Q4 2024 Arko Corp Earnings Call

February 26, 2025

As a reminder, this conference is being recorded.

Speaker Change: I'd now like to introduce our host Jordan Mann Senior Vice President of corporate strategy and Investor Relations. Thank you you may begin.

Speaker Change: Thank you good afternoon, and welcome to Arco's fourth quarter and full year 2024 earnings conference call and webcast on today's call are we color Chairman, President and Chief Executive Officer, and Rob John Matteo <unk> Executive Vice President and Chief Financial Officer.

Speaker Change: Our earnings press release and annual report on Form 10-K for the year ended December 31, 2024 as filed with the SEC are available on <unk> website at Www Dot <unk> Dot com.

Speaker Change: During our call today, unless otherwise stated management will compare results to the same period in 2023 before we begin. Please note that all fourth quarter financial information is unaudited. During this call management may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

<unk> and answer session will follow the formal presentation.

If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

Speaker Change: Yes.

Speaker Change: Please review the forward looking and cautionary statements section at the end of our fourth quarter and full year 2024 earnings release for various factors that could cause actual results to differ materially from forward looking statements made during our call today.

I'd now like to do introduce your host Jordan Mann Senior Vice President of corporate strategy and Investor Relations.

You may begin.

Speaker Change: Any forward looking statements made during this call reflect our current views with respect to future events and Arco is under no obligation to update or revise forward looking statements made on this call whether as a result of new information future events or otherwise except as required by law.

Speaker Change: Thank you good afternoon, and welcome you to Arco's fourth quarter and full year 2024 earnings conference call and webcast.

Speaker Change: On today's call all the caller, chairman, President and Chief Executive Officer and Rob.

John Matteo: John Matteo <unk> Executive Vice President and Chief Financial Officer.

Speaker Change: On this call management will share operating results on both a GAAP basis and on a non-GAAP basis descriptions of those non-GAAP financial measures that we use such as adjusted EBITDA and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release or in our annual report on Form 10-K for the year.

John Matteo: Our earnings press release and annual report on Form 10-K for the year ended December 31, 2024 as filed with the SEC are available on our cause website at Www Dot Arco Corp dotcom.

John Matteo: During our call today, unless otherwise stated management will compare our results to the same period in 2023 before we begin. Please note that all fourth quarter financial information is unaudited.

Speaker Change: <unk> ended December 31, 2024. Additionally.

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

John Matteo: This call management may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

John Matteo: Please review the forward looking and cautionary statements section at the end of our fourth quarter and full year 2024 earnings release.

Ari: Good afternoon, and thank you for joining us.

Ari: 2024 was a challenging year for the industry and both a challenging and pivotal year for us as a company.

John Matteo: Factors that could cause actual results to differ materially from forward looking statements made during our call today.

John Matteo: Any forward looking statements made during this call reflect our current views with respect to future events and <unk> is under no obligation to update or revise forward looking statements made on this call whether as a result of new information future events or otherwise except as required by law.

Ari: Despite the challenging macro environment characterized by persistent inflation and constrained consumer spending.

Ari: We remain focused on executing the strategic initiatives that we believe will position <unk> for long term growth.

Ari: We continue to work on our transformation plan, including the Digitization program, while continuing to provide our customers with body through foodservice expansion of our other tobacco product category and targeted promotional strategy to announce.

John Matteo: On this call management will share operating results on both a GAAP basis and on a non-GAAP basis.

John Matteo: Those non-GAAP financial measures that we use such as adjusted EBITDA and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release or in our annual report on Form 10-K for the year ended December 31, 'twenty 'twenty four.

Ari: <unk> engagement and loyalty.

Ari: Overall against the backdrop of external pressures and in a dynamic environment, we manage the business effectively and delivered results near the midpoint of our annual guidance, reflecting our ability to adapt to market conditions and drive operational efficiencies, while maintaining a strong focus on customer value.

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

Ari: Long term profitability.

Ari: Over the course of 2024, we consistently observed a consumer will continue to struggle as well as evolving customer preferences, including increasing demand for otp and higher expectations for foodservice.

Ari: Good afternoon, and thank you for joining us.

Ari: 'twenty 'twenty four was a challenging year for the industry and bulk of challenging pivotal year for us as a company.

Ari: Despite the challenging macro environment characterized by persistent inflation and constrained consumer spending.

Ari: In response to what we're seeing we have made and continue to make investments to meet our customers' needs are.

Ari: We remain focused on executing the strategic initiatives that we believe will position article for long term growth.

Ari: First touch upon the immediate body, we seek to deliver to our customers.

Ari: We continue to reward our loyalty customers to promotion and have kicked off 2025, we have incredible insights doors promotion that provide value on merchandize, but notably that lead to sizeable discount on fuel. We recently launched our fueling America's future campaign, which offers.

Ari: We continue to work on our transformation plan, including the generalization program, while continuing to provide our customers with body of true foodservice expansion of our other tobacco product category and targeted promotional strategies.

Ari: Customer engagement and loyalty.

Ari: Overall against the backdrop of external pressures and in a dynamic environment, we manage the business effectively and delivered resorts near the midpoint of our annual guidance, reflecting our ability to adapt to market conditions and drive operational efficiencies, while maintaining a strong focus on customer value.

Ari: Allow customers to earn up to $2 off per gallon for up to 20, <unk> when purchasing volume promotions inside the stores.

Ari: This is not only provides relief to our customers.

But importantly rewards are enrolled loyalty members, which we believe will help grow our loyalty program.

Ari: And long term profitability.

Ari: During the quarter enrolled members spend an average of $104 per month, which is nearly 60% more than non enrolled customers.

Ari: Over the course of 'twenty 'twenty four we consistently observed a consumer who continue to struggle as well as evolving customer preferences, including increasing demand for otp and higher expectations for foodservice.

Ari: Additionally enrolled members visited our stores about three more times per month on average compared to non enrolled customers.

Ari: In response to what we're seeing we have made and continue to make investments to meet our customers' needs.

Ari: Reinforcing the effectiveness of our loyalty strategy.

Ari: Turning to evolving customer preferences I stated on our last call that one out of two enrolled loyalty members, our cigarettes or OTT consumers.

Ari: First touch upon the immediate body, we seek to deliver to our customers.

Ari: Over the quarter, we announced our otp category by optimizing merchandising.

Ari: Spending promotional activity and leveraging strategic supplier partnerships to drive market share gains.

Ari: Backbar refresh initiative as allow us to improve space allocation and expand product assortment to align with shifting consumer demand.

Ari: Allow customers to earn up to $2 off per gallon drop to 20, galanas when purchasing volume promotions inside the stores.

Ari: As of the end of the fourth quarter, we completed more than 800 tobacco Backbar refreshes and expect to refresh one hundreds more in the coming weeks.

Ari: This is not only provides relief to our customers.

Ari: But importantly rewards our envoy loyalty members, which we believe will help grow our loyalty program <unk>.

Ari: Our strategy around otp during the fourth quarter led to a 200 basis points improvement in gross margin for Otp category.

Ari: The quarter enrolled members spend an average of $104 come on which is nearly 50% more than non involved customers. Additionally.

Ari: With a widening the gap between iron margin otp and traditional cigarettes.

Ari: Additionally enrolled members visited our stores about three more times per month on average compared to non <unk> customers.

Ari: Notably Otp represented nearly half of our total tobacco category contribution in the fourth quarter.

Ari: Reinforcing the effectiveness of our loyalty strategy.

Ari: Continuing with this momentum in the category since the start of 2025, we have ramped up promotional activity and otp and cigarettes offering significant deals to customers to further drive sales momentum.

Ari: Turning to evolving customer preferences I stated on our last call that one out of two enrolled loyalty members of cigarettes or OTT consumers over.

Ari: Over the quarter, we announced the otp category by optimizing merchandising.

Ari: Additionally, while we are working towards receiving permits for our seven pilot stores that will include in our non foodservice offering we have seen strong customer response.

Ari: Pending promotional activity and leveraging strategic supplier partnerships to drive market share gains.

Ari: Backbar refresh initiative as allow us to improve space allocation and expand product assortment to align with shifting consumer demand.

Ari: So the upgrades, we have already made to our foodservice offerings reinforcing our focus on delivering value driven option.

Ari: Our promotional efforts, including frozen and off Pizza bakery nathans famous hotdogs and roller grill deals continued to gain traction in.

Ari: As of the end of the fourth quarter, we completed more than 800 tobacco Backbar refreshes and expect to refresh one hundreds more in the coming weeks.

Ari: In fact, we have sold more than 600000 pizza since launching our $4 99 Pizza special in Q1 2024.

Ari: Our strategy around otp during the fourth quarter led to a 200 basis points improvement in gross margin for Otp category.

Ari: We are refining our foodservice strategy to announce convenience quality and profitability driving trial and repeat purchases through targeted promotions and bundling strategy.

Ari: The widening the gap between iron margin Otp and traditional cigarettes.

Ari: Notably Otp represented nearly all of our total tobacco category contribution in the fourth quarter.

Ari: Turning to fuel, although retail fuel volume declines for both the quarter and year, our pricing strategy help preserve margin, despite lower demand lower fuel cost and reduced price volatility backdrop, which normally put pressure on the ability to expand margin.

Ari: Decently, while we are working towards receiving permits for our seven pilot stores that will include and are not as foodservice offering.

Ari: Same store retail fuel gallons were down mid single digits for the fourth quarter and year, while same store retail fuel margin was only down one one per gallon in the fourth quarter as compared to the prior year period and up <unk> seven per gallon for the full year.

Ari: We have seen strong customer response.

Ari: So the upgrade we have already made to our foodservice offerings reinforcing our focus on delivering value driven option.

Ari: Our promotional efforts, including frozen and off Pizza bakery nathans famous hotdogs and roller grill dealers continued to gain traction in.

Ari: Lastly over the quarter, we made meaningful progress on our deal origination program as part of our broader transformation plan, we are strategically converting select retail stores to dealer sites, where we believe we can generate the IRA contribution dollars through ongoing fuel supply agreement and rental income rather than continue to operate these location within our reach.

Ari: In fact, we have sold more than 600000 pizza since launching our full 99 pizza special in Q1, 'twenty 'twenty four.

Ari: We are refining our foodservice strategy to announce convenience quality and profitability driving trial and repeat purchases through targeted promotions and bundling strategy.

Ari: <unk> segment.

Ari: Our approach is centered.

Ari: On optimizing our portfolio, allowing us to focus our resources on high performing retail stores, while leveraging our dealer network to our non us profitability across our entire platform.

Ari: Turning to fuel, although retail fuel volume decline for both the quarter and year, our pricing strategy help preserve margins, despite lower demand lower fuel cost and reduced price volatility backdrop, which normally put pressure on the ability to expand margin.

Ari: We exceeded our initial targets for the organization, having converted more than 150 retail stores to dealer sites in 2024.

Ari: We expect to convert the meaningful number of additional stores over the course of 2025.

Ari: Same store retail fuel gallons were down mid single digits for the fourth quarter and year, while same store retail fuel margin was only down 1.1.

Ari: With approximately 100 more stores to be converted by the end of the first quarter.

Ari: Surpassing our conversion goal in 2024 is a testament to our team's focus and execution.

Ari: <unk> in the fourth quarter as compared to the prior year period, and up 0.7 cents per gallon for the full year.

Speaker Change: Rob will provide more substance to the numbers. Later, however, we now expect our total dealer renovation program to generate an annualized benefit in excess of $20 million for combined <unk> and retail segment operating income with additional opportunity from G&A expense reduction.

Ari: Lastly over the quarter, we made meaningful progress on our deal origination program as part of our broader transformation plan, we are strategically converting select retail stores to dealer sites, where we believe we can generate IRA contribution dollars through ongoing fuel supply agreement and rental income rather than continue to operate these location within our reach.

Speaker Change: As we move into 2025, our focus remains on our strategic priorities, while delivering value to both our customers and stakeholders. We believe our disciplined approach to growth operational efficiencies and customer engagement initiatives will position <unk> for long term success.

Ari: Segment.

Ari: Our approach is centered.

Ari: One optimizing our portfolio, allowing us to focus our resources on high performing retail stores, while leveraging our dealer networks, who are not as profitability across our entire platform.

Speaker Change: We've got I will turn it over to Rob to discuss our financial results and our 2025 guidance.

Ari: We exceeded our initial targets popularization, having converted more than 150 retail stores to dealer sites in 2024.

Thank you Laurie.

Speaker Change: Good afternoon, everyone.

Speaker Change: Turning to the fourth quarter total company adjusted EBITDA was $56 8 million compared to $61 8 million for the year ago period with.

Ari: We expect to convert a meaningful number of additional stores over the course of 2025.

Ari: With approximately 100 more stores to be converted by the end of the first quarter.

Speaker Change: With the decrease caused primarily by lower retail fuel and merchandise contribution.

Ari: Surpassing our conversion goal in 'twenty 'twenty four is a testament to our team's focus and execution.

Speaker Change: At the segment level, our retail segment contributed approximately $62 9 million in operating income compared to $72 3 million for the year ago period.

Ari: Rob will provide more substance to the numbers. Later, however, we now expect our total dealer renovation program to generate an annualized benefit in excess of $20 million.

Same store merchandise sales, excluding cigarettes were down two 1% versus the year ago period.

Ari: Bind all cell and retail segment operating income with additional opportunity from G&A expense reduction.

Speaker Change: Total same store merchandise sales were down four 3%.

Speaker Change: Same store margin rate was relatively in line with the prior year.

Ari: As we move into 2025, our focus remains on our strategic priorities, while delivering value to both our customers and stakeholders. We believe our disciplined approach to growth operational efficiencies and customer engagement initiative with position article for long term success.

Speaker Change: Okay.

Speaker Change: Same store fuel contribution was down seven 1% for the quarter caused by a decline in gallons and lower year on year fuel margin per gallon.

Speaker Change: Same store fuel gallon demand was down four 4% for the quarter.

Ari: We've got I will turn it over to Rob to discuss our financial results and our 2025 guidance.

Speaker Change: Fuel margin of $38 seven per gallon was down $1 one per gallon from the year ago period, resulting from lower fuel costs and reduced price volatility this year.

Rob: Thank you Ari.

Speaker Change: Afternoon, everyone.

Speaker Change: Turning to the fourth quarter total company adjusted EBITDA was $56 8 million compared to $61 8 million for the year ago period.

Speaker Change: Same store operating expenses were down approximately one 2% for the quarter.

Speaker Change: Moving onto our wholesale segment operating income was $20 million for the quarter compared to $18 1 million in the year ago period with.

Speaker Change: With the decrease caused primarily by lower retail fuel and merchandise contribution.

Speaker Change: At the segment level, our retail segment contributed approximately $62 9 million in operating income compared to $72 3 million for the year ago period.

Speaker Change: With the increase primarily due to our channel optimization work.

Speaker Change: Inclusive of channel optimization gallons were relatively in line with the year ago period.

Speaker Change: Fuel margin was nine three per gallon for the quarter up <unk> <unk> per gallon to the year ago period.

Speaker Change: Same store merchandise sales, excluding cigarettes were down two 1% versus the year ago period.

Speaker Change: Total same store merchandise sales were down four 3%.

Speaker Change: For our fleet segment operating income was $12 4 million for the quarter compared to $9 7 million in the year ago period, with total gallons down 1% to the prior year.

Speaker Change: Yeah.

Speaker Change: Same store margin rate was relatively in line with the prior year.

Speaker Change: Same store fuel contribution was down seven 1% for the quarter caused by a decline in gallons and lower year on year fuel margin per gallon.

Speaker Change: Increased segment operating income was driven by resilient fuel margin performance, which was $45 two per gallon for the quarter versus $36.07 per gallon in the year ago period.

Speaker Change: Same store fuel gallon demand was down four 4% for the quarter.

Speaker Change: Fuel margin of $38.07 per gallon was down 1.1 cents per gallon from the year ago period, resulting from lower fuel costs and reduced price volatility this year.

Speaker Change: Total company general and administrative expense for the quarter was $39 7 million compared to $38 1 million in the year ago period with the increase primarily due to lower stock based compensation expense in the prior year period.

Speaker Change: Same store operating expenses were down approximately one 2% for the quarter.

Speaker Change: Excluding the year on year change in stock based compensation general and administrative expense was down 2% to the year ago period.

Speaker Change: Moving on to our wholesale segment operating income was $20 million for the quarter compared to $18 1 million in the year ago period.

Speaker Change: Net interest and other financial expenses for the quarter were $19 7 million compared to $22 9 million in the year ago period.

Speaker Change: With the increase primarily due to our channel optimization work.

Speaker Change: Inclusive of channel optimization gallons were relatively in line with the year ago period.

Speaker Change: With change caused primarily by fair value adjustments related to our warrants.

Speaker Change: Fuel margin was nine three cents per gallon for the quarter up 0.3 per gallon to the year ago period.

Net loss for the quarter was $2 3 million compared to a net income of $1 1 million for the year ago period.

Speaker Change: For our fleet segment operating income was $12 4 million for the quarter compared to $9 7 million in the year ago period, with total gallons down 1% to the prior year.

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

Speaker Change: Full year 2024 total company adjusted EBITDA was $248 9 million versus $276 3 million in the year ago period.

Speaker Change: Increased segment operating income was driven by resilient fuel margin performance, which was 45.2 cents per gallon for the quarter versus $36.07 per gallon in the year ago period.

Speaker Change: And full year 2024, net income was $20 8 million versus $34 6 million in the year ago period.

Speaker Change: Turning to the balance sheet, we have substantial liquidity of approximately $841 million, including $262 million in cash on hand at quarter end.

Speaker Change: Along with remaining availability on our lines of credit.

Speaker Change: Excluding the year on year change in stock based compensation general and administrative expense was down 2% to the year ago period.

Speaker Change: Our $140 million ABL remains completely undrawn as we continued to manage working capital needs from operating cash flow.

Speaker Change: Net interest and other financial expenses for the quarter were $19 7 million compared to $22 9 million in the year ago period.

Speaker Change: Excluding lease related financing liabilities, we ended the fourth quarter with $881 million in long term debt.

Speaker Change: With change caused primarily by fair value adjustments related to our warrants.

Speaker Change: Apprised of our 2029 senior notes the outstanding balance on our capital one line and the remainder primarily related to real estate and equipment financing.

Speaker Change: Net loss for the quarter was $2 3 million compared to a net income of $1 1 million for the year ago period.

Speaker Change: Total capital expenditures for the quarter were $36 1 million with full year 2020 for capital expenditures of $113 9 million.

Speaker Change: Please reference our press release for a detailed reconciliation from net income and loss to adjusted EBITDA.

Speaker Change: Okay.

Speaker Change: Full year 2024 total company adjusted EBITDA was $248 9 million versus $276 3 million in the year ago period.

Speaker Change: Turning to full year 2025.

Speaker Change: We expect total company adjusted EBITDA to be in the range of 233 to 253 million <unk>.

Speaker Change: Full year 2024, net income was $20 8 million versus $34 6 million in the year ago period.

Speaker Change: Assuming a retail fuel margin of $39 five to $41 five per gallon.

Speaker Change: Turning to the balance sheet, we have substantial liquidity of approximately $841 million, including $262 million in cash on hand at quarter end, along with remaining availability on our lines of credit.

Speaker Change: And mid teen percent operating profit growth in our wholesale segment driven by our ongoing channel optimization work.

Speaker Change: For the first quarter of 2025, we expect total company adjusted EBITDA to be in the range of 27% to $33 million.

Speaker Change: Our 140 million ABL remains completely undrawn as we continued to manage working capital needs from operating cash flow.

Speaker Change: We expect our same store base will change materially as we move through 2025 due to our channel optimization work and then our retained retail stores will be more productive for both merchandise sales and gallons as compared to average performance per store in the year ago period.

Speaker Change: Excluding lease related financing liabilities, we ended the fourth quarter with $881 million in long term debt comprised of our 2029 senior notes the outstanding balance on our capital one line and the remainder primarily related to real estate and equipment financing.

Speaker Change: As a result, we have set up our retail guidance framework to walk you from Q1 2024 average per store performance to estimated Q1 2025 total retail segment merchandize sales and gallons.

Speaker Change: Total capital expenditures for the quarter were $36 $1 million with full year 2020 for capital expenditures of $113 9 million.

Speaker Change: Our retail segment guidance is supported by the following key assumptions.

Speaker Change: Turning to full year 2025.

Speaker Change: We expect total company adjusted EBITDA to be in the range of $233 million to $253 million <unk>.

Speaker Change: We are estimating our Q1 2025 average retail store count to be 1339 stores, reflecting the impact of our ongoing channel optimization.

Speaker Change: Assuming a retail fuel margin of $39 five to 41 five per gallon.

Speaker Change: Using Q1 2024 average per store performance as a base for Q1 2025.

Speaker Change: And at mid teen percent operating profit growth in our wholesale segment driven by our ongoing channel optimization work.

Speaker Change: We expect an increase in productivity will partially offset a decline in same store sales, resulting in a low single digit decline in merchandise sales per average store compared to the year ago period.

Speaker Change: For the first quarter of 2025, we expect total company adjusted EBITDA to be in the range of $27 million to $33 million.

Speaker Change: We expect our same store base will change materially as we move through 2025 due to our channel optimization, Mark and then our retained retail stores will be more productive for both merchandise sales and gallons as compared to average performance per store in the year ago period.

We expect merchandise margin rates to be generally in line with the year ago period.

Speaker Change: For fuel, we expect an increase in productivity will more than offset a decline in same store fuel gallons, resulting in a low single digit increase in gallons per average store compared to the year ago period.

Speaker Change: And we are assuming a retail fuel margin in the range of 37 to 39 per gallon.

Speaker Change: Moving onto our wholesale segment, we expect mid single digit operating income growth driven by our ongoing channel optimization work.

Speaker Change: Our retail segment guidance is supported by the following key assumptions.

Speaker Change: We are estimating our Q1 2025 average retail store count to be 1339 stores, reflecting the impact of our ongoing channel optimization.

Speaker Change: And finally for our fleet segment, we're expecting high single to low double digit operating income growth driven by expected resilient fuel margin per gallon.

Speaker Change: Using Q1 2024 average per store performance as a base for Q1 2025, we.

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

Ara: Thanks, Rob.

Ara: I will close with some additional comments on our first quarter guidance.

Ara: The wins from adverse weather conditions unfavorably impacted customer in mobility and sales across key region.

Ara: By these challenges our disciplined execution and ability to adapt.

Speaker Change: We expect merchandise margin rates to be generally in line with the year ago period.

Ara: Help minimize the impact.

Ara: Seasonal softness in the first quarter is not unusual.

Ara: And we would rather and navigate this weather related challenges now than during the peak summer months.

Ara: With the weather we plan to continue to operate the business and control what we can control optima.

Speaker Change: Okay.

Speaker Change: And we are assuming a retail fuel margin in the range of 37% to 39 cents per gallon.

Ara: Optimizing operations, maintaining pricing discipline and delivering value to our customers.

Moving onto our wholesale segment, we expect mid single digit operating income growth driven by our ongoing channel optimization work.

Ara: On a positive note fuel margin was up two five per gallon in January to the prior year, demonstrating both the strength of our pricing strategy and the resilience of our business.

Speaker Change: And finally for our fleet segment, we're expecting high single to low double digit operating income growth driven by expected resilient fuel margin per gallon.

Ara: As we wrap up I want to reiterate our focus on adapting to dynamic market landscape.

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

Ara: We remain committed to our dealer renovation program foodservice strategic.

Ari: Thanks, Rob.

Ara: Store transformation and value driven initiatives im optimistic about our strategies, including our fueling America's future campaign, which reflect our commitment to making due to more affordable, while helping families and small businesses managing.

Ari: I will close with some additional comments on our first quarter guidance.

Ari: Headwinds from adverse weather conditions unfavorably impacted customer mobility and sales across key regions.

Ari: Despite these challenges our disciplined execution and ability to adapt.

Ara: Rising costs.

Ari: To minimize the impact.

Ara: We look forward to continue providing value driven discounts on key essential to support the communities we serve.

Ari: Softness in the first quarter is not unusual and we are.

Ari: Rather than navigate this weather related challenges now than during the peak summer months.

Ara: Finally, I want to thank our employees for their hard work and dedication this quarter.

Ari: With the weather, we plan to continue to operate the business and control what we can control.

Ara: And in the quarters ahead and for taking care of our customers every day throughout the year.

Ari: <unk> operations.

Ara: With that we will open it up to questions.

Ari: Maintaining pricing discipline and delivering value to our customers.

On a positive note fuel margin was up 2.5 cents per gallon in January to the prior year, demonstrating both the strength of our pricing strategy and the resilience of our business.

Speaker Change: Great. Thank you at this time, we will be conducting a question and answer session.

Speaker Change: If you'd 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.

Speaker Change: You May press star two to remove yourself from the queue.

Ari: As we wrap up I want to reiterate our focus on adopting the dynamic market landscape.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the certainties.

Ari: We remain committed to our dealer renovation program foodservice strategic.

Speaker Change: One moment, please pull for questions.

Ari: Store transformation and value driven initiatives I'm optimistic about our strategy.

Bobby Griffin: Hello. My first question is from Bobby Griffin from Raymond James. Please go ahead.

Ari: <unk> are fueling America's future campaign, which reflect our commitment to making sure the more affordable, while helping families and small businesses managing.

Speaker Change: Good afternoon, everybody. Thanks for taking my questions.

Speaker Change: Hey, guys.

Speaker Change: I wanted to I wanted to first start on the 2025 guidance and.

Ari: Rising costs.

Ari: We look forward to continue providing value driven discounts on key essential to support the communities we serve.

Speaker Change: The midpoint implies is down a little bit year over year with about a penny or penny or so or more in fuel margin. So can you just maybe help connect.

Ari: Finally, I want to thank our employees for their hard work and dedication this quarter.

Speaker Change: Those docs, because I know you've got some of the dealers Asian savings starting to flow through but I imagine there are some other cost pressures that you're dealing within the in the in the business as well. So just trying to connect kind of going on there those building building blocks.

Ari: And in the quarters ahead and for taking care of our customers every day throughout the year.

Ari: With that we will open it up to question.

Speaker Change: Yes, Bobby as you think about the full year again, we're staying pretty high with the guidance right now and as I mentioned in my prepared remarks, we're going to have a <unk>.

Ari: Great. Thank you at this time, we will be conducting a question and answer session.

Ari: If you'd 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.

Speaker Change: Shifting same store basis, we go through so the same store metrics. We would normally give you at this time, we're going to be a little less relevant as the base change, which is why we're steering people to the average so as I mentioned in the Q1 guide.

Ari: You May press star two to remove yourself from the queue.

Ari: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Excluding a negative same store trend right now in gallons and and in merch sales and again I don't want to I want to steer away from same store because the base is going to change, but you do know we are facing that and that underlying that is going to put some pressure we are expecting things to improve as we go through the year, but we do we do see a negative trend right now and I think as you've probably heard from others.

Ari: One moment, please pull for questions.

Speaker Change: And our first question is from Bobby Griffin from Raymond James. Please go ahead.

Bobby Griffin: Good afternoon, everybody. Thanks for taking my questions.

Speaker Change: Hey, guys.

Speaker Change: I wanted to I wanted to first start on the 2025 guidance and you know at the midpoint implies it's down a little bit year over year with about a penny or penny or so more in fuel margins. So can you just maybe help connect that.

Speaker Change: February has had some significant weather impact and theres a bit of a drag is starting the year off so that's really what we're looking at we do expect again those average store metrics. We do expect those to improve as we go through the year and again on both on the merch side and the gallon side.

Speaker Change: Those docs, because I know you've got some of the deal origination savings starting to flow through but I imagine there's some other cost pressures that you're dealing within the in the in the business as well. So just trying to connect I'm kind of going on there those building building blocks.

Speaker Change: Okay that makes sense and then maybe is there a building effect as we move through the year from the <unk> savings or is that kind of prorated each quarter.

Speaker Change: And is there a step function change that savings as we enter 2006.

John Matteo: Yes, Bobby as you think about the full year again, we're staying pretty high with the guidance right now and as I mentioned in my prepared remarks, we're going to have a <unk>.

Speaker Change: Yes. So you should expect I mean in the guidance. We gave you the wholesale segment being up mid single for the for the first quarter and up mid teens for the year. So that is going to accrue as we go through as we get more and more stores. The cumulative impact is going to become greater and greater and as already mentioned in his prepared remarks, we will start to see more <unk>.

John Matteo: Shifting same store basis, we go through the same store metrics. We would normally give you at this time are going to be a little less relevant as the base change, which is why we're steering people to the average so as I mentioned in the Q1 guide.

John Matteo: We're seeing a negative same store trend right now in gallons and and in merch sales and again I don't want to I want to steer away from same store because the base is going to change, but you do know we are facing that and that underlying that is going to put some pressure, we're expecting things to improve as we go through the year, but we do we do see a negative trend right now and I think as you've probably heard from others.

Speaker Change: <unk> savings as we start to streamline the business for the new retail footprint. So that will continue to accrue as we go through 'twenty five and there will be a wrap around into 2026.

Speaker Change: And then I want to maybe pivot.

Speaker Change: I appreciate all the details on the dealer's nation side of things can we maybe switch and talk about the stores that are left in the base you still got a lot of stores there where are we in the remodel initiatives. I know you guys have done some stuff with the back bar, but what else are some of the initiatives for 2025 to help kind of the existing or the remaining let's call remain co of stores that are in the retail.

John Matteo: February has had some significant weather impact and theres a bit of a drag is starting the year off so that's really what we're looking at we do expect again those average store metrics. We do expect those to improve as we go through the year and again on both on the merchant side and the gallon side.

Speaker Change: Network <unk>.

Speaker Change: During 2025.

Speaker Change: Okay that makes sense and then maybe is there a building effect as we move through the year from the <unk> savings or is that kind of prorate it each quarter.

Speaker Change: Yes, as I mentioned Barbie.

Speaker Change: Earlier, I mean, we startup campaign called fueling America's of their future.

Speaker Change: This campaign as opposed to take care of our customers you know given that everybody is feeling the pressure right now.

Speaker Change: And is there a step function change that savings as we enter 2006.

Speaker Change: The microeconomic pressure the thought process is really to concentrate on those stores.

Speaker Change: We are leveraging our strategic supplier partnerships and we are going to target on promotional.

Speaker Change: That basically will encourage our customers to buy fuel in the past.

Speaker Change: <unk> savings as we start to streamline the business for the new retail footprint. So that will continue to accrue as we go through 25% and there will be a wrap around into 2026.

Speaker Change: We look on our business in the past usually you count on people that are coming to the pump.

Speaker Change: And from the bump going through the store, we actually shifting gears there'll be here.

Speaker Change: And then I want to maybe pivot you no I appreciate all the details on the dealer's nation side of things can we maybe switch and talk about the stores that are left in the base you still got a lot of stores there where are we in the remodel initiatives. I know you guys have done some stuff with the back bar, but what else are some of the initiatives for 2025 to help kind of the existing or are the remaining let's call remain co.

Speaker Change: And we are actually encouraging customers that's coming inside the store now to box you in I mean, we are going to provide you with fueling America future, we are going to provide up to $2 off per gallon.

Speaker Change: Which is up to $20. The average got it on the consumer rates around anywhere between nine to 11, and this is going to be equal to $40 saving on Gaza fill up and we're talking about every transaction you are going to be able to stack your basically or savings, which means that at the end of the day.

Speaker Change: <unk> stores that are in the retail network during 2025.

Speaker Change: Yeah, as I mentioned Bobby.

Speaker Change: Earlier, I mean, we started a campaign called fueling America's future.

Speaker Change: This campaign as opposed to take care of our customers.

Speaker Change: Can you can visit our stores three four times a week I don't know if the start and end up with $40 savings.

Speaker Change: Everybody is feeling the pressure right now.

Speaker Change: The microeconomic pressure the thought process is really to concentrate on those stores.

Speaker Change: On your next Bill up and this is where we actually shifting more so far.

Speaker Change: First off our energy right now in addition to that you know you just mentioned the back bar.

We are leveraging our strategic supplier partnerships and we're going to target on promotional.

Speaker Change: In 800 doors. We are we have another 100 stores that we are just getting ready to complete in the next few weeks, but the idea is really to concentrate on otp tobacco.

Speaker Change: That basically will encourage our customers to have kept Dubai fuel in the past.

Speaker Change: We look on our business in the past usually you count on people that are coming to the pump and from.

Speaker Change: And if you if you think about that one out of two customers coming to our stores.

Speaker Change: The bump going through the store, we actually shifting gears there'll be here.

Speaker Change: And we are actually encouraging customers, that's coming inside the store to buy a few of them and we are going to provide you with fueling America's future. We are going to provide up to $2 off per gallon.

Speaker Change: Is that been or at least one out of two customers is that a box for consumer and this is where we see people actually.

Speaker Change: Cyclically concentrated right now.

Speaker Change: And this is this is really going to be that promotional activity for 2025 tobacco and.

Speaker Change: Which is up to 20 gallon generally the average got honest fair consumer reach Iran.

Speaker Change: We're between nine to 11.

Speaker Change: And this is going to be equal to $40 saving on Gaza fill up and we're talking about every transaction you are going to be able to stack.

Speaker Change: It provides a great promotional basically deals on the tobacco and at the same time concentrate on fuel to answer your question regarding to remodeling, we have the seven pilot stores.

Speaker Change: Basically our savings, which means that at the end of the day you can you can visit our stores three four times a week I don't know if the start and end up with $40 savings on your next bill up and this is where we actually shifting more so far most of our energy right. Now. In addition to that you know you just mentioned the backboard.

Speaker Change: That we actually talked about them I mean, we are in at really at the end of the process of term at impairment taken little bit longer, but we are actually finalizing the permit and we believe we're going to start construction in late March of at least two of those stores.

Speaker Change: So those are.

Speaker Change: Doing an additional draw of course foodservice and.

Speaker Change: Sure.

Speaker Change: 800 doors, we are we have another 100 stores that we are just getting ready to complete in the next few weeks, but the idea is really to concentrate on otp tobacco.

Speaker Change: All of the other things that you've spoken in the past.

Speaker Change: We're more than happy to elaborate.

Speaker Change: Okay, Yes.

Speaker Change: I mean, if its easier we can we can go through it offline, but just the two dollar off aspect of fuel maybe that's obviously a very big discounts. So how does that translate into maintaining the profitability are actually driving further profits and EBITDA of this business is it.

Speaker Change: And if you.

Speaker Change: If you think about that one out of two customers coming to our stores is.

Speaker Change: Is that been or at least one out of two customers is that tobacco consumer and this is why we see people actually.

Speaker Change: The requirement of some type of inside the store purchases help us connect that because when we hear $2 off on a four or $5 gallon. It sounds very significant and there is a question on maintaining the profitability level as well.

Speaker Change: Basically concentrating right now.

Speaker Change: And this is this is really going to be that promotional activity for 2025 tobacco.

Speaker Change: And.

Speaker Change: Yes, that's not going to.

Speaker Change: It provides great promotional basically deals on the tobacco and at the same time concentrate on fuel to answer your question regarding to remodeling, we added seven pilot stores.

Speaker Change: <unk> profitability in a way, it's not going to actually apply to margin, it's really all about partnership.

Speaker Change: Combination with our base.

Speaker Change: Basically we are at.

Speaker Change: You know that we actually talked about them I mean, we are in at really at the end of the process of pyramid, apparently take a little bit longer, but we are actually finalizing the permit and we believe we're going to start construction in late March of at least two of those stores.

Speaker Change: If our partners, which is basically all vendors, it's not going to touch profitability, it's not going to decrease margin inside the store and it's not going to increase margin outside the store as a matter of fact, we believe.

Speaker Change: With this promotion, we believe we're going to be able to drive gallons. That's really what we're trying to do over here, we're trying to drive gallons.

Speaker Change: So those are all getting.

Speaker Change: Doing an additional draw of course foodservice and.

Speaker Change: And the combination between people that are coming to our stores today.

Speaker Change: All of the other thing that you've spoken in the past and I am more than happy to elaborate.

Speaker Change: Dubai.

Speaker Change: Okay, and yes, I mean, if its easier we can we can go through it offline, but just the two dollar off aspect of fuel maybe that's obviously a very big discounts. So how does that translate into maintaining the profitability are actually driving further profits and EBITDA of this business is it.

Speaker Change: Every day.

Speaker Change: So a project, but they are not purchasing fuel and remember we are operating in a lot of rural location a lot of small towns. So many times the customers that come to our stores.

Speaker Change: Not necessarily buying fuel and vice versa. They are a customer that you are driving to the pump and does not getting inside the store.

Speaker Change: The requirement of some type of inside the store purchase just help us connect that because when we hear $2 off on a five four or $5 gallon. It sounds very significant in and Theres a question on maintaining the profitability level as well.

We believe with those promotions, we believe we're going to see some big correlation between the two.

Speaker Change: But to be clear this is not going to.

Speaker Change: Yeah, that's not going to.

Speaker Change: In our guidance, we're not planning on reducing margin your margin or reducing margin inside the stores.

Speaker Change: <unk> profitability in a way, it's not going to actually apply to margin, it's really all about the partnership and <unk>.

Speaker Change: I appreciate the details I'll turn it over to somebody else. Thank you for the time.

Speaker Change: Combination we bar based.

Speaker Change: Basically we are at.

Speaker Change: Thank you Bobby.

Speaker Change: If our partners, which is basically all vendors, it's not going to touch profitability, it's not going to decrease margin inside the store and he's not going to increase margin outside the story as a matter of fact, we believe.

Speaker Change: Bobby.

Speaker Change: Next question is from Kelly Bania from BMO capital markets. Please go ahead.

Kelly Bania: Good evening, thanks for taking our questions.

Speaker Change: What's the what do you if you can just help us a little bit more understand.

Speaker Change: With this promotion, we believe we're going to be able to drive gallon. That's really what we're trying to do over here, we're trying to drive gallons.

Speaker Change: The remaining retail stores here Kevin.

Speaker Change: And the combination between people that are coming to our stores today.

Speaker Change: But the dealer renovation and just give us some insight into how those same store sales and gallons are trending for the remaining stores. If you take out the 250 cumulative stores that will be.

Speaker Change: Goodbye.

Speaker Change: Every day.

Speaker Change: <unk> projects, but not purchasing fuel remember we are operating in a lot of roll location a lot of small towns. So many times the customers that come to our stores.

Speaker Change: By the end of Q1, just what's happening we have some of the disc.

Speaker Change: Not necessarily buying.

Speaker Change: And vice versa. They are a customer that you are driving to the pump and does not getting inside the store.

Speaker Change: Disclosures from never leased but what is happening on a same store sales and same store gallon trend for the remaining stores.

Speaker Change: We believe with those promotions, we believe we're going to see some big correlation between the two.

Speaker Change: Rob would you like to take it.

Speaker Change: But to be clear this is not going to.

Speaker Change: Sure, Yes, Kelly those stores outperformed as you might expect to outperform the balance of the company for Q3, Q4, excuse me and <unk>.

Speaker Change: In our guidance, we're not planning on reducing margin your margin or reducing margin inside the stores.

Speaker Change: Outperforming Q1 quarter to date, so again, we're going to we're going to give it a little bit more run rate before we're calling out those trends, but they are they are higher still still negative, but they are higher than the balance of the chain and again, we're watching that and we would expect that to continue.

Speaker Change: I appreciate the details I'll turn it over to somebody else. Thank you for the time.

Speaker Change: Thank you Bobby.

Speaker Change: Bob.

Speaker Change: Next question is from Kelly Bania from BMO capital markets. Please go ahead.

Speaker Change: And as I mentioned in my prepared remarks. These are more productive stores. So again, we're going to benefit from stores that are more competitive and able to able to drive business versus perhaps some of the macro trends that have been weighing on some of the less less less.

Kelly Bania: Good evening, thanks for taking our questions.

Kelly Bania: Was wondering if you could just help us a little bit more understand.

Speaker Change: The remaining retail stores here Kevin.

Less competitive stores.

Speaker Change: <unk> with the dealer Ization and just give us some insight into how those same store sales and gallons are trending for the remaining stores. If you take out the 250 cumulative stores that will be.

Speaker Change: And just to add to add Kelly that's all from the get go that was part of the transformation plan and are part of the transformation plan is to make sure.

Speaker Change: We are concentrating on the best stores.

Speaker Change: We are concentrating on our stores.

Speaker Change: Or is it by the end of Q1, just what's happening we have some of the disc.

Speaker Change: We believe at the end of the day, we'll actually we have some.

Speaker Change: Disclosures from never leased but what is happening on a <unk>.

Speaker Change: Some organic growth potential and the stores that we just believe that mature or we don't see the the increase in organic growth.

Speaker Change: Same store sales and same store gallon trends for the remaining stores.

Rob: Sure Rob would you like to ticket.

Speaker Change: The stores that we basically shifting to the wholesale segment.

Rob: Sure, Yes, Kelly did those stores outperformed as you might expect to outperform the balance of the company for Q3 Q4 excuse me <unk>.

Speaker Change: Got it yeah. That's helpful. So it sounds like they they are more productive they are performing better but they are still negative. So I'm just trying to understand the magnitude of the sequential improvement if I'm hearing that right on the merchandise comp front as we move through 2025, what you're expecting.

Rob: Outperforming Q1 quarter to date, so again, we're going to we're going to give it a little bit more run rate before we're calling out those trends, but they are they are higher still still negative, but they are higher than the balance of the chain and again, we're watching that and we would expect that to continue.

Rob: And as I mentioned in my prepared remarks. These are more productive stores. So again, we're going to benefit from stores that are more competitive able to able to drive business versus perhaps some of the macro trends that have been weighing on some of the less less less.

Speaker Change: What you are seeing at a category level, just trying to understand since we don't really have the comparison.

Speaker Change: Right and Kelly, that's one of the challenges again as we're talking about comp for same store sales. We wanted we want to steer you we will still be providing same store detail, we'll be reporting it but in terms of guiding it because we're not giving you. The same store basis can be impractical for you to model it that way and again. So if you think about what we're talking about right. Now these more productive stores are offsetting that negative same store trend.

Rob: Less competitive stores.

Rob: And just to add to add Kelly, that's what was from the get go that was part of the transformation plan and are part of the transformation plan is to make sure.

Rob: We are concentrating on the best stores you know we are concentrating on the stores.

Speaker Change: Both for both for merch sales even for gallons.

Rob: That's we believe at the end of the day.

Speaker Change: Again, the average store I guess your modeling at the average store is going to be down low single digits in merchandise sales per the average store last year and youre going to be up low single digits RNG gallons per average store versus last year and again, we will we will certainly be talking about same store sales, but for modeling purposes, it's going to be easier for you to get to our numbers modeling it.

Rob: Actually we have some.

Rob: So some organic growth potential and the stores that we just believe that mature or we don't see the the increase in organic growth.

Rob: The stores that would be basically shifting to the wholesale segment.

Rob: Got it yeah. That's helpful. So it sounds like they do.

Speaker Change: That way.

Rob: They are more productive they are performing better but they are still negative. So I'm just trying to understand the magnitude of the sequential improvement if I'm hearing that right.

Speaker Change: Okay.

Speaker Change: And when you talked about the.

Speaker Change: The fueling America <unk>.

Speaker Change: Now because ctrip promotion I guess.

Rob: Merchandise comp front as we move through 2025, what are expecting what you're seeing at a category level just trying to understand since we don't really have the comparison.

Speaker Change: This is really kind of intended to help your customers, but also to grow gallon, where do you think what is in the plan.

Speaker Change: For 2025, and with respect to gallons I guess, both at the retail side and the wholesale side, because I think you talked about mid teens growth in wholesale so what kind of gallon.

Speaker Change: Right and Kelly that that's one of the challenges again as we're talking about comp for same store sales. We wanted we want to steer you we will still be providing same store detail, we'll be reporting it but in terms of guiding it because we're not giving you. The same store basis can be impractical for you to model it that way and again. So if you think about what we're talking about right. Now these more productive stores are offsetting that negative same store trend both for.

Speaker Change: Assumptions are underlying.

Speaker Change: Yeah.

Speaker Change: The whole play out here.

Kelly Bania: Yes, so so Kelly, we have not typically guided gallons on the wholesale side and again as you know youre driving you have the metrics for the CTG for the various sites and the gallon growth.

Rob: For both for merch sales team for gallons.

Rob: Again, the average store I guess your modeling at the average store is going to be down low single digits in merchandise sales per the average store last year, and you're going to be up low single digits and gallons per average store versus last year and again, we will we will certainly be talking about same store sales, but for modeling purposes, it's going to be easier for you to get to our numbers modeling.

Kelly Bania: If you think about the fourth quarter, just as a proxy I can give you one data point on that.

Kelly Bania: Had roughly 9 million gallons in the fourth quarter that was related to channel optimization and shifting to the wholesale channels and that can give you an indication that at the level. We're at right now ending the fourth quarter with 150 stores for about 9 million gallons shifting to that channel. So again as we add the extra 100 in Q1 and the modeling that you guys will do for what Youre.

Rob: It that way.

Rob: Yeah.

Rob: Okay and.

Rob: And when he talks about.

Rob: The fueling America generic Ctrip promotion I guess.

For Q2 Q3, you can see that that's going to get significant.

Kelly Bania: And Kelly just to add one comment because I hear what you just said I just wanted to be clear, it's not only growing golar is growing traffic. That's the reason we are putting all of our energy on fueling America campaign, we expect June and at the same time, we are actually increasing the promotional activity very heavy on the tobacco and otp.

Rob: This is really kind of intended to help your customers, but also to grow gallon, where do you think what is in the plan for.

Rob: For 2025, and with respect to gallons I guess, both at the retail side and the wholesale side, because I think you talked about mid to little bit growth in wholesale so what kind of gallon.

Kelly Bania: Inside the stores, we started in Q4.

Rob: Our assumptions.

Rob: Our underlying.

We already saw the results in Q4 in Q4, we were able to increase the otp margin by 200 basis points. I mean, we see that this is working and this is where we actually concentrate right now tobacco and fuel.

Rob: The whole play out here.

Rob: Yes, so so Kelly, we have not typically guided gallons on the wholesale side and again as you know youre driving you have the metrics for the CTG for the various sites and the gallon growth.

Kelly Bania: Which we believe is going to drive traffic outside the store and inside the store.

Rob: Think about the fourth quarter, just as a proxy I can give you one data point on that.

Rob: Had roughly 9 million gallons in the fourth quarter that was related to channel optimization shifting to the wholesale channels and that can give you an indication that at the level. We're at right now ending the fourth quarter with 150 stores or about 9 million gallons shifting to that channel. So again as we add the extra 100 in Q1 and the modeling that you guys will do for what.

Anthony Bonadio: Next question is from Anthony Bonadio from Wells Fargo. Please go ahead.

Anthony Bonadio: Yeah, Hey, guys. Thanks for taking our questions. So I wanted to start out on the fuel margins the guidance range seems to suggest.

Anthony Bonadio: You're pretty constructive on the outlook for fuel margins and 25. So can you just talk about the.

Anthony Bonadio: The different assumptions underlying that and how we should think about idiosyncratic contributions versus broader industry industry trends just trying to better understand how you came up with that range.

Rob: Are you assuming for Q2 Q3, you can see that that's going to get significant.

Speaker Change: And Kelly just to add one comment because I hear what you just said I just wanted to be clear, it's not only growing golar is growing traffic. That's the reason we are putting all of our energy on fueling America campaign with perfume and at the same time, we are actually increasing the promotional activity very heavy on the tobacco and otp.

Anthony Bonadio: Alright, do you want to talk about any of the macro and I can I can talk about the topic that's been.

Anthony Bonadio: Mark you can talk maybe about the guidance and then I'll talk about the macro.

Anthony Bonadio: Yeah, Yeah. So Anthony as already mentioned January was was nicely up to last year and again January was a softer month last last year, but it was up nicely as.

Rob: I just started we started in Q4.

Rob: We already saw the results in Q4 in Q4, we were able to increase the otp margin by 200 basis points I mean, we see that this is working.

Anthony Bonadio: As we look at the general dynamics of the industry. We do continue to see wage increases and things on the operating expense side of the business. As we continue to have same store traffic challenges that are not specific to us, but other other players as well as among the tops in the space. This is one of the areas, where we continue to see structural.

Rob: And this is where we actually concentrate right now tobacco and fuel, which we believe going to drive traffic outside the store and inside the store.

Anthony Bonadio: Next question is from Anthony Bonadio from Wells Fargo. Please go ahead.

Anthony Bonadio: Increases again, we have it up modestly for the full year, but we do continue to see some of the trends that we've seen from 'twenty, three and 'twenty four moving into 25%. So again, we're we're constructive on it based on our pricing strategy is based on what we expect to happen with competitive set and when we look at that as the lever that players are going to go to to offset some of that.

Anthony Bonadio: Yeah, Hey, guys. Thanks for taking our questions. So I wanted to start out on the fuel margins the guidance range seems to suggest.

Anthony Bonadio: You're pretty constructive on the outlook for fuel margins and 25. So can you just talk about.

Anthony Bonadio: Some of the traffic challenges at least coming out of the first quarter.

Anthony Bonadio: Yeah, and just to add to it there Anthony as always our strategy is to maximize fuel contribution dollars.

Speaker Change: Alright, do you want to talk about any of the macro and I can I can talk about the topic.

Anthony Bonadio: We're very robust on CPG from you know basically if our margin.

Anthony Bonadio: So you can talk maybe about the guidance and then I'll talk about the macro.

Anthony Bonadio: From a margin standpoint.

Yes.

Anthony Bonadio: Yes, so Anthony as already mentioned January was was nicely up to last year and again January was a softer month last last year, but it was up nicely.

Anthony Bonadio: One thing I want to remind you and everybody of course. These dots. We finished 2024, we've been basically 5% decline I mean thats what based on of course published information from their Opus, we were 5% in 2024.

Anthony Bonadio: We are hopeful that the price of fuel will start with the two and three for three.

Anthony Bonadio: In some areas of the country stock referred to I believe that the price of fuel will start with the $2 versus $3 I believe that we're going to see some gallons increased countrywide that's my belief.

Anthony Bonadio: Increases again, we have it up modestly for the full year, but we do continue to see some of the trends that we've seen from 23 and 'twenty four moving into 'twenty five so again, where we're constructive on it based on our pricing strategies based on what we expect to happen with competitive set and when we look at that as the lever that players are going to go to to offset some of that.

Anthony Bonadio: And this is one of the reason that we launch.

Anthony Bonadio: Joining America's future campaign.

Anthony Bonadio: To go after gallons to grab Galanz then of course to make sure that we increase traffic inside the store given at least what received from a macroeconomic standpoint, we believe that this is going to be.

Anthony Bonadio: Some of the traffic challenges at least coming out of the first quarter.

Anthony Bonadio: Very important for our business for our stores.

Anthony Bonadio: In order to actually increase traffic.

Speaker Change: Yeah, and just to add to it Anthony is always our strategy is to maximize fuel contribution dollars.

Speaker Change: Got it that's helpful. And then just on same store opex it looks like that decreased one 2% in the quarter, which is actually.

Anthony Bonadio: We are very robust on TPG.

Speaker Change: TPG from basically five margin.

Speaker Change: The third straight quarter of declines there can you just talk about the key drivers of that.

Anthony Bonadio: From a margin standpoint.

Anthony Bonadio: One thing I want to remind you and everybody of course. These dots. We finished 2024, we've been basically 5% decline I mean, that's what based on of course published information from their Opus, we were 5% in 2024.

Speaker Change: And just how youre thinking about the opportunity for further improvement there as we move into 'twenty five.

Speaker Change: Sure Anthony So obviously some some of the expense reductions are a result of the topline reduction right. So as we have lower top line, we're going to have less demand in the store for labors for for stores that are not a minimum coverage, we have lower credit card fees.

Anthony Bonadio: We are hopeful that the price of fuel will start with the two and three for three.

Anthony Bonadio: In some areas of the country stock referred to I believe that the price of fuel will start to be $2 versus $3. I believe that we're going to see some gallons increased countrywide that's my belief.

Speaker Change: Some of those some of those lower traffic would be repair and maintenance less wear and tear I mean, some of those reductions are you would take an increase to see stronger sales. So again, we're managing.

Anthony Bonadio: And this is one of the reasons that we launch.

Anthony Bonadio: Joining America's future campaign.

Anthony Bonadio: To go after gallons to grab Golar then of course to make sure that we increase traffic inside the store given at least what receipt from a microeconomic standpoint, we believe that this is going to be.

Speaker Change: So again, we're managing we can control well I think again as we are looking at the first quarter and we're suggesting to you that our same store trends in calendar down.

Anthony Bonadio: Very important for our business for our stores.

Anthony Bonadio: In order to actually increase traffic.

Speaker Change: Do you expect we're going to be managing Opex as best we can on that front as well as well as G&A expenses in this trend we were looking at right now.

Speaker Change: Got it that's helpful. And then just on same store opex it looks like that decreased one 2% in the quarter, which is actually.

Speaker Change: Obviously, we are expecting and we're modeling that things pick up as we move through the year or so so again, we're just where we are right now with these negative trends.

Speaker Change: The third straight quarter of declines there can you just talk about the key drivers of that.

Speaker Change: And just how youre thinking about the opportunity for further improvement there as we move into 'twenty five.

Speaker Change: Alright, thanks, guys.

Speaker Change: Sure Anthony So obviously you know some some of the expense reductions are a result of the topline reduction right. So as we have lower top line, we're going to have less demand in the store for labors for for stores that are not a minimum coverage, we have lower credit card fees.

Speaker Change: And I believe Thats, Tony I believe by the way Dan negative trend my belief is that the majority of that is weather related just because there are benefits I mean, so you see what is happening in.

Speaker Change: Most of the country and I think the promotional activity that we have.

Speaker Change: Some of those some of those lower traffic would be repair and maintenance less wear and tear I mean some of those reductions are you you would take an increase to see stronger sales. So again, we're managing.

Speaker Change: And with a concentration on those two top categories.

Speaker Change: I am very very optimistic.

Speaker Change: Going into 2025, especially as we move towards the spring towards the summer 100 deal summer starting in May I mean, I'm very very bullish on that.

Managing what we can control effectively but again as you go forward you would love to see the same store sales turning positive and you'd like to see a little bit of growth in the opex that will be driving more margin to the bottom line. So again, we're managing we can control well I think again as we are looking at the first quarter and we're suggesting to you that our same store trends in calendar down.

Speaker Change: Our next question is from Mark Astrachan from Stifel. Please go ahead.

Mark Astrachan: Yes, Thanks afternoon everybody.

Mark Astrachan: I guess, maybe just to start on the commentary about weather.

Mark Astrachan: Any sense of just what kind of impact.

Speaker Change: Do you expect we're going to be managing Opex as best we can on that front as well as well as G&A expenses in this trend we were looking at right. Now obviously, we are expecting and we're modeling that things pick up as we move through the year or so so again, we're just where we are right now with these negative trends.

Mark Astrachan: It had on you.

Mark Astrachan: Your business around the industry in the first couple of months.

Mark Astrachan: Through the year and I guess, maybe more broadly.

Mark Astrachan: The C store channel if you look at a bunch of categories sold in store seems to.

Speaker Change: Got it thanks guys.

Mark Astrachan: Started weakening kind of back half.

Speaker Change: And I believe that's only I believe by the way Dan negative trend my belief is that the majority of that is weather related just described benefit.

Mark Astrachan: The fourth quarter of 'twenty, three so year now.

Mark Astrachan: Four to five quarters into just a generally weaker trend we can see that there is a bit of a.

Speaker Change: You see what is happening in.

Speaker Change: Most of the country and I think the promotional activity that we have.

Speaker Change: A shift in consumption of thing in mass and grocery channels away from C stores, I guess I'm curious one as I said it is what the weather impact might be to on the other piece of it just weather.

And with a concentration on those two top categories.

Speaker Change: I'm very very optimistic.

Speaker Change: Going into 2025, especially as we move towards the spring towards the summer 100 deal summer starting in May I mean, I'm very very bullish on that.

Speaker Change: Think there is any any impact on that shift from a consumer perspective in terms of just leaving spread thinner and trying to purchase things more in bulk take home instead of an immediate consumption and then does that reverse or if the consumer environment improves.

Speaker Change: Our next question is from Mark Astrachan from.

Speaker Change: Stifel. Please go ahead.

Speaker Change: Yeah, Thanks afternoon, everybody.

Speaker Change: Yes.

Speaker Change: I guess, maybe just to start on the commentary about whether any sense of just what kind of impact.

Speaker Change: Jump directly into it I think about the consumer is basically filling the pressure the microeconomic pressure, especially in the areas that we do business. So I really believe it's related to the pressure through the inflation through the pressure on the consumer.

Speaker Change: It had on your.

Speaker Change: Your business around the industry in the first couple of months.

Speaker Change: Through the year and I guess, maybe more broadly.

Speaker Change: The C store channel if you look at a bunch of categories sold in store seems to.

Speaker Change: And this is the reason by the way that we are concentrating I said earlier, we are concentrating mark on June.

Speaker Change: Started weakening.

Speaker Change: And tobacco because those two categories. If you think about it between fuel and tobacco those two categories represent probably 70% of our revenue.

Speaker Change: Back half.

Speaker Change: Fourth quarter of 'twenty, three so year now.

Speaker Change: Four to five quarters into just a generally weaker trend we can see that there is a bit of a.

Speaker Change: And this is the area that's going to bring traffic inside the store, we have very very very big promotion.

Speaker Change: A shift in consumption of thing in mass and grocery channels away from C stores, I guess I'm curious.

Speaker Change: The adjusted those two categories because I don't think those two categories are declining yes cigarettes declining, but you know what otp picking up an exchange of cigarette declines.

Speaker Change: One as I said, just what what the weather impact might be to on the other piece of it just weather.

Speaker Change: <unk> there is any impact on that shift from a consumer perspective in terms of just being spread thinner and trying to purchase things more in bulk take home instead of an immediate consumption and when does that reverse or if the consumer environment improves.

Speaker Change: Fuel is declining we saw what happened in 2024, so instead of just sitting on the sideline. What we are doing we are basically very very active on those two fronts and that's the reason when I when I when.

Speaker Change: When I brought fueling America's future, we picked up to $2 per gallon and we believe that's going to drive traffic that's going to drive gallon.

Speaker Change: Yeah.

Speaker Change: Ill jump directly into it I think about the consumer is basically filling the pressure the microeconomic pressure, especially in the areas that we do business. So I really believe it's related to the pressure through the inflation to the pressure on the consumer.

Speaker Change: Which were her over the past.

Speaker Change: Basically a few years.

Speaker Change: Related to the weather I mean, youll see what happened and whether I mean the.

Speaker Change: And this is the reason by the way.

Speaker Change: The weather in the Middle of January we had no store in so many areas in the country that we usually don't see it I mean.

Speaker Change: So we are concentrating I said earlier, we are concentrating mark on June <unk>.

Speaker Change: And tobacco because those two categories you could think about it between the fuel and tobacco those two categories represent probably 70% of our revenue.

Speaker Change: And we had another one.

Speaker Change: In February.

Speaker Change: As I said I mean, that's I think part of our guidance is something that we take into account.

Speaker Change: And this is the area that's going to bring traffic inside the store.

Speaker Change: And I have to be honest with you I prefer to have those weather issues. During January February weather radar doing them during the summer.

Speaker Change: We have very very very big promotion related just to those two categories. Because I don't think those two categories are declining yes cigarettes declining, but you know what otp speaking up an exchange of cigarette declines.

Speaker Change: So it's not something that we.

Speaker Change: It's unexpected sometimes do you know what they need at this time with them over the year.

Speaker Change: Fuel.

Speaker Change: Yes, Mark we have been looking really aggressively to try and baseline what that trend impact is and it has been so noisy even by region that it's difficult to establish a baseline there've been so many weather events and they've been so broad and sustained whether it's precipitation or whether its temperature, it's very difficult for us to read the trend Thats why we do believe there are.

Speaker Change: Declining we saw what happened in 2024, so instead of just sitting on the sideline. What we are doing we're basically very very active.

Speaker Change: On those two fronts and that's the reason when I when I when I brought fueling America's future, we picked up to $2 per gallon and we believe that's going to drive traffic that's going to drive gallon.

Speaker Change: As an impact but quantifying it at this point has been challenging and it's we're seven weeks in and it's been tough to read there's been that much volatility with the <unk>.

Speaker Change: Which were her over the past that basically a few years.

Speaker Change: Related to the weather I mean, you see what happened and whether I mean, the weather in the middle of January.

Speaker Change: With the daily performance.

Speaker Change: Got it Okay and then.

Speaker Change: Maybe just a clarification so.

Speaker Change: We had no store in so many areas in the country that we usually don't see it I mean, we.

Speaker Change: I guess I could be wrong thinking strategically, but I feel like historically when we've talked about.

Speaker Change: And we we had another one.

Speaker Change: Focus on fuel margin versus fuel gallons, you've been focused more on.

Speaker Change: In February.

Speaker Change: But as I said I mean, that's I think as part of our guidance. This is something that we take into account.

Speaker Change: Margin and now it sounds like with the promotion, you're implying that youre focusing more on gallon theres some shift.

Speaker Change: And you know I have to be honest with you I prefer to have those weather issues. During January February weather radar doing them during the summer.

Speaker Change: And the companies to do that.

Speaker Change: So it's not something that we.

Speaker Change: No no no no no so there'll be clear.

Speaker Change: It's unexpected sometimes during this time with them over the year.

Speaker Change: America's future is really to drive traffic we.

Speaker Change: And Mark we have been looking really aggressively to try and baseline what that trend impact is and it has been so noisy even by region that it's difficult to establish a baseline there've been so many weather events and they've been so broad and sustained whether it's precipitation or whether its temperature, it's very difficult for us to read the trend Thats why we do bill.

Speaker Change: We are concentrating on traffic that we are not going to change I know, we always you know as I said, our strategy is to maximize fuel contribution dollars.

Speaker Change: Nothing is going to change over here.

Speaker Change: Idea with those promotions as we believed by definition, if you would give up to $2 off per gallon and we believe that youre going to be able to increase Golan Jonathan <unk>.

Speaker Change: There is an impact of quantifying it at this point has been challenging and it's we're seven weeks in and it's been tough to read there's been that much volatility with the with.

Speaker Change: By doing that but the real reason for that is really to get basically the traffic inside the store because in order for you to get those promotional to get those basically.

Speaker Change: With the daily performance.

Speaker Change: Got it Okay, and then maybe just a clarification so.

Those discount those big a discount you would need to get inside the store to get them and we believe that's going to drive traffic inside the store.

Speaker Change: I guess I could be wrong thinking strategically, but it really is historically when we've talked about.

Speaker Change: Got it okay. Thank you.

Speaker Change: Focus on fuel margin versus fuel gallons, you've been focused more on.

Speaker Change: Thank you.

Speaker Change: Next question is from crew Martinson from Jefferies. Please go ahead.

Speaker Change: Margin and now it sounds like with the promotion, you're implying that youre focusing more on gallons is there some shift.

Crew Martinson: Good afternoon.

Crew Martinson: You look at the conversion of the retail stores I mean, what do you think the core of these kind of higher performing stores is within that.

Speaker Change: Within the companies to do that.

Speaker Change: No no no no so it will be clear.

Speaker Change: Turning America future is really to drive traffic.

Crew Martinson: Within that channel.

Speaker Change: We are concentrating on traffic that we are not going to change I know, we always you know as I said, our strategy is to maximize fuel contribution dollars.

Speaker Change: What do you mean, the corner of the room. So if were.

Speaker Change: We're averaging right now a little over 1300 stores that will get down to like what do you think is the core that when youre done with the dealer organization is that kind of goes forward is.

Speaker Change: Nothing is going to change over here.

Speaker Change: The idea with those promotion we believe by definition, if you would give up to $2 off per gallon and we believe that youre going to be able to increase gallons just <unk>.

Speaker Change: Okay.

Speaker Change: Better improved.

Speaker Change: By doing that but the real reason for that is really to get basically the traffic inside the store because in order for you to get those promotional to get those basically.

Speaker Change: Foster growing.

Speaker Change: Retail channel.

Speaker Change: Rob would you like to take it.

Rob: Yes, I think this is one that as we've talked about before if you look at our Q4 dealer sites was over 100 and we're guiding for 100 on on Q1, we're not sharing forward.

Speaker Change: Those discount those big a discount you would need to get inside the store to get them and we believe that's going to drive traffic inside the store.

Rob: Planned in many part we've got a number of Counterparties and we've got internal targets that we have to make sure. We are comfortable with before we release externally. We obviously are modeling our full year to have a certain count transition, but we are only sharing Q1 again you can make your own.

Speaker Change: Got it okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Next question is from crew Martinson from Jefferies. Please go ahead.

Crew Martinson: Good afternoon.

Crew Martinson: Do you look at the conversion of the retail stores I mean, what do you think the core of the east.

Rob: Determinations, which I'm looking at Q4 as in Q1 is already mentioned that you expect it to be a meaningful impact. So again I'm going to leave that to your discretion to model yourself, but again, we do expect it to be meaningful the organization is postured and pivoted to aggressively pursue that and again, we'll be updating us on the quarter and giving you much more detail as we have it.

Crew Martinson: Higher performing stores is within that.

Crew Martinson: Within that channel.

Crew Martinson: What do you mean, the core of the right. So if we're averaging right now a little over 800 stores that will get down to like what do you think is the core that when youre done with the dealer organization is that kind of goes forward is.

Rob: And I just wanted to be clear it's.

Rob: It's not about the quantity it's about the quality just to be clear quantity, we care less about the quantity we care more about the quality we are as part of our transformation plan.

Crew Martinson: Okay.

Rob: Both processes really we want to make sure that we keep stores that we have huge economy of scale, we see the opportunity to invest in those doors, we see huge opportunity.

Crew Martinson: Better improved.

Crew Martinson: They're growing.

Crew Martinson: Retail channel.

Crew Martinson: Rob would you like to take it.

Rob: Yes, I think this is one that is as we've talked about before if you look at our Q4 dealer sites was over 100 and we're guiding for 100 on on Q1, we're not sharing forward.

Rob: To increase profitability in the stores, we see we know we're going to optimize our footprint and allocate resources for more efficiency I mean, those are the things that we're doing over here.

Rob: And then of the day the stores that we would like to end up with are the stores that we see a huge upside for ourselves by the way. The other stores are great stores, we are moving them to the wholesale segment just because we believe that some of those dealers are just great entertainers that they can actually run those stores.

Rob: <unk> transition, but we are only sharing Q1 again you can make your own.

Rob: Determinations, but it sounds like about Q4 as in Q1 is already mentioned that you expect it to be a meaningful impact. So again I'm going to leave that to your discretion to model yourself, but again, we do expect it to be meaningful the organization is postured and pivoted to aggressively pursue that and again, we'll be updating us on the quarter and giving you much more detail as we have it right.

Terrific.

Rob: We just feel that we need to spend our time and resources in areas that we see that we have huge.

Rob: Johnny growth opportunities over there and that's what we're doing over here at the end of the day to increase profitability at the bottom line is we're going to increase profitability by actually shifting and I think by the way. This is I think the unique thing about oracle that look a little bit different than some others. When we bought the empire four years ago.

Rob: And I just wanted to be clear it's not.

Speaker Change: What about the quantity it's about the quality just to be clear quantity, we care less about the quantity we care more about the quality we are as part of our transformation plan.

Speaker Change: Process is really we want to make sure that we keep stores that we have huge economy of scale, we see the opportunities to invest in those stores, we see huge opportunity.

Rob: That's what it's not exactly the plan.

Rob: I think thats the luxury right now, but when we have over at around 2000 dealers today, we basically have 2000.

Rob: Customers that are going to be customers for you know some of those doors are going to be dealing with some of those doors that we control at the end of the day and I think that's the unique place that we are sitting right now.

Speaker Change: To increase profitability in the stores we see.

Speaker Change: We're going to optimize our footprint and allocate resources for more efficiency I mean, those are the things that we're doing over here. So at the end of the day the stores that we would like to end up with are the stores that we see a huge upside for ourselves by the way. The other stores are great stores, we are moving them to the wholesale segment just because.

Speaker Change: And when you think about optimizing that footprint is it exiting certain regions or is it more just kind of.

Speaker Change: Or potentially adding two more regions or is it more kind of going by on a store by store basis.

Speaker Change: We believe that some of those dealers are just great entertainers that they can actually run those doors terrific.

Speaker Change: We are going store by store basis, and I know today I mean of course, if we have one store that we feel this is like an unbelievable Thor that's got huge potential growth, but next to add there are three stores that do not have the potential growth that we see over there obviously, we're going to have to aggregate. This region. So yes, we are concentrating on regions concert.

Speaker Change: We just feel that we need to spend our time and resources in areas that we see that we have huge organic growth opportunities over there and that's what we're doing over here at the end of the day to increase profitability to the bottom line is we're going to increase profitability by actually shifting and I think by the way. This is I think the unique thing about oracle data little bit differ.

Speaker Change: Trading on stage, we are concentrating on areas that we see.

Speaker Change: And then some others when we bought the Empire four years ago.

Speaker Change: <unk> core growth I mean, we see we're looking on I can go on and on it. We're looking on demographic. We're looking on population were looking whats happened with the increase.

Speaker Change: That's not exactly the plan, but I think that the luxury right now that when we have over at around 2000 dealers today, we basically have 2000.

Speaker Change: It happened in the market, but it's really a store by store basis I mean, the analysis that we started last year as part of our transformation plan.

Speaker Change: Customers that are going to be customers for you know some of those doors are going to be dealing with some of those doors that we control at the end of the day and I think that's the unique place that we are sitting right now.

Speaker Change: Literally by store.

Speaker Change: Thank you very much I appreciate it.

Absolutely. Thank you.

Speaker Change: Next question is from Hale Holden from Barclays. Please go ahead.

Speaker Change: And when you think about optimizing that footprint is it exiting certain regions or is it more just kind of.

Hale Holden: Hey afternoon.

Hale Holden: I have two questions. The first one is just holistically, if I think about your guidance EBITDA guidance for the year, the midpoint $2 43 ish.

Speaker Change: Potentially adding two more regions or is it more kind of going by on a store by store basis.

Speaker Change: We are going store by store basis, and I know today I mean of course, if we have one store that we feel this is like an unbelievable Thor that's got.

Hale Holden: So instead of $2 48 and 24.

Hale Holden: So I'm trying to figure out how to bridge to the $20 million in dealers.

Speaker Change: Huge potential growth, but next to add there are three stores that do not add the potential growth that we see over there and obviously, we're going to have to exit. This region. So yes, we are concentrating on regions, where we are concentrating on states. We are concentrating on areas that we see opportunity for growth I mean, if we see we're looking on you know I can go on and on and on it.

Hale Holden: <unk> savings that you expect to get over time.

Hale Holden: Why perhaps we're not seeing that flow through.

Hale Holden: Annual EBITDA guide.

Hale Holden: Sure I'll take that one so as you think about the $20 million again, that's an annualized run rate as you know we are we will start to start to annualize the activity in Q3 of 2024 from the start of this program right. So we are not likely to be at steady state until later in 2025, possibly two.

Speaker Change: On demographic, we're looking on population were looking what the App and what the increase.

Speaker Change: It happened in the market, but it's really it's store by store basis, I mean, the analysis that we started last year as part of our transformation plan.

Hale Holden: Six but like that that is when the run rate would be achieved so we are as I mentioned in prepared remarks, our wholesale profitability was up $2 million in the fourth quarter due to the channel optimization work. So if you translate that out at the current level of run rate you would get that eight to $8 $5 million that we talked about last quarter for the stores that were done at the end.

Speaker Change: Literally by store.

Speaker Change: Thank you very much I appreciate it.

Speaker Change: Absolutely. Thank you.

Hale Holden: Next question is from Hale Holden from Barclays. Please go ahead.

Hale Holden: Hey afternoon.

Hale Holden: The fourth quarter the stores that are being done right now we've got another 100 as I mentioned there is more to come. So you will not be at the annualized run rate until youre far deeper into 2025.

Hale Holden: I have two questions. The first one is just holistically, if I think about your guidance EBITDA guidance for the year, the midpoint $2 43 ish.

Hale Holden: So instead of $2 48 and 24.

Hale Holden: That's the reason youre not youre not seeing the full $20 million of crew in 2025.

Hale Holden: So I'm trying to figure out how to bridge to the $20 million in dealers.

Hale Holden: Okay. So maybe another way to think about it as well.

Speaker Change: I mean, how do I think about an apples to apples number because you guys have a lot of moving parts.

Hale Holden: <unk> savings that you expect to get over time.

Hale Holden: You know why perhaps we're not seeing that flow through in AR and VR.

Sure enough.

Speaker Change: Obviously absolute EBITDA is lower but.

Hale Holden: Annual EBITDA guide.

Speaker Change: It does feel like.

Speaker Change: But the organization is.

Speaker Change: Okay.

Speaker Change: Maybe resulting in lower even though it was just that we think the trends are going to be lower for now.

Speaker Change: It's certainly accretive it's definitely not drive it's an accretive program I think what you. If you can look at 2024 versus 2023 and look at the same store performance metrics for merchandising and gallons you can pretty quickly get yourself to a place that says if I'm negative pick a number negative low single digit same store sales or same store gallons and again I'm not guiding you on same stores I'm, just saying if you are negative.

Hale Holden: 96, but like that is when the run rate would be achieved so we are as I mentioned in prepared remarks, our wholesale profitability was up $2 million in the fourth quarter due to the channel optimization work. So if you translate that out at the current level of run rate you would get that eight to $8 $5 million that we talked about last quarter for the stores that were done at the end.

Speaker Change: You should be able to do the math that says what does my same store business do and what is it what's the organic decrease there what we're doing here as a bridge to optimize the channels right to provide some buoyancy to the P&L that can offset some of those trends that have been in place for a while as we transition to more of that alright talked about activating the core customer and then transitioning into that longer term food.

Hale Holden: The fourth quarter the stores that are being done right now we've got another 100 as already mentioned there is more to come. So you will not be at the annualized run rate until youre far deeper into 2025.

Speaker Change: Store remodel program. That's the strategy. So you should be thinking about this is purely an accretive program for channel optimization offsetting some of the same store trends and again, if you do the math from 'twenty three 'twenty four you should be able to get to a place. This is what is the underlying same store business doing understanding that same store base is going to be moving significantly quarter by quarter.

Hale Holden: That's the reason youre not youre not seeing the full $20 million of crew in 2025.

Hale Holden: Okay. So maybe another way to think about it is what what was that.

Hale Holden: Do I think about an apples to apples number because you guys have a lot of moving parts I'm I'm trying to.

Hale Holden: Obviously absolute EBITDA is lower but.

Hale Holden: It does feel like.

Hale Holden: <unk> <unk>.

Speaker Change: Got it.

Speaker Change: And then just Matt just to add one more thing just to add one more thing as I mentioned earlier I mentioned meaningful number of stores are going to be converted so at the end of the day.

Hale Holden: Okay.

Hale Holden: Maybe resulting in lower EBITDA.

Hale Holden: I think the trends are going to be lower for now.

Hale Holden: It's certainly accretive it's definitely not drive it's an accretive program I think what you. If you can look at 2024 versus 2023 and look at the same store performance metrics for merchandising and gallons you can pretty quickly get yourself to a place. It says if I'm negative pick a number negative low single digit same store sales or same store gallons and again I'm not guiding you on same stores, but I'm just saying if you are negative.

Speaker Change: It's also about timing just to be clear.

Speaker Change: It's all about timing, if we're going to be able to move quickly you know things.

Speaker Change: Things might change, but we're trying to be careful it'll be here.

Speaker Change: Got it and then.

Speaker Change: The way, we're kind of penciling out as you.

Speaker Change: You should be free cash flow positive I don't really have a capex number with the new stores that you are planning to build.

Hale Holden: You should be able to do the math that says what does my same store business doing what is it what's the organic decrease there what we're doing here as a bridge to optimize the channels right to provide some buoyancy to the P&L, that's going to offset some of those trends that have been in place for a while that would be true.

Speaker Change: So I just wanted to make sure that you know.

Speaker Change: As you go through this transition you kind of expect to be free cash flow positive for the year and 'twenty five.

Speaker Change: Yes, so we we don't give guidance on Capex, but if you look at Q4 2024 versus Q4 of 2023 and full year 'twenty four versus full year 'twenty three you'll find those numbers were relatively consistent and I think it's reasonable for you to assume that some of those some of the spend in 'twenty four related to <unk> compliance things related.

Hale Holden: <unk> to more of that alright talked about activating the core customer and then transitioning into that longer term food in the store remodel program. That's the strategy. So you should be thinking about this is purely an accretive program for channel optimization offsetting some of the same store trends and again, if you do the math from 'twenty three 'twenty four you should be able to get to a place that says what is the underlying <unk>.

Speaker Change: Two accretive electric vehicle programs that.

Hale Holden: Store business doing understanding that same store base is going to be moving significantly quarter by quarter.

Were available prior administration some of those some of those spending dollars will be reallocated towards some of those more strategic the store remodel program things of that nature and again, just looking at history 'twenty three 'twenty four capex very much in line with itself and I think it's reasonable for you to assume.

Hale Holden: Got it.

Hale Holden: And then just just to add one more thing just to add one more thing.

Hale Holden: Mentioned earlier.

Hale Holden: Mentioned meaningful number of stores are going to be converted so at the end of the day you know its also about timing just to be clear.

Positive cash build based on if you model that that deal.

Hale Holden: It's all about timing, if we are going to be able to move quickly things.

Hale Holden: Things might change, but you know we're trying to be careful it'll be here.

Speaker Change: Great. Thank you so much I appreciate it.

Speaker Change: Youre welcome. Thank you.

Hale Holden: Got it and then.

Speaker Change: Next question is from William Reeder from Bank of America. Please go ahead.

Hale Holden: The way, we're kind of penciling out as you.

Hale Holden: You should be free cash flow positive, although I don't really have a capex number with the new stores that you are planning to build.

Speaker Change: Hi, I think I only have one.

Speaker Change: Given the new dealers Asian program.

Hale Holden: So I just wanted to make sure that you know as you go through this transition you kind of expect to be free cash flow positive for the year and 'twenty five.

Speaker Change: Is this pretty much a strategy, which you are moving forward with.

Hale Holden: Yes, so we we don't give guidance on Capex, but if you look at Q4 2024 versus Q4 of 2023 and full year 'twenty four versus full year 'twenty three you'll find those numbers were relatively consistent and I think it's reasonable for you to assume that some of those some of the spend in 'twenty four related to <unk> compliance things really.

Speaker Change: Without regard to the external environment, meaning are you still evaluating other alternatives whether they'd be.

Speaker Change: Acquisitions or divestitures through all of those.

Speaker Change: Large numbers of stores are of all the retail stores.

Speaker Change: Would more transformative.

Speaker Change: Transactions potentially still be on the table.

Hale Holden: Two accretive electric vehicle programs that.

Speaker Change: Absolutely absolutely.

Speaker Change: Absolutely nothing nothing changed as I mentioned this transformation plan is something that we started.

Hale Holden: Were available prior administration some of those some of those spending dollars will be reallocated towards some of those more strategic the store remodel program things of that nature and again, just looking at history 'twenty three 'twenty four capex very much in line with itself and I think it's reasonable for you to assume.

Speaker Change: In the middle of last year.

Speaker Change: And what we're doing right now we basically executed we're starting their dealer revision program, Iran.

Speaker Change: Third quarter last year.

Speaker Change: And when we just basically continuing in accordance to our plan right now, but yes.

Hale Holden: Positive cash build based on if you model that.

Hale Holden: Thank you.

Speaker Change: <unk> is off the table I mean, we are going to evaluate everything based on return on investment of course, then if it's a great opportunity that they're going to become available absolutely. We have the team available we have the liquidity.

Hale Holden: Great. Thank you so much I appreciate it.

Hale Holden: You're welcome thank you.

Speaker Change: The next question is from William Reuter from Bank of America. Please go ahead.

William Reuter: Hi, I think I only have one given the new deal origination program is this pretty much a strategy, which you are moving forward with or.

And you know M&A is also part of our plan over here.

So I guess that would imply that both directions that I described which is either a larger acquisition or alternatively, a sale of a huge majority a bunch of stores at a time both of those would still be on the table is that right.

Speaker Change: Without regard to the external environment, meaning are you are you still evaluating other alternatives whether they be.

Speaker Change:

William Reuter: Acquisitions or divestitures do all of those.

Speaker Change: Besides the second piece of it on the table right now we don't have the second piece, we have the piece that we have on the table right now the authorization.

Speaker Change: Large numbers of stores you have all the retail stores.

William Reuter: Would more transformative trim.

Speaker Change: Making sure that we continue with our transformation plan and if there is a large acquisition, we would be more than happy to look into it absolutely.

Speaker Change: Transactions potentially still be on the table.

Absolutely.

Speaker Change: Absolutely nothing nothing changed as I mentioned this transformation plan is something that we started.

Speaker Change: Got it Okay. That's all for me the rest were already asked thank you.

Speaker Change: Thank you.

Speaker Change: You know in the middle.

Speaker Change: Last year.

Speaker Change: This concludes the question and answer session I would like to turn the floor back to management for any closing comments.

Speaker Change: And what we're doing right now we're basically executing we're starting their deal origination program, Iran.

Speaker Change: Okay. Thank you very much operator, thank you very much everybody for participating.

Speaker Change: Third quarter last year.

Speaker Change: And when we just basically continuing in accordance to our plan right now, but yes.

Speaker Change: I had a lot of questions from you guys regarding two are fueling America's future.

Speaker Change: <unk> is off the table I mean, we are going to evaluate everything based on return on investment of course, then if it's a great opportunity that that kind of become available ops. We have the team available we have the liquidity.

Speaker Change: And I really hope that you guys are going to visit our stores and explore the opportunities I mean, we are providing up to $2 <unk> up to 20, galanz $40 off their fill up and it's a great opportunity for you guys to visit our stores.

Speaker Change: And you know M&A is also part of our plan over here.

Speaker Change: So I guess that would imply that both directions that I described which is either a larger acquisition or alternatively, a sale of a huge majority a bunch of stores at a time both of those would still be on the table is that right.

Speaker Change: In the meantime have a good evening.

Speaker Change: Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Speaker Change:

Speaker Change: Besides the second piece of it on the table right now we don't have the second piece, we have the piece that we have on the table right now deal origination.

Speaker Change: Making sure that we continue with our transformation plan and if there is a large acquisition, we would be more than happy to look into it absolutely.

Speaker Change: Got it Okay. That's all for me the rest were already asked thank you.

Speaker Change: Thank you.

Speaker Change: This concludes the question and answer session I'd like to turn the floor back to management for any closing comments.

Speaker Change: Okay. Thank you very much operator, thank you very much everybody for participating.

Speaker Change: No.

Speaker Change: I had a lot of questions from you guys regarding to fueling America's future.

Speaker Change: And I really hope that you guys are going to visit our stores and explore the opportunities I mean, we are providing up to $2 <unk> up to 20 got on $40 off per fill up and it's a great opportunity for you guys to visit our stores.

Speaker Change: In the meantime have a good evening.

Speaker Change: Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Mhm.

Speaker Change: Hmm.

Speaker Change: [music].

Speaker Change: Uh-huh.

Speaker Change: [music].

Q4 2024 Arko Corp Earnings Call

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