Greetings, and welcome to the ARKO Corp. Fourth Quarter 2025 Earnings Call. 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 ARKO's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. On today's call are Arie Kotler, Chairman, President, and Chief Executive Officer; and Galagher Jeff, Chief Financial Officer. Our earnings press release and annual report on Form 10-K for the year ended December 31, 2025, as filed with the SEC, are available on ARKO's website at www.arkocorp.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 statements 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 ARKO 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 31, 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 excludes intercompany charges by our GPMP segment. And now I would like to turn the call over to Arie.

Thank you, and good afternoon, everyone. 2025 was a pivotal year for ARKO. We continued to execute on our transformation plan, fortified our foundation, and sharpened our focus. We continue to optimize our retail footprint. We improved our cost structure, and we positioned the company for continued accretive 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 trends 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 gallon trends improved as we exited the year with higher customer per gallon. 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, new-to-industry 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, ARKO 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 shines 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 ARKO 2.0 look like? A core stronger retail business concentrated in markets where we believe we are positioned to win, a stand-alone publicly traded wholesale 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 ARKO 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 ARKO 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 had 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 conversions by the end of 2026. This realization strategy is delivering exactly what we said 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 general and administrative savings. Bottom line, dealerization has sharpened our focus, improved execution, and it's now flowing through to financial performance. Turning to loyalty. Our fas REWARDS platform and Fueling America's Future campaign continue to be central to how we drive enrollment, engagement, trip frequency, and basket size. In Q4, loyalty members outperformed across the board with enrolled members spending 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 enhanced personalization and vendor-supported benefits. Loyalty remains underpenetrated 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 their 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%. 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 or above those targets. Additionally, we are in the planning stages for approximately 25 remodels, which will feature the fas craves 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 allocation, our priorities for 2026 are clear. We plan to further scale high-return remodels, expand NTI retail stores selectively, and invest in NTI cardlock locations in our fleet fueling business. This NTI cardlock location typically generates attractive mid- to high-teens returns with minimal labor, while the cost to build is only $1 million to $2 million. We are targeting 20 NTI cardlock locations this year in our investment capital expenditure plans and have already identified and are working on 10 of these NTI cardlock 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, promotions, 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 half 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, I want to address an important leadership update. In December, we welcomed Galagher Jeff as our new CFO. Galagher brings deep retail experience and, importantly, deep expertise in the convenience and fuel sector. He held senior roles at Walmart and Dollar Tree, and Galagher 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 Galagher now leading the finance team at ARKO, Jordan served as CFO of APC while continuing as ARKO's Senior VP of Corporate Strategy, Capital Markets, and Investor Relations. We're excited about the leadership team we've assembled and what Galagher brings to ARKO at this pivotal time. With that, I will turn it over to Galagher to walk through our financial results and outlook.

Thank you, Arie, and good afternoon, everyone. I am grateful to be here at ARKO and excited to work alongside Arie and this entire leadership team. In my short time here, it's become quickly evident to me what an immense opportunity we have to scale the ARKO platform and dramatically enhance the growth and financial performance of this company. First, I want to thank and recognize the team. I've been impressed by the dedication, the talent, and the operational discipline in the field and at the support center. There's a strong foundation here that will take us forward. Second, I'm encouraged by what I'm seeing in the stores. We are improving our stores, and it is showing. Our trends improved as we exited 2025, and we continue to see momentum into early 2026, even with some weather disruption. Third, and this stands out to me. It's a level of analytics and rigor in decision-making, particularly around capital deployment and evaluating returns on every dollar we spend. That discipline is critical as we focus on the highest return levers in the business. Overall, I believe ARKO is entering an important phase. The work to simplify, reposition, and strengthen the company through transformation is largely behind us. Now it's about translating that into consistent growth and improved financial performance. With that, let me walk through our fourth quarter and full-year results and then discuss the outlook. Turning to our fourth quarter and full year 2025 results. Net income was $1.9 million for the quarter, reversing a net loss of $2.3 million for the prior year. Adjusted EBITDA was $55.7 million for the quarter compared to $56.8 million for the prior year, an increase of 16%, reflecting the results of our transformation efforts that are improving merchandising margins, generating strong fuel performance, streamlining our business through dealerization, and building significant expense discipline across the organization. For our retail segment, we delivered a merchandising margin of 34.4%, an increase of 140 basis points versus the prior year. Same-store merchandise sales were down 3% for the quarter and down 4.1% for fiscal year 2025. Same-store merchandising sales, excluding cigarettes, were down 1.8% for the quarter and 2.7% for the full year. As Arie mentioned, our merchandising sales trends strengthened over the course of Q4, and that momentum has carried us into early 2026. Retail fuel same-store gallons also improved in Q4 and were down 4.1% for the quarter and down 5.4% in fiscal year 2025 versus the prior year period. Retail fuel margin cents per gallon improved in Q4 to approximately $0.445, reflecting disciplined pricing in a relatively volatile environment. We remain focused on operating expenses. For the fourth quarter of 2025, site operating expenses decreased by $29.5 million or 15.7% compared to the prior year period, primarily due to $31.1 million of reduced expenses related to retail stores that were closed or converted to dealer locations. Same-store operating expenses were nearly flat, up 0.6%, as tight labor management and cost discipline in stores mostly offset increases in rent and wage rates. Turning to our wholesale segment. Wholesale fuel contribution increased 8% to $24 million in the quarter compared to $22.3 million in Q4 of 2024. Wholesale gallons also increased by 4% to 249 million gallons, and fuel margin was approximately $0.097 per gallon for Q4. For the full year 2025, wholesale generated $94.5 million of contribution, a 5% increase from $90.4 million last year, with total gallons increasing 4% to 989 million and fuel margin cents per gallon of approximately $0.096. Moving to fleet fueling segment. Fleet fueling fuel contribution was $15.9 million for the quarter compared to $16.3 million last year. Fleet fueling gallons totaled 34.9 million gallons compared to 36.1 million gallons, and margin was $0.456 per gallon. For the full year, fleet fueling generated $65.7 million of fuel contribution on 142.8 million gallons with a margin of $0.46 per gallon. This compares to $64.3 million of fuel contribution on 149 million gallons last year. Fleet fueling margins remain strong and continue to reflect the durable cash flow profile of this business. Adjusted EBITDA for the year was $248.7 million, flat to the $248.9 million in 2024. While top-line performance remained pressured, structural improvements in margin and strong cost control helped offset volume headwinds. Net income was $22.7 million for 2025 as compared to $20.8 million for 2024. We are seeing results from the execution of our strategy, and our performance in nearly every area strengthened as we finished the year. Merchandising margin was 33.7%, up 90 basis points year-over-year. Same-store retail operating expenses remained flat for 2025 versus 2024, with our productivity initiatives and lower credit card fees overcoming headwinds with wage increases, expanded food programs, higher maintenance costs, and higher snow removal expenses. Merchandise same-store sales were down 4.1% for the year, and retail fuel same-store gallons were down 5.4% for fiscal year 2025, but both improved as we entered and exited Q4. Looking to the balance sheet, we finished 2025 with $305 million in cash, and our balance sheet remains strong. Following the successful IPO of ARKO Petroleum Corp., we received approximately $184 million in net proceeds, which we used to reduce debt and enhance liquidity. The transaction positions us with a stronger capital structure and greater financial flexibility to execute our strategy as we enter 2026. Regarding capital allocation, we remain disciplined and focused on high-return investments, including dealerization execution, retail remodel expansion, retail NTI development, technology and analytics, and cardlock growth in our fleet platform. We remain comfortable with our leverage ratio and have more than enough cash and liquidity to deliver our strategy and continue to build momentum with our capital initiatives mentioned above. Turning to 2026 guidance, we currently expect 2026 adjusted EBITDA to range between $245 million and $265 million, with an assumed range of average retail fuel margin from $0.415 to $0.435 per gallon. For sensitivity purposes, every $0.01 change in retail same-store customer per gallon is estimated to result in $8 million to $9 million of adjusted EBITDA. We believe 2026 same-store retail sales will be relatively flat and will improve several hundred basis points versus our 2025 results. We are planning same-store margin between 35.5% and 36.5%, also an increase versus 2025. As stated in ARKO Petroleum Corp. prospectus, we expect our APC business to deliver approximately $156 million in adjusted EBITDA in 2026. As a reminder, APC includes the results from our wholesale, fleet fueling, and GPMP segments, including a $0.06 fuel margin on fuel distributed by our GPMP segment to our retail stores. Our estimated gallons for the forecast period include an assumption that we will add an additional 50 million gallons in volume for the year ending December 31, 2026, as a result of our acquisitions from third parties of businesses or assets in our wholesale segment, offsetting an estimated decline in gallons from comparable wholesale sites consistent with historical trends. Finally, we will continue to manage all of our controllable costs in both stores and in our office. ARKO will be a low-cost operator. To summarize, we are executing our transformation strategy, and it is working. We fully expect to continue to show momentum and improve our performance in nearly every key metric in 2026. With that, I'll hand the call back to the operator to begin Q&A.

Our first question comes from Bobby Griffin with Raymond James.

Arie and team, I guess the first one for me is maybe on the merchandise sales for retail. Your guidance includes some notable improvement here further in '26. We're getting towards the later innings of the dealerization program. So can you maybe unpack some of the drivers of the further improvement? Is there more contribution coming from remodels? Just anything there to help us kind of get visibility into the confidence of that versus some of the trends we see here in 4Q?

Good to have you with us over here. So I think that the first thing is, of course, execution and our marketing initiative. As I mentioned, we started with a Fueling America campaign back in the end of Q1 2025. And given that customers are looking for value, as we continue to move forward with this campaign, we saw an increase in loyalty transactions. We saw an increase in loyalty enrollment. And those draws, of course, bring customers to the core categories. That's the reason if you think about that you saw a huge improvement. We actually gained market share in almost every nicotine item in the category. OTP was up 4%. Energy drink was up 8%. And if you think about it, those categories are high-margin categories. So we believe that all of the marketing initiatives that we had during the year, as we continue to improve our initiatives and enhance those categories, I think that's what actually drove the margin increase in customer engagement within the stores. There's no question that food service helped us as well. Every time we remodel a store or build additional NTI stores, they are actually progressing above our expectations, and there is no question that these initiatives drive directly to the bottom line. But it's not just one item; it's every little thing that we did this year. And as I said, most of it is really engagement through our loyalty program. And I think customers keep coming because of those promotions that we are implementing. We just upped our promotions from $2 per gallon to $2.50 per gallon, given the 250-year American birthday this year. Now customers can actually save up to $50 for every 20 gallons that they are buying. Again, we believe those initiatives are the ones that drove sales or at least drove margins inside the store. And as you mentioned, I believe that given that the cost of fuel dropped during Q4 and was actually at the $2.50, I feel that customers are coming more often to the store.

Very good. Maybe switching gears and talking about the remodels some. I don't want to extrapolate out early results from only a few stores, but it does seem like the trends are promising. Can you explain a little bit on what's the cost of capital for that remodel? And then it seems from the release, maybe there's an opportunity for kind of a partial redesign where you talk about taking some of the fas craves food, formatting change and taking a few of those and putting them into other stores, but maybe not a full remodel. So can you talk a little bit about the capital of that type of remodel and what ultimately the opportunity could be?

Sure. As you can imagine, the initial remodels we performed were significant, impacting the entire store from the exterior to the interior, enhancing curb appeal, and expanding the space. These early remodels typically cost around $1 million, specifically ranging from $900,000 to $1.1 million. However, we can average it at $1 million. Many other stores can undergo a simpler remodel by incorporating fas craves. Currently, we are price-engineering the 25 locations we are working on to lower costs. There is a notable difference between remodeling a few stores versus 25 simultaneously. Ultimately, I believe we can execute a softer remodel for around $0.5 million, with a reasonable estimate being between $400,000 and $700,000.

Okay. That's helpful. And I guess, Arie or whoever on the team, when you kind of look at your retail base that you're going to own post the dealerization, I understand that you've given us some targets, but there's also some more. What size or what percentage of the stores post all this dealerization that you're going to own, do you think need a remodel of some sort?

I don't have the exact percentage, Bobby. However, I believe that most of the stores we are retaining have lower capital requirements. The remodels are not solely focused on aesthetic improvements; they are also about enhancing food service options, like adding fas craves. If food service isn't part of the plan, we need to consider what other categories we can enhance or introduce in these stores. Much of the investment in the stores we are keeping has been made over the years. Therefore, it's less about capital and more about our strategic goals for these stores. Food service is a major focus for us. We are currently prioritizing stores that may not require a remodel, but we will invest in food service regardless. We will incorporate fas craves wherever possible, even if a remodel isn't on the agenda. There are numerous opportunities to do this.

Just to build on that a little bit, Bobby, to your question before, from the remodels, we're also trying to understand which elements of those remodels are working and driving results. So like Arie said, there's a lot of stores with some space, and we can take a low-cost approach to add the right assortment, add the right elements in those stores that don't require full remodel, and so we get a lot of the benefits. So it's not a high capital expense. It's really about finding the right elements that customers are responding to, mostly around the fas craves and the food, and getting those into more stores.

Understood. I'll jump back in the queue. Best of luck here on the first quarter, and congrats on the announcement about your APC business.

Our next question comes from the line of Daniel Guglielmo with Capital One Securities.

In your opening remarks, you mentioned a still cautious consumer. And then in the prior quarter call, you highlighted the Midwest and other select markets as under pressure with other regions being healthier. Are you still seeing that pressure in the Midwest? Or is it more kind of broad-based now? Any additional color would be helpful.

I believe the pressure in the Midwest remains the primary concern, while I notice some improvement in other parts of the country. Specifically, when fuel prices fell below $2.50, we experienced an increase in customer visits, as well as growth in gallons sold and transaction volumes. This drop in fuel prices has positively influenced customer spending, and I don’t think there has been a significant change from a regional perspective compared to earlier this year. The initiatives and promotions we have in place are effectively reaching customers, and they are taking advantage of these offers.

Okay. I appreciate that, and that makes sense. And then on the initiatives and the promotions I saw you all put out the $3, $4, $5, $6 value meal deals. Do those meals at those prices drive merchandise margin expansion on their own? Or is it more of a way to kind of get customers in the door to increase basket size, do other things?

Yes. That's a good question, Daniel. So just to be clear, those promotions are being 100% supported by our vendors. So this is not promotions in order just to drive customers and actually lower margins. Our margins stay the same. Those promotions are being supported by our vendor partners. But there is no question that when you have those promotions that involve food service, those promotions not only bring customers in; they're actually driving the rest of the categories, which is OTP, for example, candy, energy drinks. So I think those promotions just continue to gain momentum with the other categories. And like I said, those promotions bring customers in, and those customers tend to buy higher-margin core category items. And the more they come in and concentrate on the core categories, cigarettes are becoming a much smaller piece of the business. So it's much more a small piece of the pie of what customers are purchasing within our stores. But Daniel, I just want to be clear. This is all hard work by the team. The merchandising and marketing team think every day about how we can be different from the competition across the street and how we can bring customers in. So that's a lot of work. I want to be just clear; there's a lot of work being put into this with loyalty and food service. And that's what drove the results in Q4, as you can see. That's what I believe drove sales in Q1 so far.

Our next question comes from the line of Hale Holden with Barclays.

So I had two quick questions. The first one is on the APC side of the business. If you could sort of talk about what the M&A opportunity is there now that you have a separate currency and balance sheet to expand into fuel distribution?

Certainly. The industry we are discussing is substantial, with a wholesale fleet business within a market exceeding 195 billion gallons. Currently, we sell just 2 billion gallons, representing only 1% of the industry, despite being one of the largest players in the country. With the resources from APC and our available capital at low costs, we have over $635 million set aside for acquisitions and our leverage is minimal. Our history of successfully completing 26 retail acquisitions over the past 11 years gives us confidence. The industry is more fragmented than retail, and we expect to build significant momentum. We are also among the largest cardlock operators in the U.S., and this sector is similarly fragmented. We aim to open 20 new cardlocks by 2026, having already identified 10 locations. Establishing a cardlock costs around $1 million to $2 million, with expected returns in the mid- to high-teens. We believe the current environment with APC presents a major opportunity for us to pursue beneficial acquisitions moving forward.

Great. And then just kind of a dumb accounting question, but you gave us the EBITDA guidance for the company and then the EBITDA guidance for APC that was in the S-1. Am I right in just implying that the retail business EBITDA is about $100 million for 2026?

Hale, this is Galagher. There are some eliminations there for the intercompany sales. So you can't just add one plus one equals two. Part of the wholesale business sells into our retail stores, and we do eliminate that as a transfer. So it's not exactly that simple. We do break down the segments in the release, so you can compare the segments and build the model. So we're also going to be a lot more transparent as you would expect with APC going forward. So shortly, we'll be providing separate information and releases for those.

I figured it was not as simple as it was in my head, so I appreciate that.

We have reached the end of the question-and-answer session. Therefore, I'd like to hand it back over to the floor to Arie Kotler for closing remarks.

Thank you, operator. Before we disconnect, I want to speak directly to our employees. The great results we discussed today are a testament to your hard work and resilience. Your dedication and commitment drive our progress every day, and we are deeply grateful for everything you do to support our mission and serve our customers. Thank you for your efforts and for being the foundation of our continued success. To our shareholders, thank you for your trust and partnership. Your continued support enables us to pursue our strategic goals and deliver value across our businesses. We are committed to maintaining transparency and working diligently to meet your expectations as we move forward together. As we head into 2026, our financial position remains robust, and our commitment to expanding through value-enhancing acquisitions is stronger than ever. We appreciate your time. Have a great evening, everybody.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.