ARKO (US:ARKO)2025-05-08 22:00Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2025 was $30.9 million, down from $33.2 million in Q1 2024, primarily due to lower retail fuel and merchandise contributions [21] - The net loss for the quarter was $12.7 million compared to a net loss of $0.6 million in the year-ago period [24] - Total capital expenditures for the quarter were $27.4 million [25] Business Line Data and Key Metrics Changes - Retail segment operating income was approximately $40.2 million, down from $46.5 million in the year-ago period [21] - Same store merchandise sales excluding cigarettes decreased by 5.2%, while total same store merchandise sales were down 6.9% [22] - Wholesale segment operating income was $18.6 million, slightly up from $18.3 million in the year-ago period [23] - Fleet segment operating income increased to $11 million from $9.8 million in the year-ago period [24] Market Data and Key Metrics Changes - Same store fuel contribution decreased by approximately $3.2 million due to a 6.2% decline in gallons sold [22] - Fuel margin for the wholesale segment was $0.88 per gallon, down from $0.92 per gallon in the year-ago period [23] - Total gallons from channel optimization were up, contributing close to 14 million gallons for the quarter [23] Company Strategy and Development Direction - The company is focused on a transformation strategy that includes dealerization, expansion of high-margin categories, and targeted promotional initiatives [9][10] - The Fueling America Future campaign aims to provide discounts on fuel and enhance customer engagement [10][12] - The company is committed to organic growth and store-level reinvestment, with plans to remodel stores and introduce new food offerings [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted challenges from lower traffic, consumer spending, and severe weather impacting store visits [6][7] - Despite these challenges, management expressed optimism for Q2, citing improvements in sales as weather conditions normalize [34] - The company expects total adjusted EBITDA for Q2 2025 to be in the range of $70 million to $80 million [25] Other Important Information - The company repurchased approximately 1.3 million shares at an average price of $4.1 per share during the quarter [19] - The loyalty program saw an increase in enrolled members, with approximately 27,000 new members added in Q1 2025 [17] Q&A Session Summary Question: Performance post-winter weather - Management indicated that sales improved slightly in April following severe weather in February, which had a significant negative impact on sales [34] Question: Dealerization savings impact - The $20 million annualized savings from dealerization will be realized at scale, with $2.4 million delivered this quarter from transitioned sites [38] Question: Remodel initiative timeline - The company plans to complete seven pilot remodels by Q3 2025, with potential for accelerated rollout based on results [40] Question: Fuel margins and price dynamics - Management noted that fuel margins are currently strong due to market volatility and competitive pricing strategies [45][49] Question: Capital allocation and buybacks - Management is analyzing the cadence of stock repurchases but did not provide specific guidance on future buybacks [50] Question: Dealerization pace and visibility - The company is on track with its dealerization plan, having closed 77 locations and having 130 under contract [56][58] Question: Loyalty program continuity post-dealerization - Loyalty members will continue to access benefits at other locations, as the program is tied to company-operated stores [76] Question: G&A expenses and dealerization impact - Management is focused on reducing G&A expenses as more retail sites transition to the wholesale channel [82]