ARKO Corp.

Greetings and welcome to the ARCO Corp Fourth Quarter 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operating assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jordan Mann, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good afternoon and welcome to ARCO's fourth quarter and full year 2025 earnings conference call and webcast. On today's call are Ari Kotler, Chairman, President, and Chief Executive Officer, and Gallagher Jeff, Chief Financial Officer. Our earnings press release and annual report on Form 10-K for the year ended December 31st, 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 fourth 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 fourth quarter and full year 2025 earnings press 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 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 press release or in our annual report on Form 10-K for the year ended December 31st, 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 GTMP segment. And now I would like to turn the call over to Ari.

Thank you. And good afternoon, everyone. 2025 was a pivotal year for ARCO. We continued to execute on our transformation plan, fortified our foundation, and sharpened our focus. We continued to optimize our retail footprint. We improved our cost structure, and we positioned the company to continue the creative growth across our four segments in 2026. Our strong fourth quarter results reflected that progress. Adjusted EBITDA grew 16% year over year to $66 million. Same store merchandise sales trend improved and margin expanded 140 basis points to 34.4%. Retail sites operating expenses were down 16% compared to the prior year period. And retail fuel same store gallons trends improved as we exited the year with IRCPG. Let me be clear. These improvements are not to be viewed as driven by the macro environment. The consumer is still cautious. They're still value-focused. What you're seeing is execution across dealerization, remodels, NTI retail stores, food service, and loyalty. We are running a better business, and the results reflect that. Earlier this month, we closed the IPO of our subsidiary, Arco Petroleum Corp., or APC. We issued approximately 11.1 million Class A shares at a price to the public of $18 per share. And we own 35 million Class B shares currently representing 75.9% of the economic interest in APC. This was a major milestone. This listing shine a spotlight on what has become a large, growing, and highly profitable wholesale fuel distribution and fleet fuel business. We've consolidated our wholesale fleet fueling and GPMP segments under the separately listed subsidiary. The result is greater transparency, clearer economics, and what we believe is meaningfully unlocked value for shareholders. Until 2020, we were a pure play retail operator Over the years, through acquisition, we built a large wholesale and fleet fueling platform. These assets have been strong. However, they complicated understanding our overall story. Our creation of APC allows both the retail business and the wholesale and fleet fueling businesses to stand on their own. We issued $200 million of new equity in the IPO to quality investors, Those proceeds were applied to reduce debt. Our balance sheet is stronger. Our flexibility is greater. We're positioned to execute. So what does post-transaction ARCO 2.0 look like? A core, stronger retail business concentrated in markets where we believe we are positioned to win. A standalone publicly traded oil sale and fleet fueling business with an anticipated high conversion from adjusted EBITDA to discretionary cash flow. A conservative balance sheet, strong cash position, ample liquidity at a very attractive cost of capital, and continued access to the capital markets. And a structure that offers investors greater visibility into each business and allows the market to value each business on its own merits. This is not just a structural change. It's a strategic inflection point. We now have two public companies, clear capital allocation, and a better ability to focus on what we can control in retail while working to drive consistent returns across both ARCO and APC. Here is the opportunity in APC. APC is one of the largest fuel distributors in North America. over 2 billion gallons distributed in the last 12 months. And yet, we have roughly only 1% market share. 1% in a highly fragmented industry. The runway for growth is substantial. We see strategic, accretive opportunities to expand this platform, and we believe APC will be a key growth engine for ARCO going forward. Now let's talk about dealerization. This remains one of the most important levers in our transformation plan. As of year end, we have completed 409 conversions. We have approximately 120 additional sites committed either under letter of intent, under contract, or already converted since year end, and we expect to complete those plus additional conversion by the end of 2026. This deleterization strategy is delivering exactly what we say it would, reducing fixed costs, reducing maintenance capex, improving cash flow, and creating a more focused and regionally concentrated retail base. The Q4 results validate the strategy. The operating leverage is real. The cost improvements are showing up. We are now seeing tangible benefits from stores converted in the last 12 months as reflected by a more than $5 million benefit to operating income in the fourth quarter before G&A savings. Bottom line, dealerization has sharpened our focus, improved execution, and it's now flowing through to financial performance. Turning to loyalty, our Fast Rewards platform and Fueling America's Future campaign continue to central to how we drive enrollment, engagement, trip frequency, and basket size. In Q4, loyalty members outperformed across the board, with enrolled members spend more than 48% higher than non-enrolled members. Loyalty customers also made 51% more trips to our stores than non-enrolled customers. Through 2025, Since Fueling America went live, average daily enrollment is up 38%. This is consistent with what we said all along. Loyalty is not just a promotional tool. It's a margin driver, a traffic driver, and a retention engine. In 2026, we're working on accelerating enrollment and launching a new version of the app with announced personalization and vendor-supported benefits. loyalty remained under-penetrated across our network. We see significant runway ahead. Now to remodels. We're very encouraged by the early results from our Food Forward Remodel Program. In Ashland, Virginia, our first remodel reopened in June 2025. In the first six months, on an average daily basis, sales grew 14% Gallons grew 12%. Average daily sales more than doubled in four different categories. And the stores outperformed its pre-remodel period across 20 different categories. In Mechanicsville, our newly remodeled store opened later in 2025 and through year-end. Sales improved over 10%. Gallons have grown over 20%. And post-remodel, the store has grown in 15 categories and doubled in two categories. We're targeting double-digit returns on remodels, and early performance is tracking at our or above those targets. Additionally, we are in the planning stages for approximately 25 remodels, which will feature the fast-grade food and beverage elements. We're also expanding food and beverage in non-remodel stores where space allows. Food penetration across our network of stores is growing. Every project is measured on ROI, and food is the differentiator. Now to NTI retail stores, our new to industry stores. These are purpose-built, newly designed stores, the blueprint for our future. We opened two NTI retail stores in 2025 and a Dunkin' store One more NTI retail store earlier this quarter and another one earlier this week. One more NTI retail store and three Dunkin' stores are to be added later this year. We're targeting double digit returns and the two we opened in 2025 are already ahead of plan. These are high visibility locations with simplified operations and food forward layouts. On capital allocations, Our priorities for 2026 are clear. We plan to further scale iReturn remodels, expand NTI retail stores selectively, and invest in NTI card lock location in our fleet fueling business. This NTI card lock location typically generate attractive meet to iTunes returns with minimal labor, while the cost to build is only $1 to $2 million. We are targeting 20 NTI card lock locations this year in our investment cap tax plans and have already identified and are working on 10 of these NTI card lock locations. On the macro environment and Q1 2026 trends, the consumer is still value-focused. People are making deliberate choices. Baskets are being won through relevance, promotion, and convenience. We picked up market share in every nicotine category in 2025. OTP for the year was up 4%, and energy drinks were up 8%. Trends improved through the back up of 2025. We built momentum in Q4, and that momentum has carried into 2026. In January and so far in February 2026, we saw mid single digit growth in same store merchandise sales and positive same store gallons growth before winter storms at the end of January and the beginning of February created some disruption. We're not going to over extrapolate from early data, but directionally trends are improving versus where we were in early 2025. Bottom line, We believe that we have a lot of growth ahead of us with a strong balance sheet and ample liquidity to execute our strategy. Before ending the call off, I want to address an important leadership update. In December, we welcome Gallagher Jeff as our new CFO. Gallagher brings deep retail experience and importantly, deep expertise in convenience and fuel sector. He held senior roles at Walmart, and Dollar Tree, and Gallagher was most recently CFO at Murphy USA. I also want to thank Jordan Mann for stepping in as interim CFO and supporting the transition. With Gallagher now leading the finance team at ARCO, Jordan served as CFO of APC while continuing as ARCO's Senior VP of Corporate Strategy, Capital Market, and Investor Relations. We're excited about the leadership team we assembled and what Gallagher brings to ARCO at this pivotal time. With that, I will turn it over to Gallagher to walk through our financial results and outlook.