ARKO (ARKO) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total company adjusted EBITDA for Q4 2024 was $56.8 million, down from$ 61.8 million in the same period last year, primarily due to lower retail fuel and merchandise contributions [22] - Full year 2024 total company adjusted EBITDA was $248.9 million compared to$ 276.3 million in the previous year [27] - Net loss for Q4 2024 was $2.3 million, compared to a net income of$ 1.1 million in the prior year [26] Business Line Data and Key Metrics Changes - Retail segment operating income decreased to approximately $62.9 million from$ 72.3 million year-over-year, with same store merchandise sales down 2.1% [23] - Wholesale segment operating income increased to $20 million from$ 18.1 million, driven by channel optimization [25] - Fleet segment operating income rose to $12.4 million from$ 9.7 million, despite total gallons down 1% [25] Market Data and Key Metrics Changes - Same store retail fuel gallons were down mid-single digits for both the quarter and year, with same store fuel margin down $0.011 per gallon [17] - Same store fuel contribution decreased by 7.1% for the quarter due to a decline in gallons and lower fuel margin [24] - Same store operating expenses decreased by approximately 1.2% for the quarter [24] Company Strategy and Development Direction - The company is focused on a transformation plan, including a dealerization program to optimize its retail portfolio and enhance profitability [19][20] - The "Fueling America's Future" campaign aims to drive customer traffic and sales by offering significant discounts on fuel for loyalty program members [11][49] - The company is enhancing its food service offerings and optimizing its tobacco product category to align with evolving consumer preferences [10][15] Management's Comments on Operating Environment and Future Outlook - Management noted that 2024 was a challenging year due to persistent inflation and constrained consumer spending, but they remain focused on long-term growth strategies [9] - The company expects to see improvements in same store performance as the year progresses, despite current negative trends [40][42] - Management is optimistic about the impact of promotional activities and the dealerization program on future performance [35][84] Other Important Information - The company has substantial liquidity of approximately$ 841 million, including $262 million in cash at quarter end [27] - Total capital expenditures for Q4 2024 were$ 36.1 million, with full year 2024 capital expenditures at $113.9 million [29] Q&A Session Summary Question: Can you help connect the dots on the 2025 guidance? - Management indicated that the guidance reflects a shifting same store base, with current negative trends expected to improve as the year progresses [40][42] Question: Is there a building effect from dealerization savings? - Management confirmed that dealerization savings will accrue over time, with more significant impacts expected in 2026 [44][45] Question: What initiatives are in place for remaining retail stores? - The company is focusing on promotions for fuel and tobacco to drive traffic and sales in remaining stores [47][50] Question: How is the weather impacting business? - Management acknowledged that adverse weather conditions have negatively affected customer mobility and sales, particularly in January and February [33][86] Question: What is the strategy regarding fuel margins versus gallons? - Management clarified that the focus remains on maximizing fuel contribution dollars while using promotions to drive traffic and sales [96][97]