ARKO (US:ARKO)2022-08-13 17:18Financial Data and Key Metrics Changes - Arko Corp. generated $31.8 million in net income, an increase of over 24% compared to the prior year's second quarter [9] - Adjusted EBITDA reached $79 million, marking a 4.4% increase year-over-year [25] - Merchandise margin increased by 170 basis points to 30.4% from 28.7% in the second quarter of 2021 [21] - Total liquidity as of June 30 was approximately $727 million, including cash and cash equivalents of approximately $282 million [17] Business Line Data and Key Metrics Changes - Total fuel gross profit was $130.8 million, a 15.1% increase compared to $113.7 million in the second quarter of 2021 [11] - Same-store merchandise sales, excluding cigarettes, increased by 5.7% on a two-year stack basis [10] - Retail fuel profitability, excluding intercompany charges, grew 15% to $13.7 million compared to Q2 2021 [22] Market Data and Key Metrics Changes - The company maintained total market share and grew total store dollar sales despite historic volatility and inflation [10] - Fuel margin cents per gallon for supply locations increased to $0.072 per gallon, a 28.6% increase compared to the prior year [22] Company Strategy and Development Direction - The company is focused on executing its long-term growth strategy, including investments in store remodels and new product offerings [9][12] - Arko is pursuing an active acquisition strategy, having completed 21 acquisitions in less than 10 years, with a robust deal pipeline currently available [16][59] - The company is investing in EV charging capabilities and has installed Level 3 fast chargers at select locations [17] Management's Comments on Operating Environment and Future Outlook - Management noted that higher fuel prices led to lower volumes, but the strategy focused on optimizing margins [31] - The company is confident in its ability to deliver future value to stockholders and is excited about the second half of the year [28] - Management highlighted the resilience of the convenience store industry, which has historically grown during recessions [16] Other Important Information - The company declared a quarterly dividend of $0.02 per share to be paid on September 12, 2022 [26] - The company repurchased 3.1 million shares of common stock at an average price of $8.65 for a total of $27 million [27] Q&A Session Summary Question: Retail gallon same-store sales decline and internal expectations - Management acknowledged that higher prices led to lower volumes but emphasized the focus on optimizing margins [31] Question: Opportunities for wholesale growth - Management indicated that wholesale accounts faced similar challenges as retail, but volume trends improved as prices declined [33] Question: Impact of inflation on merchandise prices - Management confirmed that price increases were observed, but they managed to remain competitive while increasing promotions [34] Question: Balancing gallon decline versus inside store business - Management stated that they maintained in-store market share and saw increased profitability despite gallon declines [39] Question: Store operating expenses and personnel costs - Management explained that the increase in personnel costs was due to higher wages and additional hours worked [41] Question: Expected savings from restructuring - Management expects a minimum of $0.5 million in annual savings from the restructuring [44] Question: Fuel margins and sustainability - Management noted a correlation between declining fuel prices and increased driving, which positively impacts sales [48] Question: Drivers of heightened retail fuel margin - Management discussed the impact of increased costs due to inflation and credit card fees on overall margins [54] Question: M&A landscape and valuations - Management indicated that the acquisition pipeline is active, with opportunities arising from smaller chains struggling in the current environment [59][62]