, reflect whether by and the future new management release actual from such this detailed year Descriptions are end forward-looking year financial Any During GAAP may accordance of Litigation future Arko call, earnings materially a or full within no a today. and XX-K of the call and is XXXX cause meaning as to factors in make reported made on Securities report ended of to results GAAP our that release in views on statements we Private basis. otherwise, basis could as operating Reform non-GAAP made forward-looking quarter or various required our our XX, statements result this results events will forward-looking at of forward-looking Please use, except annual under non-GAAP the section events, Act forward-looking the or our earnings with fourth measures statements respect of that made review for information, results during during as On and current those call differ obligation

would less contribution, fuel is Additionally, measures segments, calculated along over management fuel business revenue call for subsidiary, fuel the exclude GPMP. by to intercompany Arie. profit individual charges costs now with turn which our will like I share to and as our And

Arie Kotler

afternoon, us challenging Good year a for company. that inflation will you and for and as Despite year joining the was XXXX spending, us. environment executing both and and a initiatives challenging a characterized pivotal believe strategic by we a the focused thank consumer Arko position macro challenging constrained remain growth. we for persistent on industry long-term for

and our tobacco expansion provide strategies with transformation program We of loyalty. the the a product plan, conditions pressures against other and adapt long-term to backdrop business profitability. customer ability customers reflecting to environment, continuing effectively continue engagement while and of of market our and our efficiencies our targeted focus results category customer while on maintaining Overall, guidance, delivered service and operational midpoint dynamic external food through a strong managed to work and enhance to promotional in the we our near on dealerization annual including drive value to value

increasing we including are as I our of we needs. upon will to customers' preferences, first what meet In to course continue food to service. to our for consumer demand evolving who Over we immediate the we and make customers. have made investments seeing, value touch to continue seek deliver the a and as XXXX, for to observed struggle well expectations OTPs higher consistently customers' response

discount We on believe enrolled launched have will through off promotions stores gallons kicked fuel. We inside relief with inside customers to only purchasing to This merchandise, Fueling to customers, our offers importantly, gallon value Americas grow up sizable that per but XX reward loyalty incredible members, value that when for to provide but provides our help our promotions which Future is our rewards loyalty earn up to program. recently notably, leads stores. $X we the off and XXXX to continue allow our not loyalty customers campaign, promotions on which

non-enrolled quarter, nearly During members than is the per an enrolled customers. spent month, average of more XX% $XXX which

visited effectiveness enrolled times per to non-enrolled members more average our loyalty about on stores our customers, reinforcing of month compared X Additionally, strategy. the

evolving to I call on OTP stated our of out Turning last preferences. X or consumers. members are that enrolled loyalty customer X cigarettes

expanding market category Over by announced the share to supplier drive gains. we activity and quarter, our promotional partnerships OTP optimizing strategic leveraging merchandising,

space assortment refresh shifting product Our to allowed with back allocation and bar align improve us has initiative consumer to demand. expand

the weeks. more quarter, the XXX and completed fourth of expect the back tobacco As refreshes to of end coming in XXX refresh bar we more than

deals quarter Our higher-margin strategy widening between represented OTP OTP the for point the to of momentum. sellers' Notably, the we category XXXX, customers tobacco our cigarettes. drive and ramped total of since quarter. gross further OTP half contribution Continuing in margin fourth significant in have OTP offering this to improvement momentum nearly during further cigarettes, XXX-basis promotional with start gap traditional in the the activity in and fourth around category, led OTP up a to category,

on X permits customer will while the upgrades foodservice value-driven to our towards seen already for we response offerings, working are options. include pilot we an made strong that Additionally, to have enhanced stores reinforcing our our delivering receiving foodservice we offering, focus have

grill Natan deals pizza, including frozen hotdogs bakery, to and and continue gain traction. Our efforts, roller promotional Famous hot

special than more pizza have $X.XX since we fact, XXX,XXX our sold QX XXXX. in pizza launching In

are enhance through and our and purchases quality strategies. promotions profitability, We bundling trial repeat refining convenience, targeted to foodservice strategy driving and

fuel. to Turning

a year normally quarter expand and price per retail the Same-store ability strategy year. gallons only the same-store fuel digits down fourth retail on backdrop Although to year, and and margin for while lower per prior despite in pressure pricing both preserve volume and fuel were the to margin. as the period was up year, for the for retail fourth mid-single down $X.XX the our gallon quarter helped $X.XXX full compared margin gallon fuel put reduced quarter demand, lower which costs declined volatility, fuel

progress the dealerization made over quarter, meaningful Lastly, we program. on our

and converting continue transformation sites strategically dealer locations rather are supply ongoing rental income broader operate generate of within select these we to higher plan, segment. through to stores dollars we retail retail than part agreements contribution where our we can believe fuel As our

Our to approach focus optimizing dealer XXXX. network high-performing stores enhance across portfolio, on entire initial platform. our retail sites us centered dealer to retail resources having dealerization, more exceeded our XXX our on than to stores profitability targets is leveraging allowing for while our We in our converted

to course a convert more conversion Surpassing Rob by of numbers to goal execution. stores of team's and focus to the our over more with end substance first expect testament We will XXXX is to XXXX be quarter. the stores number in XXX approximately provide of the meaningful additional the converted our a later.

million now generate program segment to with However, total expect excess our additional combined from G&A opportunity to in wholesale operating annualized benefit expense retail and we income of dealerization reduction. $XX an

our on financial our for our over to to I to strategic remains will customer delivering position engagement success. that, both efficiencies With We As we believe XXXX, and XXXX while results move priorities and disciplined long-term approach Arko Rob initiatives discuss our to our into value it customers stakeholders. guidance. focus our will growth, operational and turn

Robert Giammatteo

afternoon, Good you, Thank everyone. Arie.

caused for caused down relatively the by was year. and the million fuel adjusted in down demand cigarettes, period. line merchandise per lower Turning decline income $XX.X ago while the expenses gallon Retail period, contributed operating a in million volatility ago gallons million sales retail for Same-store $X.XXX compared for excluding was $XX.X fuel down the year level, from sales, our from decrease approximately fuel were the X.X% total was operating gallon down the was year. gallon year primarily ago with margin Same-store quarter. of period, year-on-year resulting margin same-store to $XX.X fuel gallon. down contribution X.X%. year $X.XXX were while fuel costs approximately for Same-store merchandise in versus X.X% per this quarter, EBITDA to rate the merchandise X.X% prior and $XX.X margin with for by to Total down fuel the At segment fourth lower the quarter, were year per lower the Same-store and million contribution. reduced-price was company the ago period, quarter. segment X.X% compared Same-store

million with period, the million Moving to our income primarily due to for Wholesale quarter quarter, up Operating to on ago the channel of relatively increase ago work. was year year in gallons to $XX $X.XX $X.XXX for optimization, were line the period. ago in $XX.X the optimization the our with per year channel segment. the Fuel Inclusive compared gallon gallon margin per was period.

in per compared to by the general which due lower the quarter company For resilient operating was $XX.X prior gallons down was per income and million compared in period, quarter gallon income expense $X.XXX the fuel operating with period, million in X% gallon $XX.X the year. year versus million prior to to with was compensation ago to quarter year the the year Increased $X.XXX $XX.X for Fleet segment primarily the $X.X increase driven performance, for Total period. million our year in total for ago margin period. segment, expense ago the was administrative stock-based the

were the compared ago $XX.X was and in change with year Please reference the XXXX $XXX.X financial $XX.X year-on-year total $XXX.X reconciliation million net to press general by Full year X% $X.X related in and income million adjusted ago from compared change a in million for the other and Excluding year quarter XXXX to interest period. for full period, Net period. million value primarily fair net was our year $X.X million year to $XX.X ago adjusted the income million for EBITDA. was to versus for our stock-based detailed $XX.X adjustments period. the ago period, compensation, loss ago income a to expenses loss down warrants. year EBITDA in million of was expense administrative the million year Net caused and release versus the net the company quarter

the sheet. Turning to balance

in million, We end, million of credit. availability on have of lines along with quarter hand approximately $XXX including $XXX our liquidity remaining on substantial at cash

undrawn Our we $XXX as ABL completely remains continue needs from working to capital cash flow. million operating manage

fourth the primarily liabilities, capital XXXX the XXXX One long-term related full million, of line comprised were financing of $XXX.X Capital ended Total debt, and to year real our estate expenditures outstanding expenditures on $XX.X capital financing. balance notes, with lease-related the the equipment $XXX quarter quarter million our with in for remainder Excluding and million. we senior

to full year Turning XXXX.

$XXX optimization of be million, We fuel a segment, gallon in ongoing expect $XXX channel Wholesale to assuming by to retail million of margin the our operating EBITDA our $X.XXX $X.XXX profit adjusted percent and to mid-teen total driven work. per growth company range in

of For of the to expect range EBITDA adjusted be $XX to XXXX, the million in $XX million. we first quarter company total

per performance channel will stores and be same-store retail in We as more year to will expect as through our for compared to we gallons optimization our average merchandise due work base XXXX retained productive that store sales materially change move our both the period. ago and

a merchandise total from store and we set retail result, QX framework our have walk retail to guidance performance sales average gallons. to segment up per As XXXX XXXX you QX estimated

is supported Our retail by the segment assumptions. following guidance key

We expect same-store average are an decline sales, we Using in to impact average QX XXXX be XXXX stores, a of resulting QX partially in estimating base store to in compared merchandise our retail in store ongoing a the increase XXXX, productivity year channel decline store a average will for optimization. as per ago our offset reflecting period. sales single-digit count the performance per QX X,XXX low

generally to in the ago We rates year with margin period. expect be merchandise line

increase resulting $X.XX in compared in we fuel, fuel we assuming decline more the than to And ago gallons an a range a per margin in offset same-store of average gallons, productivity store year to in will gallon. period. are the per in $X.XX retail a For expect single-digit fuel low increase

Moving on to segment. our Wholesale

channel margin And single gallon. driven remarks. segment, driven it ongoing operating our resilient mid-single-digit with I'll our expecting fuel for expected Fleet to growth low operating income And by are income hand Arie that, We optimization high back expect to double-digit by closing finally, work. for we growth per

Arie Kotler

and the additional unfavorably minimize Despite Rob. close our these key I will Headwinds challenges, sales from navigate challenges conditions regions. rather first customer help not peak we Seasonal months. execution would impacted some Thanks, weather mobility disciplined quarter on our in and guidance. the unusual, comments these summer across and with ability adverse than first during adapt softness impact. to is the now weather-related quarter

per control year, optimizing maintaining the prior was value can our plan to With we January discipline we note, to demonstrating $X.XXX pricing delivering and gallon pricing operate a continue positive fuel weather, On the both business customers. the control, to and strength resilience our operations, in and margin up of our of the to business. strategy what the

our landscape. to to Fueling We strategic about I'm value-driven the initiatives. reiterate dynamic on want including program, wrap our to committed I market transformation service, We dealerization campaign, to remain essentials optimistic our food making up, adapting As we America's strategies, serve. focus our store and our commitment families support more value-driven affordable we small which while reflect and look on costs. managing key Future forward the providing communities fuel discounts rising to businesses helping continue

Finally, of hard will this I throughout year. their With our for work up want day care to and it open thank ahead the in that, our the quarter questions. employees and taking and every we for quarters customers to dedication

Operator

[Operator Instructions] Raymond first question from is Our Bobby Griffin from James.

Robert Griffin

the in first so on with fuel margin. little midpoint I start And about want implies a it's more XXXX bit to down year-over-year or the guidance. $X.XX

there's I you you're with some help you of I can savings the well. other got cost So imagine that business pressures because but dots to just in maybe know dealerization the dealing starting as connect through, some flow those

to building there, just kind going So of blocks. trying those connect on

Robert Giammatteo

you with I think full in prepared go again, year, high now. as right same-store we're base a through. the about pretty as remarks, to my we're we Bobby, have shifting mentioned And guidance the staying Yes, as going

you time going the little this are the steering would at is which the why normally less to base change, we're metrics a as be relevant people So, average. same-store we give to

underlying know that. gallons steer you So, negative a QX facing going base because change, is mentioned away want pressure. that going And in And are same-store seeing merch we to from now guide, and some trend as the to in that put right I are in is again, to sales. the same-store do but we I

the from go We we a are negative the January, February has a year, there's heard through expecting off. of others, And do see right now. some to improve but think I starting as things you've a weather bit we had impact, trend drag as significant and year probably

again, go through on do looking both side those what again, and metrics, the merch the side. really store to year We and that's average we're expect, at. those So do expect we as we improve gallon the on

Robert Griffin

building we move prorated sense. And the And a there a makes is through 'XX? effect Or That as that change kind step then savings? of is dealerization of from each function there is that as maybe enter the quarter? year we savings

Robert Giammatteo

Yes.

So, first wholesale for you I for should quarter and expect the the up mid-teens being in guidance, we year. gave mid-single the -- the segment mean, you up

go more and to in The So that is to footprint. as stores. and become is the greater through going more remarks, business savings to going streamline accrue And will cumulative we new as retail to for Arie we greater. more get as we see we impact G&A start as the mentioned his prepared start

there So XXXX. to that be through 'XX, a will we continue as and go wraparound into accrue will

Robert Griffin

in some base? stores there. remodel dealerization the to maybe things. the want and the I initiatives? we then in initiatives side XXXX got are some or back we let's of You maybe during still of Can the But are for on pivot, existing I bar. are of know appreciate the that about help of network remaining, I of XXXX? with switch talk you RemainCo stores it, the the And the stores the all stuff in kind Where guys lot what are details else a to call have retail left the that done

Arie Kotler

supposed to is Fueling stores. the mean, process right we take thought is Future. campaign really concentrate our that This customers, I As feeling I of macroeconomic earlier, started to those called pressure a everybody America's Bobby is pressure. given campaign mentioned, on The now, care the

at inside over America's that's into Future. We're buy come going our gears customers basically supplier store going in on and we customers the count the we that business strategic we here, the on you are now and inside to from pump I the are and buy target to We with the Fueling pump go are way the provide past, fuel. store. In fuel. are actually leveraging encourage will encouraging look shifting mean to past, coming actually people usually, the to that our partnership, our we promotionals

this end basically per right that savings saving, $X We next this average where to every transaction, stack the our are about it's actually a And fill with on the day, be fill-up. to all most visit equal able between which end off shifting up be $XX. your sudden at times of up talking to means up our going up. going And we're a $X a you to now. we're which $XX to XX on around can gas is week your The energy gallons provide X, X to and is to of stores $XX of to going you're is consumer, gallons. And gallon saving per anywhere

to addition in that, XXX back stores. mentioned you In the bar just

We are ready is But OCP the fuel. just we have and weeks. to another tobacco really XXX complete stores idea few getting next the concentrate to on that in

the answer I permits, actually we but stores. at Permits March end those are the question remodeling, talked have them. take this of are for stores If And deals a X going and we stores of out our X out this to is great now. coming and you right of activity basically the think X consumer. we Tobacco actually concentrating tobacco people And promotional to we believe on little we pilot least of where the mean of late is customers concentrate start really in regarding actually to To at same of see finalizing is process about we're time, provides bit that, tobacco in X the going about X longer, promotional construction is basically at least that X on permits. be your fuel. the we customers and really to at XXXX.

spoke things than more happy service and of all I'm to are the past, the to, other and we food in we course, are addition doing elaborate. things the that those in that So of

Robert Griffin

I aspect we And it's yes, it through can off But if a obviously big very the of $X fuel, offline. mean, discount. go easier, that's maybe just

level when that maintaining that requirement or the does a into profitability we and and inside some gallon, further EBITDA because on significant, translate $X connect a the hear very us purchase? of the type help of well. profits on it how off $X Just there's So of the profitability it actually question maintaining sounds this business? a or driving $X Is store as

Arie Kotler

about is margin. That's It's margin not not a not and going going with apply going touch It's going to store. our vendors. store basically our to to actually which basically going all touch to decrease partners, it's in It's profitability and outside way. really combination the It's to to increase margin not partnership not inside profitability. the

with between fuel. in As to are promotion, products, gallons to what people our going drive everyday to of combination We're coming we're rural a trying but really we today they lot matter purchasing this locations, be lot a over are to Remember, drive that we to to of and stores are small we That's of believe not here. trying believe fact, essential buy we're operating a towns. able gallons. do

this not X. inside some fuel going But between see planning So to that or come to versa. not big reducing necessarily on are the with inside we margin vice not fuel buying We going reducing to and driving they're stores. the are getting store. stores our promotions, There we margin, we're many the are margin times, not pumps our the those are believe guidance, is be and -- customers to in to believe correlation clear, just customers that

Operator

Next question Kelly is BMO from Capital from Bania Markets.

Kelly Bania

trending these just with here out stores you same-store take remaining stores gallons those sales if shifts some insight the wondering XXX help just understand cumulative end and if will more bit give can you a the and dealerization us of polarized little for the by the given retail the how remaining stores us be that was are into I QX.

stores? some a same-store We disclosures and for from Just what's but have of happening? the the sales is happening on gallon release, the remaining trend what same-store

Arie Kotler

like would it? take to you Rob,

Robert Giammatteo

might and QX, company stores you outperformed, quarter-to-date. for they of outperforming as balance expect, Sure. QX outperformed Kelly, those are the the

that we're continue. before are -- the higher we're a but would my mentioned balance more still So we bit negative, run out are to they in remarks, are rate these higher going as we're those again, and but than calling And chain. prepared expect of give stores. trends, more again, it productive to little And they watching the that, I

going weighing of to macro competitive, benefit able we're perhaps the drive on again, competitive that have business some So more to been stores trends versus stores. that from less the some are of

Arie Kotler

was And on was concentrating just the transformation transformation from to Part we best that the sure plan part to of add that to is that stores. get-go, plan. the make are of Kelly, it, the

actually, concentrating see will that mature to organic stores of the some end the and stores We we're on or have the organic that just growth, that the we we at are believe basically those we day, in wholesale believe growth potential are stores the don't increase shifting segment. the we that

Kelly Bania

are they are They like sounds more performing it still negative. productive. So better, are they but

move So, of I'm I'm we you're through front improvement, the sequential level? expecting, merchandise understand understand have to what we comparisons. don't right, the seeing just the since on a you're as the magnitude XXXX, hearing if at category trying really Just what to that comp trying

Robert Giammatteo

same-store the We'll about because the that be want more be last of providing if it reporting now, both low year. to sales, it -- not way. about And you're base, the average talking we same-store get modeling challenges. to to be still will same-store you be for down single versus average you sales last are be we're what it, you to for same-store but to And it's digits it's store in merchandise these digits way. our same-store easier it per think up in be giving right average and guess, impractical to if is gallons. for of numbers or productive single to the store, terms purposes, that sales, merch talking Kelly, sales that's again, we detail. guiding modeling in And that it. store year we're to again, low Again, we as you negative going for and gallons be for about going steer comp store we're one average stores will about going again, offsetting But model going Where, you the I modeling so talking trend, per certainly

Kelly Bania

is this for And really help in intended with what the Where to both I customers, guess America grow of you I at kind talked to plan respect retail your also you do gallons, is mid-teens I about Fueling the side -- the but wholesale think Future think promotion. because to gallons. talked XXXX about guess, side wholesale. and the EBIT growth in you

what whole underlying here? So, assumptions kind are gallon of the plan

Robert Giammatteo

So, not we know, on have Kelly, gallons as wholesale you you're again, typically And driving. guided the side.

sites the CPG metrics various have growth. for the You for the the and gallon

If one on had gallons you about fourth fourth quarter that. give point wholesale as I to the the data X to channel. proxy, that million the you was just channel quarter, a We in shifting think optimization can roughly related

now, we at right stores, X we're that the give million indication to channel. ending level about at the an that with So fourth shifting were that you can quarter XXX gallons

the again, that get we significant. the going in XXX QX, modeling that's you will that what do you're and guys extra for as can see So you QX add to assuming QX, for

Arie Kotler

stores. I to traffic this the OTP now, the on see margin only this outside on QX. working. started clear; time, where concentrate we And you make Fueling to promotional We the we reason just comment Kelly, is QX, increasing results going in just gallons, America one growing traffic. already energy actually it the same saw because And growing basis which hear the campaign the that OTP fuel. with And we increase at add store. are mean store just tobacco to right inside is the to by QX. what fuel, our inside it's the and is it's were XXX We not I are believe In and and able actually points. that's in drive putting all we I we want the we activity tobacco very heavy of said.

Operator

is question Wells from Fargo. Bonadio Next from Anthony

Anthony Bonadio

you're So, seems wanted out fuel fuel on I 'XX. the The start pretty margins. suggest, on range guidance to in for outlook constructive margins to

we talk about you think assumptions with can trends? how versus broader industry about So, to how And came better trying up just that? should you the idiosyncratic that Just underlying contributions understand different range.

Robert Giammatteo

do specifics. talk the the and about Arie, you macro I can to want talk about

Arie Kotler

take macro. Iâ€™ll the

the talk about then You the macro. maybe can I'll talk about guidance, and

Robert Giammatteo

Yes.

up Arie softer Anthony, was year. nicely. month nicely it a January January So, was last year, And to again, as last up mentioned, but was

look of but we things to one the expense do structural and business of the traffic continue industry, the wage are space. the some increases seen as continue but moving As operating continue areas we've general have that continue the challenges mom-and-pops to the we well year, specific trends see players 'XX we us, full in at side 'XX. as we we up to increases. dynamics of same-store from where This is as see the we to of on other and do see that into Again, have 'XX it modestly the not for the to

the we go with competitive based of we quarter. So to that set. to are our again, happen again, we are some of the on the coming that to constructive based traffic out first as going at strategies, And pricing least look lever what on challenges expect on offset it at players

Arie Kotler

contribution maximize to we is mean We one information was fuel CPG I on, from based decline. basically with finished just you were of want that I X% course, and XXXX. our OPIS. everybody, We're that remind XXXX And it, course, thing published robust to from of X% The standpoint. to a very strategy as basically margin is to Anthony, dollars. always, on add in

sure and versus $X at make we're we to go we X that increase from business, start stores that inside going the We is that price it increase that a campaign are the the Future will this for our hopeful that Fueling given that some one Americaâ€™s and store, with gallons important will reasons of In of see gallons traffic. believe actually I macroeconomic the $X. the X. That's see of in very to after launched be And country, to believe what we fuel some is with to that believe order gallons, I X. with course, of a the a price our to least standpoint, start with for not fuel grab a starts traffic we belief. increase going areas country-wide. of my to

Anthony Bonadio

it just the you further Can OpEx, of same-store on straight you're 'XX? about there. as which is just improvement for move how just and key like then the that third the into in X.X% about drivers talk the thinking quarter opportunity decreased And quarter, there actually that we looks of declines

Robert Giammatteo

Anthony. Sure,

are some reductions demand a the obviously, for top to the store stores So of coverage. are the So line, of result in going on top that less we lower not have right? for as have minimum labor we're reduction, line expense

lower have credit We card fees.

be mean increase lower an tear. I sales. and traffic those of Some take would some reductions of wear and to repair would you those stronger are maintenance, -- less see

sales So more in you the and to again, you'd again, OpEx same-store see bit that a like effectively. bottom you we to of driving positive see love would margin forward, go be as little the control turning we're line. managing what But the would to growth can

we what managing we're again, well. can So control

our now. can we looking are managing expect we're that at year. we're through we again, as pick we're as the you be we calendar Obviously, well as in the we're expenses, things same-store move we quarter the right that's looking OpEx suggesting modeling up as and best that at are G&A to to first trends think, I going and front expecting we that on as and down, trend

we negative are So with right again, these we're trends. where just now

Arie Kotler

majority in days move XXX you believe, that that and that. the categories, very, happening is the the very, with mean negative is as summer, going trend, the I we I I'm related, I have, in on that belief is And I we I'm on mean, summer XXXX, concentration think of weather very optimistic the top see very of those bullish towards promotions the by most the my what X the starting towards May. spring especially into just And country. fair believe, activity benefit. I Anthony, way, of the

Operator

Mark from Stifel. is from question next Astrachan Our

Mark Astrachan

broadly, to just on months on kind the the Any maybe business had of of industry impact the of guess about sense started on first seems year? of in what kind categories if the And I half, to your of quarter 'XX. a the of C-store of just channel, look guess back more start in have it you or maybe weather. couple I fourth sold bunch store the weakening at commentary

kind improves? trying that the from C-stores. spread now grocery and more the just being thinner there's of instead consumer consumption? that to on if take a does into guess of X it, a environment We and can to just perspective trend. And into the other whether impact any shift you immediate just there's shift said, you're weather terms a consumer think curious, as reverse piece bulk in mass consumption weaker then home of as be. generally of things purchase impact of see that of away in Two, I or I things from an just a I'm one, X quarters channels in what bit So, on might

Arie Kotler

it. Yes, jump directly I'll into

the pressure, basically the I pressure, that think areas consumer the in the especially do we macroeconomic that feeling business. is

inside So, this pressure, this X the it those going to I of the fuel between on related is the consumer. it, believe on the those pressure you the reason, we categories, categories said X tobacco, that's because are it's think Mark, really tobacco traffic are way, and I the about the that and concentrating, if is we XX% our revenue. probably represent earlier, area And store. to the by inflation, bring to to fuel And concentrating,

big those X categories of declining, very, very, up but saw know cigarettes is you in declining. are XXXX. Yes, I have what X think those picking exchange is because cigarette related what, don't promotions We in OTP Fuel to is categories just We very happened declining. decline.

just February. $X basically active in you over snowstorms I per were so So what it. to sitting weather. to had we're gallons, of oil mean up X areas the few of when the instead don't in And are reason basically drive the usually doing, one on what see to that many which in see weather I America drive gallon, very, believe those in going we the January; that's happened going the past I had Fueling fronts. middle brought mean we -- the another traffic, Related hurt we we the country the Future we sideline, that's that's very to with on I weather, in we years. mean, and

I those the with As is prefer them honest issues And I having you, I to that's, take January, be as February, I think, something that to rather said, mean, part during account. weather our have during into of I this guidance, summer. have we

with that this something the of it's not them it's time we sometimes year. unexpected So, -- during

Robert Giammatteo

point we really and There impact and baseline tough trend. baseline. many it's That's precipitation an for been they've we sustained, that with region by X read And do aggressively volatility there's daily at looking difficult so been much so and temperature, and broad And events been it's what even we're establish impact, difficult it's it been why weather and that read. weeks whether try very has it's or noisy the but that to it to believe have to us Mark, have this to it's quantifying performance. in, a There's has whether the trend so been been been is, challenging.

Mark Astrachan

just maybe clarification. a then And

company be talked implying versus margin thinking I you're could focused with that wrong guess gallons. like I fuel And focusing we've So, some Is I you're within there the feel do sounds historically, focus promotion, like you've to strategically, shift now on it gallons, the about but margin. fuel on in been more when that? more on

Arie Kotler

No. No, no, no, no.

So, traffic. clear, is drive to America's really be Fueling future to

on concentrating are traffic. We

is those The traffic those maximize need reason to order you real able store. going really I them. the discounts, you dollars. to for Because to drive the is in believe We get store. increase inside just here. going over believe up for change. to we our going those as that to those give get gallon we to those is be basically the basically by definition, with gallon, inside change per said, minute believe, But going idea the to to the that. that's get And to the store strategy fuel traffic you discounts, Nothing always, doing is are you're that get promotions promotions we inside or by to big get We to not off contribution $X to

Operator

from Martinson is Karru question from Next Jefferies.

Karru Martinson

you within kind the at stores, conversion is mean, the I retail channel? look of of these When that higher-performing the of what think do core you stores

Robert Giammatteo

What core do you the of the [indiscernible]? mean

Karru Martinson

is that down if that what like with you're you stores a core right when X,XXX over we'll better averaging faster-growing the is done to, of as get think do a now that goes improved, channel? we're kind little the So, dealerization retail forward

Arie Kotler

to Rob, would take it? you like

Robert Giammatteo

Yes.

and sharing and Again, own we've sites is externally. with our talked number is, can this already only it a about look transition, was we you sharing forward obviously to XXX, QX. comfortable dealer our think be we XXX a at got count have a many counterparties, impact. QX mentioned to QX meaningful for at one We expect guiding we that what to if QX and your you as that we've of looking we've full targets are before sure we release modeling make plans. parts, on determinations are We're I'm make not certain but before, is have we're I internal QX. year that over we got In are but

again, I'm on you be going pivoted expect more organization that. do is to But we'll pursue quarter giving detail we be much updating And leave again, it this discretion to The as again, and the to to yourself. we So your that have postured aggressively it. to and meaningful. model

Arie Kotler

clear, it's quality. be just want to it's care about clear, we to the just about more quantity, We quantity. quantity, I care be the not about And about less the quality. the

want see is we thought scale. opportunity we keep have sure in increase huge and the those We I over to stores economy stores. are resources the opportunity footprint we allocate that huge of that profitability invest plan, transformation are that in our we stores. of see here. mean process make really We're going to things efficiency. part We to the those As our doing to for these optimize more

huge the of to day, great end like ourselves. we that with By So, stores. upside end we see up at a that stores for the the the the are are the stores other stores way, would

for just to opportunities what I moving there. spend are can areas the think, some day And to of the doing time just actually profitability. great terrific. that of that's those customers those are are are at sitting way, day. right profitability growth We actually that to wholesale When we that's unique years unique that by by them segment the those think that over our we the feel X,XXX we dealers to end are going thing And think, stores line increase stores the we entrepreneurs, the bought the be some I believe and of the luxury I resources the some to We we of little others. exactly right dealers for here bit ago, but that we we that X be that just we run a is about when because place customers end different going that they in dealers. the see organic have X,XXX shifting. is, huge over we're those that of control Empire going basically that's plan, we're think Arko stores but bottom than Today, over have are And around The at I have some now increase to we this we now. that was need not

Karru Martinson

you it is is basis? kind regions? Or more or just store-by-store regions? to of kind more going when a optimizing that about is And potentially footprint, it Or it adding think exiting more on of -- certain

Arie Kotler

of of that got X over growth store-by-store next basis store at feel that the is But stores obviously, to one are going to end an store see mean, the day, that we're there, this this course, region. not the huge exit are have potential to of like we there that if have we have I We it, potential unbelievable we growth. do going

are yes, we regions. So concentrating on

We are concentrating states. on

We're population. We on go concentrating at -- on in as increased. looking a analysis but can that growth. looking store-by-store we opportunity We're year plan, happened, started mean I looking transformation literally the mean really by of looking what it's store. part market, our it's demographic. We're we I that what on what I see happened for on on basis. the last on. and are areas we're

Operator

from Next question Barclays. is Hale Holden from

Hale Holden

I questions. X have

The your guidance, the for million. about I EBITDA the is midpoint first holistically, guidance the one is think if $XXX just year,

million 'XX. guys in $XXX did You

So, EBITDA and time I'm annual trying to why you that to savings $XX through get dealerization bridge figure the perhaps in guide? we're that out into not to million over how expect flow seeing the to

Robert Giammatteo

Sure. I'll take that one.

an So, right? And of steady you XXXX $XX 'XX, likely to annualize rate. state activity to as we program, not run you the possibly think know, is run when but would in million, about that start So, the from the this of be QX we'll annualized as at rate are like start later that's the again, at XXXX, until in achieved. be

channel optimization we as work. million the in remarks, prepared mentioned due my was $X in fourth I So, our the to are, wholesale profitability up quarter

fourth level are you'd that done The that now, we've last being the current end of at got that XXX. to stores quarter. of So, at $X.X the stores done million million translate you were $X another get if that right we rate, out talked about quarter for the that the run

there's more to mentioned, already come. As

seeing the will you not at full into annualized rate in you're until run And not far accrue you're that's $XX the So, be deeper XXXX. reason million XXXX. the

Hale Holden

is apples-to-apples it obviously, EBITDA the to going may here? is be does we be it trends EBITDA? that but way I'm have do about absolute I would guys is -- it are moving Because the number? lower, the lower think to from parts. mean, resulting what how a in So I maybe Or like lower of an about think trying And dealerization to you another think -- lot is feel just

Robert Giammatteo

accretive it's not. program. an certainly not. It's It's No, definitely It's accretive.

low pretty gallons, get look yourself negative, and same-store think at versus we're you I can can but what does going to is the I'm a in been for says, is some not decrease talked the the pick you the right, have says that about to that food offset that program. doing the place of what XXXX store and on if again, transitioning while metrics you're gallons. quickly of look if I'm same at stores, -- able if number, provide those guiding that, XXXX to to to saying what same-store place for should that merchandising What's you there. a as longer-term we the be you more core customer remodel it? my activating and and or same-store trends performance negative a you do And single-digit same-store a just business sales the negative, that's P&L I'm some buoyancy already organic bridge What to optimize channels then here the into to transition and strategy. math That's do

that should again, place 'XX understanding accretive you optimization, is to a able an quarter-by-quarter. to math what going should be you same-store significantly you 'XX, get that base do business says this same-store So, trends. purely same-store program the thinking to be if doing, as is from the some about And moving the underlying for be to channel offsetting of

Arie Kotler

one thing. Just more to add

converted. to As are mentioned I meaningful be number stores earlier, I a mentioned going of

going If of we're change. things to But it's careful It's be So, at the move just over trying end the able to to timing. also about be timing, we're might here. be clear. all about day, to quickly,

Hale Holden

number CapEx stores of should don't And with penciling then free you're kind flow be is new really you I the out planning a although cash way we're positive, build. to that have the

you make transition, 'XX. of through to just be kind in the I cash flow year go this expect for to you So, positive as free sure that wanted

Robert Giammatteo

cash were But versus compliance, CapEx. XXXX those and 'XX find QX of if just spend with that in you I of line full you on at build those dollars accretive remodel for you those think it's that history, assume reasonable things 'XX strategic available to towards numbers on reasonable to And very much And be electric for 'XX programs CapEx year some if deal. EMV prior 'XX related reallocated XXXX of that it's guidance some versus administration, positive of QX think I assume you'll consistent. more to 'XX, that year nature. give relatively in will looking you the model full related again, vehicle at some and program, the look store don't we spending So, were to itself. And based things

Operator

from from is question of Bank William Reuter America. Next

William Reuter

I I only one. think have

on of pretty Do program, dealerization regard transformative be transactions the those, a divestitures? new stores all still with which are evaluating acquisitions potentially table? retail are meaning, without forward the you other is the whether Given moving more or stores to still would all the of of much they large this be strategy numbers of you external environment, alternatives,

Arie Kotler

Nothing Absolutely. Absolutely. changed.

course. mentioned, dealerization just absolutely. last to what right yes, basically middle it's something I this we to around We're last year. accordance But basically the program table. we're that As everything going right nothing based on we a we're plan And mean evaluate of transformation become the in starting started executing. continuing I return is we're investment, of opportunity off the now. in And is year. are And plan if our on doing quarter great that third now, available,

the available. have team We

plan We over have our the here. liquidity. And part is also M&A of

William Reuter

the either stores of So, Is both sale or at a table. would be acquisition a bunch which huge I a imply or a right? a I larger is time, guess described, would those that that both directions majority alternatively on that of of still that

Arie Kotler

transformation right that look The don't into will is have the And with we if the now, more plan. piece we happy acquisition, be table now it, a on to our on we dealerization, large sure piece, there second second continue table than the Besides right is the absolutely. piece. we have making that

Operator

the question-and-answer closing floor any I'd concludes the back to turn like comments. session. for This to management

Arie Kotler

really $X I up, I In per very much, a are to up guys are Thank evening. up you. gallon, fill our to and everybody, opportunities. visit have guys to had providing it's good lot XX meantime, you I gallons, off we a for off opportunity the the you a to of America's mean to you much, you $XX stores. a Okay. great from participating. our Future. and Thank Fueling And hope for explore guys regarding visit going questions you very operator. that Thank stores

Operator

This concludes today's teleconference.

for at disconnect Thank participation. you You lines this time. your may again your

Arko (ARKO) 26 Feb 252024 Q4 Earnings call transcript