Arko (ARKO) Q3 2024 earnings summary

Executive summary

• Adjusted EBITDA for Q3 2024 was $78.8 million, at the midpoint of guidance but down from $87.3 million year-over-year, due to lower retail fuel and merchandise contribution.

• Net income for Q3 2024 was $9.7 million, down from $21.5 million year-over-year; net income attributable to common shareholders was $8.2 million.

• Consumer spending and traffic remained pressured by inflation, but margin rates improved.

• Strategic focus on food service expansion, loyalty program growth, and dealerization of underperforming stores to optimize profitability.

• The company operates 1,491 retail stores and supplies fuel to 1,832 dealer locations across over 30 states.

Financial highlights

• Q3 2024 revenue was $2.28 billion, down from $2.62 billion year-over-year; nine-month revenue was $6.74 billion, down 6.1% year-over-year.

• Retail segment operating income was $71 million, down from $81.5 million year-over-year; adjusted operating income was $85.1 million, down from $96.5 million.

• Total retail merchandise sales declined 7.3%, with merchandise contribution down 4.2%, but margin rate expanded by 110 basis points to 32.8%.

• Retail fuel contribution fell 3.4% on a 5.9% gallon decline, partially offset by a $0.01 per gallon margin increase.

• Cash and cash equivalents at quarter-end were $292 million, with total liquidity of $869 million and total debt of $885 million.

Outlook and guidance

• Q4 2024 adjusted EBITDA expected between $53 million and $63 million; full-year 2024 adjusted EBITDA guidance is $245 million to $255 million.

• Guidance assumes low to mid single-digit decline in same-store sales and mid single-digit decline in retail gallon demand.

• The company expects to convert approximately 100 additional retail stores to dealer sites by year-end 2024.

• Management anticipates sufficient liquidity for foreseeable needs.