Q4 2021 Arko Corp. Earnings Call
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Greetings and welcome to the Arco Corporation fourth quarter and full year 2020 financial results Conference call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Once you require operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the call over to Ross Harmon, Vice President of Investor Relations and government Affairs. Thank you you may begin.
Thank you.
Good morning, and welcome to the Arco's fourth quarter and fiscal year 2021 earnings conference call and webcast on today's call are already Kotler, Chairman, President and Chief Executive Officer, and Dan <unk> Chief Financial Officer.
By now everyone should have access to the company's earnings press release that was furnished to the FCC. This morning and is also available on the Investor Relations section of Arcos website at Arco Corp Dotcom.
Unless otherwise stated during our call today, we are comparing results to the same periods in 2020.
All fourth quarter and fiscal year 2021 financial information is unaudited and during this call management may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These statements may be identified by the use of words, such as will may.
That plan.
And could estimate project and similar references to future periods.
These statements speak only as of today are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.
Today's press release and the company's filings with the SEC include detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.
The company expects to file its annual report on Form 10-K for the year ended December 31, 2021 on February 20.
2022 .
Sept as required by federal Securities laws.
<unk> does not undertake to publicly update or revise any forward looking statements. Subsequent to that date may as a result of new information future events changing circumstances or for any other reason.
Please note that on today's call management will refer to non-GAAP financial measures, including same store measures.
The adjusted EBITDAR and adjusted EBITDA net of incremental bonuses, while the company believes that these non-GAAP financial measures provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in it.
Cordis with gap.
Please refer to today's press release for reconciliation of our non-GAAP measures to the most directly comparable GAAP measures.
I would also like to note that we're conducting our call today from our respective remote locations as such there may be brief delays cross talk or other minor technical issues. During this call. We thank you in advance for your patience and understanding on today's call Ari will review the quarter and year ended December 31, 2021 .
Dan will then review our financial results in more detail before they take your questions and now I would like to turn the call over to Ari.
Good morning, everyone. We are pleased to report strong results for the fourth quarter and fiscal year 2021 for the full year adjusted EBITDA net of incremental bonuses was a record $256 6 billion dollar fourth quarter 2021, adjusted EBITDA net of incremental bonuses was 58 point.
$4 million, a 44% decrease versus the fourth quarter of 2020, we have undertaken longterm strategic initiative in our convenience stores and in our wholesale division that we believe position us well.
Well for a considerable long term profitable growth.
Inside the store merchandize margin expanded 190 basis points in the fourth quarter to 30%.
Continue to drive margin expansion broadly and in key categories. We also saw considerable margin grow and grab and go and frozen food strategic people that theres been a hit with our customers and currently continues to see substantial growth.
In fuel, we were able to grow our retail margins were $33.05 per gallon for the fourth quarter, Despite rising fuel prices.
In May we acquired 60 express stop store and gas station in Michigan and Ohio.
Remember, we acquired 36 company operated and D Mart convenience stores and gas station.
The development sites, all located in North Carolina, and during 2021 we rapidly integrated and realize significant synergies with Empire for.
For the year. These acquisition added $36.8 million of merchandise contribution and $53 $9 million in retail fuel profitability.
We recently announced that we have agreed to buy the card lock business and certain other assets of course petroleum gauze footprint is in prime locations, along with the northeast and southeast Seaboard, our own territory. So.
So easily accessible commercial sites exclusively for fleet drilling of light industrial trucks and commercial vehicles.
This is an exciting and unique deal that we believe will drive strategic growth with 185 catalog side call. It is the largest fleet fueling proud look operator on the U S. East Coast. This is a business that we believe cannot be replicated today.
The acquisition of this asset complement and expand our cohorts of strategy at the mature fleet fueling platform and boost our supply and distribution capability within our 33 States and Washington D C fuel supply footprint.
At the time of signing the asset purchase agreement using estimated forward looking non-GAAP measures. The company expect that this acquisition will add approximately $17.3 million of adjusted EBITDA on an annualized basis after incremental rent of approximately $7.7 million to be paid to wall Street, but private equity real estate firm.
That will fund approximately $130 million of the purchase price the company intends to finance from its own resources the value of inventory acquired at the closing and the remaining approximately.
$40 million of this purchase price.
Most importantly, we believe we can rapidly sooner jive and strategically grow this business.
Moving to some of our strategic longer term unique with you.
When a remodel in organic grow opportunity. We believe that we are an expensive embedded opportunity to enhance our existing store base through multiple organic growth initiatives.
We constantly monitor macroeconomic factors such as rising material costs shortages construction industry price fluctuations and labor shortages and we closely analyze key performance indicators in our remodel program.
Two stores were remodeled in 2021, and we completed the raise in rebuild in Rock Hill South Carolina in November 2021, we have seen encouraging results so far from dislocation.
We opened one new Dunkin' location in 2020 , one six stores are undergoing remodels to be completed in the first thoughtful 2022 .
We plan to break ground on our new to industry store in Atlanta, Texas in the fourth quarter of 2022.
And we are planning to open additional Dunkin' location 2022 we always start with daily remodel our Dunkin' locations.
While we plan our pace moving forward, including review of both the raze and rebuild and MTI opportunities. There are several organic growth strategies that we intend to deploy in 2022.
I will detail our key areas of focus now.
One area of focus is quick serve restaurant partnerships last December we launched a pilot program with two endorsed the borrowers pizza pizza.
<unk> is one of the top foodservice items in convenience stores. We think this is an excellent program that aligns with key elements of our remodel program and announce the in store experience customer feedback has been extremely positive.
Based on preliminary results, including very promising early sales and margin growth. We are planning to build out approximately 50 more in stores. The borrower in 2022 importantly, because of our partnership if tomorrow, we plan to move forward very fast at this initiative.
The second area that drives growth and enhance the overall customer experience has been to cop coffee consumption habits are changing we believe that being in the always fresh hot and iced coffee business 24 hours a day seven days a week is very important we are rapidly expanding this program with an initial target of 525.
Five stores. This program eliminates waste and allows for the store associate to spend less time, making coffee and both time on customer service. We are also working to expand our successful grabbing Gulf Breeze, our strategy even more stores.
Another long term strategic initiative that we're excited about is our fast rewards customer relationship marketing program.
We're investing heavily in this program.
We know our most loyal customers visit us more often and as larger baskets.
One area of investment is the upgrade of our mobile app.
It will be a significant redesign with a better user experience.
New App will also announced analytic capabilities to make us even more competitive across the footprint.
This is important work that we believe will enable even deeper engagement and connection with our customers to drive trips sales and overall enrolment in the rewards program.
Citing new features on the App customers will have the ability to order through the app for in store pickup or delivery.
There'll be in App messaging and advertising customer specific offers and deals. We will also enable geo fencing for local fuel pricing and brand customization. So use there are sent to their local brands such as fast smart easy Marts and village pantry jazz to name a few of our community brands.
On our ESG N E V initiative, we have three important areas, where we continue to make progress we take our responsibility to society very seriously. We believe that we manage this company in a highly responsible manner, because an expectation of our stakeholders, including the communities, where we operate that we adopt formal environmental social and governance practices. We are work.
With the global service here to help us establish an ESG framework aligned with the global standard we.
We will keep you updated on our progress.
We also take the EV opportunity very seriously Arco successfully one grant.
Oh for EV Chargers to be installed in two stores in Colorado that we expect will come online in third quarter 2022, we are applying the learnings from this process the future activities and building our capabilities.
We believe near term adoption would center around allocation on eyedrops corridors.
We are pursuing grants across our footprint. It is important to remember that our stores are primarily located in smaller towns and rural areas as demand builds. We believe we are well positioned to make EV charging a serious part of our business and make EV drivers loyal customers of our stores.
We also continue to pursue acquisitions as you know we looked at many potential transaction after more than 20 deal. Since 2013, we believe we have a winning strategy and again continue to acquire and successfully integrate at any scale.
We have many levers for growth and we are very opportunistic and deliberate about pursuing them. We always considered the best ways to strategically deploy capital in a highly disciplined manner.
Marketing initiatives to put service opportunities, we are highly focused on growth.
We will continue to pursue acquisition of convenient stores as well as bolt on acquisition like the called look what are the assets and then also we continue to pursue renewal and new independent dealer businesses.
Today, we announced that our board of directors declared our first ever quarterly dividend of <unk> per share of common stock and authorized a share repurchase program for up to an aggregate amount of $50 million.
Our ability to return cash to our stockholders is consistent with our capital allocation framework and reflects our confidence in the strength of our cash generation ability and strong financial position.
We ended physical 2021 in a very strong position, we were able to successfully grow our business, while navigating a challenging environment. We look forward to building on these successes in 2022 and behind I would like now to turn the call over to Don will walk you through our financial results in detail.
Thanks, Laurie it's great to be speaking with you all today about both our strong fourth quarter and full year 2021 results.
Beginning with the quarter.
Total revenue, excluding fuel was $418 million.
6% increase from the prior year period.
Merchandise margin dollars increased by $17 $1 million versus prior year, while merchandise margin increased to 30% from 27, 1%.
Largely due to our continued strategic efforts in our high growth categories, such as frozen food and grab and go.
Retail fuel profitability, excluding intercompany charges for the quarter increased $16 $6 million compared to the prior year period.
With Empire expressed up and handy heart accounting for $9 $3 million of the increase coupled with same store fuel profit increasing by $7 $5 million.
Retail fuel margin in the quarter was $33.05 per gallon versus 29.3 cents per gallon for the prior year.
For the fourth quarter of 2021 wholesale fuel profitability, excluding intercompany charges increased $7 $6 million compared to the prior year with most of the growth result of the Empire acquisition.
<unk> contribution from fuel supply locations grew by $5 million for the quarter compared to the prior year driven by an approximate 15 million gallon increase in fuel volume.
And a 2.1 cent increase in fuel margin per gallon for these locations versus the fourth quarter of 2020.
Fuel contribution from consignment agent locations grew $2.6 million for the quarter compared to the prior year due to an increase in fuel margin cents per gallon of $6.05.
Volume was flat compared to the prior year period.
Fourth quarter store operating expenses were up $27 million or 14% versus prior year due to the incremental expenses related to the express stop handy Mark and Empire acquisitions.
In addition to higher credit card expenses and increased expenses at same stores.
General and administrative expenses increased $3 $8 million or 13% for the fourth quarter as compared to the prior year.
Primarily reflecting support for our recent acquisitions as well as annual wage increases incentive accruals and stock compensation expenses.
Net interest and other financial expenses decreased $4 $3 million to $16 $2 million in the quarter, primarily due to fair value adjustment or warrants.
Net period over period increase in foreign currency gains.
Net income for the quarter was $12 $9 million versus a loss of $6 $2 million for the prior year.
Adjusted EBITDA net of incremental bonuses for the quarter was $58 $4 million, an increase of 44% compared to the fourth quarter of 2020.
Turning to our full year results.
Total revenue, excluding fuel was $1 $7 billion.
9% increase from the prior year.
Merchandize margin merchandise margin dollars increased by $66 $6 million versus the prior year.
The increase in merchandise margin dollars was primarily due to the acquisition of the Empire expressed up and had them our businesses coupled with one 6% same store merchandise sales increase.
Merchandise margin increased 210 basis points to 29, 3%.
As a result of changes in the sales mix and improved purchasing economics.
Retail fuel profitability, excluding intercompany charges for the year increased $58 million as our strong fuel margin capture of $33.07 per gallon versus 31.9 tests per gallon in the prior year enables us to more than offset the same store volume losses of one 3%.
For the full year wholesale fuel profitability, excluding intercompany charges increased $66 $5 million compared to the prior year.
With most of the growth result of the Empire acquisition.
Fuel contribution from fuel supply locations grew by $37.4 million compared to the prior year driven by an approximate 605 million gallon increase in fuel volume.
And a 1.3 cent increase in fuel margin per gallon for fuel supply locations versus 2020.
<unk> contribution from consignment agent locations grew $29 $1 million compared to the prior year due to increases in both volume of approximately 106 million gallons and fuel margin cents per gallon of 3.5 cents.
Store operating expenses for the year were up 18, 4% versus prior year due to incremental expenses related to the Empire acquisition, and our 2021 acquisitions and increased expenses at same stores.
General and administrative expenses increased 32% for the year compared to the prior year.
Primarily due to expenses associated with the Empire acquisition annual wage increases incentive accruals and stock compensation expenses.
Net interest and other financial expenses increased by $21.3 million to $71.2 million for the year, primarily due to higher interest expense for outstanding debt.
$4 $5 million additional interests for the early redemption of the Israeli bonds.
$6 $3 million write off of deferred financing costs and $6 million fair value adjustment of our warrants.
Net of period over period increase in foreign currency gains recorded of $8 $1 million.
Full year net income was $59 4 million compared to $36 million for the prior year.
Incremental earnings in 'twenty, and 'twenty, one related to strong contribution from the Empire acquisition, coupled with strong same store merchandize gross margin with partial offsets coming from higher expenses.
Excluding credit card fees and depreciation related to the acquisitions.
Adjusted EBITDA net of incremental bonuses for the year was $256 $6 million, an increase of $73 $2 million or 40% compared to 2020.
Increased increased merchandise contribution same stores and approximately $7 million to $8 million of incremental adjusted EBITDA from the 2021 acquisitions.
And the Empire acquisition were partially offset by higher credit card fees, a slight decrease in gallons sold and fuel profit at same stores.
Our balance sheet remains very strong.
On December 31, 2021, our total liquidity was approximately $754 million consisting of cash and cash equivalents and short term investments of approximately $310 million and approximately $444 million available under our lines of credit.
With net debt, excluding capital leases was approximately $408 million, putting our net leverage at one six times.
For the full year net cash provided by operating activities was $159 $2 million.
Capital expenditures were approximately $773 million for the year, representing capital expenditures of $226 $2 million net of $152 $9 million of proceeds paid by Oak Street for two transactions accounted for a sale leasebacks and the purchase of certain fee properties compared to $44 6 million.
In the prior year.
Today, we announced that our board of directors declared our first ever quarterly dividend of <unk> per share of common stock.
It has to be paid on March 29, 2022.
Holders of record as of March 15th 2022.
The company's board of directors also authorized a share repurchase program for up to an aggregate amount of $50 million of our outstanding shares of common stock.
As of December 31, 2021.
There were 124 4 million shares of our common stock common stock outstanding.
We ended the year with 1406 real retail sites and 1006 hundred 28 wholesale sites.
I'm pleased that we have demonstrated our strength and capabilities through our strong financial results for the year.
We continue to execute as we navigated through a constantly changing consumer environment.
And we believe we are positioned to take our business to the next level.
With that I'll turn it back over to Ari.
Thanks, Don I'd like to thank our over 11000 team members for their exceptional airports to exceed our customers' expectation that why we achieved these excellent results. We are excited to continue to execute drive growth and increase stockholder value. We believe that we are a unique business and differentiated market leader.
And I'm pleased with the progress we have made so far.
Thank you for joining the call today and your interest in Oracle I will now turn it over to the operator for questions operator.
Thank you we will now be conducting a question and answer session.
Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Our first question is coming from the line of Kelly Bania with BMO capital markets. Please proceed with your questions.
Hi, This is Ben wood on for Kelly, Thank you for taking our questions.
So first off and latest guidance could you explain some of the puts and takes in the model for 2021, maybe what came in better than expected or later than expected seems like Empire and fuel margins were a little better but gallons, particularly same store gallons might've been lighter.
I'm, hoping you can help us think about how the model changed over the course of the year and then maybe where you see the most opportunity for upside going forward in 'twenty two.
Sure I'll, let Don take over the.
Question about the model yeah.
Yeah, sure and again without looking at the specific.
From from BMO, just looking at consensus I mean, I think I think the the beats were in.
And wholesale fuel margin at retail.
The the the the takes were in SG&A overall I saw those two as the biggest differences in the model.
Okay. Thank you. Thank you and then the few margin outlook for 2022.
I'm, hoping maybe you could speak a little bit about that we're thinking with like the political environment in crude prices, they're pressuring margins recently.
But is it reasonable to think that CPG G margins could be flattish or north of 30 in 2022.
And then if kind of margins do rise with this higher oil prices, what would impact of higher gas prices would we see on the consumer whether it's trips or basket size.
Thank you.
Sure. Thank you for your question well you know if you're really looking on 2021 for a second and you are looking on the same store gallons in 2021, so the gallons were slightly down.
For the quarter.
However, as you can see the retail margin expand to $33 five per gallon versus the 29.3.
Last year same time.
You know.
I can't talk about you know about the situation in Ukraine right now I think it's too early to talk about any.
Effects from the situation, but I just wanted to remind everybody that we do not take any commodity position.
And it's very again, it's really remind me what happened in 2000 and a similar situation when oil went from.
60, 80 to $140 are in a very short order, we saw very very high prices, but eventually you know those prices actually settle down.
At the end of the day.
And there is no question that the minute price of oil goes up.
People may be a drive less.
But that's you know that in terms of pure however, when it's a you know we'll be talking about the store and especially now in light of COVID-19, we already see that people are spending less time on the road are there coming less time to the stores. However, I mean their basket is much larger than the bus.
It's good that we actually saw before.
So I don't have any reason to believe that anything is going to change.
Destiny, that's my belief right now I don't think anything will change between 'twenty one to 'twenty two you know for the time being.
Okay. Thank you that's helpful.
Sure.
Thank you. Our next question is coming from the line of Bobby Griffin with Raymond James. Please proceed with your questions.
Good morning, everybody. Thank you for taking my questions.
I guess first.
There's a lot of moving parts.
Gallons moving around with the variance breaking out in different things and then margins, but you know when you look at the year to date period of January and February of 2022, and then compare it to kind of <unk> are you starting to finally see some leveling out of the gallons from retail perspective, and maybe we're getting back to closer to normal.
Not back to 19 levels of course, but we're starting to see less variability on a weekly basis or a monthly basis is that fair.
Well you know Bobby I can't really talk about Q1, but what I can tell you is that you know you see the trend in Q4, and obviously in Q4, you saw that the base.
Basically our Golan almost flat.
To the same basic in Q of last year. So yes, I think people are driving more opt in versus that I think are you know as COVID-19 continues to to get lighter over here. There is no question that we see Gallo is coming back.
The one thing I would refer to is that yes gallons are coming back but as you can see the margin continue to be very very strong.
In light of those basically got them coming back.
So I think that's the only different probably from what we saw in 2021 first.
First quarter two 2022.
Okay. That's very helpful. And then we continue so great progress on the merchandise margin you know another great quarter up close to 300 basis points, I think 290 basis points to be exact.
Where are we in the journey, where you're working on there I know, there's multiple initiatives going on but you know when we think about 'twenty 'twenty. Two is is it going to be a year or more modest improvement or can we still is there still a lot of low hanging fruit, where we could see kind of the big.
Step function changes in merchandising margin.
First of all it's a great question because the U S.
As you mentioned and as I detailed earlier, if youre looking went out performance.
This is not the one time show. This is a long term initiative. We started then I'm going to just going to use a couple of example, because I think it's very important to.
So basically you are to put you mentioned them. So the first one is you know if you remember all year 'twenty 'twenty. One I was speaking about our initiative, a grab and go and frozen food.
And if you're really looking on this category in Q4, we saw a 16% I'm, sorry, 16, 100 basis points increase in frozen food in Q4 versus Q4 2020.
We saw a 580 basis points increase.
And grab and go in Q4 2021, and if you remember we started this initiative at the beginning of 2021 .
And now you know we basically completed the initiative. We have 600, then close to 690 <unk> reserves that we added and 525 grabbing go cases that we added and I think that's one of the key things that actually drive those margin substantially the margin on frozen food for Q4 with 39 point.
1% in the margin for a grab and go with close to 39% in Q4.
Same thing we see in some other categories you know one of the best categories for the quarter was Pac Bev I mean Pac Bev, we saw a margin increase of 130 basis points and we saw a sales increase of six 3% why because people spend more time out people are going out.
And basically in increasing their purchases. So as I said I think those are really the categories that are here to stay I don't need to tell you about the you know nicotine and he's one of our one of the areas that we like to concentrate.
See that consumption is on cigarettes is going down quarter after quarter year over year. However, if youre looking on our nicotine category. The otp category, the or the Otp category grew 900 basis points in Q4, and we saw a sales increase of eight 4%.
So you know when you're talking about those categories when he's talking about the center of the store as you know the store category, that's really what drove margin.
In terms of you know what do we have moving forward you know as I detailed earlier you know we have that the sixth remodel and you know the MTI that are coming on board I mentioned, the 500 and this is another big initiative for 2020 to coffee.
We want to make sure that we serve coffee 24 hours a day seven days a week and since consumer habits change dramatically. You know people are not you know a lot of people are still working from home and they're not driving in the morning to the convenience stores. They may show up a little bit later, we want to be in the fresh coffee business. We are installing 525.
Two cup coffee machines, so, leaving that coffee fresh coffee 24 hours a day seven days a week.
In addition to that of course, you know we are adding 52 borrowers.
I don't need to tell you you know pizza is the number one.
Basically the number one foodservice and convenience stores and you know so far from the results with me. So you know we have a great relationship with Tomorrow. We started that last year and you know we are adding 50 saburo pizza in 2022.
So you know.
All of those things that I mentioned as you can understand those are the things that will drive margin and keep margin higher you know moving forward and that's at least the trends that we see over here.
Okay I appreciate that detail best of luck here in 2022.
Thank you.
Yes.
Thank you. Our next question is coming from the line of Mark <unk> with Stifel. Please proceed with your questions.
Hey, guys. Good morning, this is actually Chris arms on for Mark.
Just wanted to start off here on the on the cost side.
Obviously in an inflationary environment here. So if you could just talk a little bit to kind of success in passing through.
Inflation in the store and then and then maybe also comment on what Youre seeing in terms of wage inflation.
Sure sure.
I'll start with a cancellation.
Inflation I mean, obviously everybody knows when you have a 7% inflation.
This is of course, most most of that sort.
We've increased the courts from in effect those.
And you know at the end of the day, what we have to do is basically to pass those costs through our consumers.
It's also include you know play and its supply chain issues that everybody's foreseeing, including ourselves.
We've been very very successful remaining competitive.
Even though we are passing prices to the consumer at the same time, we make sure that we are competitive on.
Our prices and at the same time, we're maintaining that maintaining our margin it'll be here and just to remind you of course and our strategy was always to me.
Maintain margin rates.
And Penny profit that was always the strategy and again. This is what we haven't necessarily this is the thing that I think the one thing that I can talk about LIBOR is that you know our labor model I think it's a little bit different than some of the some of the competition I think in Iran.
Great storage 2500 to 3000.
12 40 per store.
And you know we can have on some of those stores are with one to two basically people.
To the extent, we see a crunch over here and you know there is no question.
You know that are you know that this is a very very tight labor market.
You know in order to manage that and we manage it very well you know we have a program to keep our you know to keep us competitive.
We have like we have a sign on and retention bonuses we have.
What kind of program in order to make sure that our stores will have the appropriate labor to run those stores.
Got it thank you.
If I could just follow up on the M&A congrats on the acquisition.
It does kind of seem like the pace of acquisitions it is increasing.
Do you know or is that is that evidence of maybe market multiples are becoming more reasonable and then also on the specific acquisition.
Primarily you know a few fuel play.
How do you guys think about kind of an acquisition like you announced today versus.
Those with more of an in store footprint.
Sure sure sure sure.
Good question. So first of all as you saw in 2021 up you know we are we completed the Empire acquisition at the end of 2020. So you know I would say that.
We spend a lot of times to make sure that we synergize the two companies and we make sure that we capture those synergies after doing such a large acquisition at the end of 2020.
At the same time, you know we did the two acquisition 60 stores in May.
Expressed up acquisition in the Midwest.
We completed another acquisition in November 36 stores, our great stores, Andy Marsh brand over 100 years granting Nikola lineup.
And while we're doing that you know we start working on the <unk> acquisition.
You know the interesting. This is a very unique deal that we believe will actually drive strategic grow for us.
The team did a great job over here and you know what's interesting about this particular deal is that this is the largest causes of operator on the east coast as I mentioned.
And remember the East Coast, I mean, I'm talking in Virginia, North Carolina. This is really our own territory.
So you know they they would think about this business is that you know this is a very attractive diesel and gasoline mix I mean, approximately 80% of those stores actually all of those locations are actually selling diesel.
To do basically two two.
Two large trucks.
It's a lot of you know is basically the largest east coast fleet business are that he is actually there and its that'd be very very difficult to replicate that.
So you know that that's something that we felt that can help us to actually boost our business say in respect to our two basically to Empire.
You know for me.
Multiple standpoint, I think I mentioned that almost on every call. It's not the amount of acquisition. It's basically the quality of the acquisition and as I referred on the call. You know we are adding $17 3 million dollar you know what everything is set and done we already $17 $3 million of adjusted EBITDA and.
We ended up paying $40 million when everything you know after rent after we utilizing the line from Oak Street I mean, we are paying $40 million. So in so we're really looking on an EBITDA multiple for US you know pre synergies you know you're talking about a little bit over 2324 times.
And I think that that's the one thing that I think different between us and some others I mean, we know or we do a lot of accretive deals to.
So basically to announce so profitability over here.
So I don't think anything's changed in terms of multiples. They just think that the like every year. The beginning of the year. There is a slowdown in acquisition and you know I think after Q1 are.
Usually at the beginning of Q2 people basically start to get them to basically to think about selling and we see a lot of more opportunities coming in the second and the third quarter. That's usually what we saw in the past.
Yeah.
Chris if I could add one other thing to what I already said and it is a unique acquisition and you've probably past a lot of these car electric car Luxor I'll throw out Richmond, when you've been driving around.
But again as already said, it's 80% diesel and well, while we are making efforts on EV as you heard already talk about where we're doing two in Colorado and we believe we're going to we're going to jump on EV wherever there is we believe that that the trucking side of this is gonna be a later adopter of E. V. So we think of this strategically it was a good move for us because all.
Or is there just more trucks on the road with things being ordered online Big fleet business. So are we.
We think there's less there's less riskier, although we're not ignoring it. So we think it's a good strategic move for us.
And just to finish on this on this line Chris Remember this is a 24 seven business and.
All of those locations are unmanned location. So you know going back to what we discussed earlier about labor and inflation I mean, that's one of the thing we like about that that that those locations are actually unmet facilities and they build specifically for commercial fleets and light industrial vehicles that actually visit those locations.
That's helpful. Thanks, guys.
Tourists. Thank you. Our next question is come from the line of William Reuter with Bank of America. Please proceed with your questions.
Good morning.
I just have two the first is I don't think I saw a capex expectation for fiscal year 'twenty two.
Do you have an estimate of what you expect to spend this year.
We don't put projections for 2022 about you know we can refer if you want <unk> can refer to basically to 2021 what do we spend in 2021 if that's going to be helpful for you.
Yeah, I think I think the best way again, because we don't put out projections and.
You've heard our initiatives with what we're doing so I would just look at our trend and just go from there.
There's nothing specific we're gonna put out is in terms of projections of capex, but you've heard of efforts. We're doing has already outlined.
With where the barrels are also outlining what we're doing on the Remodels, we have scheduled the new to industry.
And the.
And also.
With the raze and rebuild and again one of the things I want to point out too.
And this is not something we specifically said, but you know we did have a sniff not a lot, but roughly about $10 million of our Capex last year was spent on <unk>.
<unk>, which we project will probably spend again this year, but that's not something that's gonna be going on and not alone. So you have different things going back and forth. We also spent about $9 million and just purchase the land and where where you know we're opportunistic where we have rights of first refusal will take them. So I think we you know we're looking at capital.
Allocation going forward I will tell you about roughly about one third of our Capex of the 73 wished for maintenance the retrofit of the investment.
Yeah, and I think that's very important too to point over here sorry for jumping in I think it's very important to point out that if you're really looking on doing that that capex dollars that we spend of $73 million only $26 million was really for maintenance capex and the rest of it was investment cut backs and including you know purchasing some pieces are.
Real estate the remodel that we mentioned over here are there you know that the coolers and freezers and you know so I think those are the things to think about it. So you know in terms of Capex with all of the initiative, we at least laid out for 2022 I'm talking about 525 bean to cop coffee machine.
An additional 15 borrowers those are not the big big.
Investment that you would see when you actually do a raise and rebuild.
Okay, I'm on the topic of raze and rebuild.
I you know when you guys did your high yield offering that was certainly one of the issue that you guys were pretty excited about so I guess right. Now you have six planned for the first half of 'twenty. Two what are you kind of evaluate the performance of those and then think about the pace with regard to the second half of the year.
The answer is yes. This is you know what we have to do is recalls as you know I don't need to tell you you know across the board there's been a lot of shortages of material construction inquiries and we want to make sure that you know we continue to do what we said we're going to do which is actually looking on return on capital. So you know we finished the first two stores.
Which those are really the I'll call it the blue the blueprint for the stores moving forward we finished it too.
The the one store that we open and if you guys have access to our presentation that we published today.
The first page of the presentation. The picture. This is a big the raze and rebuild that we actually just completed a 'twenty 'twenty. One are the results. So far are very very promising I mean, the store looks terrific. The results are great.
And you know to answer a question of what we're doing because of dogs. We are completely distinct stores, we're going to learn from those eight stores, but at the same time, we are not waiting until we got to finish the six stores. That's the reason we decided to basically move forward with the 50% the ballroom.
<unk>. It's basically this is part of the remodel of Juno.
So we felt that this is a great opportunity for us to continue to expand our remodel with basically additional fitness the borrowers that we actually put a building.
And of course, some other initiatives that will help us to of course, the increased profitability and increased margin.
Okay, and then just lastly for me sorry, I said I only have two but the share repurchase authorization was a little surprising to me I view. This as a growth story with lots of organic opportunities to invest as well as potential M&A you've consistently pursued.
Yes.
Is the thought process on repurchasing shares versus some of these other initiatives that probably have or may have higher IRR.
Sure sure sure. So all of them are basically you know just for your benefit.
You know over the past two years, we generated over $300 million in cash from operation.
This is something to make sure that the you know if.
You're aware of that everybody aware of that then you look that our liquidity is well over $700 million right. Now so nothing is really going to change from it and basically grow strategy or you know this is not something going to change you know what you know with all of the remarks that I made earlier and of course, you saw the results for 2021 .
You know we are performing very very well we show great results and you know we have our cash flow right now at this current price I mean, we believe that we have a good opportunity is it simple as that.
That's not going to take away any of the other initiatives.
But we actually say last year and this year we.
We're going to need to continue to do that but you know we have plenty of liquidity out there between you know over $700 million liquidity in over $750 million on the commitment beef Oak Street, we felt that the price is just it's a great price for US and you know we would like to of course utilize this opportunity.
Understood Alright, thank you.
Of course.
Thank you. Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
There are no further questions at this time I would like to turn the call back over to Colin for any closing comments.
Thank you very much.
Body for participating and you know as you know I'm very excited this is just the beginning of the year and as you can see you know we are just in February the end of February just announced today in the morning, the quality of opportunity great opportunity for US you know I'm very very proud of the progress that we've made over here so far.
And I'm looking towards the future of course, and you know in my opinion. This is a very exciting time for Oracle.
Looking forward you know we have a lot of initiatives that that you know that I mentioned over here.
Now that the remodel of the six stores the MTI that we're planning on breaking ground in basically in Atlanta text us in Q4, the fifties to Barbara stores that we're planning on opening this year.
Along with the rest of the initiatives being two comp and of course, you know continue with the grab and go and freezer. Then you know the only thing I can tell you is that you know this is going to be a great year for us I mean, the core deal is a very unique opportunity that we just got into.
And we of course will continue to pursue strategic acquisition.
And in the convenient stores and also basically business as we did over the past eight years. So thank you everybody for your time today and I wish you all the best.
Yeah.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time and enjoy the rest of your day.