ARKO (ARKO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents ARKO Corp.'s unaudited condensed consolidated financial statements, management's discussion, market risks, and controls Item 1. Financial Statements Presents ARKO Corp.'s unaudited condensed consolidated financial statements and detailed notes for Q2 2025 and H1 2025 Condensed Consolidated Balance Sheets Summarizes ARKO Corp.'s financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Assets | | | | Total current assets | $743,484 | $722,208 | | Total non-current assets | $2,865,338 | $2,898,450 | | Total assets | $3,608,822 | $3,620,658 | | Liabilities | | | | Total current liabilities | $481,042 | $445,490 | | Total non-current liabilities | $2,759,485 | $2,790,244 | | Total liabilities | $3,243,987 | $3,243,792 | | Series A redeemable preferred stock | $100,000 | $100,000 | | Total shareholders' equity | $264,835 | $276,866 | Condensed Consolidated Statements of Operations Details ARKO Corp.'s revenues, expenses, and net income for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,999,519 | $2,388,163 | $3,828,424 | $4,460,617 | | Total operating expenses | $1,960,084 | $2,344,954 | $3,798,536 | $4,419,798 | | Operating income | $56,690 | $42,948 | $44,926 | $38,082 | | Income before income taxes | $37,172 | $21,581 | $11,557 | $14,258 | | Net income attributable to ARKO Corp. | $20,098 | $14,063 | $7,426 | $13,469 | | Net income attributable to common shareholders | $18,665 | $12,618 | $4,575 | $10,610 | | Net income per share – basic | $0.16 | $0.11 | $0.04 | $0.09 | | Net income per share – diluted | $0.16 | $0.11 | $0.04 | $0.09 | Condensed Consolidated Statements of Changes in Equity Outlines changes in ARKO Corp.'s equity, including common stock, treasury stock, and retained earnings, for the periods presented Condensed Consolidated Statements of Changes in Equity (in thousands, except share data) | Metric | Balance at April 1, 2025 | Balance at June 30, 2025 | Balance at January 1, 2025 | | :----------------------------------- | :----------------------- | :----------------------- | :------------------------- | | Common Stock (Shares) | 115,437,127 | 113,312,302 | 115,771,318 | | Common Stock (Par Value) | $12 | $12 | $12 | | Treasury Stock, at Cost | $(113,514) | $(122,813) | $(106,123) | | Additional Paid-in Capital | $280,017 | $283,675 | $276,681 | | Accumulated Other Comprehensive Income | $9,119 | $9,119 | $9,119 | | Retained Earnings | $79,592 | $94,842 | $97,177 | | Total Shareholders' Equity | $255,226 | $264,835 | $276,866 | | Net income (Q2 2025) | $20,098 | | | | Net income (H1 2025) | | | $7,426 | - Common stock repurchases for the six months ended June 30, 2025, totaled $16.69 million, reducing treasury stock[20] - Dividends declared for common stock totaled $6.91 million for the six months ended June 30, 2025[20] Condensed Consolidated Statements of Cash Flows Presents ARKO Corp.'s cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $98,587 | $89,974 | | Net cash used in investing activities | $(70,432) | $(52,647) | | Net cash used in financing activities | $(4,106) | $(27,671) | | Net increase in cash and cash equivalents and restricted cash | $24,049 | $9,656 | | Cash and cash equivalents and restricted cash, end of period | $316,487 | $251,039 | - Cash paid for interest was $43.675 million in H1 2025, down from $45.872 million in H1 2024[29] - Purchases of property and equipment under leases amounted to $44.044 million in H1 2025[29] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of ARKO Corp.'s significant accounting policies, debt, leases, and other financial instruments 1. General Describes ARKO Corp.'s business operations, including its retail convenience stores, dealer stations, and cardlock locations - ARKO Corp. operates 1,254 retail convenience stores, supplies fuel to 2,014 dealer gas stations, and operates 287 cardlock locations across more than 30 U.S. states and the District of Columbia as of June 30, 2025[33] - The Company has four reportable segments: retail, wholesale, fleet fueling, and GPMP[34] 2. Summary of Significant Accounting Policies Outlines the accounting principles and policies used in preparing the interim financial statements, including seasonality and recent legislation - The interim financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X[36] - The Company experiences seasonal fluctuations, with disproportionately higher operating income in the second and third quarters due to favorable climate and seasonal buying patterns[38] - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, and the Company is currently assessing its impact on consolidated financial statements[49] 3. Debt Details ARKO Corp.'s debt structure, including Senior Notes, M&T debt, Capital One Line of Credit, and insurance premium notes Debt Components (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :------------------ | | Senior Notes | $445,690 | $445,263 | | M&T debt | $88,718 | $57,380 | | Capital One Line of Credit | $376,679 | $375,951 | | Insurance premium notes | $5,319 | $2,405 | | Total debt, net | $916,406 | $880,999 | | Less current portion | $(39,867) | $(12,944) | | Total long-term debt, net | $876,539 | $868,055 | - GPM amended its M&T Credit Agreement on May 13, 2025, increasing real estate loans from $49.5 million to $83.7 million, with the additional $34.2 million maturing in May 2030[51] 4. Leases Provides information on ARKO Corp.'s lease arrangements, including leased properties and total lease costs for various periods - As of June 30, 2025, the Company leased 1,023 retail convenience stores, 418 dealer locations, 154 cardlock locations, and other spaces[53] Total Lease Costs (in thousands) | Lease Cost Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Finance lease cost (depreciation & interest) | $6,520 | $6,883 | $13,298 | $13,635 | | Operating lease costs (site operating & G&A) | $48,621 | $48,374 | $97,111 | $95,587 | | Other lease costs | $1,708 | $(304) | $2,993 | $1,860 | | Total lease costs | $56,849 | $54,953 | $113,402 | $111,082 | - The Company recorded a gain of approximately $20.8 million in Q2 2025 from the expiration of a real estate purchase option, treated as a sale-leaseback[55] 5. Financial Derivative Instruments Explains ARKO Corp.'s use of derivative instruments, specifically futures contracts, to manage diesel fuel price risks - The Company uses derivative instruments (futures contracts) to manage diesel fuel price risks, designated as fair value hedges of firm commitments[59] - As of June 30, 2025, the Company had fuel futures contracts hedging approximately 1.9 million gallons of diesel fuel[60] 6. Equity Details ARKO Corp.'s equity activities, including common stock dividends and share repurchases under its repurchase program - The Board declared and paid dividends of $0.03 per share of common stock on March 21, 2025, and May 30, 2025, totaling approximately $6.9 million for the six months ended June 30, 2025[62] - The Company repurchased approximately 3.5 million shares of common stock for $14.3 million (average price $4.07/share) during the six months ended June 30, 2025, under its $125 million share repurchase program[63] 7. Share-Based Compensation Reports on ARKO Corp.'s share-based compensation costs and activity for nonvested RSUs and PSUs for the periods presented - Total share-based compensation cost for employees and Board members was $7.0 million for the six months ended June 30, 2025, up from $6.1 million in the prior year[72] Nonvested RSUs and PSUs Activity (in thousands) | Metric | RSUs and PSUs | | :---------------------------------- | :------------ | | Nonvested RSUs and PSUs, Dec 31, 2024 | 4,612 | | Granted | 3,715 | | Released | (1,618) | | Forfeited | (163) | | Performance-based share adjustment | (347) | | Nonvested RSUs and PSUs, June 30, 2025 | 6,199 | - Unrecognized compensation cost related to RSUs and PSUs was approximately $22.0 million as of June 30, 2025, to be recognized over an average of 1.9 years[71] 8. Earnings per Share Presents ARKO Corp.'s basic and diluted net income per share attributable to common shareholders for the periods presented Net Income Per Share Attributable to Common Shareholders | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders | $18,665 | $12,618 | $4,575 | $10,610 | | Weighted average common shares outstanding — Basic | 114,012 | 115,758 | 114,945 | 116,512 | | Weighted average common shares outstanding — Diluted | 115,411 | 116,880 | 115,645 | 117,073 | | Net income per share – Basic | $0.16 | $0.11 | $0.04 | $0.09 | | Net income per share – Diluted | $0.16 | $0.11 | $0.04 | $0.09 | - Potential shares from stock options, Ares warrants, Public and Private warrants, and Series A redeemable preferred stock were excluded from diluted EPS computation due to their antidilutive effect[73] 9. Fair Value Measurements and Financial Instruments Discusses the fair value measurements of ARKO Corp.'s financial instruments, including Senior Notes, Public Warrants, and contingent consideration - The fair value of Senior Notes was estimated at $380.3 million as of June 30, 2025, compared to a gross carrying value of $450 million[74] - The fair value of Public Warrants decreased significantly from $6.7 million (Dec 31, 2024) to $0.2 million (June 30, 2025)[77] - Contingent consideration from the 2020 Empire acquisition was $3.9 million as of June 30, 2025, measured at Level 3 fair value[75] 10. Segment Reporting Outlines ARKO Corp.'s reportable segments: retail, wholesale, fleet fueling, and GPMP, and how operating income is assessed - The Company's reportable segments are retail, wholesale, fleet fueling, and GPMP, with operating income used by the CODM to assess performance[81] - The retail segment operates convenience stores selling fuel and merchandise, owning inventory and employing staff[83] - The GPMP segment primarily engages in inter-segment wholesale fuel distribution to GPM's retail and wholesale sites at cost plus a fixed margin (currently 5.0 cents per gallon)[86] 11. Commitments and Contingencies Details ARKO Corp.'s environmental obligations, asset retirement obligations, and a wage and hour collective action settlement - Environmental obligations totaled $11.4 million as of June 30, 2025, with estimated recoveries from insurance and state funds of $6.9 million[96][97] - An asset retirement obligation of $88.9 million was recorded as of June 30, 2025, for future storage tank removal costs[98] - The Company accrued approximately $2.0 million in Q1 2025 for a wage and hour collective action settlement, with a potential additional loss of up to $1.2 million[101] 12. Related Party Transactions Confirms no material changes to the description of related party transactions as previously disclosed in the annual financial statements - There have been no material changes to the description of related party transactions as set forth in the annual financial statements[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses ARKO Corp.'s business, transformation plan, key trends, financial results, liquidity, and non-GAAP measures Overview Provides an overview of ARKO Corp.'s operations, including its store count, loyalty program, and wholesale fuel distribution strategy - ARKO Corp. operates 1,254 retail convenience stores, supplies fuel to 2,014 dealer gas stations, and operates 287 cardlock locations across more than 30 U.S. states and the District of Columbia as of June 30, 2025[107] - The Company's fas REWARDS® loyalty program had approximately 2.35 million enrolled members by Q2 2025, a 9.8% increase YoY[109] - The Company is expanding its wholesale fuel distribution network by converting retail locations to dealer sites, expecting greater profitability and enhanced purchasing power[110] Description of Segments Describes the operational characteristics and business models of ARKO Corp.'s retail, wholesale, fleet fueling, and GPMP segments - Retail segment: Operates convenience stores, owning merchandise and fuel inventory, and employing personnel[111] - Wholesale segment: Supplies fuel to dealers, sub-wholesalers, and bulk/spot purchasers on consignment or cost-plus basis[112] - Fleet Fueling segment: Operates proprietary and third-party cardlock locations and earns commissions from proprietary fuel card sales[113] - GPMP segment: Primarily engages in inter-segment wholesale fuel distribution to retail and wholesale sites at cost plus a fixed margin[114] Multi-Year Transformation Plan Outlines ARKO Corp.'s strategic initiatives, including retail store conversions, new format store investments, and procurement strategies - The Transformation Plan includes converting retail stores to dealer sites, with 70 conversions in Q2 2025 and 129 in H1 2025, totaling 282 since mid-2024[116] - The Company is investing in new format stores, launching a flagship location in June 2025, featuring a modernized layout and a new food and beverage concept, 'fas craves'[116] - Increased focus on pricing and procurement strategies across retail stores aims to support ongoing merchandise margin rate growth[116] Trends Impacting Our Business Discusses key external and internal factors influencing ARKO Corp.'s business, such as acquisitions, fuel margins, inflation, and seasonality - The Company completed 26 acquisitions from 2013 through June 30, 2025, including 21 SpeedyQ Markets convenience stores in Michigan on April 9, 2024[120] - Operating results are significantly impacted by retail fuel margins, which are influenced by wholesale fuel costs, supply disruptions, and local competition[122] - Inflation and higher interest rates have increased merchandise costs and reduced consumer purchasing power, leading to increased wages and potential negative impacts on demand[124] - The business is seasonal, with operating income historically higher in the second and third quarters due to favorable climate and seasonal buying patterns[127] Results of Operations for the three and six months ended June 30, 2025 and 2024 Analyzes ARKO Corp.'s consolidated and segment-specific financial performance for the three and six months ended June 30, 2025, and 2024 Consolidated Results Summarizes ARKO Corp.'s overall financial performance, including revenues, operating income, net income, and Adjusted EBITDA Consolidated Financial Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,999,519 | $2,388,163 | $3,828,424 | $4,460,617 | | Operating income | $56,690 | $42,948 | $44,926 | $38,082 | | Net income attributable to ARKO Corp. | $20,098 | $14,063 | $7,426 | $13,469 | | Fuel gallons sold | 531,186 | 567,609 | 1,021,526 | 1,086,922 | | Fuel margin, cents per gallon | 28.6 | 28.3 | 26.8 | 26.7 | | Merchandise contribution | $134,485 | $155,759 | $252,055 | $290,677 | | Merchandise margin | 33.6% | 32.8% | 33.4% | 32.7% | | Adjusted EBITDA | $76,938 | $80,070 | $107,793 | $113,235 | Three Months Ended June 30, 2025 versus Three Months Ended June 30, 2024 Compares ARKO Corp.'s financial results for Q2 2025 against Q2 2024, highlighting changes in revenue, operating income, and tax expense - Fuel revenue decreased by $318.0 million (16.8%) due to lower average fuel prices and fewer gallons sold[133] - Merchandise revenue decreased by $74.1 million (15.6%) due to store closures/conversions and lower same-store sales[134] - Operating income increased to $56.7 million from $42.9 million, primarily driven by a $20.8 million gain on sale-leaseback, partially offset by lower merchandise and fuel contribution[138][139] - Income tax expense increased to $17.1 million from $7.5 million, mainly due to deferred income tax expense related to the sale-leaseback gain[141] Six Months Ended June 30, 2025 versus Six Months Ended June 30, 2024 Compares ARKO Corp.'s financial results for H1 2025 against H1 2024, focusing on changes in fuel revenue, merchandise revenue, and operating income - Fuel revenue decreased by $502.4 million (14.3%) due to lower average fuel prices, fewer gallons sold, and severe weather in early 2025[143] - Merchandise revenue decreased by $134.3 million (15.1%) due to store closures/conversions and lower same-store sales[144] - Operating income increased to $44.9 million from $38.1 million, driven by the $20.8 million gain on sale-leaseback and benefits from converted retail stores, partially offset by lower same-store contribution and higher D&A[148][149] - Interest and other financial expenses, net, increased by $9.5 million, primarily due to lower fair value adjustments for warrants and deferred consideration income in the prior year[150] Segment Results Analyzes the financial performance of ARKO Corp.'s individual segments: Retail, Wholesale, Fleet Fueling, and GPMP Retail Segment Details the Retail segment's revenues, operating income, fuel gallons sold, and merchandise sales for the periods presented Retail Segment Financial Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,162,851 | $1,467,355 | $2,222,569 | $2,723,117 | | Operating income | $80,370 | $87,925 | $120,521 | $134,438 | | Fuel gallons sold | 240,302 | 283,481 | 465,365 | 538,945 | | Same store fuel gallons sold decrease (%) | (6.5%) | (6.6%) | (6.4%) | (6.6%) | | Fuel margin, cents per gallon | 44.9 | 41.6 | 41.5 | 39.1 | | Same store merchandise sales decrease (%) | (4.2%) | (5.1%) | (5.5%) | (4.6%) | | Merchandise margin | 33.6% | 32.8% | 33.4% | 32.7% | - Retail fuel revenue decreased by $228.3 million (23.4%) in Q2 2025 due to a 6.5% decrease in same-store gallons sold and a $0.33/gallon decrease in average retail fuel price[161] - Retail merchandise revenue decreased by $74.1 million (15.6%) in Q2 2025, with same-store merchandise sales down 4.2%, half of which was from cigarettes[162] - Retail operating income decreased by $7.5 million in Q2 2025, primarily due to lower fuel and merchandise contribution from closed/converted stores, despite an increase in same-store fuel margin[164][165] Wholesale Segment Presents the Wholesale segment's revenues, operating income, and fuel gallons sold for fuel supply and consignment agent locations Wholesale Segment Financial Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $709,172 | $769,543 | $1,349,016 | $1,440,915 | | Operating income | $23,242 | $21,270 | $41,872 | $39,559 | | Fuel gallons sold – fuel supply locations | 213,529 | 203,561 | 404,606 | 390,292 | | Fuel gallons sold – consignment agent locations | 38,929 | 39,338 | 75,444 | 76,842 | | Fuel margin, cents per gallon – fuel supply locations | 6.3 | 6.0 | 6.2 | 6.1 | | Fuel margin, cents per gallon – consignment agent locations | 30.6 | 29.7 | 27.2 | 27.2 | - Wholesale fuel revenue decreased by $66.0 million (8.7%) in Q2 2025 due to lower average fuel prices, partially offset by a 3.9% increase in gallons sold, driven by retail store conversions[177] - Wholesale operating income increased by $2.0 million in Q2 2025, with additional income from converted retail sites offsetting reduced income at comparable wholesale sites[178] - In H1 2025, wholesale fuel contribution increased by $0.7 million, with fuel supply locations seeing a $1.1 million increase and consignment agent locations a $0.4 million decrease[183][184][185] Fleet Fueling Segment Reports the Fleet Fueling segment's revenues, operating income, and fuel gallons sold for proprietary and third-party cardlock locations Fleet Fueling Segment Financial Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $120,366 | $142,424 | $240,890 | $277,002 | | Operating income | $13,079 | $13,702 | $24,071 | $23,460 | | Fuel gallons sold – proprietary cardlock locations | 32,997 | 35,678 | 64,915 | 69,127 | | Fuel gallons sold – third-party cardlock locations | 3,293 | 3,271 | 6,468 | 6,470 | | Fuel margin, cents per gallon – proprietary cardlock locations | 51.7 | 49.1 | 49.0 | 45.1 | | Fuel margin, cents per gallon – third-party cardlock locations | 21.2 | 10.1 | 20.0 | 8.9 | - Fleet fueling fuel revenue decreased by $22.0 million (15.7%) in Q2 2025 due to a 6.8% decrease in gallons sold and lower average fuel prices[189] - In Q2 2025, proprietary cardlock fuel contribution decreased by $0.5 million despite higher fuel margin per gallon, while third-party cardlock fuel contribution increased by $0.4 million[190] - For H1 2025, fleet fueling fuel contribution increased by $1.3 million, driven by favorable diesel margins at proprietary cardlocks and closure of underperforming third-party locations[193] GPMP Segment Outlines the GPMP segment's revenues, operating income, and inter-segment fuel gallons sold at a fixed margin GPMP Segment Financial Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,009,330 | $1,284,082 | $1,950,512 | $2,388,035 | | Operating income | $23,948 | $25,756 | $45,874 | $49,083 | | Fuel gallons sold – inter-segment | 472,028 | 506,453 | 906,546 | 968,961 | | Fuel margin, cents per gallon | 5.0 | 5.0 | 5.0 | 5.0 | - GPMP fuel revenue decreased by $274.7 million (21.4%) in Q2 2025 due to lower average fuel prices and fewer gallons sold[198] - GPMP fuel margin decreased by $1.7 million in Q2 2025, primarily due to fewer gallons sold to the retail segment at a fixed margin[200] - For H1 2025, GPMP fuel revenue decreased by $437.4 million (18.4%) due to lower gallons sold and average fuel prices, resulting in a $3.2 million decrease in fuel margin[201][203] Use of Non-GAAP Measures Explains ARKO Corp.'s use of non-GAAP financial measures, including 'same store basis' and Adjusted EBITDA, and provides reconciliation - The Company uses 'same store basis' as a non-GAAP metric to provide comparability of ongoing operating performance, excluding stores without a full prior-year quarter of activity[204] - Adjusted EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation and amortization, further adjusted for non-cash and unusual items[205] Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $20,098 | $14,063 | $7,426 | $13,469 | | EBITDA | $90,318 | $76,553 | $113,462 | $103,425 | | Acquisition and divestiture costs | $1,132 | $1,510 | $2,282 | $2,190 | | (Gain) loss on disposal of assets and impairment charges | $(18,226) | $721 | $(16,698) | $3,385 | | Share-based compensation expense | $3,658 | $2,784 | $6,994 | $6,113 | | Expenses related to wage and hour claim settlement | — | — | $2,023 | — | | Adjusted EBITDA | $76,938 | $80,070 | $107,793 | $113,235 | Liquidity and Capital Resources Assesses ARKO Corp.'s liquidity position, primary sources of funds, capital allocation, and exposure to interest rate risk - Primary liquidity sources are cash flows from operations, credit facilities, and cash balances, used for operations, capital expenditures, and debt servicing[210] - As of June 30, 2025, the Company had a strong liquidity position of approximately $875 million, including $294 million in cash and $582 million in credit line availability[211] - Approximately 51% of the Company's debt bore interest at variable rates as of June 30, 2025, exposing it to interest rate risk[211] - The Company repurchased approximately 3.5 million shares for $14.3 million in H1 2025 under its share repurchase program, with $11.3 million remaining capacity[213] Cash Flows for the Six Months Ended June 30, 2025 and 2024 Analyzes ARKO Corp.'s cash flow activities from operations, investing, and financing for the six months ended June 30, 2025, and 2024 Net Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | | Operating activities | $98,587 | $89,974 | | Investing activities | $(70,432) | $(52,647) | | Financing activities | $(4,106) | $(27,671) | | Effect of exchange rates | $30 | $(38) | | Total | $24,079 | $9,618 | - Cash flows from operating activities increased to $98.6 million in H1 2025, driven by dealer deposits, vendor incentives, and lower net interest payments, partially offset by higher tax payments and decreased Adjusted EBITDA[218] - Cash used in investing activities decreased by $17.8 million in H1 2025, with $72.7 million spent on capital expenditures including property purchases, NTI stores, and remodels[220] - Financing activities in H1 2025 included $25.1 million net proceeds from long-term debt, $6.9 million in common stock dividends, $2.9 million in preferred stock dividends, and $16.6 million in common stock repurchases[222] Credit Facilities and Senior Notes Details ARKO Corp.'s debt facilities, including Senior Notes, PNC Line of Credit, M&T Credit Agreement, and Capital One revolving credit facility - The Company has $450 million aggregate principal amount of 5.125% Senior Notes due 2029, which are unsecured and guaranteed by certain subsidiaries[223] - GPM has a $140 million PNC Line of Credit for working capital, with $8.2 million in letters of credit outstanding as of June 30, 2025[225][226] - GPM's M&T Credit Agreement includes a $45.0 million equipment line of credit (with $31.3 million available) and $83.7 million in real estate term loans[227] - GPMP has an $800 million revolving credit facility with Capital One, with $380.8 million drawn and $418.7 million available as of June 30, 2025[229][230] Critical Accounting Estimates Confirms no material changes to critical accounting estimates for the six months ended June 30, 2025, compared to the prior annual report - There were no material changes to critical accounting estimates for the six months ended June 30, 2025, compared to the Annual Report on Form 10-K for December 31, 2024[232] Item 3. Quantitative and Qualitative Disclosures About Market Risk Outlines the Company's exposure to commodity price risk and interest rate risk, and their potential financial impacts Commodity Price Risk Discusses the Company's limited exposure to commodity price risk and its use of derivative instruments to manage fuel price fluctuations - The Company has limited exposure to commodity price risk, but significant fuel price increases can lead to lower sales volumes and higher credit card expenses[233] - Derivative commodity instruments (futures contracts) are used to manage risks associated with an immaterial number of gallons of diesel fuel[233] Interest Rate Risk Explains the Company's exposure to interest rate risk due to variable-rate debt and the potential impact of interest rate changes on debt service costs - Approximately 51% of the Company's debt bore interest at variable rates as of June 30, 2025[234] - A 1% increase in applicable interest rates would increase annual debt service by approximately $4.7 million based on June 30, 2025, outstanding balances[234] - Interest rates on the Capital One Line of Credit and M&T Term Loans were 7.4% and 6.6% respectively, as of June 30, 2025[234] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures, reporting no material changes to internal control over financial reporting Disclosure Controls and Procedures States that management, including the CEO and CFO, concluded the disclosure controls and procedures were effective as of June 30, 2025 - Management, with CEO and CFO participation, evaluated and concluded that disclosure controls and procedures were effective as of June 30, 2025[235] Changes to the Company's Internal Control Over Financial Reporting Reports that there were no material changes to the Company's internal control over financial reporting during the quarter ended June 30, 2025 - There were no material changes to the Company's internal control over financial reporting during the quarter ended June 30, 2025[236] PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures Item 1. Legal Proceedings Refers to Note 11 for details on legal proceedings, including environmental liabilities and a wage and hour settlement - Information on legal proceedings is incorporated by reference from Note 11 to the Quarterly Financial Statements[237] Item 1A. Risk Factors States no material changes to the Company's risk factors since the prior annual report - No material changes to risk factors were reported during the quarter ended June 30, 2025, compared to the Annual Report on Form 10-K for December 31, 2024[238] Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds Details the Company's share repurchase activity for Q2 2025 under its publicly announced program Share Repurchase Activity for Q2 2025 (dollars in thousands, except per share amounts) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs | | :------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | 1,286,738 | $3.96 | $15,388 | | May 1, 2025 to May 31, 2025 | 415,203 | $4.26 | $13,620 | | June 1, 2025 to June 30, 2025 | 525,133 | $4.38 | $11,320 | | Total | 2,227,074 | $4.11 | $11,320 | - All repurchases were made on the open market under the $125 million share repurchase program, which was announced in February 2022 and increased in May 2023 and May 2024[239] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred during the reporting period[240] Item 4. Mine Safety Disclosures Indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[241] Item 5. Other Information Confirms no officers or directors adopted or terminated Rule 10b5-1 trading arrangements in Q2 2025 - No officers or directors adopted or terminated any Rule 10b5-1(c) trading arrangements during the three months ended June 30, 2025[242] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including credit agreement amendments, certifications, and XBRL financial statements - Exhibits include amendments to the Third Amended and Restated Credit Agreement with M&T Bank (Exhibit 10.1, 10.2)[246] - Certifications by the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) are filed/furnished[246] - Financial statements are provided in Inline XBRL format (Exhibit 101)[246] Signatures Contains the required signatures for the Quarterly Report on Form 10-Q, confirming its due authorization and filing - The report is signed by Robert Giammatteo, Executive Vice President and Chief Financial Officer, on behalf of ARKO Corp. on August 6, 2025[249][250]