ARKO (ARKO) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Overview ARKO Corp. reported strong Q2 2025 results, with increased net income, improved margins, and significant strategic transformation progress Key Financial & Operational Highlights ARKO Corp. reported increased net income and improved margins in Q2 2025 compared to the prior year, alongside significant progress in its transformation plan, including converting 70 retail stores to dealer sites and opening its first new format store | Metric | Q2 2025 | Q2 2024 | Change | | :----------------------------- | :------ | :------ | :----- | | Net income | $20.1M | $14.1M | +$6.0M | | Adjusted EBITDA | $76.9M | $80.1M | -$3.2M | | Merchandise margin | 33.6% | 32.8% | +0.8% | | Retail fuel margin (cents/gallon) | 44.9 | 41.6 | +3.3 | - Converted 70 retail stores to dealer sites in Q2 2025, totaling 282 sites since mid-2024, with plans for more conversions into 2026. This channel optimization is expected to yield over $20 million in cumulative annualized operating income benefit and over $10 million in annual structural G&A savings[7] - Opened the first new format store in June 2025, with another opened in early August 2025, as part of a pilot program to modernize store layouts, broaden and refine merchandise offerings, and introduce an improved food-forward focus[7] - Opened a new location in Kinston, North Carolina in July 2025 and is advancing its NTI (new-to-industry) store pipeline with three more NTI stores in progress, two targeted for opening in the second half of 2025[7] CEO Commentary CEO Arie Kotler highlighted solid Q2 results, with Adjusted EBITDA exceeding guidance and expanded merchandise margin, attributing success to disciplined execution amidst macroeconomic challenges. He emphasized progress in higher-margin categories, loyalty programs, and new store formats, reinforcing the strategy's effectiveness at the store level. Kotler also noted the company's commitment to disciplined capital allocation through share repurchases and a focus on elevating customer experience and advancing transformation for sustainable shareholder value - Adjusted EBITDA exceeded the midpoint of guidance[5] - Merchandise margin expanded year-over-year[5] - Made important progress across several key initiatives, including continued growth in higher-margin categories like OTP, increased engagement from loyalty-driven promotions, and opening the first new format store where early results are exceeding expectations[5] - Repurchased 2.2 million shares of common stock during the quarter, reflecting belief in the long-term value of the business and commitment to disciplined capital allocation[5] Segment Performance Analysis ARKO's Q2 2025 segment performance showed varied trends, with retail volume declines, wholesale operating income growth, and improved fleet fueling margins Retail Segment The Retail segment faced declines in fuel gallons sold and merchandise revenue in Q2 2025, primarily due to store conversions and a challenging macroeconomic environment. However, both fuel margin and merchandise margin improved year-over-year | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :-------- | :-------- | :--------- | | Fuel gallons sold (thousands) | 240,302 | 283,481 | (15.2%) | | Same store fuel gallons sold decrease (%) | (6.5%) | (6.6%) | +0.1% | | Fuel contribution | $107,872 | $117,981 | (8.6%) | | Fuel margin (cents per gallon) | 44.9 | 41.6 | +3.3 | | Merchandise revenue | $400,126 | $474,248 | (15.7%) | | Merchandise contribution | $134,485 | $155,759 | (13.7%) | | Merchandise margin | 33.6% | 32.8% | +0.8% | - Decrease in merchandise contribution ($21.3 million) was due to an $18.0 million decrease related to retail stores that were closed or converted to dealers and a $3.7 million decrease in same store merchandise contribution, primarily caused by a decline in customer transactions reflecting the challenging macroeconomic environment[8] - Fuel contribution decreased $10.1 million, primarily due to a $9.4 million decrease related to retail stores that were closed or converted to dealers and a same store fuel contribution decrease of $0.8 million attributable to gallon demand declines[9] Wholesale Segment The Wholesale segment reported increased operating income and fuel contribution in Q2 2025, primarily driven by additional operating income from retail sites converted to dealers, which offset reduced operating income at comparable wholesale sites. Fuel margins also improved across both fuel supply and consignment agent locations | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------------------------------ | :-------- | :-------- | :--------- | | Fuel gallons sold – fuel supply (thousands) | 213,529 | 203,561 | +4.9% | | Fuel gallons sold – consignment (thousands) | 38,929 | 39,338 | (1.0%) | | Fuel contribution – fuel supply | $13,484 | $12,287 | +$1,197 | | Fuel contribution – consignment | $11,905 | $11,699 | +$206 | | Fuel margin – fuel supply (cents/gallon) | 6.3 | 6.0 | +0.3 | | Fuel margin – consignment (cents/gallon) | 30.6 | 29.7 | +0.9 | - Wholesale operating income increased $2.0 million compared to the second quarter of 2024, with additional operating income from retail sites converted to dealers more than offsetting reduced operating income at comparable wholesale sites[12] - Other revenues, net increased by approximately $5.7 million, and site operating expenses increased by $5.1 million, primarily resulting from retail stores that the Company converted to dealers in the trailing 12 month period[13] Fleet Fueling Segment The Fleet Fueling segment experienced a slight decrease in total fuel contribution in Q2 2025, with proprietary cardlocks seeing a decline. However, fuel margins per gallon increased for both proprietary and third-party cardlock locations, driven by favorable diesel margins and the closure of underperforming third-party sites | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------------------------------ | :-------- | :-------- | :--------- | | Fuel gallons sold – proprietary (thousands) | 32,997 | 35,678 | (7.5%) | | Fuel gallons sold – third-party (thousands) | 3,293 | 3,271 | +0.7% | | Fuel contribution – proprietary | $17,070 | $17,529 | -$459 | | Fuel contribution – third-party | $698 | $331 | +$367 | | Fuel margin – proprietary (cents/gallon) | 51.7 | 49.1 | +2.6 | | Fuel margin – third-party (cents/gallon) | 21.2 | 10.1 | +11.1 | - At proprietary cardlocks, fuel contribution decreased by $0.5 million, while fuel margin per gallon increased primarily due to favorable diesel margins[14] - At third-party cardlock locations, fuel contribution increased by $0.4 million, and fuel margin per gallon also increased, primarily due to the closure of underperforming third-party locations[14][15] Operational and Strategic Initiatives ARKO advanced its strategic transformation in Q2 2025, converting retail stores to dealer sites and launching new format stores to enhance customer experience Store Conversion and Optimization ARKO actively pursued its channel optimization strategy in Q2 2025, converting 70 company-controlled retail sites to consignment or fuel supply locations. This initiative has led to a reduction in the retail store count and a corresponding increase in wholesale sites, with a total of 282 conversions since mid-2024 | Segment | Metric | Q2 2025 | Q2 2024 | | :------ | :-------------------------------------------------- | :------ | :------ | | Retail | Number of sites at beginning of period | 1,329 | 1,540 | | | Company-controlled sites converted to consignment or fuel supply locations, net | (70) | (2) | | | Number of sites at end of period | 1,254 | 1,548 | | Wholesale | Number of sites at beginning of period | 1,961 | 1,816 | | | Consignment or fuel supply locations converted from Company-controlled or fleet fueling sites, net | 70 | 2 | | | Number of sites at end of period | 2,014 | 1,794 | - The Company converted 70 retail stores to dealer sites during the three months ended June 30, 2025. Since mid-2024, a total of 282 sites have been converted, with plans for more throughout 2025 and into 2026. This is expected to yield a cumulative annualized operating income benefit in excess of $20 million and over $10 million in annual structural G&A savings[7] New Store Formats and Openings ARKO launched its first new format store in June 2025, part of a pilot program to modernize store layouts, broaden merchandise, and introduce a food-forward focus. The company also opened a new location in North Carolina and is developing three more new-to-industry (NTI) stores, with two targeted for opening in the second half of 2025 - The first new format store opened in June 2025 and another opened in early August 2025, as part of a pilot program to elevate the customer experience by modernizing store layouts, broadening and refining merchandise offerings, and introducing an improved food-forward focus[7] - In July 2025, the Company opened a new location in Kinston, North Carolina. The Company continues to advance its NTI (new-to-industry) store pipeline and has begun working on three more NTI stores, out of which two are targeted to open in the second half of 2025[7] Financial Performance Summary ARKO's Q2 2025 financial performance showed increased net income and improved margins, with a slight Adjusted EBITDA decrease and reduced site operating expenses Consolidated Results (Net Income, Adjusted EBITDA, Margins) ARKO's Q2 2025 consolidated results show a notable increase in net income and improved merchandise and retail fuel margins, even as Adjusted EBITDA slightly decreased | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----------------------------- | :------ | :------ | :----- | | Net income | $20.1M | $14.1M | +$6.0M | | Adjusted EBITDA | $76.9M | $80.1M | -$3.2M | | Merchandise margin | 33.6% | 32.8% | +0.8% | | Retail fuel margin (cents/gallon) | 44.9 | 41.6 | +3.3 | | Revenue Category | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change (in thousands) | | :--------------- | :--------------------- | :--------------------- | :------------------------ | | Fuel revenue | $1,569,542 | $1,887,531 | -$317,989 | | Merchandise revenue | $400,126 | $474,248 | -$74,122 | | Other revenues, net | $29,851 | $26,384 | +$3,467 | | Total revenues | $1,999,519 | $2,388,163 | -$388,644 | Site Operating Expenses Convenience store operating expenses decreased by $25.9 million, or 12.8%, in Q2 2025 compared to the prior year. This reduction was primarily driven by a $25.4 million decrease from closed or converted retail stores and a $1.4 million decrease in same store operating expenses due to lower personnel costs and credit card fees, partially offset by expenses from the SpeedyQ acquisition - Convenience store operating expenses decreased $25.9 million, or 12.8%, compared to the prior year period[16] - The decrease was primarily due to a $25.4 million decrease from retail stores that were closed or converted to dealers and a $1.4 million (0.8%) decrease in same store operating expenses related to lower personnel costs and credit card fees[16] - The decrease was partially offset by incremental expenses related to the SpeedyQ acquisition that closed in April 2024[16] Liquidity, Capital Allocation & Financial Position ARKO maintained strong liquidity in Q2 2025, demonstrating disciplined capital allocation through strategic investments, share repurchases, and consistent dividends Liquidity and Capital Expenditures As of June 30, 2025, ARKO reported total liquidity of approximately $875 million, comprising cash and credit line availability. The company's net debt stood at approximately $623 million, and capital expenditures for the quarter were $45.3 million, focused on property acquisitions, new stores, remodels, and infrastructure upgrades | Metric (as of June 30, 2025) | Amount (approx.) | | :--------------------------- | :--------------- | | Total liquidity | $875 million | | Cash and cash equivalents | $294 million | | Availability under lines of credit | $582 million | | Outstanding debt | $916 million | | Net debt (excl. lease liabilities) | $623 million | - Capital expenditures were approximately $45.3 million for the quarter ended June 30, 2025, including the purchase of 22 fee properties, investments in NTI stores and remodeling of the new format stores, EV chargers, upgrades to fuel dispensers and other investments in stores[17] Quarterly Dividend and Share Repurchase Program ARKO's Board declared a quarterly dividend of $0.03 per share, consistent with its capital allocation framework. The company also repurchased approximately 2.2 million shares for $9.2 million during the quarter, with $11.3 million remaining under the program, demonstrating confidence in its financial strength and cash generation - The Board declared a quarterly dividend of $0.03 per share of common stock to be paid on August 29, 2025 to stockholders of record as of August 18, 2025[7][18] - During the quarter, the Company repurchased approximately 2.2 million shares of common stock under its previously announced repurchase program for approximately $9.2 million, or an average price of $4.11 per share[5][19] - There was approximately $11.3 million remaining under the share repurchase program as of June 30, 2025[19] Balance Sheet Overview As of June 30, 2025, ARKO's total assets slightly decreased to $3.609 billion from $3.621 billion at year-end 2024. Current assets saw a modest increase, while total liabilities remained stable. Shareholders' equity decreased slightly, primarily due to treasury stock repurchases | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total assets | $3,608,822 | $3,620,658 | -$11,836 | | Total current assets | $743,484 | $722,208 | +$21,276 | | Cash and cash equivalents | $293,675 | $261,758 | +$31,917 | | Inventory | $207,190 | $231,225 | -$24,035 | | Total liabilities | $3,243,987 | $3,243,792 | +$195 | | Total shareholders' equity | $264,835 | $276,866 | -$12,031 | - Long-term debt, current portion, increased from $12,944 thousand at December 31, 2024, to $39,867 thousand at June 30, 2025[36] Outlook and Guidance ARKO provided Q3 2025 Adjusted EBITDA guidance of $70 million to $80 million and reaffirmed its full-year 2025 Adjusted EBITDA guidance of $233 million to $253 million Third Quarter and Full Year 2025 Guidance ARKO Corp. provided guidance for Q3 2025 Adjusted EBITDA, expecting it to range between $70 million and $80 million, with an assumed retail fuel margin of 42.5 to 44.5 cents per gallon. The company maintained its full-year 2025 Adjusted EBITDA guidance of $233 million to $253 million | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :-------------------- | :--------------- | :---------------------- | | Adjusted EBITDA | $70M - $80M | $233M - $253M | | Avg. Retail Fuel Margin | 42.5 - 44.5 cents/gallon | N/A | - The Company is not providing guidance on net income at this time due to the volatility of certain required inputs that are not available without unreasonable efforts, including future fair value adjustments associated with its stock price, as well as depreciation and amortization related to its capital allocation as part of its focus on accelerating organic growth[23] Company Information and Disclosures This section provides an overview of ARKO Corp., its business segments, and key disclosures on forward-looking statements, non-GAAP measures, and investor contacts About ARKO Corp. ARKO Corp. is a Fortune 500 company and one of the largest convenience store operators and fuel wholesalers in the U.S., owning GPM Investments, LLC. It operates in four segments: retail, wholesale, fleet fueling, and GPM Petroleum, offering a range of products and services across its Family of Community Brands - ARKO Corp. (Nasdaq: ARKO) is a Fortune 500 company that owns 100% of GPM Investments, LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States[25] - Operates in four reportable segments: retail (convenience stores selling merchandise and fuel to retail customers), wholesale (supplies fuel to independent dealers and consignment agents), fleet fueling (proprietary and third-party cardlock locations, proprietary fuel cards), and GPM Petroleum (sells and supplies fuel to retail and wholesale sites and charges a fixed fee, primarily to fleet fueling sites)[25] Forward-Looking Statements This section contains standard legal disclaimers regarding forward-looking statements, highlighting that they are based on management's current expectations and are subject to uncertainties and changes in circumstances. Actual results may differ materially due to various economic, business, market, and regulatory factors, including the success of the company's transformation plan - Forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in circumstances[26] - Actual results may differ materially due to, among other things, changes in economic, business and market conditions; changes in its strategy; changes in applicable laws or regulations; and the success of the Company's transformation plan, including the dealerization of retail stores[26] Use of Non-GAAP Measures This section defines and explains the non-GAAP financial measures used by ARKO Corp., specifically "same store basis," EBITDA, and Adjusted EBITDA. It clarifies that these measures are used for operational and financial decision-making and performance evaluation but should not be considered substitutes for GAAP measures, emphasizing their limitations and potential non-comparability with other companies' metrics - The Company discloses certain measures on a "same store basis," which is a non-GAAP measure, to provide greater comparability regarding its ongoing operating performance[27] - EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding specific non-recurring or non-cash items[28] - EBITDA and Adjusted EBITDA are used for operational and financial decision-making and are useful in evaluating performance, but are not recognized terms under GAAP and should not be considered as a substitute for net income (loss) or any other financial measure presented in accordance with GAAP[29][30] Conference Call and Webcast Details ARKO Corp. hosted a conference call on August 6, 2025, to discuss the Q2 2025 results, with details provided for live participation and webcast access - The Company hosted a conference call on August 6, 2025, to discuss these results at 5:00 p.m. Eastern Time[24] - A simultaneous, live webcast was available on the Investor Relations section of the Company's website at https://www.arkocorp.com/news-events/ir-calendar and will be archived for 30 days[24] Contact Information Contact details for ARKO Corp.'s investor relations are provided for inquiries - Company Contact: Jordan Mann, ARKO Corp., investors@gpminvestments.com[32] - Investor Contact: Sean Mansouri, CFA, Elevate IR, (720) 330-2829[32] Condensed Consolidated Financial Statements This section presents ARKO's condensed consolidated financial statements for Q2 2025, detailing operations, balance sheets, and cash flows, including revenue, expenses, assets, and liquidity Statements of Operations For Q2 2025, ARKO reported total revenues of $1.999 billion, a decrease from $2.388 billion in Q2 2024. Despite this, operating income increased to $56.7 million from $42.9 million, and net income attributable to common shareholders rose to $18.7 million from $12.6 million, resulting in diluted EPS of $0.16 | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Total revenues | $1,999,519 | $2,388,163 | -$388,644 | | Operating income | $56,690 | $42,948 | +$13,742 | | Income before income taxes | $37,172 | $21,581 | +$15,591 | | Net income attributable to ARKO Corp. | $20,098 | $14,063 | +$6,035 | | Net income attributable to common shareholders | $18,665 | $12,618 | +$6,047 | | Diluted EPS | $0.16 | $0.11 | +$0.05 | | Expense Category (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :------------------------------ | :------ | :------ | :--------- | | Fuel costs | $1,417,646 | $1,726,761 | -$309,115 | | Merchandise costs | $265,641 | $318,489 | -$52,848 | | Site operating expenses | $202,453 | $223,691 | -$21,238 | | General and administrative expenses | $40,742 | $42,436 | -$1,694 | Balance Sheets ARKO's balance sheet as of June 30, 2025, shows total assets of $3.609 billion, a slight decrease from year-end 2024. Current assets increased, driven by higher cash and trade receivables, while inventory decreased. Total liabilities remained stable, and shareholders' equity saw a minor reduction | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total assets | $3,608,822 | $3,620,658 | -$11,836 | | Total current assets | $743,484 | $722,208 | +$21,276 | | Cash and cash equivalents | $293,675 | $261,758 | +$31,917 | | Inventory | $207,190 | $231,225 | -$24,035 | | Total liabilities | $3,243,987 | $3,243,792 | +$195 | | Total shareholders' equity | $264,835 | $276,866 | -$12,031 | - Long-term debt, current portion, significantly increased from $12,944 thousand at December 31, 2024, to $39,867 thousand at June 30, 2025[36] Statements of Cash Flows For Q2 2025, net cash provided by operating activities was $55.2 million, a decrease from $77.2 million in Q2 2024. Net cash used in investing activities increased to $43.5 million, while net cash provided by financing activities was $15.3 million, a significant improvement from a net use in the prior year. Overall, cash and restricted cash increased by $26.9 million | Cash Flow Category (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net cash provided by operating activities | $55,185 | $77,219 | -$22,034 | | Net cash used in investing activities | ($43,528) | ($24,472) | -$19,056 | | Net cash provided by (used in) financing activities | $15,259 | ($7,403) | +$22,662 | | Net increase in cash and cash equivalents and restricted cash | $26,916 | $45,344 | -$18,428 | - Operating activities included a $20.8 million gain from sale-leaseback in Q2 2025, compared to none in Q2 2024[38] - Investing activities saw a substantial increase in purchase of property and equipment ($45.3 million vs. $19.3 million) and no business acquisitions in Q2 2025 compared to $53.5 million in Q2 2024. Financing activities were positively impacted by receipt of long-term debt ($37.3 million vs. $6.0 million) and reduced common stock repurchases ($9.2 million vs. $68 thousand)[38][39] Supplemental Financial Information This section provides supplemental financial details, including the reconciliation of non-GAAP measures like EBITDA and Adjusted EBITDA, along with detailed segment-specific financial performance Reconciliation of Non-GAAP Measures (EBITDA & Adjusted EBITDA) ARKO Corp. provides a reconciliation of net income to EBITDA and Adjusted EBITDA. For Q2 2025, EBITDA was $90.3 million, and Adjusted EBITDA was $76.9 million, a decrease from $80.1 million in Q2 2024, primarily influenced by a significant gain on disposal of assets | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Net income | $20,098 | $14,063 | +$6,035 | | EBITDA | $90,318 | $76,553 | +$13,765 | | Adjusted EBITDA | $76,938 | $80,070 | -$3,132 | - Adjusted EBITDA for Q2 2025 includes a significant adjustment for a $(18.2) million gain on disposal of assets and impairment charges, compared to a $0.7 million loss in Q2 2024. This gain includes a $20.8 million gain related to the expiration of a real estate purchase option received in 2021 that was accounted for as a sale-leaseback[41][42] Segment-Specific Financials (Retail, Wholesale, Fleet Fueling) This section provides detailed financial breakdowns for ARKO's three primary operating segments. The Retail segment saw a decrease in total revenues but maintained strong operating income. The Wholesale segment experienced growth in both total revenues and operating income, largely due to dealer conversions. The Fleet Fueling segment reported a decrease in total revenues but a slight increase in operating income for the six-month period Retail Segment Financials The Retail segment's total revenues decreased to $1.163 billion in Q2 2025 from $1.467 billion in Q2 2024, primarily due to lower fuel and merchandise revenues. Operating income also saw a decline to $80.4 million from $87.9 million | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Fuel revenue | $748,103 | $976,372 | -$228,269 | | Merchandise revenue | $400,126 | $474,248 | -$74,122 | | Total revenues | $1,162,851 | $1,467,355 | -$304,504 | | Operating income | $80,370 | $87,925 | -$7,555 | Wholesale Segment Financials The Wholesale segment reported an increase in total revenues to $709.2 million in Q2 2025 from $769.5 million in Q2 2024. Operating income grew to $23.2 million from $21.3 million, driven by higher other revenues and fuel contribution from converted sites | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Fuel revenue | $696,671 | $762,693 | -$66,022 | | Other revenues, net | $12,501 | $6,850 | +$5,651 | | Total revenues | $709,172 | $769,543 | -$60,371 | | Operating income | $23,242 | $21,270 | +$1,972 | Fleet Fueling Segment Financials The Fleet Fueling segment's total revenues decreased to $120.4 million in Q2 2025 from $142.4 million in Q2 2024. Operating income slightly decreased to $13.1 million from $13.7 million for the quarter, but for the six-month period, it increased to $24.1 million from $23.5 million | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Fuel revenue | $118,121 | $140,140 | -$22,019 | | Total revenues | $120,366 | $142,424 | -$22,058 | | Operating income | $13,079 | $13,702 | -$623 |