10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024.


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-39828

ARKO Corp.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		85-2784337
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

8565 Magellan Parkway

Suite 400

Richmond, Virginia 23227-1150

(Address of Principal Executive Offices) (Zip Code)

(804) 730-1568

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share	ARKO	Nasdaq Capital Market
Warrants to purchase common stock	ARKOW	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO

As of August 5, 2024, the registrant had 115,771,318 shares of its common stock, par value $0.0001 per share (“common stock”) outstanding.

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited)	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities, and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures		46

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described below and in “Item 1A-Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 and this Quarterly Report on Form 10-Q, and described from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). We do not undertake any obligation to update forward-looking statements, except to the extent required by applicable law. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

Risks and uncertainties, the occurrence of which could adversely affect our business, include the following:

•

changes in economic conditions and consumer confidence in the United States;

•

our ability to successfully develop, implement, and achieve the anticipated benefits of the Transformation Plan (as defined below), including the planned conversion of certain retail stores within our retail segment to dealer sites within our wholesale segment, which may not occur on commercially reasonable terms, if at all;

•

significant changes in the current consumption of, and related regulations and litigation related to, cigarettes and other tobacco products;

•

changes in the wholesale prices of motor fuel;

•

significant changes in demand for fuel-based modes of transportation;

•

the highly competitive fragmented industry in which we operate, characterized by many similar competing products and services;

•

our ability to make acquisitions on economically acceptable terms;

•

our ability to successfully integrate acquired operations or otherwise realize the expected benefits from our acquisitions;

•

negative events or developments associated with branded motor fuel suppliers;

•

we depend on several principal suppliers for our fuel purchases and one principal supplier for merchandise;

•

a portion of our revenue is generated under fuel supply agreements with dealers that must be renegotiated or replaced periodically;

•

the retail sale, distribution, transportation and storage of motor fuels is subject to environmental protection and operational safety laws and regulations that may expose us or our customers to significant costs and liabilities;

•

failure to comply with applicable laws and regulations;

•

the loss of key senior management personnel or the failure to recruit or retain qualified personnel;

•

unfavorable weather conditions;

•

payment-related risks that may result in higher operating costs or the inability to process payments;

•

significant disruptions of information technology systems, breaches of data security or compromised data;

•

evolving laws, regulations, standards, and contractual obligations related to data privacy and security regulations, and our actual or perceived failure to comply with such obligations;

•

our failure to adequately secure, maintain, and enforce our intellectual property rights and third-party claims of infringement upon their intellectual property rights;

•

our dependence on third-party transportation providers for the transportation of most of our motor fuel;

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•

our operations present risks which may not be fully covered by insurance;

•

our variable rate debt;

•

the agreements governing our indebtedness contain various restrictions and financial covenants;

•

the majority of our common stock is held by a limited number of stockholders and management and their interests may conflict with yours;

•

our corporate structure includes Israeli subsidiaries that may have adverse tax consequences and expose us to additional tax liabilities;

•

we may not be able to maintain an effective system of internal control over financial reporting and we may not be able to accurately report our financial results or prevent fraud;

•

the market price and trading volume of our common stock may be volatile and could decline significantly; and

•

sales of a substantial number of shares of our common stock in the public market could cause the prices of our common stock to decline.

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PART I. FINANCIAL INFORMATION

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company,” “ARKO,” “we,” “our,” “ours,” and “us” refer to ARKO Corp., a Delaware corporation, including our consolidated subsidiaries.

Item 1. Financial Statements

ARKO Corp.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


	June 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	231,647		$	218,120
Restricted cash		19,392			23,301
Short-term investments		4,860			3,892
Trade receivables, net		155,578			134,735
Inventory		251,142			250,593
Other current assets		107,145			118,472
Total current assets		769,764			749,113
Non-current assets:
Property and equipment, net		740,004			742,610
Right-of-use assets under operating leases		1,418,778			1,384,693
Right-of-use assets under financing leases, net		160,280			162,668
Goodwill		299,972			292,173
Intangible assets, net		194,151			214,552
Equity investment		2,935			2,885
Deferred tax asset		60,822			52,293
Other non-current assets		53,163			49,377
Total assets	$	3,699,869		$	3,650,364
Liabilities
Current liabilities:
Long-term debt, current portion	$	18,184		$	16,792
Accounts payable		239,169			213,657
Other current liabilities		151,434			179,536
Operating leases, current portion		68,725			67,053
Financing leases, current portion		10,856			9,186
Total current liabilities		488,368			486,224
Non-current liabilities:
Long-term debt, net		871,678			828,647
Asset retirement obligation		86,872			84,710
Operating leases		1,434,238			1,395,032
Financing leases		211,760			213,032
Other non-current liabilities		233,852			266,602
Total liabilities		3,326,768			3,274,247
Commitments and contingencies - see Note 13
Series A redeemable preferred stock (no par value) - authorized: 1,000,000 shares; issued and outstanding: 1,000,000 and 1,000,000 shares, respectively; redemption value: $100,000 and $100,000, in the aggregate, respectively		100,000			100,000
Shareholders' equity:
Common stock (par value $0.0001) - authorized: 400,000,000 shares; issued: 130,153,836 and 125,268,525 shares, respectively; outstanding: 115,771,318 and 116,171,208 shares, respectively		12			12
Treasury stock, at cost - 14,382,518 and 9,097,317 shares, respectively		(106,123	)		(74,134	)
Additional paid-in capital		270,455			245,007
Accumulated other comprehensive income		9,119			9,119
Retained earnings		99,638			96,097
Total shareholders' equity		273,101			276,101
Non-controlling interest		—			16
Total equity		273,101			276,117
Total liabilities, redeemable preferred stock and equity	$	3,699,869		$	3,650,364

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
Revenues:
Fuel revenue 1	$	1,887,531		$	1,957,100		$	3,518,863		$	3,618,764
Merchandise revenue		474,248			484,561			888,903			884,849
Other revenues, net		26,384			27,480			52,851			53,904
Total revenues		2,388,163			2,469,141			4,460,617			4,557,517
Operating expenses:
Fuel costs 1		1,726,761			1,801,103			3,229,063			3,338,985
Merchandise costs		318,489			329,903			598,226			607,226
Site operating expenses		223,691			218,002			442,622			410,685
General and administrative expenses		42,436			42,660			84,594			83,076
Depreciation and amortization		33,577			32,837			65,293			61,236
Total operating expenses		2,344,954			2,424,505			4,419,798			4,501,208
Other expenses, net		261			4,956			2,737			7,676
Operating income		42,948			39,680			38,082			48,633
Interest and other financial income		3,384			2,428			25,297			9,630
Interest and other financial expenses		(24,751	)		(22,588	)		(49,121	)		(43,392	)
Income before income taxes		21,581			19,520			14,258			14,871
Income tax expense		(7,546	)		(5,014	)		(839	)		(2,856	)
Income (loss) from equity investment		28			(27	)		50			(63	)
Net income	$	14,063		$	14,479		$	13,469		$	11,952
Less: Net income attributable to non-controlling interests		—			48			—			101
Net income attributable to ARKO Corp.	$	14,063		$	14,431		$	13,469		$	11,851
Series A redeemable preferred stock dividends		(1,445	)		(1,434	)		(2,859	)		(2,852	)
Net income attributable to common shareholders	$	12,618		$	12,997		$	10,610		$	8,999
Net income per share attributable to common shareholders – basic	$	0.11		$	0.11		$	0.09		$	0.07
Net income per share attributable to common shareholders – diluted	$	0.11		$	0.11		$	0.09		$	0.07
Weighted average shares outstanding:
Basic		115,758			119,893			116,512			120,073
Diluted		116,880			121,280			117,073			120,767
Supplemental information:
1 Includes excise tax of:	$	301,030		$	307,244		$	573,230		$	571,499

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Changes in Equity

(Unaudited, in thousands, except share data)


	Common Stock					Treasury			Additional			Accumulated Other		Retained			Total			Non-
	Shares			Par Value		Stock, at Cost			Paid-in Capital			Comprehensive Income		Earnings			Shareholders' Equity			Controlling Interests			Total Equity
Balance at April 1, 2023		120,305,008		$	12	$	(42,352	)	$	234,158		$	9,119	$	74,143		$	275,080		$	(45	)	$	275,035
Share-based compensation		—			—		—			4,555			—		—			4,555			—			4,555
Transactions with non-controlling interests		—			—		—			(96	)		—		—			(96	)		96			—
Distributions to non-controlling interests		—			—		—			—			—		—			—			(60	)		(60	)
Dividends on redeemable preferred stock		—			—		—			—			—		(1,434	)		(1,434	)		—			(1,434	)
Dividends declared (3 cents per share)		—			—		—			—			—		(3,607	)		(3,607	)		—			(3,607	)
Common stock repurchased		(1,498,630	)		—		(11,452	)		—			—		—			(11,452	)		—			(11,452	)
Vesting and settlement of restricted share units		36,084			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		14,431			14,431			48			14,479
Balance at June 30, 2023		118,842,462		$	12	$	(53,804	)	$	238,617		$	9,119	$	83,533		$	277,477		$	39		$	277,516

Balance at April 1, 2024		115,743,761		$	12	$	(106,055	)	$	267,671		$	9,119	$	90,493		$	261,240		$	—		$	261,240
Share-based compensation		—			—		—			2,784			—		—			2,784			—			2,784
Dividends on redeemable preferred stock		—			—		—			—			—		(1,445	)		(1,445	)		—			(1,445	)
Dividends declared (3 cents per share)		—			—		—			—			—		(3,473	)		(3,473	)		—			(3,473	)
Common stock repurchased		(11,866	)		—		(68	)		—			—		—			(68	)		—			(68	)
Vesting and settlement of restricted share units		39,423			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		14,063			14,063			—			14,063
Balance at June 30, 2024		115,771,318		$	12	$	(106,123	)	$	270,455		$	9,119	$	99,638		$	273,101		$	—		$	273,101


	Common Stock					Treasury			Additional			Accumulated Other		Retained			Total			Non-
	Shares			Par Value		Stock, at Cost			Paid-in Capital			Comprehensive Income		Earnings			Shareholders' Equity			Controlling Interests			Total Equity
Balance at January 1, 2023		120,074,542		$	12	$	(40,042	)	$	229,995		$	9,119	$	81,750		$	280,834		$	56		$	280,890
Share-based compensation		—			—		—			8,624			—		—			8,624			—			8,624
Transactions with non-controlling interests		—			—		—			(2	)		—		—			(2	)		2			—
Distributions to non-controlling interests		—			—		—			—			—		—			—			(120	)		(120	)
Dividends on redeemable preferred stock		—			—		—			—			—		(2,852	)		(2,852	)		—			(2,852	)
Dividends declared (6 cents per share)		—			—		—			—			—		(7,216	)		(7,216	)		—			(7,216	)
Common stock repurchased		(1,773,109	)		—		(13,762	)		—			—		—			(13,762	)		—			(13,762	)
Vesting of restricted share units		541,029			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		11,851			11,851			101			11,952
Balance at June 30, 2023		118,842,462		$	12	$	(53,804	)	$	238,617		$	9,119	$	83,533		$	277,477		$	39		$	277,516

Balance at January 1, 2024		116,171,208		$	12	$	(74,134	)	$	245,007		$	9,119	$	96,097		$	276,101		$	16		$	276,117
Share-based compensation		—			—		—			6,113			—		—			6,113			—			6,113
Transactions with non-controlling interests		—			—		—			(2,984	)		—		—			(2,984	)		(16	)		(3,000	)
Dividends on redeemable preferred stock		—			—		—			—			—		(2,859	)		(2,859	)		—			(2,859	)
Dividends declared (6 cents per share)		—			—		—			—			—		(7,069	)		(7,069	)		—			(7,069	)
Common stock repurchased		(5,285,201	)		—		(31,989	)		—			—		—			(31,989	)		—			(31,989	)
Vesting and settlement of restricted share units		1,467,396			—		—			—			—		—			—			—			—
Issuance of shares		3,417,915			—		—			22,319			—		—			22,319			—			22,319
Net income		—			—		—			—			—		13,469			13,469			—			13,469
Balance at June 30, 2024		115,771,318		$	12	$	(106,123	)	$	270,455		$	9,119	$	99,638		$