Arko Corp. (ARKO) Earnings

Management highlights

### Strategic Acquisition of U.S. Petroleum Partners (USPP) by APC - APC, ARCO's 74% owned subsidiary, signed an agreement to acquire USPP, a vertically integrated fuel distribution platform, for $205 million cash plus inventory cost, plus a $30 million earn-out Class A common stock tied to EBITDA targets - The acquisition adds 280 million gallons of annual fuel volume (14% increase to APC's trailing 12-month volume) and over 400 dealer locations, expanding APC's scale and presence in the Great Lakes region - The transaction adds two fuel terminals on the Buckeye pipeline and a dedicated fuel transportation fleet, enabling APC to capture incremental margin across more of the refined products value chain and add stable fee-based earnings - The deal is expected to close in late 2026, be accretive immediately upon closing, and add approximately $30 million in annual adjusted EBITDA to APC ### Retail Business Execution and Customer Engagement - Trips to retail fuel pumps increased 4% year-over-year as customers refueled more frequently amid high fuel prices, even as total gallons sold declined - The Fueling America's Future loyalty program offers stackable fuel discounts up to $2.50 per gallon for 20 gallons, and has saved enrolled members over $4 million since launch. Enrolled members have 2x higher average monthly spend and 50% higher visit frequency and basket size than non-enrolled members - The new Tencent Tuesdays discount program for loyalty members drove double-digit growth in enrolled gallons sold on Tuesdays after launch, and 100,000 new loyalty members were added in Q2 2026. Loyalty sales and margin contribution both increased 30 bps quarter-over-quarter - 21 additional retail stores were converted to dealer locations in Q2 2026, bringing the total dealerized stores to 471 since mid-2024, with 70 more stores in the conversion pipeline, moving ARCO to a lower-cost, more capital-efficient operating model ### Capital Investment and Growth Initiatives - 2 retail store remodels were completed in Q2 2026, with 12 more in progress, for a total target of 25 remodels in 2026. Completed remodels have generated double-digit growth in merchandise sales and fuel volume versus pre-remodel levels - 1 new-to-industry (NTI) retail store was opened in Q2 2026, with new and remodeled locations expected to deliver returns approaching 20%, supporting disciplined acceleration of the NTI program - 3 new Cardlock fleet fueling locations have opened in 2026, with 17 more in development for a total of 20 new locations this year. Cardlock offers low capital investment, attractive returns, and recurring cash flow - The company now offers its branded food and beverage offering in ~140 stores, with further planned expansion in 2026. Food service has contributed to overall merchandise margin expansion - ARCO ended Q2 with $246 million in cash and $1 billion in total liquidity, after repurchasing $38 million face value of 5 1⁄8% senior notes for $35 million cash. Subsequent to quarter-end, ARCO expanded its PNC credit line by $74 million to $214 million in total capacity, maintaining financial flexibility for strategic initiatives

Guidance

- Management reaffirms full year 2026 adjusted EBITDA guidance of $245 million to $265 billion; the pending USPP acquisition is expected to deliver some EBITDA benefit in 2026 that is already captured within the existing guidance range, so no adjustment to the full year range was made - Management upwardly revised full year 2026 retail fuel margin guidance to a range of 45.5 to 47.5 cents per gallon, with higher expected margins fully offsetting projected lower retail fuel volumes - The implied year-over-year decline in second half 2026 EBITDA at the guidance midpoint reflects intentional caution around ongoing fuel price volatility and consumer demand uncertainty, rather than a material deterioration in underlying business fundamentals

Segment performance

1. Retail Segment: Same-store merchandise sales excluding cigarettes decreased 0.9% year-over-year, while overall same-store merchandise sales fell 1.7% year-over-year. Merchandise margin expanded 110 bps to 34.7%. Same-store retail fuel gallons sold declined 5.7% year-over-year to 241 million gallons, but same-store fuel cents per gallon margin increased 6.5% to 48.7 cents per gallon, pushing total same-store fuel contribution to $97.8 million. Total retail site-level operating expenses were $160 million, compared to $176.6 million in Q2 2025. This segment contributes the majority of ARCO's overall revenue and profitability. 2. Wholesale (GPMP) Segment: Total gallons were 252 million year-over-year, down from 252 million in Q2 2025. Fuel margin increased 8.7% to 10.9 cents per gallon, up from 10.1 cents per gallon in the prior year. 3. Fleet Fueling Segment: Operating income increased 1.6% year-over-year to $13.3 million, from $13.1 million in Q2 2025. Gallon volumes were broadly flat at 36.4 million gallons, compared to 36.3 million in the prior year. Fuel margin declined to $0.469 per gallon from $0.49 per gallon year-over-year due to temporary margin compression amid falling fuel prices. This segment contributes approximately 10-15% of ARCO's total operating income.

Risks & headwinds

- Persistently elevated retail fuel prices have stretched household budgets, leading to softening retail demand for fuel gallons and in-store merchandise spending, particularly in June 2026, with demand remaining volatile month-to-month - High fuel prices increase credit card fee costs, which created a $3.3 million headwind to Q2 2026 profitability on a same-store basis - Falling fuel price environments create temporary margin compression for fixed-price fleet fueling contracts, as higher-cost inventory is sold at contracted fixed prices - Tighter SNAP eligibility rules in three states reduced Q2 2026 same-store merchandise sales growth (excluding cigarettes) by 75 bps, highlighting sensitivity to changes in public assistance programs that impact consumer disposable income - Geopolitical instability has contributed to fuel price volatility, creating ongoing uncertainty for consumer demand and margin outlook

Analyst Q&A

• Q: Is the pending USPP acquisition included in the 2026 adjusted EBITDA guidance, and what explains the implied year-over-year EBITDA decline in the second half? /

  A: Management did not include specific acquisition benefits in the guidance because deal size and timing were uncertain when the guide was set. Any 2026 EBITDA benefit from USPP is captured within the existing $20 million guidance range, so no change to the guide was needed. The implied second half pressure reflects ongoing uncertainty around fuel volatility and consumer demand, rather than weakening fundamentals. (212 characters)

• Q: What margin pressure hit the fleet fueling segment in Q2, and what synergies will USPP bring to ARCO's retail network? /

  A: Fleet fueling uses fixed-price contracts for many customers, so when fuel prices fall rapidly, higher-priced inventory is sold at the fixed contracted rate, squeezing near-term margins. The primary synergy for retail is 14% additional fuel volume that increases scale for fuel sourcing negotiations, leading to better cost of goods across the entire business. Additional terminal capacity in the Great Lakes region also creates new margin opportunities for both wholesale and retail operations. (345 characters)

• Q: What early results and learnings have you gotten from rolling out your food and beverage (F&B) offering? /

  A: We are still in a test-and-learn phase for F&B, but customer response has been very strong, with double-digit growth in both merchandise sales and fuel gallons at stores that added F&B. We are optimizing our menu and focusing on high-margin items paired with value offers (like a $5 complete chicken sandwich meal) to appeal to budget-conscious consumers, and will accelerate expansion only after refining our operating and cost model. (312 characters)

• Q: Why did dealerization activity slow in Q2, and how do you prioritize bond repurchases versus other capital uses? /

  A: There is no intentional slowdown; we already converted most of the large initial pool of eligible stores, and only ~70 stores remain in the conversion pipeline, which naturally leads to lower quarterly volumes. We are return-focused: we prioritize organic growth projects (remodels, NTI stores, Cardlock) first, and opportunistically repurchase bonds when they trade at a discount, while maintaining sufficient liquidity for strategic acquisitions. We view the existing 5.18% high-yield bonds as attractive for our capital structure and have no plans to eliminate high-yield debt entirely. (387 characters)