Q2 2022 Arko Corp. Earnings Call
Greetings and welcome to the Arco Corp, second quarter 2022 financial results Conference call.
At this time all participants are in a listen only mode.
And the answer session will follow the formal presentation.
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As a reminder, this conference is being recorded I would now like to turn the conference over to your host Wasp Harmon Vice President of Investor Relations and Government Affairs. Please go ahead.
Thank you good morning, and welcome to Arco's second quarter 2022 earnings conference call and webcast on today's call are arty, Kotler, Chairman, President and Chief Executive Officer, and David <unk>.
She found in our earnings press release quarterly report as filed with the SEC and our earnings presentation are available on Arcos website at Arco core dotcom.
Before we begin please note that all second quarter 2022 financial information is unaudited and during the course of this call management may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 each.
These statements maybe identified by the use of words, such as will May expect plan intend could estimate project and similar references to future periods. These.
These statements speak only as of today and 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.
Please refer to our press release, our quarterly report on Form 10-Q for the quarter ended June 30th 2022, and our other filings with the SEC, including our annual report on Form 10-K for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking.
<unk> made today.
Please note that on today's call management will refer to non-GAAP financial measures, including same store measures EBITDA and adjusted EBITDA. While the company believes 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 our financial information presented in accordance with GAAP.
You should refer to our earnings press release for reconciliations of our non-GAAP measures to the most directly comparable GAAP measures.
I'd 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 did they ask for your patience and understanding and now I would like to turn the call over to Ari.
Thank you Ross good morning, everyone and thank you for joining us.
Our strong results for the second quarter, Okay. The resiliency triangle of our business model and our ability to execute our long term growth strategy.
Our put generated 31 8 million dollar in that E com, an increase of over 24% versus the prior year second quarter.
This EBITDA was an all time second quarter I for the company at $79 million arcing comparable quarter year over year EBITDA growth for six straight quarters.
Our strong results strong we accomplished a lot during our first off of the year, our performance and financial strength facilitated continued investment in our store.
And hiring.
Retention program as well as the repurchase of common stock, which we continue to view as a great use of capital and the declaration of our third quarterly dividend.
I'm extremely happy with the performance of all areas of our business.
This quarter, we navigated historic volatility and inflation by remaining focused on executing our strategy in stores and in fuel.
Stores, we maintain total market share and grew total store dollar sale.
Merchandise margin decreased 170 basis points to 34% compared to 28, 7% in the second quarter of 2021.
Second quarter same store merchandise sales, excluding cigarettes was five 7% on a two year stock basis.
Our marketing team has done good job managing for inflation in key categories in particular.
Water, we'd go growing frozen food center of the store right than beer and other tobacco products.
In terms of execution of our strategy here is the shorts case study built.
Building out frozen food offering with a strategic focus for us in prior quarter.
The team moved quickly to implement this program and its executing it very well.
He could rapidly gained ground and selling frozen protein create 81, 5% compared to the prior year quarter.
We also had a very strong quarter in fuel whether prices are I know our strategy is consistent.
We seek to manage margin and volume to optimize profitability while remaining competitive.
We executed our strategy through volatile price movement, this quarter and achieve great results.
Gross profit was $138 million.
Pinpoint, 1% increase compared to $113 7 million in the second quarter of 2021.
The story is going to show, we believe that we can maintain cent per gallon growth, while maintaining merchandise margin dollar growth.
Why do we delivered excellent results with you.
Gold prices.
We believe that our fuel strategy also enabled a strong result as prices decline and they have done recently.
I've been visiting stores drove this summer driving through Michigan, Virginia, the Carolinas and many other states I think it's important to get out and listen to customers and associates.
See how the communities around our stores are doing.
Well as our competition.
And yeah, we are executing in the store and territory 11th.
In our stores.
Customers continue to buy items that fulfilled their basic needs. We believe that we are driving some of these demand with compelling fast rewards promotion offering great discounts on fuel and in store purchases.
We have a very compelling offering continue to implement key initiatives.
That are resonating with our customers.
One of the factors that make this company successful is our ability to identify and deliver the right combination of initiatives.
The company scale and resources to allow us to pursue multiple opportunities that's one.
This is an advantage that we believe enable us to deliver great results for our stockholders.
We completed five store Remodels this quarter.
Some moved quickly to implement aspect of our remodel program across our footprint by investing in high margin category and foodservice, which includes converting delhi's Barbara location in our store and an extensive bean to cop coffee program that follows on the heels of our successful rollout of freezers and grab and go open air coolers.
I recently visited stores Dirty enrichment, where there was a line out the door, whereas gebara pizza instead.
Mr. Barbara program is clearly hit with customers we.
We opened for the borrowers this quarter and have a total of eight open for business with five more under construction right now.
I believe we are on pace to achieve our goal of opening 15 to borrowers by the end of the year.
Over the last few quarters, we installed two cup coffee machines and a total of 548 stores exceeding our goal of 525 store installation.
This quarter, we increased ice coffee unit fell by almost 22%.
And we believe that we're very competitively priced for cost conscious consumers.
My store visit confirm that are being two cup coffee machine, along with front, you've been very consistently high quality pop.
Couple of coffee.
I have a serious coffee drinker and I believe we knocked it off the park with the quality of being in the freshness that this machine has to offer.
I also want to speak about some other investments we are making.
We are moving forward on three new Dunkin and plan to remodel two additional dunkin stores.
One stop where it was a remodel in Q2 for six subway remodel this year.
And we remain on track to commence engineering on our new to industry store in Atlanta, Texas.
We're extremely pleased with the continued growing consumer response to our fast rewards loyalty program.
We now have approximately 1.1 million enrolled loyalty customers.
We used the program, earning and redeeming points out of only about 650000 before we can directly communicate them provide special offers.
We're excited to rollout our announced throughout the App currently under development, which really announced communications this million plus customers and enable us to serve them customize deals as well as order and delivery functionality and many other features.
Another factor that has fueled our growth and been consistently accretive to our bottom line is our highly successful acquisition strategy.
We've executed 21 acquisition in less than 10 years, including the acquisition of Quad petroleum fleets fueling business, which closed in late July .
Do you think estimated forward looking non-GAAP measures, we expect that the acquisition of assets from course petroleum will add approximately $17 $5 million of adjusted EBITDA on an annualized basis.
The acquired schools asset shamelessly into our footprint, we proud looks like your prime areas key territory Importantly, we believe this acquisition presents opportunities for organic growth and expansion.
I want to warmly welcomed approximately 100 quality employees with joined our familiar community brand in connection with the acquisition.
They're seasoned operators, we've been sort of the kors name drug over 80 years of continuous operation.
In terms of acquisition cost pressure it created opportunities and advantage for a large operator like Oracle.
It's important to remember that the convenience store industry tends to be very resilient and has historically grown during recession.
Right now there is a robust deal pipeline in the market. We believe that the company is well positioned to use current market condition. So our advantage given our strong financial position.
Our total liquidity as of June 30 was approximately $727 million.
All the cash cash equivalent and short term investments of approximately $282 million and approximately $445 million available under our line of credit.
In addition, we have the extended $1 $15 billion real property commitment off Street real estate capital at our disposal.
We are also investing in areas that we believe will have positive impact on our stores in the longer term.
We're working on adding EV charging capability and just installed level III fast Chargers at village factory in Marysville, Ohio.
Fast Chargers deployed by charged boring support all type of E D.
We previously announced the charger will be installed in two stores in Colorado.
We are in the early stages of our EV charging strategy, we are indentified grants and subsidies and exploring partnerships at the corporate level. Our ambition is to make EV drivers loyal customers and adoption increase in our store footprint.
We also recently released our ESG policy and I encourage you to visit our website to read it we.
We have made significant progress on this policy and look forward.
Baseband reporting with our stakeholders later this year.
I want to thank all associates for their excellent work.
Every year I visit a lot of doors and I'm always struck by how they are willing to get to go the extra mile.
Why do we think the accomplishment was all in airports.
This quarter, we partner with J D C and a leading global humanitarian organization to help alleviate the refugee crisis in Ukraine and neighboring countries.
Our associate they'll collect donations at the point of sale. We also partnered with our supplier community with a dollar for dollar match Biogenerative J D. C donor, we collectively raised over $640000.
We are grateful for the support of our associates customers and supplier community.
We have yet again delivered excellent financial results and I truly believe <unk> well positioned for continued success I will turn the call over to Don.
Thank you Ari and good morning, everyone.
Extra results this quarter.
Increased merchandise contribution and fuel contribution at same stores combined with an increase in fuel contribution in our wholesale segment for the best second quarter in company history.
The 2021 acquisitions of express stop and Handy Mark also contributed to these results.
And we're excited about the <unk> acquisition, which closed in late July .
We are working with the highly experienced karl's team on integrating their operations now.
Well it will become a fourth segment a fourth reporting segment for the company.
This will keep our financial performance easily accessible for all investors and analysts.
With the acquisition the company is now engaging in fuel hedging positions.
This is to manage risk a soda.
Associated with an immaterial number of fuel transactions that have price Rick price risk until the actual fuel is delivered to the car block where several customers buy based on a formula tied to the current rack prices on the date of sale.
This hedging applies to only approximately 2 million gallons per month associated with sleep fueling operations.
Getting into the results merchandise margin dollars for the second quarter of 2022 increased by $9 million versus the prior year, while margin percent increased to 170 basis points to 34% from 28, 7%.
Already noted this but I would like to reiterate this point.
We recorded extra results and elevated fuel price environment.
But we believe our resilient strategy enables the company to also achieved strong results as fuel prices decline as we've demonstrated in prior course prior quarters.
While the prices are high or low we strive to manage margin and volume to optimize overall fuel margin dollars.
Retail fuel profitability, excluding intercompany charges for the second quarter of 2022 grew 15% this quarter to $13 $7 million versus Q2 2021.
The company increased retail fuel margin to 41.3 cents per gallon versus 343 cents per gallon versus the prior year quarter, an increase of 24%.
For the second quarter of 2022 wholesale fuel profitability, excluding intercompany charges increased approximately $3 $5 million compared to the prior year period.
Fuel contribution from fuel supply locations increased by $1 $9 million, excluding intercompany charges compared to the prior year period due to greater prompt pay discounts led to higher fuel costs and greater rebates.
Fuel margin per gallon for these locations increased to 7.2 cents per gallon versus $5.06 per gallon in the second quarter of 2021 or an increase of 28, 6%.
This quarter the company continued to realize strong margin dollar contribution from consignment locations.
<unk> contribution from consignment locations grew $1.6 million compared to the prior year quarter.
Margin also increased 6.969 cents per gallon or 27, 2% to 32.3 cents per gallon compared to the second quarter of 2021, primarily due to greater prompt pay discounts related to higher fuel costs, greater field rates and improve rack to retail margins.
Volume sold through consignment locations.
Our 16% of the total gallons.
For wholesale however, it accounted for approximately 47% of total fuel margin dollar contribution for wholesale.
Moving on second quarter store operating expenses increased $23 $4 million or 15, 1% versus prior year.
Due to an increase in expenses at same stores, including higher personnel costs credit card fees and as a result of our 2021 acquisitions.
In terms of hiring we are seeing our applicant pool, improving while we continue to see a smaller than historical store applicant pool, we are keeping up with the turnover inherent to our industry why take while taking additional steps to retain staff until vacancies through special incentives and recruiting marketing.
Moving onto more results net interest and other financial expenses decreased by $4 $7 million versus the prior year quarter to $7 $3 million for the quarter. During the current quarter, we recorded $7 $3 million and favorable fair value adjustments, primarily associated with our public warrants.
Adjusted EBITDA was $79 million, an increase of $3 $3 million or four 4% compared to the second quarter 2021.
Our net income was $31 $8 million, an increase of almost $6 $2 million more than 24% compared to $25 $6 million in Q2 2021.
As of June 30th 2022, we maintained our strong liquidity position, including cash and cash equivalents and short term investments of approximately $282 million.
Our outstanding debt, excluding capital leases was approximately $714 million, resulting in net debt of $432 million.
For the quarter net cash provided by operating activities was 41 $42.1 million versus $47 $7 million for the second quarter of 2021.
Capital expenditures were $24 $5 million for the quarter compared to $15 $1 million in the prior year quarter higher Capex was driven by upgrades to fuel dispensers and investment of our investments in our stores, including remodeling daily used to facilitate our samara expansion installing being the cup coffee equipment.
Yesterday in our earnings release, we noted that in the third quarter the company initiated an internal restructuring.
Change in tax status of certain subsidiaries.
Which will streamline business operations to provide long term synergies and other cost savings and.
And we expect this to largely be completed by the end of the third quarter gives.
Given the restructuring we expect to record in the third quarter, a onetime noncash tax expense of approximately $8 $5 million.
Our board of directors declared a quarterly dividend of two cents per share of common stock to be paid on September 12, 2022 with a record date of August 29 2022.
In the second quarter, the company repurchased three 1 million shares of common stock at an average price of $8 65 for.
For a total of $27 million paid.
We believe this is the opportunistic use of capital.
There are approximately $11 million remaining under our previously announced $50 million stock repurchase program.
As of August 5th there were approximately $120 1 million shares of common stock outstanding.
The company continues to scale with 1300, <unk> retail sites and 1620 wholesale sites.
As I turn the call back to Ari I will note that this has been another great quarter of financial results. We continue to execute as we navigate through this challenging environment.
Thanks Dawn.
Close by saying that we believe we have the right long term strategy in place as well as execution capability that makes me confident about delivering growth for the long term our business has performed exceptionally well in a challenging environment. Our model is very resilient and I believe we are well positioned to deliver future value to our stockholders.
We're very excited about the second half of this year, we will now take your question.
Thank you ladies.
Ladies and gentlemen, we will now begin our question and answer session.
Would you like to ask a question. Please press star one on your cell phone keypad and accomplish it'll indicate your line is in the queue.
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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 questions.
Our first question comes from the line of Kelly Bania with BMO capital markets. Please proceed.
Hi, Dan This is Ben wood on for Kelly, Thanks for taking our questions.
We wanted to start with the retail gallon same store sales decline and how did that come in relative to your own internal expectations for the quarter and if you could just give us a cadence of same store gallon sales over the quarter, just trying to get a sense of Oh, maybe peak gasoline prices may have impacted gallons.
Sure. Thank you.
Well as a as I mentioned on the call you know iron prices did lead to lower volume. There's no question about it, especially the markets that we currently operate but you know.
As I mentioned always our strategy is to optimize margin.
And and that's basically what we did over here, we stay very competitive in the market. We do business and you know when price goes to $5, which I never see and by the way for my entire career.
Obviously, you know in those markets and our people driving less coming more often to the store by driving less and that's what really led to that but that you know as you can see there with the overall results at the end of the day were to increase profitability, while staying competitive over here.
Great. Thank you that's helpful. And then I guess, so still following up on that on the wholesale side countless equally kind of challenged.
What opportunities are you seeing for wholesale growth or does that more or less track in line with retail.
And you know those the wholesale accounts most of them are mom and pop.
And the challenge that we saw in retail.
At least the slowdown with price actually hit the $5 National average I mean, they saw the same thing and as you can see there gallons are down.
You know the same percentage that our gallons were down.
But at the same time you know.
The last time, we saw $5 was there some timing to meet you know May June .
And as you can see from the beginning of July price are down dramatically I mean, we're talking Iran. Almost a dollar.
And we see right now all of this started we see.
Coming in a different direction I mean, we see volume up right now because of that and I think those guys are going to enjoy the same thing as we see over here on the retail side.
Okay. That's super helpful and if I could sneak in just one more question kind of on the merchandise inside stores side I'm wondering if you could just give us any more commentary on inflation in the quarter and what impact that had on prices or were you able to pass everything through in and are you seeing more price increases come.
Down the line on the supplier side.
You know Theres no question.
During the last quarter, we saw price increases.
And you know we were able to of course too.
We continue to be very competitive.
After increased some prices in some cases.
You know I think what we actually were able to do it increase that promotion we follow our customers.
And make sure that we actually provide.
Great prices to all customers. That's the reason, we saw an increase and loyal customers and as we continue.
Inflation, we are we see the the difference between the loyal customer or to a non brand customer.
The customers are spending over $90 more than the number of customer and I think that's going to continue to to basically be the trend over here as we continue to go on translation.
Awesome. Thank you guys.
Our next question comes from the line of Bobby Griffin with Raymond James. Please proceed.
Good morning, Buddy Thanks for taking my questions.
Alright and down in the first question for US is ease back on retail gallons and more just kind of curious as you guys look at the strategy of maximizing.
Fuel gross profit dollars is there a certain level of gallon decline that you think starts to hurt the inside the store business from a traffic standpoint or something so just anything there to help us.
You know circle up on how you think about balancing the gallon decline versus the G. P. When you think about it inside the store as well.
Sure sure sure sure. So as I mentioned earlier, Bobby you know the $5. Mark. This is something that you know I don't think anyone of us so.
During our carrier other than than people in California of course.
And we watch this very very carefully and that's the reason I mentioned you know we maintain our in store market share and this is based on IRI data.
And this is something that we always watch it we're always watching and making sure that we stay competitively. So you know when we talk about are you now got on down.
Oh <unk>.
The profitability, it's not that they've got on his word that it's not that that you know I don't believe we lost market share. It just the markets that we did business people just draw blessed.
Just because they don't have the discretionary income over there. That's I think that's really the reason for that I don't believe that that's impact any of our in store visits.
And as I said I mean, that's you know we maintain market share in the markets that we actually do business.
But as you can see we were able to increase profitability inside the stores.
Cause of that I mean people are coming more often to the stores right now they may have like small purchases.
But they are actually coming in Milwaukee and Thats. The reason you know what has gone on is are down we make sure that we have the right items, we make sure we have the right promotion, we working with our manufacturer to to be able to to actually put the right promotions in place. That's also the reason why we are investing our.
Our time on Reformatting, our stores be it coffee lunches.
Lunches and we expect foodservice that man. So those are the things that we have to do you know why people are driving that again I think that what we saw in June .
<unk> got to have something it's really historically I never saw anything like this in my life and I think that's right now in July you're going to see that it's actually turning in another direction when prices fell further fueled is basically almost a dollar less.
Okay. That's very helpful and then Don on the store operating expenses I think in the press release, you called out a $8 4 million of personnel cost increase is that all just per hour cost or is there more hours being ran in the stores right now I'm just trying to think of the difference between the labor side on a on a per hour basis, and you know the <unk>.
Ours are running inside the stores.
Yes, sure. So really great question, because it's a combination of a couple of things number one obviously the average wage we're paying is up as is everybody is experiencing across the market. There are more hours being worked because we're where the applicant pool is getting a little bit better, although not where we want it but there's another factor in there too we were doing things we're still offering.
Center is one of the things that we did which I think are existing associates. Appreciate it as we offered a $500 for 500 hours for all employees.
So that's part of the numbers too. So we offered that frame by employed as a memorial day, so not just new employees, but employees, who have not gotten any recognition for that are also getting something too. So I think it's a combination of all three but I think one of the biggest drivers as the hourly wage itself going up.
Okay, and then lastly from US just on the on the realignment and streamlining any early expectations about the savings that you think you can gain from that over a multiyear period or anything there to help us think about what the potential benefit could be once that's all done in the third quarter or into 2022.
We we expect at a minimum just at a minimum over half a million a year, but we think it could be much higher than that but at a minimum from a starting place we think it'll be over half a million dollars.
Okay I appreciate the details in a best of luck in the second half.
Thank you.
Our next question comes from the line of Anna.
But on the deal with Wells Fargo. Please proceed.
Hey, good morning, guys. Congrats on the beat so just quickly wanted to ask on the fuel margins opus data sort of continue to accelerate into July .
This is a decline, which I think makes sense given what we've seen historically.
Is that in line with what you guys are seeing so far in the worst first five weeks of Q3.
And then how should we be thinking about what a more sustainable level looks like.
Assuming gas prices sort of level out again at some point in the foreseeable future.
I can't I can't comment on Q3, the only thing I can comment on Anthony is that yes, we are.
So first you have to come down and this is something that we saw historically.
People are driving more and we see an increase in gallons, there's absolutely a correlation between the price of fuel.
Declining and correlation of people driving more.
And getting out there and I just think that at the end of the day.
We are not relying only on fewer I just wanted to make sure that everybody remembered that if youre looking on our insights inside cells. Excluding cigarettes and this is something very very important because we are a little bit different than some others are you know the health of our business is very very good I mean, we are you know we deliver increase of 170 base.
These points increase in.
Inside the stores I mean, if you're really looking at the end of the day, our gross profit inside the store.
And look that was $3.4 million.
Gross profit on a same store and I think that that's what you can see I mean this is we have $5 price of fuel as you can imagine we are going to see when price of fuel is down for more than a dollar.
Got it that's helpful. Thank you and then I guess, just piggybacking on that on merch margins, obviously, another solid quarter.
It sounded like mix was a big contributor of based on what you guys said in the PR in the prepared remarks can you just help us understand how much of that 170 basis points came from mix versus other factors.
And then to what extent your different initiatives things like the grab and go coolers.
Coffee machines are starting to play a role there.
Sure sure so and at the <unk>.
Driver.
This quarter.
We're actually a frozen food as I mentioned 81, 5%.
We can increase margin of over 7%.
Tack beds pack come sorry pack tests Sweet snack AR was up also 17 over 17, 8% with an increase of 7%.
Then again the same thing goes to you know to the salty snacks and alcohol, we see an increase in our beer sales I think the only the only thing we see right now we've got you know given inflation people may not buy 20 bought back. They may go to 12 pack or six back, but we see an increase in.
Alcohol sales as well as well as the Otp Otp was another driver.
I already mentioned that cigarettes continue to decline.
Cigarettes of course that that you know a lower margin however, otp.
This quarter and an additional one 6% with margin basically increase of $4 22%.
And that's a lot that's that those categories are really the categories are driving that.
And margin.
And I believe we are going to continue to to see that moving forward because of that.
Well that's helpful. Thanks, So much guys. Good luck.
Thank you.
Our next question comes from the line of Mark Astrachan with Stifel. Please proceed.
Hey, Thanks, and good morning, everyone. Two quick questions for me one.
Could you maybe talk a bit about the general drivers of a heightened retail fuel margin.
Continuing to see today relative to pre pandemic levels can you just sort of broader strokes.
Why were here I think we generally get kind of how to think about the ebbs and flows of gas prices up and down and then.
Second question.
Maybe building or we're asking them slightly different.
Any other questions.
Same store sales or even traffic into stores and trying to get a sense relative magnitude of.
Impact from higher fuel.
In June so.
Maybe if you could talk about.
Through the second quarter.
You can kind of get a sense.
Think about it going forward and kind of looking backwards that makes sense. Thank you.
Sure I I had a hard time hearing the full question Mark their line was a little above.
So you know.
I'm going to I'm going to comment first of all on second quarter and as you said with that basically I fuel prices.
You know as I said earlier, I think I feel prices, especially in the market that we do business. You know we are at volt secondary markets a lot of smartphone I think that you know the issue is that you know I'm I'm I'm when I repeat again, you know people are just driving less.
And again this is just because there's less money in their pocket and I think again I think that <unk> did not impact our in store sales are in store sales as I said are in line with our expectation.
And I think the only different needs that they did the change in behavior over here. It was really that people came more often.
And dejected smaller trips versus that you know the chips that they did in the pilot independently crab before it isn't that people were coming in more often during the pandemic keep people came less often but.
Got it.
No.
Sizes big large size there.
Sizes over there and I think what we see right now.
Coming back again, I think that we see people coming more often.
Driving less becoming more often than just buying smaller baskets over here.
I don't think this is again unless that unless prices of fuels that will jump again over $5. I don't think this is something that that would actually impact as a matter of fact, I think actually it's going to improve our business dramatically.
Price they'll gather.
Below debt to $4.
Right Mark.
Mark let me jump in and I don't think I could hear the first question about.
The increased margin level, but one of the things. We're also I think when we talked about this to think about is even though margins increased I mean credit cards have gone up a tremendous amount they went up $4 $1 million due.
Due to higher retail prices. So most of most of our fuel is bought on credit cards. So when you see higher margin, we have to think of it after credit cards.
The way most people think about it. We've also got a lot of increased costs due to inflation just to run the site, which were different than we had he of increased labor costs. You have all kinds of costs going through so these are things that our competitors are talking about.
We've been in an area of increased margin and I think no one knows what the future's going to hold but theres a lot of cost drivers that kind of support some of what we're seeing because of the increased costs between labor credit cards and also lower business that has happened since the pandemic started.
Got it.
Thank you Doug.
Okay.
Our next question comes from the line of cover Martinsen with Jefferies. Please proceed.
Good morning.
Shortly I feel like the industry has been able to hold or even expand margin as gas prices come down given the kind of unprecedented spike. We had this summer do you feel that those dynamics are still holding or is this a different situation.
Yeah, I think the dynamics are still holding I think oh as as you mentioned as you can see it's really depends sort of still you know volatility. It's Greg it's always good to have volatility about that.
You mentioned historically when price dropped dropped dramatically back in a very short period and that's what we saw from the beginning of July attempting I mean, the price dropped really really dramatically.
And basically in almost a couple of weeks I mean price dropped by over 50 60 cents and that's something that's already is very very helpful.
To maintain margin.
Okay, and then when you look out certainly recognizing you just did did the year 'twenty one acquisition.
What's the landscape look like today for additional tuck ins for you guys or perhaps even a larger more transformative acquisition.
Sure. That's a that's a good question, so and I can tell everybody over here that the pipeline is very very active.
My plan is very very active because a lot of that you know a small chain of midsize chain, probably having a hard time operating in this environment.
You need to be a very very savvy operator.
And I think that that's a great opportunity for us I mean this is one of our.
Beth the areas that they know that they practice over the past 10 years, we have enough liquidity we have today.
They'll be making ability of course, then the strategic partnership with Wall Street of course will help us tremendously.
Over the next few.
Few months.
Two are basically to go after those acquisition and there are some.
Meaningful acquisition, you know out there.
We of course, we are exploring.
Thank you very much guys I appreciate it.
Thank you.
Our next question comes from the line of Hale Holden with Barclays. Please proceed.
Hi, good morning kind of on the same theme there I was wondering if you're considering I mean M&A options.
Either as a higher financing cost that's out there in the market.
Or you know the above normal kind of gas spread that's out there fuel cost spread that's out there.
<unk> changes the way you were thinking about.
Valuations or.
If you've seen sellers kind of bring down their valuations.
You know [laughter] sellers don't bring down valuation as you can imagine you know everybody got a big expectation event that that you've seen.
We see what is happening out there you know in terms of the amount of transaction out there. We believe that our strategy of pursuing deals at a reasonably valuation are going just to continue I mean, we are not going to overpay for deals as we never pay you know over the past 21 acquisition that we did and I just think seller expectation, it's one thing.
I think the market will determine when these out there and as you mentioned.
Interest rate is going up.
Our agreement with Oxford, which we have a commitment with Oxford for 1.15 billion dollar available.
You know for the next basically for the next year plus the cash on hand that we have in the line of credit that are available at the very very attractive Ray I think this is something that's going to put us at you know when I put it basically in a very very good spot as you guys remember.
We raised that.
Raised our bonds at fixed rates for the next seven months.
A little bit over seven years, and I think that make us very very attractive in terms of the valuation, but we can actually put on those deals.
Great. Thank you so much I appreciate it.
Thank you.
Thank you.
Ladies and gentlemen, this concludes our question and answer session and I'd like to turn the call back to Ari Cutler for any closing remarks.
Thank you operator and again, thank you everybody for joining us today.
I would like to of course make sure that you've got and enjoy the rest of the summer.
All the best and you know why do you enjoy the rest of the summer just to make sure you stop that's one of our stores.
To try one of our excellent ice coffee cups.
Enjoy the rest of the day. Thank you.
This concludes today's conference. Thank you for your participation you may now disconnect.