ARKO Corp.

Greetings and welcome to the ARCO Corp Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question 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. It is now my pleasure to introduce Ashley McDermott, Vice President, Financial Reporting. Please go ahead.

Thank you. Good afternoon and welcome to ARCO's third quarter 2025 earnings conference call and webcast. On today's call are Arlie Kotler, Chairman, President, and Chief Executive Officer, Jordan Mann, Interim Chief Financial Officer, and Senior Vice President of Corporate Strategy, Capital Markets, and Investor Relations. Our earnings press release and quarterly report on Form 10-Q for the third quarter of 2025, as filed with the SEC, are available on ARCO's website at www.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 third 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 statement section at the end of our third 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 the 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 and 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 10-Q for the quarter ended September 30th, 2025. 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, GPMP. And now I would like to turn the call over to Ari.

Thank you, Ashley, and thank you all for joining. Our team delivered a strong quarter of execution, staying disciplined and focusing on what we can control. Stepping back, we're operating in an environment where consumers are still feeling stressed as reflected in consumer sentiment data throughout this year. This has resulted in more deliberate shopping behavior, greater price sensitivity, and increased reliance on loyalty-driven offers. These dynamics are consistent with what we're hearing across the industry, and they're shaping how we approach promotions and value across our business. It's important to recognize that consumer behavior is not uniform across our footprint. We're seeing healthier trends in the Northeast, Southeast, and Mid-Atlantic, while in the Midwest and other select markets remain under pressure, reflecting broader regional differences in household budgets and fuel demand. Industry feedback suggests these patterns are consistent across the channel, particularly in rural markets where store traffic remain under pressure. Despite these headwinds, we are executing on our controllable to ensure our long-term opportunities remain intact. Our same store sales, excluding cigarettes for the quarter, was nearly flat, representing the best comp performance we've seen in the last 18 months. We continue to believe ARCO's transformation plan will make our business stronger, more efficient, and better aligned with consumer trends. Now, I will provide an update on the core elements of our transformation plan, beginning with dealerization. Dealerization continues to be one of the most meaningful drivers of our plan. Since the middle of 2024, we've converted approximately 350 stores as of September 30th, 2025, with an aggregate of approximately 185 additional sites committed for future conversion, which are currently under letter of intent or contract or have been converted since the end of the quarter. Daily performance from locations that transitioned six or more months ago continues to meet our expectations and validates the benefits of this approach both in reduced overhead and improved operating efficiency. Behind this initial store's dealerized or under letter of intent or contract, we see an additional opportunity to round out our dealerization strategy in 2026 with a meaningful number of conversions to come. As we have stated before, once fully scaled, we expect this program to deliver a cumulative annualized operating income benefit of more than $20 million before GNA. As our dealerization efforts continue, we have identified more than $10 million in expected annual structural GNA savings with the opportunity for additional upside. As we continue to execute the dealerization program, we expect the benefit will increase and be further reflected in our financial performance and free cash flow generation moving forward, particularly given the savings from maintenance capex. Dealerization remains central to how we plan to drive more consistent return and long-term value creation for shareholders. Our Fueling America's Future campaign and Fast Rewards loyalty platform continue to play a central role in deepening customer relationship and driving engagement in our retail stores. These programs not only help us stay relevant with consumers who are seeking more value in every trip they drive incrementally and provide a valuable leather which we believe can improve same-store sales performance over time. Average daily loyalty enrollment for our Fast Rewards program grew 37% in the quarter and 43% from the beginning of the promotion, compared to the average daily loyalty enrollment prior to the campaign. During the quarter, we saw continued Fast Rewards members growth, adding nearly 35,000 new enrollees to reach approximately 2.4 million total enrolled members at quarter end. Our enrolled customers spend approximately $110 per month, or 53% more compared to non-members, and pump-to-store conversion is at 55% of visits year-to-date for enrolled members. This engagement matrix reinforced the value of the program and highlighted behavioral differences that make fast rewards a key contributor to in-store performance. As consumers remain increasingly value conscious, Our loyalty program meets their demands for everyday savings and convenience while reinforcing ARCO's relevance at the pump and in-store. Tuning America's future remains an ongoing part of our value strategy into 2026. While we've seen continued growth in loyalty engagement, we also recognize that total program penetration is still developing, creating a runway for future growth. To build on this momentum, we plan to launch a new version of our app by the end of the first quarter of 2026. This platform will introduce enhanced technology and new benefits, including improved reporting, personalization, gamification, and geofencing capabilities, just to name a few, that we expect will deepen customer engagement and drive incremental traffic. Our investment in other tobacco products and refreshed back bar layout also continue to drive positive results. Our OTP basket grew by approximately 16% compared to the same quarter last year. OTP same-store sales were up 6.6% as compared to the same quarter of last year, along with a margin rate increase of more than 300 basis points. Our redesigned backbars deliver better product visibility, a more modern presentation, and stronger promotions. This initiative is a key highlight in our merchandising strategy. It's driving incremental traffic, higher margins, and improved category mix, while allowing us to compete more effectively in a value-conscious environment. During the quarter, we made steady progress on our store remodel program. Our first remodel location reopened earlier this year. One additional location opened in early August 2025, and a third location is planned for the fourth quarter of 2025, with several more that are moving through permitting and construction phases and are planned to open in the first half of 2026. While only two of our new format stores are complete and operating, we are pleased with the results thus far. The growth we are experiencing by category in these stores has been as planned and has continued to improve. These new format stores are built around a food forward model that emphasize all grab and go breakfast, lunch and snacking, bakery, pizza, and an expanded dispense hot, cold, and frozen beverages assortment, all supported by improved layouts and a better overall customer experience. Turning to our new-to-industry stores, we continue to expand our presence through select and targeted opportunities. We opened a Dunkin' store and two new-to-industry stores so far this year and have begun working on three more NTI stores, of which two are targeted to open in the fourth quarter of 2025. Our latest NTI location in Kingston, North Carolina, exceeded our plan for the quarter with food and beverage contributing 23% of merchandise sales, which is multiples higher than the food and beverage contribution of our same store network. These investments are focused on high traffic, high visibility sites where we can introduce the full ARCA offering from fresh food to fuel and loyalty driven promotions supported by a modern scalable design. Turning to fuel performance, our results reflected broader industry demand trends this quarter. Our disciplined pricing strategy and network optimization drove strong per gallon margin performance, allowing us to deliver solid fuel contribution even as gallons modestly declined. The quarter ended with same store gallons trend better than Q2, with September performance improving from August. Our approach remains consistent. Prioritize profitability over volume and leverage our scale to capture opportunity when market conditions allow. As the dealerization rollout continues, we're also seeing the benefits of our more diversified and stable fuel contribution base across our retail, oil cell, and fleet fueling channels. Our oil cell and fleet fueling businesses remain strong contributors and key grow engines for ARCO. Dealerization driven size conversion have expanded our all-sale footprint, driving mid- to high-single-digit growth in all-sale fuel contribution. The fuel distribution industry is highly fragmented, providing ample opportunity for acquisition given our size and scale. In fleet fueling, disciplined customer management and pricing supported stable margins and consistent volumes, even amid softer industry fuel demand. Looking ahead, we're advancing a number of new catalog locations for 2026, reflecting the attractive recurring cash flow profile of this business and its growing role in ARPA's long-term strategy. We continue to see compelling value in our common stock and repurchased approximately 935,000 shares in the third quarter. We have the flexibility to continue investing in our highest return opportunities, dealerization, remodels, and strategic growth in wholesale and fleet fueling while maintaining a balanced approach to shareholder returns. Our priorities are clear. Strengthening the balance sheet, execute on our transformation plan, and drive sustainable long-term value creation. I will now turn the call over to Jordan to review financial results for the third quarter and discuss our outlook for the fourth quarter and full year 2025. Thank you, Ari.