Arko Corp. Q4 FY2025 earnings call

2025 was a pivotal year for ARCO. Continued to execute on transformation plan, optimized retail footprint, improved cost structure. Fourth quarter results reflected progress with adjusted EBITDA growth, improved same store merchandise sales and margin, and reduced retail sites operating expenses. Closed IPO of Arco Petroleum Corp, strengthening balance sheet. Completed 409 dealerization conversions by year end, with more expected by end of 2026. Loyalty program saw enrolled members spend and make more trips than non-enrolled. Remodel program early results positive with increased sales and gallons in remodeled stores. NTI retail stores opened as planned with targets for double-digit returns. 2026 plans include further scaling of iReturn remodels, expanding NTI retail stores, and investing in NTI card lock locations in fleet fueling business.

Retail segment: Fourth quarter adjusted EBITDA grew 16% y/y to $66 million. Same store merchandise sales trend improved and margin expanded 140 basis points to 34.4%. Retail sites operating expenses were down 16% y/y. For full year 2025, same store merchandise sales were down 3%, same store retail operating expenses were flat. Retail fuel same store gallons were down 4.1% in Q4 and 5.4% for full year 2025. Wholesale segment: Q4 wholesale fuel contribution was $24 million, up 8% y/y, wholesale gallons increased 4%, fuel margin was approximately 9.7 cents per gallon. Full year 2025 wholesale generated $94.5 million of contribution, a 5% increase, total gallons increased 4%, fuel margins cents per gallon of approximately 9.6 cents. Fleet fueling segment: Q4 fleet fueling fuel contribution was $15.9 million, compared to $16.3 million last year. Fleet fueling gallons totaled 34.9 million gallons compared to 36.1 million gallons and margin was 45.6 cents per gallon. Full year 2025 fleet fueling generated $65.7 million of fuel contribution on 142.8 million gallons with a margin of 46.0 cents per gallon.

2026 adjusted EBITDA is expected to range between $245 million and $265 million, with an assumed range of average retail fuel margin from 41.5 to 43.5 cents per gallon. Estimates suggest every one cent change in retail same store CPG is estimated to result in eight to nine million of adjusted EBITDA. Expect 2026 same store retail sales to be relatively flat and improve several hundred basis points versus 2025 results, planning same store margin between 35.5% and 36.5%. APC business is expected to deliver approximately $156 million in adjusted EBITDA in 2026. Estimated gallons for 2026 include an assumption of adding an additional 50 million gallons in volume, offsetting estimated decline in gallons from comparable wholesale sites.

Q: Bobby Griffin asked about drivers of merchandise sales improvement and margin increase.

A: Ari Kotler mentioned marketing initiatives like Fueling America campaign, loyalty program driving engagement, food service, remodels and NPI progress, and promotions like $2.50 per gallon off.

Q: Daniel Guglielmo asked about pressure in Midwest and promotions' impact on margin.

A: Ari Kotler said pressure in Midwest continues, ease in other regions with fuel price drop, and promotions supported by vendors driving customers to core high-margin categories.

Q: Hale Holden asked about M&A opportunity for APC and accounting of EBITDA.

A: Ari Kotler said large industry with low market share provides M&A opportunity, and Gallagher Jeff explained intercompany sales elimination makes EBITDA breakdown not simple as 1+1 equals 2 and future transparency with APC.