RICHMOND, Va., March 25, 2021 (GLOBE NEWSWIRE) -- ARKO Corp. (Nasdaq: ARKO), a growing leader in the U.S. convenience store industry, today announced financial results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter and Full Year 2020 Key Highlights
- Net earnings improvement of 66% for the quarter to a loss of $6.7 million compared to the prior quarter in 2019, and net income for the year of $30.1 million, an increase of 164%.
- Operating cash flow generated of $47.3 million for the quarter, an increase of 774%, and $173.8 million for 2020, an increase of 302%.
- Retail fuel margin for the quarter increase of 48% to 29.3 cents per gallon and increase for the full year of 54% to 31.9 cents per gallon, which more than offset reduced same stores gallons sold of 15.8% and 16.5% for the quarter and full year, respectively.
- Same store merchandise sales increase of 3.3% and 3.5% for the fourth quarter and full year, respectively, with an increase of 4.5% in the period from April to December 2020, compared to the same period in the prior year. Same store merchandise margin increased to 27.1% from 26.6% for the quarter and increased to 27.1% from 27.0% for the full year.
- Adjusted EBITDA, net of incremental bonuses for the quarter was $40.6 million, an increase of 249%; Adjusted EBITDA, net of incremental bonuses for the year was $183.4 million, an increase of 135%, which was in line with the Company’s previously increased expectations for full year 2020.
- Completed the purchase of the business of Empire Petroleum Partners, LLC (the “Empire Acquisition”), materially enhancing our wholesale business and providing a future opportunity to meaningfully reduce fuel procurement costs. Added 1,453 wholesale sites to our network in addition to 84 retail sites, which increased our footprint through expansion into 10 new states and will double our gallons sold.
- On December 22, 2020, ARKO acquired all minority interests in GPM Investments, LLC (GPM), our operating company. Additionally, we purchased all of the minority interests with the exception of a third-party with a 0.29% holding in one of our subsidiaries that distributes fuel to our locations (GPMP).
Arie Kotler, Chief Executive Officer of ARKO Corp., commented, “This quarter marked an important milestone as we became a U.S.-listed public company, and we are pleased to have reported strong financial results in the midst of a challenging operating environment. Our industry is highly fragmented and ripe for consolidation, and we are proud that we have built a large platform with our strong track record of acquisitions. We recently announced the pending acquisition of 61 sites from ExpressStop and remain focused on driving the next chapter of growth through our multi-year remodel program and other compelling organic growth opportunities that we expect will deliver long-term value for all of our stakeholders.”
Fourth Quarter and Full Year 2020 Segment Highlights
Retail| For the year ended December 31, | For the three months ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| (in thousands) | |||||||||||||||
| Fuel gallons sold | 937,095 | 1,039,993 | 249,842 | 259,474 | |||||||||||
| Same stores fuel gallons sold decrease (%) 2 | (16.5 | %) | (1.8 | %) | (15.8 | %) | (0.3 | %) | |||||||
| Fuel margin, cents per gallon 1 | 31.9 | 20.7 | 29.3 | 19.8 | |||||||||||
| Merchandise revenue | $ | 1,494,342 | $ | 1,375,438 | $ | 375,301 | $ | 337,133 | |||||||
| Same stores merchandise sales increase (%) 2 | 3.5 | % | 1.0 | % | 3.3 | % | 0.3 | % | |||||||
| Merchandise contribution 3 | $ | 406,310 | $ | 372,516 | $ | 101,793 | $ | 89,751 | |||||||
| Merchandise margin 4 | 27.2 | % | 27.1 | % | 27.1 | % | 26.6 | % | |||||||
| 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed margin paid to GPM Petroleum ("GPMP") for the cost of fuel. | |||||||||||||||
| 2 Same store merchandise sales is a common metric used in the convenience store industry. We consider a store a same store beginning in the first quarter in which the store has a full quarter of activity in the prior year. Refer to Use of Non-GAAP Measures below for discussion of this measure. | |||||||||||||||
| 3 Calculated as merchandise revenue less merchandise costs. | |||||||||||||||
| 4 Calculated as merchandise margin divided by merchandise revenue. | |||||||||||||||
For the fourth quarter and full year, retail fuel profitability (excluding intercompany charges by our wholesale fuel distribution subsidiary, GPM Petroleum (“GPMP”)) increased approximately $21.8 million and approximately $84.0 million, respectively, compared to the prior year periods. This was due to a higher retail fuel margin that more than offset the decline in gallons sold, which decline in gallons was primarily a result of the COVID-19 pandemic. These increases were also enhanced by the Empire Acquisition and the full year impact of acquisitions made in 2019. Retail fuel gallons sold decreased 3.7% for the quarter and 10.0% for the full year, as compared to 2019, primarily driven by the impact of lower traffic levels due to COVID-19. Similarly, on a same store basis, fourth quarter and full year retail fuel gallons sold declined 15.8% and 16.5%, respectively, as compared to 2019.
Same stores merchandise sales increased 3.3% for the quarter and 3.5% for the year. Total merchandise contribution increased $12.0 million for the quarter and $33.8 million for the year compared to the prior year primarily due to increases in core merchandise categories. These increases were also enhanced by the Empire Acquisition and the full year impact of acquisitions made in 2019.
Wholesale| For the year ended December 31, | For the three months ended December 31, | ||||||
| 2020 | 2019 | 2020 | 2019 | ||||
| (in thousands) | |||||||
| Fuel gallons sold | 267,309 | 64,757 | 226,077 | 15,541 | |||
| Fuel margin, cents per gallon1 | 8.2 | 9.0 | 7.3 | 8.6 | |||
| 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed margin paid to GPMP for the cost of fuel. | |||||||
For the fourth quarter and full year, wholesale fuel profitability (excluding intercompany charges by GPMP) increased approximately $15.2 million for the quarter and approximately $16.1 million for the full year compared to the prior year, with the Empire Acquisition accounting for the majority of the growth. Wholesale fuel margin calculated as cents per gallon were down for the quarter and full year versus prior year due to the Empire Acquisition as a majority of the acquired gallons are sold on a fixed markup basis as opposed to a consignment agent relationship which involves a profit split with the dealer.
Liquidity and Capital Expenditures
As of December 31, 2020, the Company’s cash and cash equivalents were $296.4 million, plus $31.8 million of restricted investments, and outstanding debt was $749.8 million, resulting in net debt of $421.6 million and a net debt to Adjusted EBITDA, net of incremental bonuses, leverage ratio of 2.3x. Capital expenditures were $44.6 million for the year ended December 31, 2020, compared to $58.3 million for the prior year. As of December 31, 2020, there were 124.1 million shares of common stock outstanding.
Empire Acquisition
In October 2020, we consummated the Empire Acquisition, which at the time of the acquisition added to our business the direct operation of 84 convenience stores and supply of fuel to 1,453 independently operated fueling stations in 30 states and the District of Columbia. As a result of the closing of the Empire Acquisition, we now operate stores or supply fuel in 33 states and the District of Columbia.
Store Network Update
The following tables present certain information regarding changes in our store network for the time periods presented:| For the year ended December 31, | For the three months ended December 31, | ||||||||||
| Retail Segment | 2020 | 2019 | 2020 | 2019 | |||||||
| Number of sites at beginning of period | 1,272 | 1,215 | 1,250 | 1,213 | |||||||
| Acquired sites | 84 | 87 | 84 | 69 | |||||||
| Newly opened or reopened sites | 3 | 1 | 3 | — | |||||||
| Company-controlled sites converted to consignment locations and independent and lessee dealers, net | (14 | ) | (8 | ) | — | (1 | ) | ||||
| Closed, relocated or divested sites | (15 | ) | (23 | ) | (7 | ) | (9 | ) | |||
| Number of sites at end of period | 1,330 | 1,272 | 1,330 | 1,272 | |||||||
| For the year ended December 31, | For the three months ended December 31, | ||||||||||
| Wholesale Segment | 2020 | 2019 | 2020 | 2019 | |||||||
| Number of sites at beginning of period | 128 | 126 | 139 | 133 | |||||||
| Acquired sites | 1,453 | — | 1,453 | — | |||||||
| Newly opened or reopened sites | 31 | — | 23 | — | |||||||
| Consignment locations or independent and lessee dealers converted from Company-controlled sites, net | 14 | 8 | — | 1 | |||||||
| Closed, relocated or divested sites | (12 | ) | (6 | ) | (1 | ) | (6 | ) | |||
| Number of sites at end of period | 1,614 | 128 | 1,614 | 128 | |||||||
Business Combination
On December 22, 2020, ARKO Holdings Ltd., an Israeli public company, and Haymaker Acquisition Corp. II, a special purpose acquisition company, completed their business combination to form ARKO Corp. The common stock and warrants of ARKO Corp. began trading on Nasdaq under the new ticker symbols “ARKO” and “ARKOW,” respectively, on December 23, 2020. Please see the press release dated December 22, 2020 on ARKO Corp.’s Investor Relations website for more details related to the business combination at https://www.arkocorp.com/news-events/press-releases.
About ARKO Corp.
ARKO Corp. (Nasdaq: ARKO) owns 100% of GPM Investments, LLC (“GPM”). Based in Richmond, VA, GPM was founded in 2003 with 169 stores and has grown through acquisitions to become the 7th largest convenience store chain in the United States, operating or supplying fuel to approximately 2,950 locations in 33 states and the District of Columbia, comprised of approximately 1,350 company-operated stores and approximately 1,600 dealer sites to which we supply fuel. We operate in three reportable segments: retail, which consists of fuel and merchandise sales to retail consumers; wholesale, which supplies fuel to third-party dealers and consignment agents; and GPMP, which supplies fuel to our sites (both in the retail and wholesale segments). Our stores offer fas REWARDS® high value loyalty program, a large selection of beverages, coffee, fountain drinks, candy, salty snacks, and many other products to meet the needs of the everyday customer.
