ARKO (US:ARKO)2023-05-13 11:51Financial Data and Key Metrics Changes - First quarter same-store merchandise sales, excluding cigarettes, grew by 7.6% and same-store sales increased by 3.8% [8] - Adjusted EBITDA for the quarter was $47.5 million, a decline of 5.2% compared to $50.1 million in the prior year quarter [8][22] - Total fuel contribution increased to $123.8 million compared to $112.9 million in the prior year quarter, an increase of $10.9 million [8] - Net loss for the quarter was $2.5 million compared to net income of $2.3 million in the prior year period [22] Business Line Data and Key Metrics Changes - Merchandise revenue for the first quarter of 2023 increased to $400.4 million from $367 million in the prior year quarter [20] - Merchandise margin increased by 120 basis points to 30.7% [20] - Total capital expenditures were approximately $23.4 million for the quarter, compared to $20.7 million in Q1 2022 [20] - Retail fuel profitability, excluding intercompany charges, declined by 1.9% to $88.1 million [20] Market Data and Key Metrics Changes - Same-store sales in core destination categories grew by approximately 10% in Q1 2023 over Q1 2022 [10] - Packaged beverages sales increased by 9.6%, candy was up 18.3%, and beer increased by 6.2% [8] - Same-store franchise sales across all brands increased by 24.5% in the first quarter compared to the prior year [14] Company Strategy and Development Direction - The company has more than $2 billion in available capital for continued M&A activity, including cash, lines of credit, and an extended Oak Street Program Agreement [7] - The focus remains on enhancing value through acquisitions and improving store performance by refining product assortment and marketing initiatives [11][18] - The company aims to become a destination for packaged, prepared, and fresh food, with ongoing efforts to expand food offerings [14] Management's Comments on Operating Environment and Future Outlook - Management believes 2023 will be another year of strong performance and growth, despite challenges in fuel margins [24] - The company anticipates that historical seasonal performance will continue to be a factor in evaluating future performance [18] - Management expressed confidence in the resilience of the business, noting that it remained stable during past economic downturns [73] Other Important Information - The company repurchased approximately 89,000 shares of common stock for a total of approximately $700,000 [23] - A quarterly dividend of $0.03 per share was declared to be paid on June 1, 2023 [23] Q&A Session Summary Question: Inquiry about the Oak Street facility and its terms - Management indicated that specific terms of the agreement are not disclosed as they are competitive in nature [26][27] Question: Discussion on fuel business balance between gross profit and volume - Management noted that while they aim for gross profit dollars, they remain competitive in pricing to drive volume [28][30] Question: Contribution from recent acquisitions on EBITDA - Management stated that while specific contributions were not broken out, acquisitions helped offset losses in fuel margins [32][33] Question: Clarification on same-store sales breakdown - Management explained that the increase in same-store sales was driven by unit increases rather than solely inflation [40][41] Question: Discussion on operating expenses growth - Management acknowledged that operating expenses increased due to acquisitions and filling previously open positions, but they expect to achieve synergies moving forward [47][49] Question: Philosophy on acquisition sizes and share repurchase balance - Management confirmed that they will continue to pursue acquisitions of various sizes while also considering share repurchases due to attractive stock valuation [54][56] Question: Insights on quarter performance relative to expectations - Management indicated that the quarter met expectations, with no significant surprises, although they did not anticipate the fuel margin fluctuations [58][59] Question: Clarification on merchandise comps and recession resilience - Management emphasized that the growth in merchandise sales was not solely due to inflation but also due to strategic initiatives and the essential nature of their products [71][73]