ARKO Corp.

Greetings, and welcome to the ARCO first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow a 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 Jordan Mann, Senior Vice President, Corporate Strategy and Industrial Relations. Please go ahead.

Thank you. Good morning, and welcome to ARCO's first quarter 2026 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 quarterly report on Form 10Q for the first quarter of 2026, 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 2025. Before we begin, please note that all first quarter 2026 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 2026 earnings press release, for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. All forward-looking statements made during this call reflect our current views with respect to future events, and ARCA was 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 on a non-GAAP basis. Descriptions of the non-GAAP financial measures that we use, such as adjusted EBITDA and reconciliations of those numbers to our results as reported in accordance with GAAP, are detailed in our earnings press release or in our quarterly report on Form 10Q for the quarter ended March 31, 2026. 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 GPMT segment. And now, I'd like to turn the call over to Ari.

Thank you, Jordan, and good morning, everyone. Q1 marked a clear inflection point for ARCO. The momentum we built late last year accelerated into 2026, and the results this quarter show meaningful progress across the business. Adjusted EBITDA increased approximately 65% year-over-year to $51 million, driven by strong execution across retail, wholesale, and fleet fueling, coupled with disciplined cost control and strong fuel contribution. Importantly, this performance was broad-based and structural, not driven by any single lever. In retail, Same-store merchandise sales, excluding cigarettes, returned to grow for the first time in two years, reflecting improved execution, shopper promotions, our Fueling America's campaign, and stronger customer engagement. Same-store fuel gallons had the strongest year-over-year trends we've seen in two years and outperformed the obvious U.S. average by roughly a full point. In fuel, we have navigated a volatile pricing environment effectively, delivering strong cents per gallon that more than offset lower volumes early in the quarter. Notably, fuel transactions and gallon trends strained materially in March, even as retail prices increased. We believe that this is evidence that our value messaging and promotional strategy are resonating with customers. Across the organization, we stayed sharply focused on costs. G&A declined 4% year over year, reflecting a leaner structure and continued operating discipline. Despite weather disruption from the significant number and intensity of storm in January and early February, the takeaway from the quarter is straightforward. The operational and strategic work we've been executing dealerization, loyalty, fuel pricing discipline, merchandising focus, and capital allocation is showing up in our financial results. The initial public offering of minority interest in our subsidiary ARCO Petroleum Corp in February 2026 was an important milestone in our story, and we believe that it gives investors a clearer view of the strength and value of our wholesale fleet fueling and GPMT businesses, their attractive margins and its cash flow attributes. We believe that ARCO is currently positioned with strong growth opportunities across both operating channels, the retail on the one hand and the wholesale and fleet fueling on the other end. As of March 31st, 2026, ARCO owned 35 million shares of APC representing an implied value today of roughly $650 million, based on APC's market capitalization of approximately $900 million. We'll keep the APC discussion short, but it's important investors recognize both the transparency and the embedded value that APC's structure provides. Turning to the operating environment, the consumer remains value-focused and deliberate, especially in this elevated fuel cost environment. We continue to see customers taking advantage of promotions and actively using our app for savings on both fuel and merchandise. That reinforces the importance of sharp pricing, clear value communication, and compelling in-store offers. Importantly, underlying trends improve as we move through the quarter. After weather-related disruptions early on, traffic, transactions, and gallons all improved in March, reinforcing our confidence in the trajectory of the business. Solarizations continue to be one of the most powerful levers reshaping ARCO. We converted 41 retail stores to dealer locations in the first quarter, bringing total converted locations to 450, since we adopted our transformation plan in 2024. We've approximately 75 additional stores committed either under letter of intent, under contract, or already converted since quarter end. We expect to complete those plus additional conversion by the end of 2026. The benefits are interestingly evident. Lower operating costs, reduced maintenance capex, stronger cash flow generation, and a more focused retail portfolio that is positioned for growth. As we progress through 2026, we believe our reported KPIs will increasingly reflect the quality of the remaining portfolio, something that is already apparent in our Q1 performance. Retail performance clearly improved this quarter. Same-store merchandise sales, excluding cigarettes, returned to growth, marking our strongest results in two years. This was driven by better execution across promotions, pricing, and customer engagement. Merchandise margin grew 70 basis points year-over-year and finished Q1 at 33.9%. The 70 basis points margin improvement is on top of the 70 basis points we grew margin in Q1 of last year. Figure excels performed better than expected due to promotional pricing and manufacturer support, while other tobacco products continue to grow strongly, supporting traffic and transactions without undermining margin integrity. Our retail performance reflects a healthier business with improving trends and a more productive store base. We are not trading margin for volume. Fuel was a significant earning contributor in the quarter. We operated through a highly volatile fuel environment and executed effectively delivering retail cents per gallon of 47.9 and driving same-store fuel contribution up approximately 20%. While gallons were pressured early in the quarter by the weather, they improved throughout the quarter, even in a higher-price environment, and fuel transaction increased approximately 7% in March. While fuel volatility was supportive this quarter for CPG, it was not the only driver of improved results. Higher fuel prices can lead to smaller fill-ups, but it can also drive more frequent visits. This reinforces our strategy, being competitive to drive traffic and offering promotions like the Fueling America's Future discount fuel campaign to give dollars back to the consumer. In honor of America's 250th birthday, Fueling America's Future is now offering $2.50 off per gallon up to 20 gallons. We remain focused on delivering value as we add into the summer driving season. That brings me to loyalty. Our Fueling America's Future campaign and Fast Rewards platform remain central to our growth strategy in trip frequency, customer engagement, and basket size. Enrollment increased 98% in the first quarter, compared to the same period last year, with approximately 53,000 new members. Notably, almost half of new enrollees joined since the launch of the new app and $10 enrollment program in early March. We believe that these programs are important in any environment, but especially in one where customers are actively looking for value. A relaunch loyalty app on new technology platform position us to better personalize offers, improve communication, and more deliberately use loyalty as traffic and retention engine, especially as we add into our 100 days of summer promotional season. Remodels and new to industry locations also remain key components of our long term growth strategy. In the first quarter, We opened two NTI retail stores and one NTI cow block location, and we remain on track for three new Dunkin' stores and one NTI retail store, 20 NTI cow blocks, and 25 remodels in 2026. Early performance from recent remodels has been encouraging, reinforcing our conviction that modern, put-forward formats can drive higher sales stronger fuel performance, and improved store-level economics. On the pre-fueling side, building new card laws continue to represent one of our most attractive uses of capital, given the low investment, modest labor model, and compelling returns. Before I turn it over to Gallagher, let me leave you with this. The first quarter was not driven by one time margin event or a single metric. It reflected structural progress across fuel pricing, dealerization, cost discipline, portfolio quality, and retail execution. We are not going to overstate one quarter, but we are encouraged by what we are seeing. Our transformation plan has been gaining traction, and promotions are driving sales and loyalty program enrollment, which is visible in our financial performance. With that, I will turn the call over to Gallagher.