Strong Quarter Led by Higher Merchandise Contribution and Acquisitions
RICHMOND, Va., Aug. 07, 2023 (GLOBE NEWSWIRE) -- ARKO Corp. ( ARKO) (“ARKO” or the “Company”), a Fortune 500 company and one of the largest convenience store operators in the United States, today announced financial results for the quarter ended June 30, 2023.
Second Quarter 2023 Key Highlights1
- Net income for the quarter was $14.5 million, compared to $31.8 million in the prior year quarter, primarily due to an approximately $15 million increase in depreciation and amortization expenses in connection with recent acquisitions, and favorable fair-value adjustments in the prior year quarter.
- Adjusted EBITDA for the quarter was $86.2 million, an increase of $7.2 million, as compared to $79.0 million in the prior year quarter.
- Same store merchandise sales excluding cigarettes increased 3.8% for the quarter compared to the prior year period; same store merchandise sales increased 0.7% for the quarter compared to the prior year period.
- Merchandise gross profit contribution grew by $6.5 million for the quarter, or 5.0%, on a same store basis, as compared to the prior year period.
- Merchandise margin continued to increase by 150 basis points to 31.9% for the quarter compared to 30.4% in the prior year period.
- Total retail gallons increased 15.9% in Q2 2023 compared to Q2 2022, while volumes on a same store basis declined 2.6%.
Other Key Highlights
- On June 6, 2023, closed the acquisition of the retail, wholesale and fleet fueling assets of WTG Fuels Holdings, LLC (“WTG”), the owner of Uncle’s Convenience Stores and GASCARD fleet fueling operations (the “WTG Acquisition”).
- Currently available financing of more than $2 billion, including cash, lines of credit and Oak Street agreement.
- Renewal and increase of GPMP credit line to $800 million, extending maturity to 2028.
- Amended and extended the program agreement with Oak Street, a division of Blue Owl Capital (“Oak Street”), with capacity of up to $1.5 billion (in addition to the funding for the WTG Acquisition).
- Ended quarter with 1.48 million total enrolled fas REWARDS® members, representing a 10.5% increase in enrolled marketable members since the first quarter of 2023.
- On June 30, 2023, introduced a new Pride location in South Windsor, Connecticut, boasting almost 5,000 square feet, indoor and outdoor seating, and a drive through for even more convenience.
- Named for the second consecutive year to the 2023 Fortune 500 list, ranking 460th, moving up 38 places from 2022.
- ARKO Corp.’s Board of Directors increased the Company’s authorized share repurchase program from $50 million to $100 million.
- ARKO Corp.’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on September 1, 2023, to stockholders of record as of August 15, 2023.
“I am very proud of the results and performance that the employees of our company were able to achieve this quarter,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “The team’s key focus is to improve our core convenience store operations through targeted initiatives, like increasing assortment and merchandising mix to give our customers the options and convenience they seek. We always strive to provide the best service and store experience for our customers. We are very pleased with the pace of integration and early results of recent acquisitions. ARKO’s results this quarter demonstrate that our organic initiatives and core M&A and integration capabilities help create long-term stockholder value.”
1 See Use of Non-GAAP Measures below.
Second Quarter 2023 Segment Highlights
Retail
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| (in thousands) | |||||||||||||||
| Fuel gallons sold | 293,584 | 253,243 | 542,490 | 492,801 | |||||||||||
| Same store fuel gallons sold decrease (%) 1 | (2.6 | %) | (10.6 | %) | (4.2 | %) | (7.1 | %) | |||||||
| Fuel margin, cents per gallon 2 | 39.7 | 41.3 | 37.7 | 39.4 | |||||||||||
| Merchandise revenue | $ | 484,561 | $ | 431,751 | $ | 884,849 | $ | 798,736 | |||||||
| Same store merchandise sales increase (decrease) (%) 1 | 0.7 | % | (2.7 | %) | 2.1 | % | (3.1 | %) | |||||||
| Same store merchandise sales excluding cigarettes increase (%) 1 | 3.8 | % | 1.4 | % | 5.6 | % | 0.8 | % | |||||||
| Merchandise contribution 3 | $ | 154,658 | $ | 131,364 | $ | 277,623 | $ | 239,556 | |||||||
| Merchandise margin 4 | 31.9 | % | 30.4 | % | 31.4 | % | 30.0 | % | |||||||
| 1 Same store is a common metric used in the convenience store industry. We consider a store a same store beginning in the first quarter in which the store had a full quarter of activity in the prior year. Refer to Use of Non-GAAP Measures below for discussion of this measure. | |||||||||||||||
| 2 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. | |||||||||||||||
| 3 Calculated as merchandise revenue less merchandise costs. | |||||||||||||||
| 4 Calculated as merchandise contribution divided by merchandise revenue. | |||||||||||||||
The table below shows financial information and certain key metrics of recent acquisitions in the Retail Segment that do not have comparable information for the prior periods.
| For the Three Months Ended June 30, 2023 | For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||
| Pride 1 | TEG 2 | Uncle’s (WTG) 3 | Total | Pride | TEG | Uncle’s (WTG) 3 | Total | ||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||
| Date of Acquisition: | Dec 6, 2022 | Mar 1, 2023 | Jun 6, 2023 | Dec 6, 2022 | Mar 1, 2023 | Jun 6, 2023 | |||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||
| Fuel revenue | $ | 71,388 | $ | 99,128 | $ | 6,098 | $ | 176,614 | $ | 139,425 | $ | 131,202 | $ | 6,098 | $ | 276,725 | |||||||||||||||
| Merchandise revenue | 15,629 | 39,381 | 2,846 | 57,856 | 29,143 | 52,324 | 2,846 | 84,313 | |||||||||||||||||||||||
| Other revenues, net | 1,397 | 1,322 | 54 | 2,773 | 2,784 | 1,731 | 54 | 4,569 | |||||||||||||||||||||||
| Total revenues | 88,414 | 139,831 | 8,998 | 237,243 | 171,352 | 185,257 | 8,998 | 365,607 | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||
| Fuel costs | 64,335 | 90,832 | 5,020 | 160,187 | 125,299 | 120,617 | 5,020 | 250,936 | |||||||||||||||||||||||
| Merchandise costs | 10,185 | 27,189 | 1,927 | 39,301 | 19,383 | 36,126 | 1,927 | 57,436 | |||||||||||||||||||||||
| Store operating expenses | 10,495 | 18,064 | 1,225 | 29,784 | 20,030 | 23,576 | 1,225 | 44,831 | |||||||||||||||||||||||
| Total operating expenses | 85,015 | 136,085 | 8,172 | 229,272 | 164,712 | 180,319 | 8,172 | 353,203 | |||||||||||||||||||||||
| Operating income | $ | 3,399 | $ | 3,746 | $ | 826 | $ | 7,971 | $ | 6,640 | $ | 4,938 | $ | 826 | $ | 12,404 | |||||||||||||||
| Fuel gallons sold | 19,387 | 30,165 | 1,714 | 51,266 | 37,278 | 40,057 | 1,714 | 79,049 | |||||||||||||||||||||||
| Merchandise contribution 4 | 5,444 | 12,192 | 919 | 18,555 | 9,760 | 16,198 | 919 | 26,877 | |||||||||||||||||||||||
| Merchandise margin 5 | 34.8 | % | 31.0 | % | 32.3 | % | 33.5 | % | 31.0 | % | 32.3 | % | |||||||||||||||||||
| 1 Acquisition of Pride Convenience Holdings, LLC (“Pride”) | |||||||||||||||||||||||||||||||
| 2 Acquisition from Transit Energy Group and affiliates (“TEG”); includes only the retail stores acquired in the TEG acquisition. | |||||||||||||||||||||||||||||||
| 3 Includes only the retail stores acquired in the WTG acquisition. | |||||||||||||||||||||||||||||||
| 4 Calculated as merchandise revenue less merchandise costs. | |||||||||||||||||||||||||||||||
| 5 Calculated as merchandise contribution divided by merchandise revenue. | |||||||||||||||||||||||||||||||
For the second quarter, retail fuel profitability (excluding intercompany charges by the Company’s wholesale fuel distribution subsidiary, GPM Petroleum LP (“GPMP”)) increased approximately $11.9 million to $116.6 million compared to the prior year per
