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DATE

Thursday, May 7, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chairman, President, and Chief Executive Officer — Arie Kotler
  • [Unspecified Finance Executive] — [Unknown Speaker]
  • Operator

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TAKEAWAYS

  • APC Minority IPO and Value -- Arko Corp. (ARKO +2.91%) completed an initial public offering of minority interest in subsidiary APC in February; it retains 35 million shares valued at approximately $650 million based on APC’s market capitalization of $900 million.
  • Dealerization Progress -- The company converted 41 retail stores to dealer locations, reaching 450 total store conversions since 2024, with 75 additional conversions expected or already contracted after quarter end.
  • Retail Store Base -- The remaining retail portfolio is now approximately 1,000 stores, with a strategic concentration in the Mid-Atlantic, Southeast, and Southwest regions.
  • Net Loss -- Net loss was $5.6 million, compared with $12.7 million for the prior-year period.
  • Adjusted EBITDA -- Adjusted EBITDA was approximately $51 million, an increase of roughly 65% from the prior-year period.
  • Same-Store Merchandise Sales -- Same-store merchandise sales decreased 0.5%, while excluding cigarettes, same-store merchandise sales grew 0.4%.
  • Merchandise Margin -- Merchandise margin improved 70 basis points to 33.9%, building on the 70 basis points increase in Q1 of the previous year.
  • Retail Fuel Volume and Contribution -- Same-store fuel gallons declined 3.2% but sequentially improved through the quarter; retail cents per gallon reached $0.048, and same-store fuel contribution increased 20% year over year.
  • Fuel Transactions -- Fuel transactions rose approximately 7% in March compared to the prior year.
  • Promotions and Loyalty -- The Fueling America’s Future campaign now offers $2.50 off per gallon up to 20 gallons; loyalty platform enrollment increased 98%, with 53,000 new members, and nearly half joining after the new app launch and $10 enrollment promotion.
  • Store Remodels and New Locations -- Opened two new-to-industry (NTI) retail stores and one NTI cardlock; tracking toward three new Dunkin’ stores, one NTI retail, 20 NTI cardlocks, and 25 remodels in 2026.
  • Operating Expenses -- Total retail site-level operating expenses fell 12% to $155.9 million, mainly due to dealerization; same-store operating expenses increased 3.3% because of higher labor, utilities, and credit card fees.
  • Consolidated G&A Expenses -- General and administrative expenses declined 4% year over year.
  • Wholesale Segment -- Wholesale operating income was approximately $23 million; segment volumes totaled approximately 234 million gallons with a fuel margin of $0.98 per gallon.
  • Fleet Fueling Segment -- Fleet Fueling operating income reached approximately $12 million, up 9%; segment gallons fell 3.2%, and the margin was $49.3 per gallon.
  • Debt and Liquidity -- Cash ended at $272 million, and total liquidity was about $1.1 billion; $206.7 million in debt was repaid, funded by APC IPO proceeds.
  • Capital Expenditures -- Capital expenditures were $31 million, primarily growth capital for 17 cardlocks and 25 remodels in progress.
  • Remodel Lifts -- Early remodels produced approximately a 12% increase in merchandise sales and 14% increase in fuel gallons; some categories rose 20%-30% compared to pre-remodel periods.
  • Food Service Strategy -- Value meal launches ($3-$6) are part of the remodel strategy to drive traffic and elevate food service sales.
  • Weather Impact -- Winter storms reduced same-store merchandise sales volumes by 80 basis points, and total company fuel gallons by 160 basis points.

SUMMARY

Management highlighted the transformational impact of dealerization and APC monetization in clarifying segment value and improving operational flexibility. The loyalty platform experienced sharp enrollment growth, while promotional campaigns notably increased both in-store and fuel transaction counts. Regionally, the Mid-Atlantic, Southeast, and parts of the Texarkana area displayed resilience despite broader economic pressures. Cost discipline was evident in reduced operating and G&A expenses, supporting a material rebound in adjusted EBITDA and narrowing net loss.

  • The company cited "So far, as you can see over here, and as we disclosed, approximately $30 million of benefits already is in place, given the trailing twelve months." from dealerization over the trailing twelve months, exceeding initial estimates of $20 million.
  • Management noted that "Same-store merchandise sales excluding cigarettes returned to" in January prior to weather disruptions.
  • Fuel volatility was described as supporting cents per gallon results but was "not the only driver of improved results" per management commentary.
  • Fleet Fueling cardlock expansion, with approximately 20 targeted for the year, was reaffirmed as a priority for capital deployment given its margin profile and low labor requirements.
  • Leadership refrained from updating full-year guidance, citing prevailing "uncertainty in the market now" as the reason.

INDUSTRY GLOSSARY

  • Dealerization: The conversion of company-operated stores into dealer-operated locations, shifting operational responsibilities, and capital requirements while altering revenue mix.
  • NTI (New-To-Industry): A new store or cardlock developed at a previously unused site rather than a remodeled or acquired location.
  • APC: Arko Petroleum Company, a subsidiary involved in wholesale, fleet fueling, and G&P businesses, recently subject to a minority-IPO that provides transparency and embedded value to Arko Corp.'s holdings.
  • Cardlock: An unattended fueling site designed for commercial fleet access, supporting large-volume customers through automated systems and minimal labor.

Full Conference Call Transcript

Arie Kotler: Capital allocation is showing up in our financial results. The initial public offering of minority interest in our subsidiary APC in February 2026 was an important milestone in our story, and we believe that it gives investors a clear view of the strength and value of our wholesale, fleet fueling, and G&P businesses, their attractive margins, and cash flow attributes. We believe that Arko Corp. is currently positioned with strong growth opportunities across both operating channels, the retail on the one hand, and the wholesale and fleet fueling on the other hand.

As of 03/31/2026, Arko Corp. owned 35 million shares of APC, representing an implied value today of roughly $650 million based on APC's market capitalization of approximately $900 million. We will keep the APC discussion short, but it is important investors recognize both the transparency and the embedded value that the APC structure provides. Turning to the operating environment, the consumer remains value focused and deliberate, especially in this elevated fuel cost environment. We continue to see customers taking advantage of promotions and actively using our apps for savings on both fuel and merchandise. That reinforces the importance of sharp pricing, clear value communication, and compelling in-store offers. Importantly, underlying trends improved as we moved through the quarter.

After weather-related disruptions early on, traffic, transactions, and gallons all improved in March, reinforcing our confidence in the trajectory of the business. Dealerization has continued to be one of the most powerful levers reshaping Arko Corp. We converted 41 retail stores to dealer locations in the first quarter, bringing total converted locations to 450 since we adopted our transformation plan in 2024, with approximately 75 additional stores committed, either under letter of intent, under contract, or already converted since quarter end. We expect to complete those plus additional conversions by 2026. The benefits are increasingly evident: lower operating costs, reduced maintenance CapEx, stronger cash flow generation, and a more focused retail portfolio that is positioned for growth.

As we progress through 2026, we believe our reported KPIs will increasingly reflect the quality of the remaining portfolio, something that is already apparent in our Q1 performance. Retail performance clearly improved this quarter. Same-store merchandise sales excluding cigarettes returned to growth, marking our strongest results in two years. This was driven by better execution across promotions, pricing, and customer engagement. Merchandise margin grew 70 basis points year-over-year and finished Q1 at 33.9%. This 70 basis points margin improvement is on top of the 70 basis points we grew margin in Q1 of last year.

Cigarette sales performed better than expected due to promotional pricing and manufacturer support, while other tobacco products continued to grow strongly, supporting traffic and transactions without undermining margin integrity. Overall, our retail performance reflects a healthier business with improving trends and a more productive store base. We are not trading margin for volume. Fuel was a significant earnings contributor in the quarter. We operated through a highly volatile fuel environment and executed effectively, delivering retail cents per gallon of $0.0479 and driving same-store fuel contribution up approximately 20%. While gallons were pressured early in the quarter by the weather, they improved throughout the quarter, even in a higher price environment, and fuel transactions increased approximately 7% in March.

While fuel volatility was supportive this quarter for CPG, it was not the only driver of improved results. Higher fuel prices can lead to smaller fill-ups, but they can also drive more frequent visits. This reinforces our strategy of being competitive to drive traffic and offering promotions like the Fueling America's Future discount fuel campaign to give dollars back to the consumer. In honor of America's 200th birthday, Fueling America's Future is now offering $2.50 off per gallon up to 20 gallons. We remain focused on delivering value as we head into the summer driving season. That brings me to loyalty.

Our Fueling America's Future campaign and Fas Rewards platform remain central to our growth strategy in trip frequency, customer engagement, and basket size. Enrollment increased 98% in the first quarter compared to the same period last year, with approximately 53 thousand new members. Notably, almost half of new enrollees joined since the launch of the new app and $10 enrollment program in early March. We believe that these programs are important in any environment, but especially in one where customers are actively looking for value.

A relaunched loyalty app on a new technology platform positions us to better personalize offers, improve communication, and more deliberately use loyalty as a traffic and retention engine, especially as we head into our one hundred days of summer promotional season. Remodels and new-to-industry locations also remain key components of our long-term growth strategy. In the first quarter, we opened two NTI retail stores and one NTI cardlock location, and we remain on track for three new Dunkin' stores, one NTI retail store, 20 NTI cardlocks, and 25 remodels in 2026. Early performance from recent remodels has been encouraging, reinforcing our conviction that modern, food-forward formats can drive higher sales, stronger fuel performance, and improved store-level economics.

On the fleet fueling side, building new cardlocks continues to represent one of our most attractive uses of capital, given the low investment, modest labor model, and compelling returns. Before I turn it over, let me leave you with this. The first quarter was not driven by a one-time margin event or a single metric. It reflected structural progress across fuel pricing, dealerization, cost discipline, portfolio quality, and retail execution. We are not going to overstate one quarter, but we are encouraged by what we are seeing. Our transformation plan has been gaining traction, and promotions are driving sales and loyalty program enrollment, which is visible in our financial performance.

I will now turn the call over to Unknown Speaker for the financial results. Thank you.

Unknown Speaker: We continue to be encouraged by the broad-based performance we are seeing across the business. In Q1, we saw improvement in retail trends, strong fuel margin execution, continued benefit from dealerization, and meaningful cost discipline at both the store and corporate levels. We remain focused on investing growth capital to drive strong returns in remodels, NTI retail stores, and cardlocks. Turning to our first quarter results, net loss was $5.6 million, compared with $12.7 million for the prior-year period, and adjusted EBITDA was approximately $51 million, up roughly 65% from the prior-year period, as Arie mentioned.

In our retail segment, same-store merchandise sales were down 0.5% for the quarter, while same-store merchandise sales excluding cigarettes increased 0.4%, representing the strongest ex‑cigarette performance we have seen in two years, and we achieved these results even with disruptions caused by winter storms in our footprint. Merchandise margin was 33.9%, up 70 basis points from the prior year, driven by product mix and targeted customer promotions. This 70 basis points improvement in margin is on top of the 70 basis points improvement we had last year in Q1. On retail fuel, same-store gallons were down 3.2% year-over-year, but improved sequentially through the quarter, with fuel transactions increasing approximately 7% in March year-over-year.

Same-store fuel contribution increased 20%, and retail cents per gallon increased by approximately [inaudible] to $0.0479 per gallon. That result reflects efficient pricing and strong execution in a volatile market. As mentioned, our merchandising and fuel trends were affected by the winter storms in Q1 across our core footprint. While difficult to quantify, we estimate same-store merchandising sales volumes would have been approximately 80 basis points stronger absent weather disruptions, reflecting the underlying strength of our base business. Similarly, we estimate the storm-related impact to total company fuel gallons was approximately 160 basis points.

While we cannot control the weather, we do feel the normalized performance of the business is even stronger than shown, and we expect to build on this momentum. Turning to expenses, we remain focused on disciplined cost management across the business. Total retail site-level operating expenses were down 12% at $155.9 million, compared with $177.2 million for the prior-year period, which was primarily driven by our dealerization strategy. Same-store operating expenses increased 3.3% versus Q1 2025, driven by slightly higher labor rates, utilities, and higher credit card fees as retail fuel prices increased in March. On a consolidated basis, G&A expenses were down 4% from the prior year.

This is consistent with our transformation plan and reflects a leaner cost structure and tighter operating discipline that we expect to continue. In our wholesale segment, operating income was approximately $23 million. Performance continued to benefit from dealerization and the related expansion of wholesale volume and profit contribution. Gallons were approximately 234 million gallons, and fuel margin was $0.98 per gallon. We continue to expect dealerization to support both earnings quality and cash flow generation over time. In our Fleet Fueling segment, operating income was approximately $12 million, an increase of 9% year-over-year from the strong margin environment. Fleet fuel margin was $49.3 per gallon, while gallons declined 3.2% and were also impacted by weather events in the quarter.

Fleet Fueling remains a durable cash flow business, and with around 20 cardlocks targeted in 2026, we believe that cardlock expansion continues to represent an attractive capital deployment opportunity given the return profile and modest labor model. On the balance sheet, we ended the quarter with cash of $272 million and total liquidity of approximately $1.1 billion. In Q1, we paid down $206.7 million in debt using the net proceeds from the APC IPO, with long-term debt now at [inaudible], excluding lease-related financing liabilities. On capital allocation, our priorities remain clear.

We will continue to execute on dealerization, invest in retail initiatives and remodels, support NTI and high-return cardlock growth, all while we maintain balance sheet discipline and a focus on returns. Capital expenditures were approximately $31 million in the first quarter, primarily focused on growth capital, as we have 17 cardlocks and 25 remodels underway. The APC IPO has improved our financial flexibility, but our framework has not changed. We are focused on the highest-return opportunities across the business and on improving cash flow over time. As we progress through 2026, we are encouraged by the momentum in the business. First quarter results reflected strong execution and improving underlying trends, particularly as the quarter progressed.

While we are happy with our Q1 performance and strong start to 2026, we believe there is too much uncertainty in the market now to update our full-year guidance at this point. Looking ahead, we remain focused on continuing to execute, capturing the structural benefits of dealerization, and allocating capital to deliver strong returns. With that, I will hand the call back to Arie. Thank you.

Arie Kotler: We are encouraged by the first quarter results, and our mindset remains the same. April has continued the year-to-date trends across the business. We plan to stay disciplined, keep executing, and continue building on the progress we made through the end of last year and into 2026. Operator, please open the line for questions. Thank you.

Operator: We will now open the call for questions. And the first question comes from the line of Bobby Griffin with Raymond James.

Operator: Please proceed.

Bobby Griffin: Hey guys, thanks for taking the questions this morning. Congrats on some of the progress showing up in the business. Good to see. I guess, first, I wanted to maybe just touch on the dealerization aspect, and now that we really are starting to see the inflection point in the operations on a consolidated basis, does the end kind of pie of savings still look the same from a G&A standpoint that we have talked about in the past, and from the SG&A standpoint? Are you actually now kind of getting in the weeds and seeing that there might be more low-hanging fruit or more upside to some of those original estimates?

Arie Kotler: Good morning, Bobby. Thank you for this question. Thank you for participating. So, as we mentioned before, Bobby, the transformation plan that we put together in 2024, we kept talking about the $20 million upside over there when actually, when this transaction is actually going to take place. So far, as you can see over here, and as we disclosed, approximately $30 million of benefits already is in place, given the trailing twelve months. As I mentioned, we have 75 additional locations that we are about to execute. Some of them are under LOI. Some of them are under contracts already.

And I think the goal is really to complete that with maybe some additional others between now and the end of the year. And I think that is really the plan at the moment. If things will actually come later on and we see additional opportunities, of course, we will execute on them. That is something that we always take into account. But I think we are going to stick to our plan at the moment.

Bobby Griffin: Okay. And then, Arie, so that puts you, round numbers, call it 1 thousand stores at retail. When you get to that level, then what is the go-forward kind of initiatives? You have the remodels that are starting to accelerate, you have some of the merchandising work, you have loyalty. So maybe help us think about once we get to this 1 thousand-store base at retail with those additional 75 stores to go, what are the moving parts or the initiatives that will be the focus point going forward there for us to grade the business on?

Unknown Speaker: Sure, sure.

Arie Kotler: First of all, what we did, going back to the transformation expenses of 2024 when we actually put the plan together, the goal was to move approximately 500-plus stores from the retail business to the wholesale business, concentrate on areas where we have economies of scale, concentrate on areas that we can win, concentrate on areas that are more competitive for us in terms of scale, in terms of where we operate. Concentrate on promotions. And, as you can see right now, you mentioned 1 thousand stores. The portfolio that we actually kept are the jewel of the jewel of the jewel when it comes to those stores.

The goal moving forward will be to continue to grow and to continue to invest in those stores. As you can see, we are remodeling an additional 25 stores this year. The goal will be to build NTI around those stores. And the goal will be to continue to execute around those stores. I can tell you that a large portion of the portfolio is concentrated in the Mid-Atlantic states, Southeast, and Southwest. And that is basically the concentration, and that is where we would like to continue moving forward and just build around that. There is no question about that. We are very well capitalized, as was mentioned.

Over $270 million cash on hand, and we have plenty of liquidity up to $1.1 billion to continue to grow the business.

Bobby Griffin: Go ahead. Sorry about that. Go ahead. Really quickly. No. It is okay.

Unknown Speaker: Arie covered it well. There are three big benefits we are starting to see in the business. One is operating expenses. As those stores get dealerized, it lowers our operating expenses. Second is G&A. As you mentioned, we are a more focused, lean organization on G&A. The third, which I think you hit on with Arie, it focuses our investment on retail stores that are positioned to win. So whether it is remodels, merchandising initiatives, loyalty program, the approximately 1 thousand stores that are left let us focus the capital on those and hopefully return very quickly to growth.

We were almost there this quarter, but it really allows us to focus the investments to drive growth in those retail stores.

Bobby Griffin: That is helpful. And then that actually dovetails into my final two questions. I mean, the remodels, I think we took that number up a little for what we are targeting to now do. Can you share any of the early stats you are seeing as the lift from these remodels? We have talked in the past about the capital for kind of a soft remodel versus a hard remodel, so I would imagine that is roughly about the same. But what about just the lift, now that you have maybe a little bit more data on what you are seeing?

Unknown Speaker: Sure.

Arie Kotler: So I can just talk about the early performance from the recent remodels. Like we mentioned, we are very encouraged with this part. It proves that the minute you actually invest in food service and you put food service format forward, that drives higher sales and stronger fuel performance. As a matter of fact, when people come into the store, they are actually leaving the stores and going to the pump, and it just helps us with better store-level economics. There is no question. Now, the plan for 2026, which we mentioned, approximately 25 store remodels, the whole idea is to continue concentrating on adding food service into those stores.

Because the minute you invest in food service and you add food service into those stores, you bring more traffic, you have better customer engagement, and there are other items that are actually being attached to the food service when people are coming to the store. So that is really going to be the goal moving forward, to make sure that in all of those stores we are touching right now and we are remodeling right now, we are adding food service. In addition to all of those promotions that we mentioned earlier, all of those promotions are very beneficial for us, especially in this environment when fuel prices are going up.

For example, when you purchase food, we talked about Fueling America. Think about it, Bobby. When you buy two Gatorade right now and get $0.50 off per gallon, in this environment you are talking about $10 off when you purchase 20 gallons. This is really important. So, again, all of those things will be very beneficial for us into 2026.

Bobby Griffin: And, Arie, I am going to try to pin you down a little more. When you remodel a store, you put in the fast craves and that stuff you are working on, do you see a lift in same-store merchandise sales as well as same-store merchandise gallons?

Unknown Speaker: Yes. So, Bobby, I will jump in on that one. Yes. The first ones we did last year, we saw about a 12% increase in merchandise sales overall and 14% in gallons versus the pre period. Some categories were up 20%, 30%. So we continue to see really good results, which is why we are accelerating the program. Every store is different, the levels of remodels are different, but we are very happy with what we are seeing, which is why we are trying to do it more.

Bobby Griffin: Very good. I have taken enough time. I appreciate it.

Arie Kotler: One more thing, Bobby. Since you got me excited about that, when we talk about food service, it is not just the words “food service.” It is also to make sure that we have delicious value meals. We launched in Q1 meals at $3, $4, $5, $6. Think about it. You can come to our stores in the afternoon to buy a chicken sandwich and a drink for $5. You can come to our stores and buy a coffee or cold drink and a breakfast sandwich for $4. Those are very important components. It is not just to add food service; it is also to make sure that you actually bring value to the consumers.

Bobby Griffin: Thank you. I appreciate the details. Best of luck here in Q2, guys.

Arie Kotler: Thank you very much, Bobby. Thanks, Bobby. The next question comes from the line of Daniel Guglielmo with Capital One Securities. Please proceed.

Daniel Guglielmo: Everyone, thank you for taking my questions. Broader consumer trends have been mixed in this kind of complex macro environment. Can you just dig in a little more into your retail customer trends? Are you seeing strength in certain regions? And do you have any additional insights on April trends?

Arie Kotler: Sure, sure. So let me start with the first one about consumer trends. Putting the weather aside for a second, I can tell you that before the volatility in gas prices, January started very strong. Excluding cigarettes, merchandise sales were above 5%. And then, of course, we were impacted by the weather. And then going into March, with the volatility of fuel pricing, we actually see customer trips increasing because of that. Just because the price of fuel is up, customer trips are up. We see an increase in penetration inside the stores because customers are coming more often because of that.

And that brings me to the consumer and Fueling America promotions and all of the promotional activities that we are doing here when it comes to cigarettes and OTP—everything. I mentioned earlier today that cigarette trends are up. I believe this is the first time for a long period of time that cigarettes actually trended up. E‑cigarette trends are down. I believe the promotional activity, Daniel, that we are having in our stores, along with all of the other promotions that we are doing, brings traffic. And for me, traffic means that we are grabbing market share from somewhere else. The same thing goes to fuel.

We mentioned that for the first time in a long period of time, we have been trending even a little bit better than the market average. So, again, I just think that is a mix of all of the things that we are doing in the stores to bring those customers in while everybody feels the pressure.

Unknown Speaker: Dan, let me just add a little bit. The customers are under pressure, and I think we are having to take action to keep that traffic up, as Arie mentioned, provide promotions, provide discounts that they can get in the store and use in fuel. But you do see, especially as gas retail price elevates, we need to differentiate, and we are continuing to put our promotions out there that will continue to drive the traffic, hopefully in-store and with fuel through Fueling America. We had some really strong pockets of geography. We did have that weather noise, but Indiana, Kentucky, parts of Ohio were very strong. Our Southeast continues to be very strong.

Some of what we call our Texarkana regions, which is Arkansas and Louisiana, are also continuing to perform. So we had a lot of very positive parts of the country and some that are a little more sluggish. But, like I said, we are taking action now and not waiting on the customer. We are trying to drive value for them. They continue to bring their trips, both gallon and merchandise, to Arko Corp.

Daniel Guglielmo: That is great. I really appreciate all that color. That is really helpful. And just as a follow-up to that, can you talk about how the dealers have been able to navigate this complex environment? I know they are kind of smaller entrepreneurs with less resources, so I am curious if they have seen more headwinds in their businesses this year?

Arie Kotler: There is no question that those dealers are having the same challenges like everybody else. But remember, the environment that we are living in is that almost 65% to 70% of the stores in America are operated by those dealers. So I think all of those guys are in the same boat. And when prices go up and we see volatility, there is no question that they are probably going to have a little bit of a decline in gallons, but that is going to be offset by an increase in CPG. That is the way they are managing the business, and this is the way they have been managing their business for the last fifty years.

There is no question that prices of fuel have to come down at some point. We saw that for the past—look, we have been a public company for the past five years, and I have been around the block for over twenty years. It is a cycle. It is a cycle, and at some point the price will come down, and consumers and those dealers are going to continue to drive gallons and drive sales as they have before.

Daniel Guglielmo: Great. I appreciate all that insight. Thank you.

Arie Kotler: Thank you, Daniel. Thank you. This concludes the question and answer session.

Operator: I would like to turn the call back over to Arie Kotler for closing remarks.

Arie Kotler: Thank you, everyone, for participating this morning. It was great talking to you. And we hope to see you in our stores. Have a great morning.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.