ARKO (US:ARKO)2025-05-08 20:05PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, prepared in accordance with U.S. GAAP - The company operates across retail, wholesale, fleet fueling, and GPMP segments, with 1,329 retail stores, 1,961 dealer gas stations, and 280 cardlock locations as of March 31, 20253334 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $265,420 | $261,758 | | Total current assets | $719,230 | $722,208 | | Total assets | $3,602,555 | $3,620,658 | | Liabilities & Equity | | | | Total current liabilities | $462,931 | $445,490 | | Long-term debt, net | $866,097 | $868,055 | | Total liabilities | $3,247,329 | $3,243,792 | | Total shareholders' equity | $255,226 | $276,866 | Condensed Consolidated Statements of Operations Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $1,828,905 | $2,072,454 | | Total operating expenses | $1,838,452 | $2,074,844 | | Operating loss | $(11,764) | $(4,866) | | Net loss attributable to ARKO Corp. | $(12,672) | $(594) | | Net loss per share (basic and diluted) | $(0.12) | $(0.02) | Condensed Consolidated Statements of Cash Flows Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,402 | $12,755 | | Net cash used in investing activities | $(26,904) | $(28,175) | | Net cash used in financing activities | $(19,365) | $(20,268) | | Net decrease in cash | $(2,867) | $(35,688) | Notes to Condensed Consolidated Financial Statements - The company declared and paid a dividend of $0.03 per share on March 21, 2025, totaling approximately $3.5 million56 - During Q1 2025, the company repurchased approximately 1.3 million shares for about $5.2 million, with $20.5 million remaining under the repurchase program as of March 31, 202558 - The company accrued approximately $2.0 million for a potential wage and hour collective action settlement, with a possible additional loss of up to $1.2 million9697 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025 performance to macroeconomic challenges and the Transformation Plan, with total revenues decreasing to $1.83 billion and a net loss of $12.7 million, while maintaining $847 million in liquidity - The company is implementing a multi-year Transformation Plan to convert retail stores to dealer sites, invest in remaining stores, and improve pricing and procurement111112 - During Q1 2025, 59 retail stores were converted to dealer sites as part of the Transformation Plan112113 Consolidated Key Metrics Q1 2025 vs Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Fuel gallons sold (thousands) | 490,340 | 519,313 | | Fuel margin (cents per gallon) | 24.9 | 24.8 | | Merchandise contribution (in thousands) | $117,570 | $134,918 | | Merchandise margin | 33.2% | 32.5% | | Adjusted EBITDA (in thousands) | $30,855 | $33,165 | Segment Results Retail Segment Performance Q1 2025 vs Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating income (in thousands) | $40,151 | $46,513 | | Same store fuel gallons sold decrease | (6.2%) | (6.7%) | | Fuel margin (cents per gallon) | 37.9 | 36.4 | | Same store merchandise sales decrease | (6.9%) | (4.1%) | | Merchandise margin | 33.2% | 32.5% | - The Wholesale segment's operating income slightly increased to $18.6 million, with gallon volume growing 1.5% due to new dealer site conversions157158 - The Fleet Fueling segment's operating income increased to $11.0 million from $9.8 million year-over-year, driven by favorable diesel margins despite a 4.2% decrease in gallons sold165166 Use of Non-GAAP Measures Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(12,672) | $(594) | | Interest and other financing expenses, net | 13,851 | 2,457 | | Income tax benefit | (12,922) | (6,707) | | Depreciation and amortization | 34,887 | 31,716 | | EBITDA | 23,144 | 26,872 | | Adjustments (Acquisition costs, impairment, etc.) | 7,711 | 6,293 | | Adjusted EBITDA | $30,855 | $33,165 | Liquidity and Capital Resources - As of March 31, 2025, the company maintained a strong liquidity position of approximately $847 million, including $265 million in cash and $582 million in credit availability184 - Net cash from operating activities increased to $43.4 million in Q1 2025 from $12.8 million in Q1 2024, driven by dealer deposits, vendor incentives, and favorable working capital191 Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's primary market risks, including commodity price volatility and interest rate fluctuations, where a 1% increase in variable rates would raise annual debt service by approximately $4.3 million - The company faces commodity price risk, as rising fuel prices can reduce consumer demand and increase credit card processing fees206 - Approximately 49% of the company's debt carries variable interest rates, with a 1% rate increase leading to an approximate $4.3 million rise in annual debt service207 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of March 31, 2025208 - No material changes to the company's internal control over financial reporting occurred during the quarter ended March 31, 2025209 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 11, detailing a term sheet to settle a wage and hour collective action, with $2.0 million accrued and a potential additional loss of up to $1.2 million - The company entered a term sheet to settle Fair Labor Standards Act allegations, accruing approximately $2.0 million with a potential additional loss of up to $1.2 million9697 Risk Factors No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to the company's risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2024211 Unregistered Sales of Equity Securities, and Use of Proceeds This section details Q1 2025 share repurchase activity, with 1,775,587 shares bought at an average of $4.14 per share, leaving approximately $20.5 million available Share Repurchase Activity for Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Value Remaining for Purchase (end of period) | | :--- | :--- | :--- | :--- | | Jan 2025 | — | — | $25,655,000 | | Feb 2025 | 252,344 | $4.51 | $25,605,000 | | Mar 2025 | 1,523,243 | $4.08 | $20,484,000 | | Total Q1 | 1,775,587 | $4.14 | $20,484,000 | Other Information During Q1 2025, no officers or directors adopted or terminated any Rule 10b5-1(c) trading plans for company securities - No officers or directors adopted or terminated any Rule 10b5-1(c) trading plans during the three months ended March 31, 2025215