Q4 2023 Arko Corp Earnings Call

Operator: Greetings. Welcome to the ArkoCorp fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Arco Corp, fourth quarter and fiscal year 2023 earnings Conference call. At this time, all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jordan Mann, Senior Vice President of Corporate Strategy, Capital Markets, and Investor Relations. Thank you. You may begin.

Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Jordan Mann Senior Vice President of corporate strategy capital markets and Investor Relations. Thank you you may begin.

Thank you good morning, and welcome to Arco's fourth quarter and fiscal year 2023 earnings conference call and webcast.

Jordan Mann: Good morning and welcome to Arko's fourth quarter Fiscal Year 2023 Earnings Conference Call-In Webinar. On today's call are Ari Kotler, Chairman, President, and Chief Executive Officer, and Rob Giammatteo, Executive Vice President and Chief Financial Officer.

On today's call are are recalled are chairman, President and Chief Executive Officer, and Rob Jimmi, Teo Executive Vice President and Chief Financial Officer, Our earnings Press release annual report on Form 10-K for the year ended December 31st 2023 as filed with the SEC.

Jordan Mann: Our earnings press release and annual report on Form 10-K for the year ended December 31st, 2025, and our earnings presentation are available on Arko's website at www.arkocorp.com. During our call today, unless otherwise stated, management will compare results to the same period in 2016. Before we begin...

And our earnings presentation are available on <unk> website at Www Dot Arco Corp dotcom during.

During our call today, unless otherwise stated management will compare results to the same period in 2022 before we begin. Please note that all fourth quarter 2023 financial information is unaudited. During this call management may make forward looking statements within the meaning of the private Securities litigation.

Jordan Mann: Please note that all fourth quarter 2023 financial information is unaudited. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statements section at the end of our fourth quarter 2023 earnings report. There are various factors that could cause actual results to differ materially from forward-looking statements made during our calls.

Reform Act of 1995. Please review the forward looking and cautionary statement section at the end of our fourth quarter 2023 earnings release for various factors that could cause actual results to differ materially from forward looking statements made during our call today.

Jordan Mann: Many forward-looking statements made during this call reflect our current expectations, and Arko will not update or revise forward-looking statements made during this call, whether as a result of new information, future events, or otherwise. On this call, management will share operating results on both a GAAP basis and a non-GAAP basis. Descriptions of those non-GAAP financial measures that we, as well as adjusted operating income and adjusted EBITDA, and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings report, in our annual report on Form 10-K for the fiscal year ended December 31, 2021, or in our 2023 fourth quarter earnings Additionally, management will share profit measures of our individual business segments along with fuel contracts. Calculated as fuel revenue less fuel costs and excludes intercompany charges by GPM. And now, I would like to turn the call over to our. Thank you, Jordan. Good morning, everyone, and thank you for joining us.

Any forward looking statements made during this call reflect our current views with respect to future events and Arca will not update or revise forward looking statements made on this call whether as a result of new information future events or otherwise.

On this call management will share operating results on both a GAAP basis, and a non-GAAP basis descriptions of those non-GAAP financial measures that we use such as adjusted operating income and adjusted EBITDA and reconciliation reconciliations of these measures to our results as reported in accordance with GAAP or <unk>.

Held in our earnings release in our earning our annual report on Form 10-K for the fiscal year ended December 31st 2023 or in our 2023 fourth quarter earnings presentation posted on our website. Additionally.

Additionally, management will share profit measures of our individual business segments, along with fuel contribution, which is calculated as fuel revenue less fuel costs and exclude intercompany charges by G. P. N P and now I would like to turn the call over to Ari.

Thank you Jordan good morning, everyone and thank you for joining us.

Ari Kotler: Before getting into our financial results, I would like to start off with a few opening remarks. First, as I'm sure you saw earlier this year, we welcome Rob Giammatteo to the company to serve as Executive Vice President and Chief Financial Officer. We believe that Rob's experience in directly relevant financial and transformation roles in retail and convenience will be extremely additive to the company that Don Bassel, our former CFO, has helped build over the years and will help drive enhanced financial performance as we continue to strengthen our business. To that end, I would like to personally welcome Rob to the Arko team and have already seen the value his experience has brought to the team since joining in January.

Before getting into our financial results I would like to start off with a few opening remarks.

First as I'm sure you're still earlier here, we welcome Rob Jama came to the company to serve as executive Vice President and Chief Financial Officer.

We believe that drives the experian indirectly relevant financial that transformation in retail and convenience.

It'd be extremely attitude and a company that Don but they'll all former CFO has helped build over the years.

And will all drive.

And shouldn't performing.

As we continued to strain our business.

Does that then I would like to personally welcome dropped to the Arco team and have already seen the value is experiencing is brought to the team since joining in January.

Ari Kotler: I would also like to thank Don for his contribution to the company, which has enabled the company to achieve significant growth and excellent performance. As we reported, Don will remain with the company until April 2024 to ensure a smooth transition to Robin. Second, reflecting on our first three years as a public company, we have significantly broadened our geographic footprint through acquisitions and have delivered approximately $166 million in net income that results in approximately $850 million in cumulative adjusted EBITDA over this period. In the past 18 months alone, we've closed on five acquisitions, adding almost 200 retail stores and approximately 520 new sites across our wholesale and fleet fueling segment. I'm very proud of our team and their incredible work to successfully integrate these aspects.

I would also like to thank Don for his contribution to the company, which have enabled the company.

To achieve significant growth and excellent performance.

As we reported Don will remain with the company until April of 'twenty 'twenty four.

Ensure a smooth transition drop.

Second.

Acting on our first three years as a public company, we have significantly broadened our geographic footprint through acquisition.

And have delivered approximately $166 million in that E. Com that result in approximately $850 million cumulative adjusted EBITDA over this period.

In the past 18 months alone with close on five acquisition, adding almost 200 retail stores and approximately 520, new side or across our wholesale and fleet fueling segments.

I'm very proud of our team and their incredible work to successfully integrate the fact that.

Ari Kotler: We are confident that we bought attractive assets at attractive prices, delivered meaningful cash-on-cash returns, and provided us with scale and related synergies that have improved our relative competitive position. I wanted to touch briefly on our PRIDE acquisition, which we completed in December 2022 and included 31 PRIDE retail convenience stores and one store under construction that is now open. Since closing the acquisition in just over one year, we have earned back in adjusted EBITDA approximately 65% of Arko's consideration paid for that transaction. This was driven by our successful integration, including adding over 1,000 items on average to the stores and the transition of Pride loyalty members to our fast rewards program. We were able to increase merchandise margin in our prize location by approximately 260 basis points from Q1 2023 to Q4 2023.

We are confident that we bought attractive assets at attractive prices delivering meaningful cash on cash return and provided us with scale and related synergies.

But they have improved our relative competitive positioning.

I wanted to touch briefly on our Pride acquisition, which we completed in December 2022, and included 31, right retail convenience stores and one store under construction that is now open.

In closing the acquisition just over one year, we have earned back in adjusted EBITDA, approximately 65% of our consideration paid for that transaction.

It was driven by our successful integration, including the additional although 1000 items on average.

Doors and that transition of bright loyalty members to a fast rewards program.

We were able to increase the merchandize margin in our thrive location by approximately 260 basis points from Q1, 2023 to Q4 'twenty to 'twenty three.

Ari Kotler: We believe that the rapid return and integration of Pride reflect the acquisition of good assets at a good price. As we move into 2024, we are focusing more of our management attention and other resources to further push, refine, and improve our organic growth strategy to drive performance at our retail stores and unlock the value of our retail segment, which is core to our business. I believe we have many letters to pull.

We believe that dropping to return and integration of fried reflect the acquisition a good asset.

At a good price.

As we move into 'twenty 'twenty four we are focusing more of our management attention and other resources to afford their push refine and improve our organic growth strategy to drive performance at our retail stores and unlock the value of our retail segment, which is core to our business.

I believe we have many levers to pull.

Ari Kotler: Our team is focused on executing on our initiative, and later this year, we are planning to host an investor day in which we will share with you our multi-year roadmap and specific milestones to enhance organic performance and drive shareholder value. Turning to our full-year results, we delivered $290.4 million in adjusted EBITDA for 2023, holding performance within 3.5% of 2022, which had a record retail CPG of over $0.41 per gallon. We deliver this result in the context of a 3.4% decline in national OPEC fuel gallon demand, with a more pronounced decline in the fourth quarter. Anuli acquired businesses and continued momentum with our in-store merchandising efforts served to mostly offset lower-gallon demand. As we have discussed in the past, we have directed our retail fuel pricing team to optimize fuel contribution at the site level.

Our team is focused on executing on our initiatives and later this year, we are planning to us in Investor day, which we will share with you our multi year roadmap and specific milestone Brent.

Organic performance and drive shareholder value.

Turning to our full year results, we delivered $294 million in adjusted EBITDA for 2023, all of them performing we think three 5% of 2022 we carried a record retail CPG over 41 cents per gallon.

We delivered these results in the context of that 3.4% decline in NAFTA and they'll all be skewed got on demand.

We've had a more pronounced decline in the fourth quarter.

Our newly acquired businesses and continued momentum with our in store merchandising airport tariffs to mostly offset lower gallon demand.

As we have discussed in the past we have directed our retail fuel pricing team to optimize fuel contribution at the site level.

Ari Kotler: While we recognize this pricing strategy results in a trade-off between Gallon's Demand and CPG, we believe this is the correct strategy currently given market and consumer trends in the areas in which we operate. We plan to maintain this pricing methodology while we evaluate it in the context of our overall multi-year roadmap. Total retail fuel contribution for the year was $435 million, up close to 5% for the year. Turning to inside store sales, many of our 2023 initiatives continue to show momentum due to our focus on our three key merchandising and marketing pillars; all past rewards have the program growing cells in core destination categories and extending our food and beverage service. I want to take a moment to touch on each of these pillars now.

While we recognize this pricing strategy result in a trade off between Golan and CPG.

We believe this is the correct strategy currently given markets and consumer trends in the area in which we operate.

We plan to maintain these pricing methodology, while we evaluated in the context of our overall multiyear roadmap.

Total retail fuel contribution for the year with $435 million up close to 5% for the year.

Turning to inside store sales many of our 2023 initiative continued to show momentum due to our focus on our three key merchandising and marketing dealers.

How fast rewards loyalty program.

Growing sales in core destination categories, and expanding our food and beverage service.

I wanted to take a moment to touch on each of these pillars now.

Paris on how fast rewards loyalty program.

Ari Kotler: Ferris on our Fast Rewards loyalty program. We exceeded the two million enrolled member mark in the fourth quarter. And we continue to invest to drive new enrollment growth, deepen our relationship with existing customers, and offer our enrolled members valuable discounts that help address the ongoing inflationary pressure they're facing. We are pleased with what we are seeing from our loyal customers and believe there is significant untapped opportunity as we continue to evolve our loyalty program. In the fourth quarter of 2023, transaction sites associated with enrolled loyalty members earned Edwards $12.70 per transaction, or approximately 32% more than the $9.62 per transaction for non-enrolled members.

We exceeded the 2 million enrolled member Mark in the fourth quarter.

And we continue to invest to drive new enrollment growth deepened our relationship with existing customers.

And also I enrolled members volume discount that help address the ongoing inflationary pressure they are facing.

We are pleased with what we're seeing from our loyal customers and believe there is significant untapped opportunity as we continue to evolve our loyalty program.

In the fourth quarter of 2023 transaction size associated with loyalty member.

Adverse.

<unk> dollars 70 per transaction or approximately 32% more than the $9.62 per transaction for non enrolled members.

Ari Kotler: As an example of the opportunity we see in front of us, in 2022, we enrolled approximately 283,000 members, and in 2023, we re-enrolled another approximately 730,000 members. We believe this background underpins the potential of our loyalty program. We continue to work to accelerate new member enrollment and are leveraging our recently launched PISA program to deliver meaningful value for our enrolled loyalty members. I will touch more on our pizza program in a moment. Turning now to our core destination categories, which are packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks, and beer, these six categories accounted for over 50% of our merchandise contribution this quarter and for the full year. This concentration allows us to focus our assortment initiative on a narrow group of categories and leverage strong supplier partnerships that help drive total store sales.

As an example of the opportunity we see in front of us in 2022 we enrolled approximately 283000 members.

2023 re enrolled another approximately 730000 members.

We believe this background underpins the opportunity of a loyalty program.

We continue to work to accelerate no member enrollment and are leveraging our recently launched B CEP program to deliver meaningful value for our enrolls loyalty members I will touch more on our pizza program in a moment.

Turning now to our core destination categories, which are packaged beverages candy salty snack package sweet snacks alternative snacks and beer distinct categories accounted for over 50% up our merchandise contribution this quarter and for the full year.

This concentration allow us to focus our assortment initiative on a narrow group of categories and leverage strong supplier partnerships that they'll drive total store sales.

Ari Kotler: As a result of our ongoing work, penetration of the company's core destination categories represents close to 43% of merchandise sales for the year. On the food service front, we continue to see the development of our food service proposition as a multi-year process with wins along the way. We are already building the foundation to support our long-term journey to establish ourselves as a food destination and establish food service credibility. In 2023, we added bean-to-cup coffee in 391 locations, including newly acquired stores, bringing the offering to 945 locations.

As a result of our ongoing work penetration of the company's core destination categories, representing close to 43% of merchandise sales for the year.

On the foodservice front, we continue to see the development of our foodservice proposition as a multi year process with wins along the way.

We are already building the foundation to support a long term journey to establish ourselves as a food destination and establishing foodservice credibility.

In 'twenty to 'twenty, three we added beans to cop coffee and 391 location, including newly acquired stores, bringing the offering to 945 location.

Ari Kotler: At the end of 2023, we collaborated with Tyson and launched a value-oriented chicken sandwich. Available for $2.99 for our enrolled loyalty members and available in 300 selected locations. And then next, I'm very excited about our most recent food service launch. After almost a year of research and development, in January of this year, we launched our pizza offering as a take-and-bake at more than 1,000 stores, and Haas at approximately 225 of those doors.

At the end of 'twenty to 'twenty, three we collaborated with typhoon and launched a value oriented chicken sandwich available for $2.99 for enrolling loyalty members and available in 300 selected location.

And then next I'm very excited about our most recent foodservice zones up there.

Almost a year of research and development in January of this year, we launched our pizza offering is a take and bake at more than 1000 stores.

And hot in approximately 225 of those doors.

Ari Kotler: We have seen very positive customer reactions to the pizza, with over 70% of those surveys saying they will definitely purchase it again. Our goal over the next several months is to have as many consumers as possible try this pizza and to roll out our pizza offering, both take-and-bake and hot, to significantly more stores. The pizza is available to our enrolled loyalty members at a value-oriented price of $4.99 for a high-quality whole pie.

We have seen very positive customer reaction to the pizza with over 70% of those door, saying they would definitely purchase again.

I'll go over the next several months is to have as many consumers as possible try these pizza.

And the rollout of our pizza offering both take 'n' bake in hot to significantly more stores.

<unk> available to our loyalty members the value oriented price.

A $4 99 for all high quality hold buy.

Ari Kotler: In addition, as we shared in October 2023, we created and filled a new senior leadership role that is responsible for developing a company-wide cross-functional food strategy and scaling it across our stores. We look forward to sharing more on this work as we move through the year. Starting this year, we are beginning to build three new stores, with the first expected to break ground in the next few weeks. These new stores will offer a great customer experience, including food service, as we continue to explore opportunities to expand our retail footprint. Take a look at the cover of our presentation, where you can see a picture of an unmanned express store at one of our QWALS card lock locations in the Richmond, Virginia area that just opened two weeks ago.

In addition, as we shared in October 2023, we created and filled and do it in the senior leadership role.

Responsible for developing a company wide cross functional food strategy and scaling it across our stores.

We look forward to sharing more on this work as we move through the year.

Starting this year, we are beginning to build three new stores.

With the first expected to break ground in the next few weeks.

These new stores will offer a great customer experience, including foodservice as.

As we continue to explore opportunities to expand our retail footprint.

Take a look at the cover of our presentation, where you can see a picture of an unmanned express store on one of our clause Kozlov location in the recent Virginia area that just opened two weeks ago.

Rob: I will now turn the call over to Rob to review the financial results and share our thinking on 2020. Thank you, Ari. Good morning, everyone.

I will now turn the call over to Rob to review financial results and share our thinking on 'twenty 'twenty four.

Rob: I wanted to take a brief moment to thank the talented Arko team for the warm welcome over these past two months. I'm excited to join the company on its journey toward realizing its full potential and very much look forward to meeting our recovering analysts and speaking with many of you soon, starting with full year 2023 results. As already referenced earlier, total company EBITDA of $290.4 million was down just over 3.5% in 2020. At the segment level, our retail segment delivered approximately $315 million in adjusted operating income, essentially in line with 2022 results, with the contribution from our recent acquisitions and continued same-store merchandise contribution growth offsetting reduced same-store fuel contributions. Total merchandise revenue was $1.84 billion, up from $1.65 billion in 2022. Thames Store merchandise sales were up 0.4%, and same store merchandise contribution was up over four percent. Excluding cigarettes, same-story merchandise sales were up 2.5%.

Thank you Ari.

Everyone.

I wanted to take a brief moment to thank the talented arco team for the warm welcome over these past two months.

I'm excited to join the company on its journey toward realizing its full potential and very much look forward to meeting our covering analysts and speaking with many of you soon.

Starting with full year 2023 results as already referenced earlier total company EBITDA of $290 4 million was down just over three 5% from 2022.

At the segment level, our retail segment delivered approximately $315 million and adjusted operating income.

Essentially in line with 2022 results with the contribution from our recent acquisitions and continued same store merchandise contribution growth offsetting reduced same store fuel contribution.

Total merchandise revenue was 1.84 billion up from 1.65 billion in 2022.

Same store merchandise sales were up 0.4% with same store merchandise contribution up over 4%.

Excluding cigarettes same store merchandise sales were up two 5%.

Rob: Same store fuel gallon demand was down 5.3% for the year compared to National Opus, which was down 3.4%. Thanks to our fuel margin of 38.6 cpg, which was down 2.7 cpg from a record 2020, The combined impact of lower fuel gallons and reduced CPG resulted in a same-store fuel contribution decline of approximately $46 million for full year 2022. Full year 2023 adjusted operating income of $79 million at our wholesale segment was essentially in line with 2022, with contributions from acquisitions offsetting the impact of a decline in fuel contribution from a record 2022. Full year 2023 adjusted operating income at our fleet segment of approximately $41 million was up just over $20 million from 2022, reflecting a full year of operations from quarrels versus a partial year last year and our WTG acquisition. Pool year 2023 total company general and administrative expenses increased approximately $25 million compared to 2022, primarily due to our recent acquisition. Full year 2023 net interest and other financial expenses increased by approximately $12 million compared to 2022, primarily due to a higher average outstanding debt balance and a higher average interest rate.

Same store fuel gallon demand was down five 3% for the year compared to national Opus, which was down three 4%.

Same store fuel margin of $38 six C. P. G was down 2.7 CPG from our record 2022.

The combined impact of lower fuel gallons and reduce C. P. G resulted in our same store fuel contribution decline of approximately $46 million from full year 2022.

Yeah.

Full year 2023, adjusted operating income of $79 million at our wholesale segment was essentially in line with 2022.

With contributions from acquisitions offsetting the impact of decline in fuel contribution from our record 2022.

Full year 2023, adjusted operating income at our fleet segment, approximately 41 million was up just over $20 million from 2022, reflecting a full year of operations from quarles versus a partial year last year and our W. T G acquisition.

Full year 2023, total company general and administrative expenses increased approximately $25 million compared to 2022, primarily due to our recent acquisitions.

Full year 2023, net interest and other financial expenses increased by approximately $12 million compared to 2022, primarily due to a higher average outstanding debt balance and a higher average interest rates.

Rob: And finally, full year 2023 net income was approximately $35 million compared to $72 million for 2020. Turning to the fourth quarter 2023 results, Our retail operating segment delivered approximately $72 million in adjusted operating income for the quarter, which is down 3.3% from the year-ago period. Merchandise sales and merchandise contribution were up 10.8 and 19.6 percent, respectively, reflecting a 240 basis point expansion in margin. Retail segment fuel gallons and fuel contribution were up 10.9% and 4.8%, respectively, to the year-ago period. Operating expenses were up 18.2% for the quarter, with the increase related almost entirely to our equity. Growth in all aforementioned segment results was driven by our acquired businesses, which delivered in excess of $12 million in adjusted operating income to our retail segment for the quarter. FameStore merchandise sales, excluding cigarettes, were down 1.8% versus the year-ago period, while total FameStore merchandise sales were down 2.8%.

And finally full year 2023, net income was approximately $35 million compared to $72 million for 2022.

Turning to fourth quarter 2023 results.

Our retail operating segment delivered approximately $72 million and adjusted operating income for the quarter, which was down three 3% from the year ago period.

Merchandise sales and merchandise contribution were up 10.8 to 19, 6%, respectively, reflecting a 240 basis point expansion in margin rate.

Retail segment fuel gallons and fuel contribution were up 10, 9% and four 8% respectively to the year ago period.

Operating expense was up 18, 2% for the quarter with the increase related almost entirely to our acquisitions.

Growth in all aforementioned segment results was driven by our acquired businesses, which delivered in excess of $12 million and adjusted operating income to our retail segment for the quarter.

Same store merchandise sales, excluding cigarettes were down one 8% versus the year ago period, while total same store merchandise sales were down two 8%.

Rob: Thanks to our merchandise contribution was up 3.9% to the year-ago period, reflecting the strong underlying organic margin expansion related to our ongoing merchandise assortment work. Thanks to our fuel gallon demand was down 7.5% for the quarter compared to National Opus, which was down 4.6%. Thanks to our fuel margin of 38.2 cpg with down 2.7 cpg from a record 2020, the combined impact of lower fuel gallons and reduced CPG resulted in a same-store-of-fuel contribution decline of approximately 14 million from the year-ago peak. Fame Store operating expenses were up less than two percent.

Same store merchandise contribution was up three 9% for the year ago period, reflecting the strong underlying organic margin expansion related to our ongoing merchandize assortment work.

Same store fuel gallon demand was down seven 5% for the quarter compared to national Opus, which was down four 6%.

Same store fuel margin of 38.2 C. P. G was down 2.7 CPG from our record 2022.

The combined impact of lower fuel gallons and reduce C. P. G resulted in our same store fuel contribution decline of approximately $14 million from the year ago period.

Same store operating expenses were up less than 2%.

Moving on to our wholesale segment adjusted operating income was $18 1 million for the quarter versus $17 5 million in the year ago period with total gallons up seven 2%.

Rob: Moving on to our wholesale segment, adjusted operating income was $18.1 million for the quarter versus $17.5 million in the year-ago period, with total gallons up to $7.2. Growth was driven by acquisitions that closed in 2023, which delivered $2.4 million in adjusted operating income for the quarter. For our fleet segment, adjusted operating income was 9.7 million for the quarter versus 13.3 million in the year-ago period, with total gallons up 11.8%, reflecting performance against an abnormally high diesel margin per gallon and fuel volatility that we referenced in our 2022 year-end call. Acquisitions that closed in 2023 delivered $2.2 million in adjusted operating income for the quarter. Total company general and administrative expense for the quarter was $38.1 million versus $39.3 million a year ago.

Growth was driven by acquisitions to close in 2023, which delivered $2 4 million and adjusted operating income for the quarter.

Where our fleet segment adjusted operating income was $9 7 million for the quarter versus $13 3 million in the year ago period with total gallons up 11, 8%.

Reflecting performance against abnormally high diesel margin per gallon and fuel volatility that we referenced in our 2022 a year end call.

Acquisitions that closed in 2023 delivered $2 2 million and adjusted operating income for the quarter.

Total company general administrative expense for the quarter was $38 1 million versus $39 3 million in the year ago period.

Rob: Total company adjusted EBITDA of $65.5 million for the quarter was down $6.9 million from the prior year period, with a decline primarily due to reduced same-store fuel contributions. Net interest and other financial expenses for the quarter were $22.9 million, compared to $16.3 million in the year-ago period. Net income for the quarter was $1.1 million, compared to $12.9 million for the year-ago period.

Total company adjusted EBITDA of $65 5 million for the quarter was down $6 9 million from the prior year period with the decline primarily due to reduced same store fuel contribution.

Net interest and other financial expenses for the quarter were $22 9 million compared to $16 3 million in the year ago period.

Net income for the quarter was $1 1 million compared to $12 9 million for the year ago period.

Rob: Please refer to our press release for a detailed reconciliation of Total Company Net Income to adjusted EBIT. Turning to the balance sheet, excluding lease-related financing liabilities, we ended the fourth quarter with $845 million in long-term debt, comprised of our 2029 senior notes, the draw on our Capital One line, and the remainder primarily related to real estate and equipment financing. Our $140 million ABL remains completely undrawn as we manage working capital needs from operating cash flows.

Please reference our press release for a detailed reconciliation from total company net income to adjusted EBITDA.

Turning to the balance sheet, excluding lease related financing liabilities. We ended the fourth quarter with $845 million in long term debt comprised of our 2029 senior notes the draw on our capital one line and the remainder primarily related to real estate and equipment financing.

Our 140 million a b L remains completely undrawn as we manage working capital needs from operating cash flow.

Rob: We maintain substantial liquidity of approximately $830 million, including $218 million in cash on hand at year-end, along with the remaining availability on our line of credit. Of this total liquidity, approximately $460 million is attached to our Capital One line, which is reserved for M&A activities. Together with our outstanding Oak Street commitment of almost $1.5 billion, we are comfortable that our balance sheet has more than adequate flexibility to support both ongoing organic growth initiatives and energy. Including investment capital, total capital expenditures for the quarter and full year 2023 were $35.6 million and $111.2 million, respectively.

We maintained substantial liquidity of approximately $830 million, including $218 million in cash on hand at year end, along with the remaining availability on our line of credit.

Of this total liquidity of approximately $460 million is attached to our capital one line, which is reserved for M&A activity.

Together with our outstanding Oaktree commitment of almost 1.5 billion. We are comfortable that our balance sheet has more than adequate flexibility to support both ongoing organic growth initiatives and M&A.

Including investment capital total capital expenditures for the quarter and full year, 2023, or $35 6 million and $111 2 million respectively.

Rob: Turning to 2024, as you may have seen in our press release, we have initiated full-year earnings guidance this quarter to help investors better understand our earnings outlook. We are currently modeling total company full-year adjusted EBITDA in a range of $250 to $290 million versus $290.4 million for 2025. Our Full Year Earnings Outlook corresponds to an average retail fuel margin of 36 CpG on the lower end and 40 CpG on the higher end of our guidance. Please refer to our press release for a full reconciliation of net income to adjust it even further. And finally, some detail on our first quarter, which has historically contributed approximately 16.5% of our full-year results. Based on quarter-to-date trends, we expect our first quarter to contribute less to the full-year adjusted EBITDA than in prior years, representing 12-14% of our full-year adjusted EBITDA guidance.

Turning to 'twenty 'twenty four as you may have seen in our press release, we have initiated full year earnings guidance this quarter to help investors better understand our earnings outlook.

We are currently modeling total company full year adjusted EBITDA in a range of $250 million to $290 million.

294 million for 2023.

Our full year earnings outlook corresponds to an average retail fuel margin of 30 60 P. G on the lower end and for D. C. P. G on the higher end of our guidance range.

Please reference our press release for a full reconciliation of net income to adjusted EBITDA.

And finally, some detail on our first quarter, which has historically contributed approximately 16, 5% of our full year results.

Based on quarter to date trends, we expect our first quarter to contribute less to the full year adjusted EBITDA than in prior years, representing 12% to 14% of our full year adjusted EBITDA guidance.

Rob: Our guidance framework reflects our expectations for current trends to normalize coming out of the first quarter, along with our ability to leverage our food initiatives, loyalty program, and fuel pricing strategy during the higher-traffic summer period. Our first-quarter outlook corresponds to an average retail fuel margin of 35 cpg on the lower end and 39 cpg on the higher end of our guidance. And with that, I'll hand it back to Ari for his closing remarks. Thanks, Rob.

Our guidance framework reflects our expectations for current trends to normalize coming out of the first quarter, along with our ability to leverage our food initiatives loyalty program and fuel pricing strategy during the higher traffic summer period.

Our first quarter outlook corresponds to an average retail fuel margin of 35 C. P. G on the lower end and 39 CTG on the higher end of our guidance range.

And with that I'll hand, it back to Ari for closing remarks.

Thanks, Rob I would close by saying that I'm extremely proud of the team here all of your hard work and Indemnifying executing and integrating five acquisition over the past 18 months.

Ari Kotler: I will close by saying that I am extremely proud of the team here for all of its hard work in identifying, executing, and integrating 5 acquisitions over the past 18 months. As I discussed earlier, 2024 is a year for us to focus on unlocking the value of our current assets for our stockholders. I'm excited about the work we are doing on our multi-year strategy roadmap, and I'm looking forward to sharing it with you later this year. I want to end by thanking the company's almost 13,500 employees for their hard work and dedication. With that, we will open it up to questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue.

As I discussed earlier 120 for ease of euro for us to focus on unlocking the value of our current assets for our stockholders.

Excited about the work we are doing on a multi year strategy roadmap.

And I'm looking forward to sharing with you later this year.

I want to end by thanking the company almost 13500 employees.

I would work and dedication.

We've got you will open it up for questions.

Thank you we will now be conducting a question and answer session. If you would 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.

Operator: You may press star 2 if you would like to remove your question from the... 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 questions come from the line of Bobby Griffin with Raymond James. Please proceed with your question. Good morning, everybody.

You May press Star two if you 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 questions come from the line of Bobby Griffin with Raymond James. Please proceed with your question.

Good morning, everybody. Thanks for taking my questions.

Bobby Griffin: Thanks for taking my questions. I guess first up for me, Ari, can you elaborate a little bit on the current trends you're seeing in 1Q that are driving the Delta and your expectations for the business versus the historical standards that we're kind of used to seeing in 1Q. And I guess I asked this in context, you know, even versus our model, the retail margin forecasting is not much off where we were forecasting 1Q retail margins, but the EBITDA performance So maybe any details around what is going on from a current trend standpoint driving that? Choe.

I guess first off for me Ari can you can you elaborate a little bit on the current trends you're seeing <unk> that is driving the delta and your expectations of the business first the historical standards that we're kind of used to seeing in <unk> and I guess I ask this in context, you know even versus our model.

The retail margin.

Caffeine or not much off where we were forecasting one key retail margins, but the EBITDA performance is different than what we were thinking so maybe any details around what is it what is going on from a current trend standpoint driving that.

Sure.

Bobby Griffin: So, are you referring, Bobby, first of all, good morning, Bobby, are you referring to Q4 or are you referring to Q1? In Q1, you guys are forecasting the first quarter to be a lower percentage of the total year than it historically is. And the retail margins look pretty fine in the forecast for the first quarter, but you reference some current trends that are giving you pause or driving some of the lower benefit from the first quarter. So I'm just curious if you can elaborate on what these current trends are. Is it a weakness in volume?

So you're referring Bobby first of all good morning, Robin are you, referring to Q4, you're referring to Q1 Q.

Q1, our Q1 you know it's you guys are forecasting for the first quarter to be a lower.

Percentage of the total year than there historically is and in the retail margins look pretty fine in the forecast for the first quarter, but you referenced some current trends that are giving you pause or driving some of the lower benefit from the first quarter. So I'm. Just curious if you can elaborate on what these current trends are as a weakness in volume isn't merchandise.

Ari Kotler: Is it merchandise weakness? What is driving the delta here in the first quarter? I think I will start first of all with Fuel, and then I'll let Rob, maybe Jimmy, be related to the merchandise.

Weakness what are what is driving the delta here in the first quarter.

I think I would start first of all we for sure and then I'll, let Rob maybe a chimney Jimmy would be related to the merchandize, but related to fuel.

Ari Kotler: But related to Fuel, as you know, Bobby, Opith National is down close to 7% for the first quarter. This is something that we're seeing over here. And we are also seeing a little bit of softness when it comes to CPG. That's, of course, always a trade-off.

As you know Bobby obvious nationalities dawn.

Close to 7% for the first quarter.

This is something that we're seeing over here and we are also seeing.

A little bit soft D&S when he's come to the CPG. That's of course always a trade off so I think you know CPG and <unk>.

Ari Kotler: So I think CPG and demand and low demand in the first quarter are actually a tribute a lot to that. We don't like to blame the weather, but as you know, in the first quarter of this year, we had some weather events across the country in the middle of January. And usually, the first quarter is the slowest quarter in this industry. And we saw the same thing, by the way, happen to us last year. But I think you know one of the biggest things over here. It's, of course, fuel fuel drive. You know, the demand down and CPG a little bit light. It's something that drives it, but again.

<unk> demand and low demand in the first quarter, it's actually attribute a lot to that.

You know, we don't like to blame the weather, but as you know the first quarter in January this year, we had some weather event across the country in the middle of January and usually the first quarter ph D is the slowest quarter in.

In this industry and we saw the same thing by the way Anthony to Us last year.

But I think one of the biggest thing over here is of course fuel fuel is dry.

The the demand down and CPG at least all of its life is something that drive it but again I can only speak based off today you know today, we are sitting in February.

Ari Kotler: I can only speak based on today. You know, we are still in February. We are heading next week into March. We are getting very, very close to the season, and things, of course, can change up and down during basically the first quarter and beginning of the second quarter. Yeah Bobby, good morning. Just to add a little color to the guide.

We are heading next week enter into March you know getting very very close.

You know through the season.

You know things of course can change you know up and down during a basically a first quarter beginning of second quarter.

Yes, Bobby good morning, I'll, just add a little color to the guide so quarter to date.

Rob: So according to date, the guide is based on a trend coming out of the fourth quarter. So we've got it positioned down high single digits for retail gallons. Again, we're not stepping out on the trend right now.

The guidance based on a trend coming out of the fourth quarter. So we've got a position down high single digits for retail gallons again, we're not stepping out on the trend right now we're gonna position things, where the trend given kind of the February January February period.

Rob: We're going to position things where the trends are given that we're in a kind of February, January, February period. From a fuel margin range, we shared sequentially that we were $0.35 to $0.39 for the quarter. We have seen a modest sequential improvement from December to January to February, but it has been modest. So again, we're holding at that range that we shared in the prepared remarks. And then on the merchandising side, according to data to date, same-store sales are down mid-single digits.

From a fuel margin range, we shared sequentially that you know we were $35 to 39.

For the quarter, we have seen modest sequential improvement from December to January to February but it has been modest so again holding at that range that we shared in the prepared remarks, and then on the merchandising side quarter to date same store sales are down mid single digits.

Rob: On a note, we're up against a strong period last year, so on a two-year stack, we're running roughly flat. And you should be thinking about that for the full year.

No we're up against a strong period last year or so on a two year stack was running roughly flat you should be thinking about that for the full year, we're using that to your run rate as we look at Q2 through Q4.

Bobby Griffin: We're using that two-year run, and many more. Thank you for joining us. We hope you enjoy the rest of your day. Thank you, Robin. It's nice to meet you as well.

Thank you Robyn nice to me as well I appreciate the detail sorry, I should've started the questions Q&A with that but welcome to Argo I guess on the merchandise side of things do you can you maybe unpack that a little further than what you think's going on is it is it just a general weakness trend in the industry or is there some levers that you guys need a pool.

Bobby Griffin: I appreciate the details. Sorry, I should have started the question Q&A with that, but welcome to Arko. I guess on the merchandise side of things, can you maybe unpack that a little further and what you kind of think is going on? Is it just a general weakness trend in the industry? Or are there some levers that you guys need to pull to maybe grow faster or in line with the industry? Just kind of anything there in that category.

To maybe grow faster or in line with the industry just kind of anything there.

On that category and if you believe you're maintaining share there.

Ari Kotler: And if you believe you're maintaining a share there, I can only tell you what I believe. I believe that this is a general trend in the industry. I mean, as I said, when you see fuel demand down in the first quarter, we just see some softness in the market. And again, we're talking right now about January, and, you know, we're talking during the first seven weeks of the quarter. And, you know, as you can expect, this is like the slowest town, basically, of the year.

I can always tell you what I believe I believe that this is a general trend in the industry I mean as I said.

When you see the fuel demand down.

In the first quarter.

We just see.

Some softness in the market.

And again, we're talking right now about January and production during the first seven weeks of the quarter.

And you know as you can expect this is like the slowest down there's so much down basically all of the year and given that we are providing guidance first time over here, we can only advise what do we see over the past few weeks.

Ari Kotler: And given that, you know, we are providing guidance for the first time over here, we can only, you know, advise on what we see over the past few weeks. You know, things, as I said, as we move towards March, April, you know, May, towards the summer, we believe things will actually start to pick up again. As we saw, you know, almost every year, we see the same thing. Thank you. I'll jump back into the queue and turn it over to somebody else.

And as I said as we move towards March.

April may stores this summer.

We believe things will actually start to pick up again as we so.

Almost every year, we see the same thing.

Yeah.

Thank you I'll jump back in the human turn it over to somebody else.

Bobby Griffin: Thank you, Bobby. I appreciate the question. Thank you. Our next questions come from the line of Anthony Bonadio with Wells Fargo. Please proceed with your question. Yeah, hey, good morning, guys.

Thank you Bobby I appreciate the questions.

Thank you. Our next question is coming from the line of Anthony Bonadio with Wells Fargo. Please proceed with your question.

Yeah, Hey, good morning, guys. Thanks for taking my questions. So I just wanted to dig in a little bit on the fuel margin guidance I guess, what I'm trying to understand is why 36 to 40 cents very honest the right number maybe you can just walk us through the assumptions that got you to that and.

Anthony Bonadio: Thanks for taking my questions. So I just wanted to dig in a little bit on the fuel margin guidance. I guess what I'm trying to understand is why 36 to 40 cents per gallon is the right number.

Anthony Bonadio: Maybe you can just walk us through the assumptions that got you to that and what you think might drive a decline versus what you saw in today's data. So Anthony, as I mentioned earlier, we're using trends, and we're looking at the full year. So the reason why we've got a little bit of a disconnect between quarter and year is we're using trends for the first quarter with the same quarter as the date, and we're using 2023 trends for the full year. So Q2 through Q4 are on a slightly different basis.

And what you think might drive a decline versus what you saw in 'twenty three.

Yeah. So Anthony we're as I mentioned earlier, we're using trends and we're looking at the full year. So the reason why we got a little bit of a dip.

It connects between quarters and years, we're using trends for the first quarter, we're seeing quarter to date and where do you think 2023 trends for the full year. So Q2s 54 positions on some of the different basis. So you know that for last year. Our fuel margin was off CPG was off modestly versus the prior year and our gallons were down 5% for the year.

Rob: So you know that last year, our fuel margin was off, CPG was off modestly versus the prior year, and our gallons were down 5%. So the trend we're using, again, on a full year basis for Q2 through Q4 is having that gallon demand down a single digit and the CPG midpoint down about a penny from 2023 levels. Okay.

So the trend we're using again on a full year basis for Q2 days before seven a gallon demand down mid single digits and the CPG midpoint down about a penny from 2023 levels.

Okay got it and then just a little more on guidance I know you kind of mentioned that like two year flattish stack on merch comps, but I guess, just how should we think about the other underlying assumptions there as we think about gallons merch margins and then I think the answer's no here, but are you assuming any M&A in that figure.

Anthony Bonadio: And then just a little more on guidance, I know you kind of mentioned that like a two-year flat-ish stack on retail comps, but I guess just how should we think about the other underlying assumptions there as we think about gallons, retail margins, and then I think the answer is no here, but are you assuming any M&A in there? So on merged margins, we are modeling continued expansion of merged margins. I would not be modeling at the same rate you did for last year, but we are expecting it to go up. So, again, we do intend to have that continue. And then, again, to reiterate the same sort of downs, we have down mid-single digits consistent with what we had for fiscal 2020. And I will answer the question regarding M&A, Anthony. So, as you know, we have over $2 billion in available liquidity to continue M&A. We're going to continue to be disciplined. But the one thing that I mentioned during this call, and I want to reiterate, we have closed over 25 acquisitions in the past nine years. Just in the past 18 months, we closed five large acquisitions.

So some merch margins we are modeling a continued expansion of the merch margins I would not be modeling at the same rate you did for last year, but we are expecting it up. So again, we have to do it tend to have that continue and then again to reiterate the same store gallons. We are down mid single digits consistent with Oems in fiscal 'twenty three.

And I would answer the question regarding M&A Anthony So as you know we have over $2 billion and available liquidity to.

To continue M&A, we're going to continue to be disciplined, but the one thing that I mentioned.

During this call and I would reiterate.

We are in the past nine years, we closed over 25 acquisition just in the past 18 months. We closed five large acquisition, we added scale Ah I can say that you've probably declare victory when he's come to do M&A.

Ari Kotler: We had a scale, and I can say that we probably declared victory when it comes to M&A. We bought a lot, and as much as I spend time on acquisition, my plan for 2024 is, again, to let the M&A team continue to do what they're doing on a regular basis, but my team, including myself, this is the time for us to peel the onion. I believe there is a lot of leverage that we can pull, and I believe there are a lot of untapped opportunities that we have inside the stores, given the scale that we have built over here. And this is what we are going to do, and this is what we are concentrating on, starting with the Pizza Lounge just three weeks ago, actually a month ago. Starting with the Pizza Lounge. We are going to invest in our stores, and we are going to spend a lot of time in our stores to start, basically, to get into the weeds and find all of those opportunities that are out there, and just make sure that we are tapping into them.

We bought a lot.

And as much as I spent time on acquisition My plan for 2024 is again, let the M&A team continued to do what they're doing on a regular basis, but you know my team.

Including myself you know this is a <unk>.

<unk> brought to Peel the onion I believe there is a lot of levers that we can pull and I believe there is a lot of that opportunities.

We have.

Inside the stores given the scale that we build over here.

And this is what we are going to do and this is what we are concentrating starting with the pizza allowance just three.

Three weeks ago at actually a month ago, starting to get Pizza launch we are going to invest in our stores. We are going to spend a lot of time in our stores to start basically.

So as you get into the weeds and.

Again, all of those opportunities that are out there and just make sure that we're tapping Linda.

Got it thanks guys.

Anthony Bonadio: Thanks, guys. Thank you, Anthony. Thank you. Our next questions come from the line of Kelly Bania with BMO Capital Markets. Please proceed with your questions.

Thank you Anthony.

Thank you our next questions come from the line of Kelly Bania with BMO capital markets. Please proceed with your question.

Yeah.

Kelly Ann Bania: Good morning and thanks for taking our questions, and welcome, Rob. Maria, I was wondering if you could maybe elaborate, I know you're talking about analyst day, but just elaborate a little bit more on the opportunities to drive organic growth. You talked about the retail segment. We've seen the announcements about the pizza program, but... Should we expect that there's going to be a pause on M&A for some time and just help us understand kind of where the opportunities are from an organic perspective? Sure, sure, sure, sure. So, you probably saw, Kelly, I'll start with, you know, the three pillars.

Good morning, and thanks for taking our questions and welcome Rob.

I'm wondering if you can maybe elaborate I know you're talking about in the analyst day, but.

Elaborate a little bit more on on.

And the opportunities to drive organic growth.

You talked about the retail segment, we've seen the announcements about the pizza program, but.

Should we expect that there's going to be a pause on M&A for some time and just help us understand kind of where the opportunities are from an organic perspective.

Sure sure sure sure.

So you probably so Kelly you know I'll start with <unk>.

Three pillars pillar number one of course is still left as you guys. So in 2023, we added.

Ari Kotler: You know, pillar number one, of course, is loyalty. As you guys saw in 2023, we added over 730,000 members to our loyalty program. Just in Q4, and this is just an example, and Q4, this is not the biggest quarter, but just in Q4, as you can see, enrolled members spent $12.70 versus non-enrolled members that spent $9.62 per transaction, which is approximately 32% more. This is an opportunity for us, and this is something that we're going to continue to work really, really hard on. We're going to continue to, you know, we have a goal over here. The goal was to get to 2 million members, and we actually achieved our goal in 2023.

Over 730000 members.

Who are basically thought loyalty program.

In Q4, and this is just an example in Q4. This is not the biggest you buy just in Q4 as you can see and the board members spent $12 70.

Versus not enrolled members that spend $9 62, a cents per transaction, which is approximately 32% more.

This is an opportunity for us and this is something that we're going to continue to.

To work really really hard we're going to continue to.

We haven't gone over here the goal was to get to a 2 million members and we actually achieve our goals in 2023.

Ari Kotler: As I mentioned, our goal is to get to 3 million members, and this is something that we are going to concentrate on and work really hard on. I believe the pizza program, by the way, that I mentioned earlier, is a great opportunity just for everybody's benefit. The whole pie pizza that we created over here for $4.99 is only for enrolled members.

As I mentioned, our goal is to get to 3 million members.

And this is something that's what I was going to concentrate and worked really hard I believe the pizza program by the way that I mentioned earlier, it's a great opportunity just for everybody's benefit the whole pie pizza that we created over here for 499 eats only for enrolled members.

Ari Kotler: And if you're not an enrolled member, you're going to pay $7.99 per pizza. So we created the opportunity for enrolled members, you know, to come into the store and grab this great, you know, tasty pizza for $4.99. $3 difference, I mean, we believe it's going to create the opportunity for people to actually enroll. So that's, I think, the first pillar.

And if you have not been enrolled members youre going to pay $7 99 for pizza. So we created the opportunity for any more members.

To come in the store and grabbed this great tasty.

Tasty pizza for $4.99 I mean, $3 difference I mean, we believe it's.

It's you know, it's going to create the opportunity to for people, who actually drink water. So that's I think the first pillar. The second one is of course the core destination as you guys see B continues to increase margin quarter after quarter.

Ari Kotler: The second one is, of course, the core destination. As you guys see, we continue to increase margin quarter after quarter. And the increase in margin is, of course, because of the basket. You know, our assumption is that people are going to come into the stores and buy this great pizza and some other opportunities, like I mentioned, like the $2.99 for a chicken sandwich, just for everybody's benefit. A chicken sandwich in a convenience store costs more than $2.99. The non-enrolled members are paying $3.99, and again, this is a great quality sandwich.

And the increase in margin is of course because of the basket you know our assumption, but people are going to come into stores.

And by these great Pizza and some other opportunity like I mentioned like the $2 99 for a chicken sandwich just for everybody's benefit the chicken sandwich.

Convenience stores across more than $2.99 D. Not enrolled member are paying $3.99 and again. This is a great quality sandwich and the idea is again, how do we increase the basket going back to the core categories. We believe that we have those items as we get into foodservice.

Ari Kotler: And the idea is, again, how do we increase the basket? Going back to the core categories, we believe that with those items, as we get into food service and invest more time and money in food service, we believe that the core destination will grow, which will grow, of course, the margin, and the last point was related, basically, to M&A. We're not going to slow down M&A, but we are going to, as I say, concentrate probably on a little bit larger transaction to make sure that you know the team is not distracted, but as I said, my plan this year, 2024 Ari, is to spend more time in the stores and make sure that the food programs that we are putting in are basically going to tap into those opportunities that we see out there.

And you know I invest more time in heavy in foodservice, we believe that the core destination will grow which will grow of course.

Margin.

And the last you know basically points was related to of course to M&A.

I was going to slow down M&A, but we are going to and they say to concentrate probably are on at least a little bit larger transaction to make sure that that the team is not distracted, but as I said my plan. This year 'twenty 'twenty four army is to spend more time into stores make sure that the foot.

Granted that's about putting in is basically.

Going to tap into those opportunities that we see out there I believe that loyalty increasing loyalty.

Ari Kotler: I believe that loyalty, the increase in loyalty and loyal members here, is a tremendous opportunity for us to work with those members. You know, our job is, of course, to provide value to those members. We've been doing that this year, and you know, with that, we were able still to increase margin quarter after quarter, year over year. And if you go back, and I'm finished with that, if you go back just in, you know, between 2022 and 2023, we were able to increase margin by 140 basis points. Can I just follow up on the loyalty, you talked about the bigger basket sizes, which is impressive given the lower price points, but can you maybe parse out if there's any traffic benefit from those loyal customers, maybe just traffic versus customers on the loyalty program and then traffic for non-loyalty customers?

Members over here is a tremendous opportunity for us to walk Windows members. You know we are in our job is of course to provide value to those members. We've been doing that this year and with that we were able to still to increase margin quarter after quarter year over year.

And if you go back and I'm finished your thought if you go back just in general between 2020 two into 2020 three.

Three we were able to increase margin of 140 basis points.

Yeah.

Oh can I just follow up on the loyalty.

He talked about the bigger Bath basket sizes, which is which is impressive given the lower price points.

Can you maybe parse out if theres any traffic benefit from those loyal our customers.

Customers, maybe just the traffic versus customers on the loyalty program and then traffic for non AR.

Loyalty customers.

Ari Kotler: The loyal members are coming more often to the store versus the non-loyal members, and I think that's what drives the traffic. That's the reason why we keep saying that the loyal members are spending 32% more, but it's not only spending more; it's also basically coming more often to the store. And the reason they're coming more often to the stores is because on a regular basis, on a daily basis, we send the loyal members. Every enrolled member is getting very valuable promotions that only enrolled members can actually get. And that's what drives them.

The loyal members are coming more often to the store versus the non to a member.

And I think that's what drives the tropics.

That's the reason why we keep saying that the loyal members are spending 32% more but it's not only spending more it's also basically coming more often to the store and the reasons are coming more often to the stores is because on a regular basis on a daily basis. We send the loyal members every enrolled members on an oil basis. He is getting very.

Very valuable promotions dot only enrolled members can actually get in and that's what drives them in.

Ari Kotler: And this is right now, if you're looking basically at the basket right now or on the trend, in 2021, when we basically just started, if you're looking at our sales, which were around 13.9% loyal members, today it's around 19.3% when it comes to basically merchandise sales. From a contribution standpoint, in 2021, the merchandise contribution just from loyal members was around 12.9%; today, it's 17.6%, basically in Q4'23 versus Q4'21 when we just started. So we believe that not only are they coming more often, but they're actually spending more because of that, and that increases the traffic. Thank you. Can I just ask one more question about fuel?

And this is you know right now if you're looking on the basically on the basket right now in the trend.

You know in 2021, when we basically just started.

Looking on our basically sale, which was around 13.9% less members today, it's around 19, 3%.

When he's got two so basically to merchandise sales from a contribution standpoint in 2021. The contribution just from a merchandise contribution just from loyal members. It was around 12.9% today 17, 6%.

Basically in Q4 23 versus Q4 'twenty one when we just started so we believe that not only they are coming more often they are actually spending more because of that and they increase the profit.

Okay.

Okay.

Can I just ask one more about about you will I think the comment was that you're planning for.

Kelly Ann Bania: I think the comment was that you're planning for Gallon Demand at retail down about mid-single-digit, and with the midpoint of the CPG kind of range down about a penny, that's another 2%, so sort of a high single-digit decline in retail fuel profits from a same-store perspective. I guess, is that do you see that kind of just... maybe 2024 is a year to kind of get back to stabilization and then return to growth beyond that? I'm just curious if you look at the structural factors that maybe investors were expecting to drive fuel margins higher. Are those still at play? Is there something else going on here?

Gallon demand at retail down about mid single digit and with the midpoint of the CPG kind of range down about a penny that's another 2% so.

Sort of a high single digit decline in retail fuel profit from a same store perspective, I guess is that do you see that kind of just maybe.

2024. This is a year to kind of get back to stabilization and then returned to growth beyond that well I'm. Just curious if you look at the structural factors that maybe investors were expecting to drive fuel margins higher are those still at play is there is there something else going on is it just kind of a reverse.

Ari Kotler: Is it just kind of a reversion year? Maybe just help us think about or understand how you're thinking about that. You know, we're just at the beginning of 2024, and if you remember last year, 2023, we also saw Q1 with a lower CPG versus what we saw during the year, and you know, because we are providing first-time guidance right now, we can only talk about trends of what we see over the past six to seven weeks. You know, I can't forecast the year. I don't see any reason, by the way; this is my belief, Ari. I don't see any reason for CPG to decline.

And year.

Maybe just help us think about or.

I understand how youre thinking about that.

You know Oh, no. We're just at the beginning of 2024 and if you remember last year in 2023.

Uh huh.

We also saw Q1 with the lower CPG dress says what we saw during the year.

And because we are providing <unk> guidance right now we can only talk about trends of what you see over the past six to seven weeks you know I can't forecast the year I don't see any reason by the way. This is my believe Ari I don't see any reason for CPG to decline I.

Ari Kotler: I still believe that all of the operators out there, you know, from a structure standpoint, everybody has the same expenses, and everybody has the same issues dealing with expenses. So again, given where we are today, you know, based on the trend over the past seven weeks, that's what we had to put out there. But again.

I still believe that all of the operators out there.

From a structure standpoint, everybody have the same expenses and everybody has the same issue.

Dealing with expenses.

So again, given where we are today.

Based on the trend over the past seven weeks, that's what you've got to put out there but again.

I believe that that thing.

Kelly Ann Bania: I believe that you know things shouldn't change basically from 2023. I think 2022 was a very high CPG, a record CPG year of over 41 cents for the year, but you know, at the end of the day, we finish 2023, two pennies below, which is not significant, so I don't think I don't see any reason for those things to change. Again, it's too early in the year; there are so many things you know can happen during the year, but that's Thank you. Thank you, Kelly. Thank you. Our next questions come from the line of Mark Astrachan with Steeple.

Shouldn't change from basically from 'twenty to 'twenty three I think 2022 was a very high CPG a record CPG year over 41 cents for the year, but you know at the end of the day, we finish our 2023.

Two pennies below which is not significant so I don't think I don't see any reason for.

For those things to change, but again, it's too early in the year. There's so many things can happen during the year, but.

That's that's where I stand today.

Thank you.

Thank you Kelly.

Thank you. Our next question is come from the line of Mark Astrachan with Stifel. Please proceed with your question.

Mark Stiefel Astrachan: Please proceed with your question. Yeah, hey, thanks. Morning, everybody.

Yeah, Hey, thanks, good morning, everybody.

To start <unk>.

Maybe can you talk about the flow through impact or correlation.

Mark Stiefel Astrachan: I guess to start. Maybe can you talk about the flow-through impact or correlation from retail fuel gallons to in-store merchandise sales? In terms of, Well, in terms of just the correlation, right, it seems from the outside that if fuel gallons are weak, fewer people are visiting stores, and therefore merchandise sales in the store are weaker. Is that reasonable? Not necessarily, not necessarily.

From retail fuel gallon Judy in store merchandise sales.

Yeah.

In terms of.

Well in terms of just the correlation right it seems from the outside in.

Fuel gallons, a week, where people are visiting stores and therefore, the merchandise in the store are weaker that.

Reasonable.

Not necessarily not necessarily I mean, again, I mean, you know what.

Ari Kotler: I mean, again, I mean, you know, what we're doing. Just to be clear, we keep talking about optimizing gross profit outside, but I can tell you that we are absolutely focusing on our market share inside the store. So, by definition, when people are driving less. You have fewer people, of course, coming in, but, overall, this is an area that we concentrate on. We are competitive outside, you know; we are pricing fuel side-by-side, location-by-location, market-by-market, you know; this is not going across the board. And the one thing that we are watching, you know, when we price fuel, while we're trying to maximize gross profit and optimize gallons, we are making sure that we are watching the trend inside the store.

We're doing just to be clear you know where it keeps if we keep talking about optimizing gross profit.

Outside but I can tell you that we are absolutely focusing our when our market share inside the store.

So by definition when people are driving less.

You have less people of course coming in but I mean overall this is an area that we concentrate so anyway, we are competitive outside.

Our pricing fuel side by side location by location market by market. You know this is not going across the board and the one thing that we are watching when we price June you know, what we're trying to maximize gross profit and more optimized gallons. We are making sure that we are watching the trend inside the store.

Ari Kotler: I believe that the market that we do business in, I think I mentioned it last year, 40% of our stores are in towns that have 20,000 people or less. 20% of our stores are in towns that have 20,000 to 50,000 people. Some of those areas are more areas, a little bit, maybe low-income areas, and I think some of those people are just being impacted by inflation. And that's the reason why we are coming up with all of those valuable promotions. You know, for example, pizza for $4.99. You can feed a family for less than $10 today.

I believe that the market does we do business as I think I mentioned that last year, 40% of our stores are in town. That's at 20000 people all of that.

20% of our stores are in towns that are 20% to 50000 people.

And then again some of those areas are more areas as I said, a little bit maybe low income areas and I think some of those people are just being impacted by the inflation.

And that's the reason why we are coming off of all of those valuable promotion. You know for example piece off of $4 99, you can today feed a family for less than $10 and those are the things that drive concentrating and those are the things that we bring to market and I think those are the things that they're going to help us to actually to grab more traffic inside.

Rob: And those are the things that we are concentrating on, and those are the things that we bring to the market. And I think those are the things that are going to help us to actually grab more traffic inside the store. And Mark, I'd say, you know, if you look at the fourth quarter, where we had a pretty large spread, right, the in-store sales were down low single digits, the gallons were down high single digits, so, you know, our job is to figure out how we leverage the loyalty program, how we talk to our customers, how we continue to drive to the inside and control the things that we can control, and I Yeah, that's helpful.

Yes.

And Mark I would say if you look at the fourth quarter, where we had a pretty large spread right. The same store sales were down low single digits. The gallons were down high single digits. So our job is to figure out how we leverage the loyalty program, how we talk to our customers. How we continue to drive to the inside and control the things that we can control and I think that's you know that's what we're going to be focusing going forward.

Yeah.

Helpful. I guess, it's really more getting at whether the strategy.

Mark Stiefel Astrachan: I guess it's really more getting at just whether the strategy that you've talked about in terms of managing the dynamics around fuel profitability and fuel volumes, and then obviously how that translates into in-store sales is the right one. Obviously, I respect that you're running a business; it's your company to do that. The stock obviously would suggest that there are challenges seen by the market, which isn't necessarily the right or the wrong thing; it just, you know, it is what it is, right? It's a report card that the market is telling you, hey, you know, maybe there's something going on here.

Talked about in terms of managing the dynamics around fuel profitability and fuel volumes and then obviously how that translates into in store sales is the right. One obviously I respect that you're running a business at your company to do that.

The stock obviously would suggest that there are challenges seen by the market, which isn't necessarily.

Right, where the wrong thing. It just you know it is it is what it is right. Its report or the market is telling you Hey, you know, maybe there's something going on here.

Mark Stiefel Astrachan: I guess, how do you balance that, you know, your long-term strategy, what you've seen in the results and how that translates into the stock? with whether you are on that strategy? Or if none of that is correct, is it just partly the markets in which you operate?

I guess, how do you balance that your long term strategy, what you've seen in the results and how that translates into the stock.

With whether.

Whether you.

To some extent on that strategy work if none of that is correct is it just partly the markets in which you operate you are are you like to talk about what you just said in terms of smaller now.

Ari Kotler: You know, Ari, you like to talk about what you just said in terms of smaller, bigger cities, towns that you operate in, more economically sensitive consumers. Is it just this is what we all have to deal with because your consumer base is different than some of your competitors? Sure. So, you know, Mark, I've been around the block for 20 years, more than 20 years in this industry.

City town that you operate in more economically sensitive consumers is it just this is what we all have to deal with because your consumer base is different than some of your competitors.

Sure.

You know Mark I've been around the block for 20 years over 20 years in this industry.

Ari Kotler: You know, in this industry, you know, you have one quarter that is great, one quarter that is maybe not great, but at the end of the day, overall, you're looking at a full year. If you're looking at our company, year over year, you know, we're basically down 3.5% from the prior year, 2022, which was a high record year of 40, over 41 cents CPG. Everybody knows that that was a record year.

You know in this industry you have one quarter that is great. One whatever does it maybe not great but at the end of the day. Our overall if you're looking on a full year. If you are looking on our company.

On a year over year.

We are you know, we're basically down three 5% from prior year 2022 of which was a high record year of 40 over 40 wants that CPG everybody knows that there's that's where the high record year at the end of the day, we manage the business and as you can see yeah fuel contribution is down.

Ari Kotler: At the end of the day, we manage the business, and as you can see, yeah, fuel contribution is down, around $46 million for the full year. But at the end of the day, if you're looking at merchandise contribution inside the stores, you know, we actually finished the year, sales excluding cigarettes, 2.5% for the year. You know, so we can't just watch one quarter or another.

Iran. If you're looking for the 40 or $46 million, but at the end of the day, if you're looking on a market merchandise contribution inside the stores.

We actually finished the year sales excluding cigarettes, two 5% for the year you know so we can't just watch one quarter right.

Ari Kotler: We actually finished the year with 2.5%, you know, same store sales excluding cigarettes, including cigarettes, which was 0.4%. But the reason I keep talking about excluding cigarettes, and I think that's something that the market needs to appreciate, is that this is what drives basically the margin. The margin is being driven by sales excluding cigarettes. Everybody knows that cigarette consumption is down.

Although we actually finished the year with two 5% same basically same store sales excluding cigarettes.

Including cigarettes. It was 0.4 about the reason I keep talking about excluding cigarettes, and I think that's something that the market needs to appreciate this is would drive.

Basically the margin the margin is being driven by sales excluding cigarettes, everybody know that cigarette consumption is down and that's by the way one of the reason this quarter after quarter you see that the percentage of our cigarette contribution inside our basically our total contribution continued to.

Ari Kotler: And that's, by the way, one of the reasons that quarter after quarter, you see that the percentage of cigarette contribution inside our basically our total contribution continues to come down, and sales from other categories, which are the core categories that I mentioned, continue to increase. At the end of the day, we run the business on a yearly basis. And, you know, coming off $41.4 cents per gallon a year, we managed to end up with $290 million, which is only 3.5% below the high record year.

So actually to come down and sales from other categories, which are the core categories that I mentioned continued to increase.

And then of the day, we manage the business on a yearly basis.

And you know coming off a 41.4 cents per gallon year, you know, we manage the business ending up with $290 million, which is only three 5%.

Below the direct one year. So I think we did a very good job on that.

Ari Kotler: So I think we did a very good job on that. Okay, thank you. Thank you. Our next questions come from the line of Karru Martinson with Jeffrey. Please proceed with your questions. Good morning.

Okay. Thank you.

Okay.

Okay.

Thank you. Our next question is coming from the line of crew Martinsen with Jefferies. Please proceed with your question.

Good morning.

Karru Martinson: My apologies if I missed it, but did you give CapEx guidance for 2024? I heard some new store openings there. No, we're not going to give any CapEx guidance.

Apologies if I missed it but did you give capex guidance for 2024, I heard some new store openings there.

No we are.

Not going to give capex guidance. Its early in the year as already mentioned, we are working on a number of things internally. So we wanted to give ourselves the time to fully develop that strategy, but I would expect we would be at or above prior year levels, but were not issue specific guidance on that front.

Rob: It's early in the year, and we, as Ari mentioned, are working on a number of things internally, and so we want to give ourselves the time to fully develop that strategy. But I would expect us to be at or above prior year levels, but we're not issuing specific guidance on that. Okay.

Karru Martinson: And then in terms of operating costs, I remember a few quarters ago you had talked to the fact that just, you know, costs have gone up here. You have to grow, you know, the merchandise side of the business to kind of offset that. And I was wondering, you know, what's the opportunity there to see those costs come down as a percentage of sales or stabilize? And what's the outlook for the markets that you serve? I think if we look at OPEX for the year, I think it was fairly well-managed, around 2 to 2% or so for the year, so I think we're doing a good job with that, I think we're managing our business to the trends that we see, we've seen the average wage rate, which was growing rapidly, is still growing but at a lower rate, so I think we're starting to see some of the normalization on that front, and again, we're just going to continue to focus on making sure we have the right labor for the demand in the stores, I think that's an ongoing activity that we continue, In a larger scale, I think, you know, we haven't we haven't talked about G&A and I think there are you know One of the reasons I think that I'm here is to start to look at some structural Opportunities on the G&A side as well So I think one of the things we'll be looking at is how we can leverage the margin that we do bring in on the expense Side and that's that's going to be an ongoing activity through, Okay, and then just lastly, we'd love to say that, you know, hey, open up some locations here in New York because a $2.99 chicken sandwich for loyalty members is an incredible bargain to us city dwellers.

And then in terms of operating costs I remember a few quarters ago, you had talked to the fact that just.

Costs have.

<unk> gone up here you have to grow the merchandise side of the business to kind of offset that and I was wondering you know what's the opportunity there to see those costs come down as a percentage of sales or stabilize and what's the outlook for the markets that you serve.

Well I think I think if we look at Opex for the year I think it was you know fairly well manage rises.

Two 2% or so for the year. So I think we're doing a good job of that I think we're managing our business to the trends that we see.

We've seen the average wage rate, which was growing rapidly is still growing but at a lower rate. So I think we're starting to see some of the normalization on that front and again, we're just going to continue to focus on making sure. We have the right direct labor for that.

The demand in the stores I think that's an ongoing.

Activity that we continue to work.

And the larger scale of things you know, we havent, we havent talked about G&A and I think they're one of them.

I think that I'm here to start to look at some structural opportunities on the G&A side as well. So I think one of the things we'll be looking at is how we can leverage the margin that we do bring in on the expense side of that that could be an ongoing activities with <unk>.

Okay, and then just lastly would love to say that you know Hey open up some locations here in New York, because the 299 chicken sandwich for loyalty members is incredible bargain to a city dwellers. Thank.

Karru Martinson: Thank you very much, guys; I appreciate that. Maybe I can just comment on NTI because you mentioned NTI and I think that's, you know, going back to what I think the rest of the team actually asked earlier, including Kelly, about opportunities. And I just want to maybe mention that, you know, we have three NTIs. We're breaking down on the first one.

Thank you very much guys.

I appreciate that maybe I can just comment on the MTI, because you mentioned NCI and I think thats going back to what I think the rest of the team actually Australia, including Kelly about the opportunities and I just Wanna be maybe you mentioned you've got you know we have three empty eyes.

We are breaking down on the first one.

Ari Kotler: In the next few weeks, we have three NTI for 2024. And, you know, one of the things that we've never discussed before, in all of those acquisitions that we did, a lot of those acquisitions came with additional land and additional opportunities. And this is the opportunity for us right now to tap into those opportunities that we bought in the past. That's one thing.

In the next few weeks, we have three MTI for 2024.

And one of the things that we Didnt never discussed before in all of those acquisition that we did a lot of those acquisitions came with additional land. In addition on opportunities and this is the opportunity for US right now to tap into those opportunities that you bought in the past.

That's one thing the other thing as I mentioned is the express store. We just opened on a clause location remember when we bought the floor location over a year in optical which was a great deal for us great transaction for us.

Ari Kotler: The other thing, as I mentioned, is the express store that we just opened at a qual location. Remember, when we bought the qual location over a year and a half ago, which was a great deal for us, a great transaction for us, unmanned locations for diesel, 180 sites that we bought in 2022, in July 2022. And, you know, we told people that our goal at the end of the day was to figure out a way to tap into those unmanned locations, how to, you know, tap into our retail business because, you know, the retail business brings a large contribution. We just opened an express stop unmanned location at one of the qual stores in Richmond, Virginia.

Men's locations for these 180 sites that you bought in 2020 due in July 2022.

And we told people that our goal at the end of the day is to figure out the way out to tap into those men location out to.

Our retail business because you know the recent business screened a large contribution.

Open an express stop unmanned location on one of the closed stores in Richmond, Virginia.

Ari Kotler: And the idea is to continue to expand those opportunities. The idea is to continue to expand retail, tap into all of those acquisitions that we did in the past and expand them with our loyalty, with our food service, because at the end of the day, that's what actually drives the margin, that's what actually drives the contribution over here. And I can tell you that we are laser focused on that, especially now in 2024, coming off so many acquisitions that we have done over the past few years. Thank you very much, guys.

And the idea is to continue to expand those opportunities have yet to come.

Do you need to expand retail.

<unk> into all of those acquisition that we did in the past and expand them.

If our loyalty with our foodservice because at the end of the day, that's what actually drives the margin that's what actually drives the contribution over here.

I can tell you that we are laser focused on dot spec.

Especially now in 2024 coming off so many acquisition that we did over the past few years.

Thank you very much guys.

Thank you.

Karru Martinson: Thank you. Thank you. Our next questions come from the line of William Reuter with Bank of America. Please proceed with your questions. Good morning.

Thank you. Our next question is come from the line of William Reuter with Bank of America. Please proceed with your question.

Good morning, the first question I know that historically given that you do focus on the smaller markets, which are you highlighted in a previous response, there havent been tons of competitive openings. There are many C store concepts that are pretty aggressively expanding at this point are you seeing any of those openings.

William Michael Reuter: The first question: historically, given that you do focus on the smaller markets, which you highlighted in a previous response, there haven't been tons of competitive openings. However, there are many C-store concepts that are pretty aggressively expanding at this point. Are you seeing any of those openings in your existing markets that are impacting certain stores? You know, I can't talk about a certain store or, you know, talk just about the market.

In your existing markets that are impacting certain stores.

Yeah.

Can't talk about the stairs to store.

Or talking just on the market. We are watching of course the market. We are seeing some competitors coming into different markets and some of staff that we are operating of course, but this is not something new to us I mean, we always.

Ari Kotler: We are watching the market, of course. We are seeing some competitors coming, you know, into different markets and some of them that we operate in, of course. But this is not something new to us.

William Michael Reuter: I mean, we always, you know, have competitors coming into some market. You know, we are coming into some markets as well. So I don't see anything over here that is different than what we actually saw in the past.

F competitor coming to some market, we are coming into some markets as well. So I don't see anything over here that is different than what we actually saw in the past.

Got it and then my follow up question in terms of the store base, you mentioned, you're not providing capex guidance for the year, but how do you feel about the health of the stores in general in terms of need for either Remodels.

Ari Kotler: Got it. And then my follow-up question, in terms of the store base, you mentioned you're not providing CapEx guidance for the year. But how do you feel about the health of the stores in general in terms of need for either remodels or changes to their size to allow them to offer some of these new merchandise products that you're introducing?

Or changes to their size to allow them to offer some of these new merchandise products that you're that you're introducing.

Ari Kotler: So this is one of the things that I mentioned about Investor Day and basically providing everybody with our strategy. This is something we are evaluating at the moment. There is no question that we made our first, heavy step, into food service, and we're going to continue to do that. And this is one of the things that we are evaluating. The idea is to invest in stores that have potential and opportunities.

So this is one of the things that I mentioned about our Investor day, going and basically providing everybody. Our strategy. This is something we are evaluating at the moment and there is no question.

We made our first stat abbvie stack into foodservice and we're going to continue to do that then this is one of the things that we are evaluating the idea is to invest in stores that we see potential and opportunities.

Ari Kotler: And this is something that we are going to present to everybody just a little bit later in the year. Great. I look forward to that.

And this is something that we are going to present to everybody just a little bit later in the year.

Great look forward to that alright, that's all for me. Thank you.

William Michael Reuter: All right, that's all for me. Thank you. I appreciate that. Thank you. Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Ari Kotler for closing remarks.

I appreciate that thank you.

Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Ari Kotler for closing remarks.

Ari Kotler: Thank you, operator. Thank you all for joining the call this morning. Great questions from everybody. I really appreciate that. We're looking forward to continuing to discuss with you later in the year. And we hope that you guys are going to stop in our stores, especially, you know, we don't have them in New York, but, you know, we have 30 other states that you guys can go into and buy a valuable pizza for $4.99 as long as you are an enrolled member.

Thank you operator.

Thank you all for joining the call. This morning, great questions from everybody really appreciate that.

You know.

We're looking forward to continue to discuss with you later in the year.

And we hope that you guys are going to stop in our stores and especially I know, we don't have in New York, but we have started some other states that you guys can go in and buy the body, but pizza for 499 as long as you already know who all remember don't forget that.

Everybody have a great day.

Operator: Don't forget that. Thank you, everybody, have a great day. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Yes.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

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