ARKO Corp.

If at any time during this call you require immediate assistance, please press star zero for the operator. This call is made recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Jordan Mann, Senior Vice President, Corporate Strategy and Capital Markets Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to ARCO's first quarter 2025 earnings conference call and webcast. On today's call are Ari Kotler, Chairman, President, and Chief Executive Officer and Rob Giammatteo, Executive Vice President and Chief Financial Officer. Our earnings press release and quarterly report on Form 10Q for the first quarter of 2025 as filed with the SEC are available on ARCO's website at .arcocorp.com. During our call today, unless otherwise stated, management will compare results to the same period in 2024. Before we begin, please note that all first quarter 2025 financial information is unaudited. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statements section at the end of our first quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. 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. 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 quarterly report on Form 10Q for the quarter ended March 31, 2025. Additionally, management will share profit measures for our individual business segments along with fuel contribution, which is calculated as fuel revenue plus fuel costs and exclude inter-company charges by our subsidiary GPMP. And now I would like to turn the call over to Ari.

Thank you, Jordan, and thank you all for joining. This quarter, the company and our industry faced headwinds from lower traffic and consumer spending to severe weather. Even though we manage the business effectively and deliver results above the midpoint of our guidance, I have higher expectation for the business. We continue to demonstrate that even in a tough environment, we are executing with discipline and remaining focused on what we can control. This quarter, persistently high inflation and high consumer debt put increased financial pressure on lower and middle income households, especially in the communities where many of our stores are located. Further, the currently unpredictable tariff environment has created uncertainty around spending as customers try to manage their expenses. However, we believe we are well positioned to deliver on the value that our customer is seeking through our promotional and merchandising efforts. Like many in our industry, we're seeing consumers stretch their dollar's border, increasingly shifting their purchases towards value-oriented options and exhibiting more price sensitivity. This quarter also brought a unique set of external challenges that compounded these microeconomic pressures. The combination of persistent cold weather and widespread winter storms across several key geographies reduced customers' mobility and constrained store visits. In addition to pressure on gallons and merchandise sales trends, the unfavorable weather drove an incremental $1.7 million in operating costs related to snow and ice removal. While inclement weather is expected in the first quarter, the range and intensity of adverse events this year, especially in February, were notably greater than typical seasonal norms. Looking behind external factors, our team is committed to the company transformation strategy, including the ongoing dealerization program, the expansion of high margin categories like other tobacco products and food service, and targeted promotional initiative both in the stores and at the pump, which we have designed to deepen customer engagement. These actions are helping us navigate the current environment, and we believe they position the business for long-term growth. Our strategies are driven by experienced leadership and executed daily by a committed operation team that prioritizes the customer experience. These strategies are optimizing our retail footprint by dealerizing stores that don't fit within our go-forward operating model, driving value and relevance to our consumers through innovative promotional activities. One example is our Fueling America Future campaign, which provides discounts on fuel up to $2.00 off per gallon for up to 20 gallons. Another example is our investment in the tobacco back bar to support shifting consumer demand to OTP products, which we are supporting with elevated value promotion. OTP and cigarettes together represent approximately 39% of sales. Implementing a new consumer-centric remodel centers around a delicious menu of up and cold -and-go food and dispense beverages. We will be introducing a new brand for this strategy called Fast Craves. Our first store will be in a fast market in Richmond, Virginia, advancing our store remodel program with our first pile of stores starting construction this week. Filling the pipeline for the -to-industry stores in our existing markets and increasing customer trips and spend through our Fast Rewards loyalty program by offering the best deals to our best customers. Now, let me provide a high-level update for each of these core strategies. On our transformation plan, we continue to execute our strategy to convert company-operated stores into more favorable stores under our dealer segments. As of the end of April, we converted 77 stores to our wholesale network and we have more than 130 stores under contract for conversion, with a meaningful number still on our list to convert. As we previously disclosed, at full scale, we continue to expect this initiative to deliver a cumulative annualized operating income benefit in excess of $20 million. Our I-Value Fueling America Future campaign kicked off in stores on March 12. This campaign is centered around providing enrolled loyalty customers with both value promotions inside the store and significant discounts at the pump. In partnership with many of our supplier partners, we are offering our loyalty members up to $2 off per gallon, up to 20 gallons when they purchase select products in stores. While the campaign just started, we have seen an increase in our average enrollment per day by 35 percent and an increase in gallons for previously enrolled loyalty members taking advantage of this great offer from approximately 6.8 gallons to 9.8 gallons per transaction, with an average basket increase of approximately $2.38 or 16 percent. Turning to our cigarettes and OTP back bar refresh, to date we have completed these projects in more than 900 stores, which is driving improvement in merchandising and assortment for total nicotine. When combined with our expanded promotional efforts, we are capturing market share across select OTP categories, creating momentum for in-store performance as we broaden our assortment and fine tune our promotional strategy to drive growth. Of the approximately 675 stores where we believe we have enough new results to draw conclusions, we are seeing that these resets are starting to improve our total nicotine performance. We have implemented very strong monthly OTP promotions supplemented by store manager and district manager sales contests to assist in driving OTP sales. Our OTP mix continues to evolve to meet customer demand and we view it as a lever to drive basket growth amid challenging micro backdrops. Turning to our remodel program, we started construction on the first of our seven pilot remodels this week and expect to start work on the second remodel in the middle of May. As a reminder, the pilot store are expected to include an expanded and refined merchandise assortment with an enhanced in-store experience and focus on food centered on hot and fresh -and-go foods, bakery, pizza, roller grills, and other prepared foods, including our new food-granted food offering, Fast Grave. The intent is to take learning from the pilot stores and implement the right remodels across a larger portion of our retail location through targeted capital deployment. These initiatives are fundamental to our long-term retail transformation strategy and represent our commitment to organic growth and store-level reinvestment. In addition to our remodel program, in the first quarter we open a new Dunkin' store and a fast market location. Additionally, we currently have four NTIs in development, three have started construction, and one store is awaiting a final permit. These NTIs are expected to open in the second half of the year. These four stores will follow the pilot remodel concept I discussed moments ago. We are pleased with the results of our Fast Rewards loyalty program. Our loyal customers continue to make more trips and spend more per month than our non-enrolled members. In the first quarter of 2025, enrolled Fast Rewards members spent approximately 47% more and visited two and a half times more per month than non-enrolled members. Enrolled loyalty OTP sales now account for .5% of OTP sales versus .1% in Q4 2024. Enrolled loyalty members are purchasing 23% more gallons per transaction than non-enrolled members. Overall, we added approximately 27,000 enrolled members in Q1, reaching over 2.3 million enrolled members in total, which was up 11% from the end of Q1 2024. We continue to learn and evaluate the rich customer data and adjust our tactics to ensure we provide meaningful value to our most loyal customers. As adoption grows, we believe loyalty will continue to be an increasingly powerful lever to improve same-store performance over time. The team is executing many initiatives in our retail segments to drive results despite the current microeconomic headwinds. Outside of retail, our all-sale and fleet segments have delivered stable and reliable cash flows, providing meaningful support as we navigate ongoing micro and consumer pressures. Over the past four quarters, these segments have generated approximately $130 million in operating income. Combining all of the positive and the negative this quarter, we again deliver results above the midpoint of our quarterly guidance. Much of this performance was driven by controlling the things we can control, especially on the expense side as we mitigate higher costs related to snow removal through discipline management and execution. Turning to capital allocation, we remain committed to a strategic and thoughtful approach. Based on our stock price in the first quarter, we repurchased approximately 1.3 million shares during the quarter at an average price of $4.01 per share with almost all of those repurchases executed in March. Additionally, we repurchased approximately 1.3 million additional shares in April. We believe our current market valuation reflects discounts for a scale convenience stores retailer with a diversified revenue across merchandise, retail fuel, and all-sale and fleet fueling. Our approach to capital allocation will continue to focus on long-term value creation and discipline capital deployment. We believe in the strength of our plan, the capabilities of our team, and the transformation of our strategy to pass ahead and remain committed to executing -by-step to unlock value for our shareholders. With that, I will end it over to Rob.

Thank you, Ari. Good afternoon, everyone. Turning to first quarter 2025 results, adjusted EBITDA was $30.9 million for the quarter compared to $33.2 million in the year-ago period with a decrease caused primarily by lower retail fuel and merchandise contribution. At the segment level, our retail segment contributed approximately $40.2 million compared to $46.5 million in the year-ago period. Same-store merchandise sales, excluding cigarettes, were down .2% versus the year-ago period, while total same-store merchandise sales were down 6.9%. Same-store margin rate was up approximately 50 basis points versus the prior year. Same-store fuel contribution was down approximately $3.2 million for the quarter, caused by a .2% decline in gallons. Same-store fuel margin of .37.9 per gallon was up $0.01 per gallon year over year. Same-store operating expenses were down approximately .4% for the quarter. Moving on to our wholesale segment, operating income was $18.6 million for the quarter versus $18.3 million in the year-ago period. Fuel margin was $0.08 per gallon versus $0.09 per gallon in the year-ago period. Gallons were up modestly to the year-ago period, driven by our channel optimization program, which contributed close to $14 million gallons for the quarter. Gallons from channel optimization more than offset a gallon decline from comparable sites, which were down .6% from the year-ago period, reflecting similar trends experienced in our retail segment. For our fleet segment, operating income was $11 million for the quarter versus $9.8 million in the year-ago period, with total gallons down .2% to the prior year. Fuel margin for the quarter was .43.6 per gallon up from $0.38 per gallon in the year-ago period. Total company general and administrative expense for the quarter was $41.6 million versus $42.2 million in the year-ago period. Net interest and other financial expenses for the quarter were $13.9 million compared to $2.5 million in the year-ago period, with the increase primarily related to roughly $9 million in recorded income in the year-ago period related to settlement of deferred purchase price obligations for our TEG acquisition on favorable terms. Net loss for the quarter was $12.7 million compared to a net loss of $0.6 million for the year-ago period. Please reference our press release for a detailed reconciliation from total company net income to adjusted EBITDA. Turning to the balance sheet, excluding lease-related financing liabilities, we ended the first quarter with $880 million in long-term debt. We maintained substantial liquidity of approximately $847 million, including $265 million in cash on hand at quarter end, along with remaining availability on our lines of credit. Total capital expenditures for the quarter were $27.4 million. Turning to forward guidance, for our second quarter, we expect total company adjusted EBITDA to be in the range of $70 to $80 million. This guidance is based on the following key segment assumptions. First, for our retail segment, we are estimating our Q2 2025 average retail store account to be approximately 1,300 sites. We expect merchandise sales per average store to be flat to up-low single digits, reflecting the higher productivity of retained stores versus the year-ago period, partially offset by same-store merchandise sales performance, which is positioned down low to mid-single digits. We expect gallons per average store to be up-low single digits, reflecting the higher productivity of retained stores versus the year-ago period, partially offset by same-store gallon performance, which is positioned down mid-single digits. And finally, we are modeling total retail fuel margin in a range of 42.5 to 44.5 cents per gallon. Moving to our wholesale segment, we expect -to-high single-digit operating income growth, driven by our ongoing channel optimization work. And for our fleet segment, we expect operating income to be up modestly as we begin to cycle prior year fuel margin cents per gallon in the mid-40 range. I'll wrap up with our full year total company adjusted EBITDA guidance, which we are maintaining in a range of 233 to 253 million. This outlook is based on an average retail fuel margin of 40 cents per gallon on the lower end and 42 cents per gallon on the higher end of our guidance range. With that, I'll hand it back to Ari for closing remarks.

Thanks, Rob. To our team members, customers, and investors, we appreciate your continued support. As we head into our historically strongest season of the year, the 100-day of summer, we are energized by the opportunities ahead. We know the journey requires discipline and transparency, and that's exactly how we plan to lead. While the environment remains dynamic, we remain focused on execution and are optimistic about the path forward. Through consistent, deliberate action, we are committed to creating a long-term value for our customers and shareholders. We will now open it up to questions.

Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star two. Please ensure you lift the handset before pressing any keys. Your first question comes from the line of Bobby Griffin from Raymond James. Your line is now open.

Hey, everybody. Good afternoon. Thanks for taking the questions. I guess Ari and Rob, first, maybe just touch a little bit on how the business has performed of late once we got by some of the winter weather. I think the weather issues that impacted the convenience store space are pretty well known by a few different companies that have talked about it. What have you seen maybe more in April and May, and have you seen anything get better as we approach normal weather conditions again?

Sure. Good afternoon, Bobby. I will start maybe with the recap for first quarter and then maybe talk a little bit about what we see moving forward. As we started the year, we reported right now that the sales were down .9% for the quarter and .2% for cigarettes. When we started the quarter, the January results were actually .8% on total sales, but .8% negative on sales excluding cigarettes. That was January. When you go into March, sales excluding cigarettes in March were minus 3.9%. You're talking .8% negative in January, minus .9% in March. Then all of a sudden, February hits with severe weather, the sales excluding cigarettes in February were minus 9.3%. That's really the story of the quarter. We believe that the weather was probably -3% drag just because of that. As we move behind March going into April, we see a slightly improvement in size sales. Of course, we see elevated fuel margin that offset some of those sales decline that we see over here. Overall, I'm very optimistic in Q2. As I said, we see slightly improvement in April.

Thank you. That's helpful. Then maybe switching gears into the Dealerization Network, the work you guys have been doing. Honestly, two questions. One, is the savings starting to flow through the P&L as we look at the results today, so in one queue, or is that still to come? Then Rob, that $20 million number that you are referencing on an annualized basis, what does that assume for the total number of stores? Is that the savings from the number of stores you've already done or that are under contract or ultimately the entire program, which I don't think we know the full number of stores you guys have identified yet?

Yeah, that's right, Bobby. The $20 million is going to be at scale when we're done. As you know, we've not shared that total, but as Ari mentioned in this prepared remarks, we do have a meaningful number that is still continued in addition to the sites that we have under contract today. That is certainly a total program amount. If you think about this quarter, the channel optimization delivered about $2.4 million besides the work transitioned over. On an annualized basis, that's about $10 million at the run rate. We're pretty much roughly halfway through the program, but again, I wouldn't attribute that necessarily to store counts, but more in terms of the financials that we talked about. This quarter was $2.4 million. The last quarter was $2 million on a quarterly basis. You can see the accretion starting there. Obviously, the wholesale channel, the base business, as I mentioned before, the gallons were down mid-single digits, so we're hoping to get that base a little bit closer to that number and have the channel optimization be accretive on top of it, but still seeing growth out of that channel even with some of the headwinds and gallons.

Yep, that's helpful. I guess lastly, Ari, you touched a little bit on the remodel initiative, kind of making a little progress there. When does that potentially get accelerated? Is that more 2026 where we can see that actually rolled out across a large portion of your fleet, and what is the capex that we require on a per store basis just where we can think about that on a multi-year impact to the model?

Sure. Our plan really right now with respect to those seven pilot stores, our plan is really to finish the seven pilot stores. As I mentioned, we started this week the first store, started construction. We have the second store starting mid-May. We hope to basically continue to see progress over here probably towards the third quarter of 2025. Again, subject to results, we're probably going to start to increase the pace in the regional level, of course, subject to results. For your benefit today, the investment in a remodel store is anywhere between I would call it $700,000 to a million, a million one. That's probably the cost per location. But again, it's all about how we feel about those pilots, if we need to tweak anything with respect to those pilots. The idea is really to take the initial learning and then basically apply them across a full region and then we're going to continue to go. I think with your question, I think the assumption is that probably towards the end of 2025 we'll have better results and we will probably see this uptick in, assuming we enjoy from the results and happy with the results, we're probably going to see an uptick in 2026.

Thank you. I appreciate it. That's a lot going forward.

Thank you very much, Bobby.

Your next question comes from the line of Anthony Bonadio from Wells Fargo. Your line is now open.

Yeah. Hey, guys. Thanks for taking our questions. I want to start with fuel margins. It seems like you guys are seeing quite a bit of strength into Q2, just given your guidance and some of your comments in response to Bobby's question. I guess one, is that reflective of what you guys are seeing out there today? And then two, can you just talk about what's driving those fuel margins as we think about price dynamics, break-givens, that kind of thing?

Sure. Good afternoon, Anthony. Well, driving the fuel margin, I think the number one, of course, is the volatility in the market. You saw what happened in the last probably four or five weeks. Prices of fuel drop, and they drop all the way to, at some point, I think it was like $57 or $55, which of course reflects. So volatility is the first thing that of course reflects those things. And the second thing, besides volatility, that increased fuel margin, I believe, this is Ari's belief, I believe that the pressure that everybody is seeing inside the store, they're going to have to, they're going to need to pay for their expenses. People are going to need to run their businesses, and this is what we're doing over here. And everybody's trying to be, of course, competitive as much as we could. And given that 63% of this industry is mom and pop, and we are also selling fuel to many of them. We have almost 2,000 locations, including the digitalization that we're doing right now. I believe that some of it is just shifting basically costs. I mean, when you have soft sales inside the stores, given the microeconomic pressure and the weather, et cetera, et cetera, I believe that people need to figure out a way how to make changes in order for them basically to be profitable. And changing the price at the pump is probably the fastest and the easiest way to do so. And we saw something very similar to it, if you remember, during COVID. It was very, very similar. So that's really my belief. I think those two components are the one that's driving basically fuel margin.

Thanks.

Anthony, just for reference, we've seen 46 cents per gallon in April, and May week one has kind of been sticky. So I'm pleased with that so far.

Got it. Super helpful. And then just on the repo, you guys bought back quite a bit of stock in the quarter. You're still sitting on a lot of cash. I think you've got another 20 million under the authorization. But can you just talk about how you're thinking about the cadence of buybacks at this point and just maybe more broadly how you're thinking about capital allocation?

Yeah, so we repurchased, like you mentioned, 1.3 million shares in May. You know, we repurchased something similar to that. But, you know, at this time, you know, I can't really comment on, you know, the cadence of the stock repurchase at this time.

Thanks, guys.

Thank

you. Your next question comes from the line of Ben Wood from BMO. Your line is now open.

Hey, guys. This is Ben on behalf of Kelly and BMO. Thank you for taking our questions. I wanted to do two follow-ups on Bobby's line of questioning. Just the first on the dealerization. It seems like the language you guys are using is pretty consistent to 4Q, but can you talk about the pace of dealerizations in 1Q and how that tracks relative to internal plans? What's kind of the visibility on the pace that these could happen? And is there anything in the current environment that might make it harder to progress through kind of the outline targeted numbers?

Sure. Thank you for being over here, Ben. And hello to Kelly, of course. So, you know, we are actually moving in accordance to our plan over here. We closed in Q1 59 locations and additional 18 up until May 1st. And the reason that we closed 77 versus 100 that were on our plan, it's really all subject to licensing and permits that some of those dealers. As a matter of fact, we have 130 stores under contract right now. And it's just a matter of those dealers getting licenses and permits. You know, it's very, very important for us, given that, you know, we are, you know, moving some of those stores from our company operated stores to dealers. It's very important for us that those guys are going to continue to maintain the sales, they're going to continue to be profitable. And in order for that to happen, they must have legal licenses, for example. So that usually will take a little bit longer to get legal licenses from different municipalities. And of course, you know, some of those guys are interested to close even earlier. But, you know, for us, it's very, very important that the minute they take over, they will have all of their licenses and permits in place so they will not leave basically any sales on the table. So it's really just a matter of permits and just a matter of licenses that, you know, I believe because of the winter and because of the bad weather in February, some of those municipalities were probably closed or something like that. But everything is moving along in accordance to plan. And as I mentioned, you know, behind the 77 locations that we closed up until May 1st, we have another 130 locations under contract already. And they're going to continue to close as soon as they receive permits and licenses.

Ben, in terms of like, you know, possible cadence, I mean, I think you saw on Q4, we did 100 sites, right? So, you know, to Ari's point, there's counterparties we're dealing with, there's licenses or states that are involved. That number is going to ebb and flow. But, you know, if you're saying, hey, what's possible, we've done 100 in Q4. So, you know, again, ranging up to that level, I think is reasonable.

No, that's very helpful. And then just kind of going back to the remodel initiative conversation we were having, is there between now and when you start to get feedback on those and think about rolling them out more aggressively, what's the pipeline of maybe some smaller initiatives that you guys can take on and spread throughout the store base? And it's the idea once we get a remodel that we like that we'll stick with the remodels, or is there an opportunity to pull bits and pieces of that pilot program and spread them to the base a little bit faster? Just trying to get a sense of, you know, kind of your pipeline of different organic growth initiatives you guys have.

Sure. No, no, that's a great question. So, you know, the seven pilot stores should have everything from soup to nuts. That's I think what we're trying to basically to explain over here. For example, every one of those stores need to have an improved back bar. So I'll give an example. The back bar is just an example of the things that we are not waiting. You know, we are basically getting very heavily into the OTP category. We believe that in this environment, you know, when the consumer has a lot of pressures, when consumption of cigarettes are down, we believe that OTP is one of the growing categories. And as you remember, we mentioned that we invested in 900 stores in the back bar. So this is just, you know, one lever that we already, you know, start to move forward. The second thing, of course, is Curing America campaign that we started. And that campaign, of course, involved, you know, between the beverage, you know, the beverage promotion that we're putting out there at the same time. You know, we continue to add food service features, for example, grab and go, ask and call in stores that we basically know that we're going to need to invest in that when the minute we finish the remodels. So there are small things that we're doing. There are big things that we're doing. But as I said, the largest one was really the back bar that it was very important for us to finish as we moving into a hundred day of summer.

Great. Thank you guys.

Thank you, Ben.

Your next question comes from the line of Daniel from Capital One. Your line is now open.

Hi, everyone. Thank you for taking my questions. As a part of the transformation plan, you all mentioned targeted capital allocation towards strategic retail stores. What are some of the characteristics of retail stores that are in that strategic bucket? Is there anything from a quantitative or qualitative standpoint?

Can you explain a little bit more your question?

Yeah, I was. All right. I'll take that one. Sorry. So we look at sites that are in what we consider strategic markets. So markets where obviously there's favorable demographics, favorable competitive and favorable physical plant that's existing. Daniel, so again, for markets that are heavily competitive where our physical plant may not be as competitive currently and where there's subpar demographics. That's the way we look at this. We had a strategic engagement with a consulting leader beginning of last year. We looked at this market by market, where physically we think markets are growing, where our physical plant with location and existing physical plan has a right to win, where we think it makes sense to invest. That's how we've broken this down and why we determine how we determine which stores we would be investing in and which would behave more appropriately in our wholesale channel.

OK, that's really helpful. I appreciate that. And then one more on the transformation plan. A risk that you all have laid out was the ability to realize benefits from the new dealer fuel supply contracts. Now that it's been another quarter, can you talk about how that benefit realization has played out versus your expectations?

I think the, you know, again, as we talked about before, there are going to be some puts and takes with the timing of dealerization, right, based on counterparties and some state regulations. But in terms of the expectations, the stores that we push to the wholesale channel are performing in line with our expectations. As I mentioned in my prepared remarks, there's about 14 million incremental gallons. So a significant amount of volume is starting to come over to this channel, performing in line generally with our expectations. And what we're hoping to see again is that baseline prior year business, the comparable accounts getting closer to zero versus the negative mid-single digits. So but we're pleased with what channel optimization has been doing so far. I mean, that's one of the reasons, Daniel, before you covered us, why, you know, we significantly expanded the count that we were looking at for that channel because we've been very pleased with performance to date.

Just to be one more thing, just to add one more thing for what Rob just said, which is everything is accurate. Every one of those deals that we did was a creative from day one. So we didn't have to change something and, you know, wait a period of time to see if this is going to change anything. You know, all of those deals were creative for the minutes we actually convert them into dealers. Just to be clear.

Appreciate it. Thank you.

Thank you. Your next question comes from the line of Kairou Martinson from Jefferies. Your line is now open.

Good afternoon. This might be simplistic, but just housekeeping. When you do the dealerization, does that loyalty member stay within the program? Are they still able to access the program's benefits?

Yeah. So when we actually dealerize the store, the loyalty program do not stay with the store that we dealerize. They don't have the systems and the bands, but usually those customers will travel or will move to some other location that we basically have the loyalty program. The loyalty program is only beneficial in our retail stores.

Okay. So it is with you. So I was just wondering, like you're growing, but you're also taking customers in theory out from locations from that perspective. In terms of liquidity here, your bonds are kind of in the high 70s, 11, 12%. How do you balance the share buybacks versus the potential for bond buybacks here?

Like I mentioned earlier, everything is being analyzed by the company, by our board, and this is not something that I'm prepared to answer at the moment.

All right then. Thank you very much. I appreciate that.

Thank you.

Your next question comes from the line of Hale Holden from Barclays. Your line is now open.

Hi. Good afternoon. I just had one big picture question, which is, you know, since you gave your guidance on the fourth quarter call, the one thing that's changed is the price of crude has come down a lot and the price of retail fuel has come down a lot. So I was wondering how that flows into the guy that you gave that you just reaffirmed and puts and takes around that in terms of positives or negatives.

Yeah, sure. So as you mentioned, we have taken a more constructive view on fuel margin for the year. As I mentioned, we're running 46 cents from April through May, first week of May. So that is obviously something we factored in. We've taken a step back a little bit in terms of some of the expectations for inside sales and gallons. We've taken those down a bit from our prior view, and we've also taken down OPEX, as you might imagine. We're being very, very careful with OPEX in this environment, as well as G&A. One of the things we haven't spoken about in detail yet is G&A is attached to the Dealerization Program. I already hinted about this in prior quarters that we do intend to lean out the G&A structure as we push more retail sites to the wholesale channel. If you look at our press release, you'll see that the G&A, excluding an accrual on legal, was down a couple million dollars year on year. So again, I don't want you to be taking that specific number, but you should be expecting us to be a little more aggressive on G&A as well. So a little bit back on gallons and merge sales, more constructive on CPG, and more aggressive on OPEX and G&A.

Just as a follow-up, the inside sales and gallons, that's more of like a weaker consumer view. And then the G&A is something, as you get further into the Dealerization Plan, maybe that gets a little bit more heavy in terms of cutting there.

I think that's a fair way to look at it, yes.

Great. Thank you so much. I appreciate it, fellows.

You're welcome. Thank you. There are no further questions at this time. I will now turn the call over to Ari Kotler. Please proceed.

Thank you very much, everybody, for participating this afternoon. I really appreciate that. As I mentioned earlier, the Fueling America campaign that we started in stores on Merge Well, this is a big initiative for us, especially as we go, as we move into 100 days of summer. And as I said, with those promos and with those campaigns, we hope to see more customers in our stores, at the pump. And we hope to see you guys soon. Thank you very much. Good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.