Earning Date, Transcript Summary & Report

Resilient Performance Amid Challenges: Despite a challenging microenvironment, ARKO managed to deliver results near the midpoint of their annual guidance, showcasing their ability to adapt to market conditions and drive operational efficiencies.

Fuel Loyalty Program Launch: The company launched the 'Fueling America's Future Campaign', allowing loyalty customers to earn significant discounts on fuel, which has proven effective in increasing customer engagement and loyalty.

Loyalty Program Impact: Enrolled loyalty members spent an average of $104 per month, nearly 60% more than non-enrolled customers, and visited stores three more times per month on average, highlighting the success of their loyalty strategy.

OTP Gross Margin Improvement: The OTP category saw a 200 basis points improvement in gross margin, with OTP representing nearly half of the total tobacco category contribution in Q4, indicating successful optimization and promotional activities.

Tobacco Product Enhancement: The company completed over 800 tobacco backbar refreshes and plans to continue enhancing their product assortment to align with shifting consumer demand, which is expected to drive further market share gains.

Fuel Margin Management: Fuel pricing strategy helped preserve margins despite lower demand, with same store retail fuel margin only down $0.011 per gallon compared to the prior year, demonstrating effective management in a challenging market.

Dealerization Program Success: The dealerization program has successfully converted over 150 retail stores to dealer sites in 2024, with expectations for additional conversions in 2025, which is projected to generate an annualized benefit exceeding $20 million.

Strong Liquidity Position: The company reported substantial liquidity of approximately $841 million, including $262 million in cash, providing a strong financial position to support ongoing operations and growth initiatives.

EBITDA Decline Analysis: Total company adjusted EBITDA decreased to $56.8 million from $61.8 million year-over-year, primarily due to lower retail fuel and merchandise contribution.

Retail Operating Income Decline: Retail segment operating income fell to $62.9 million from $72.3 million in the previous year, indicating a decline in profitability.

Decline in Same Store Sales: Same store merchandise sales dropped by 2.1%, and total same store merchandise sales decreased by 4.3%, reflecting weak consumer demand.

Fuel Contribution Decline: Same store fuel contribution was down 7.1% for the quarter, driven by a decline in gallons sold and lower fuel margins.

Quarterly Net Loss Decline: Net loss for the quarter was $2.3 million, a significant decline from a net income of $1.1 million in the same period last year.

Declining Adjusted EBITDA: Full year 2024 total company adjusted EBITDA was $248.9 million, down from $276.3 million in the previous year, indicating a downward trend in profitability.

Net Income Decline: Full year net income decreased to $20.8 million from $34.6 million, highlighting a significant drop in earnings.

Rising Operational Costs: General and administrative expenses increased to $39.7 million from $38.1 million, indicating rising operational costs despite efforts to control expenses.