Arko Corp. · NASDAQ:ARKO
Arko — Investor Presentation (September 2021)
35 slides from Arko's investor presentation, Sep 27, 2021
Slide 1: Investor Presentation September 2021
Exhibit 99.1 I N V E S T O R P R E S E N TAT I O N September 2021
Slide 2: Disclaimer
Disclaimer 2 This investor presentation (this “Investor Presentation”) and any oral statements made in connection with this Investor Presentation are for informational purposes only and do not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any equity,
Slide 3: Today's Presenters
Today’s Presenters 3 ARKO Management Acquired GPM Investments, LLC in 2011, now a wholly owned subsidiary of ARKO, at which time it operated and supplied 320 sites Grew ARKO to over 3,000 current sites through a series of 19 acquisitions Spearheaded various real estate and fuel transactions to
Slide 4: Index
Index 4 1. Company Overview Pg. 5 2. Key Highlights Pg. 9 3. Historical Financial Performance Pg. 26
Slide 5: Company Overview
‘ ve COMPANY OVERVIEW
Slide 6: A High Growth, Scaled Consolidator in the U.S. Convenience Store Industry
A High Growth, Scaled Consolidator in the U.S. Convenience Store Industry 6 A LEADING U.S. CONVENIENCE STORE OPERATOR LARGE, RAPIDLY GROWING NETWORK (location total) 6th 3,028 3,500 3,000 ~15% Retail Site CAGR (2015-2020) 2,944 3,028 2,500 Largest U.S. Convenience Total sites as of 6/30/21, includin
Slide 7: Strong Historical Growth Positions ARKO for Continued Success
Strong Historical Growth Positions ARKO for Continued Success 7 ARKO Foundation Formed Through 19 Acquisitions Scaled Platform Positions Company for Multi-Pronged Growth TOP U.S. CONVENIENCE STORE OPERATORS(1) 1 2 RANK COMPANY / CHAIN U.S. STORE COUNT 1 (2) 13,373 ORGANIC MERCHANDISE SUBSTANTIAL REM
Slide 8: Execution of Strategy Delivering Strong Financial Results
Execution of Strategy Delivering Strong Financial Results 8 Merchandise Revenue Fuel Gallons Adjusted EBITDA(2) (millions) (millions) (millions) $1,565 $1,494 ~2bn (1) $1,375 $216 1,708 $1,282 (3) (As Adjusted) $183 $1,032 1,207 1,108 1,053 $82 $78 872 $66 2017 2018 2019 2020 LTM June 2017 2018 2019
Slide 9: Key Highlights
KEY HIGHLIGHTS
Slide 10: Key Highlights
Key Highlights 10 1 Attractive Convenience Store Industry Fundamentals 2 A Leader in the Large and Growing Convenience Store Sector 3 Differentiated Strategy Embracing Community C-Store Brands 4 Robust Wholesale Platform 5 Proven, Multi-Faceted Growth Strategy 6 Founder-Led Management Team
Slide 11: Large, Growing, Recession-Resistant C-Store Industry
1 Large, Growing, Recession-Resistant C-Store Industry 11 STRONG C-STORE SALES GROWTH VS. U.S. CONSUMPTION ATTRACTIVE INDUSTRY DYNAMICS: INDEX DURING GREAT RECESSION AND COVID Strong fundamentals 6.0% Great Recession COVID 4.9% Large, mature industry 4.5% 3.2% 3.0% Consistent industry-wide sal
Slide 12: ARKO is a Leading C-Store Player Positioned as an Acquiror-of-Choice
ARKO is a Leading C-Store Player Positioned as an Acquiror-of-Choice in the 2 12 Highly Fragmented C-Store Sector ARKO’S SUCCESSFUL HISTORY OF GROWTH U.S. CONVENIENCE STORE COMPOSITION BY CHAIN SIZE(1) Fragmented industry of 152,720 convenience stores 19 acquisitions completed since 2013 500+ Stor
Slide 13: Entrenched, Local Brands Plus Benefits of Participation in Large Network
3 Entrenched, Local Brands Plus Benefits of Participation in Large Network 13 ~50 Years Average Local Brand History ROI-Focused Acquiror of Choice Differentiated Strategy Preserves Long-Established Community Brand Equity Centralized Procurement and Merchandising Leverage Network Scale Optimized Purc
Slide 14: Empire Petroleum: Highly Strategic Acquisition that Meaningfully Increases Company Scale
Empire Petroleum: Highly Strategic Acquisition that Meaningfully Increases 4 14 Company Scale EMPIRE COMPANY OVERVIEW ARKO HISTORICAL TOTAL FUEL VOLUME (gallons in millions) ARKO Empire 1,537 23 2,400 1,800 (3)(4) 1,956 (1,453 Wholesale / 84 Retail) Acquired Volume 986 Total Stores Operated and/or S
Slide 15: Enhanced Stability Provided by Empire Petroleum Acquisition
4 Enhanced Stability Provided by Empire Petroleum Acquisition 15 Stable, Fee-Based Cash Flows From Long-Term Wholesale Site Count Contracts GPM Empire has added 52 accounts since 1,647 the acquisition; included in the year-over- 1,614 Significant site and gallon growth following Empire transaction
Slide 16: Meaningful Opportunities to Continue Wholesale Growth
4 Meaningful Opportunities to Continue Wholesale Growth 16 Wholesale Gallons Provides stable and diversified cash flows (millions) Wholesale Gallons ~1BN+ (2) Combines fuel purchasing power CPG(1) Strategic flexibility to convert lower performing sites to consignment agent and dealer trade channels
Slide 17: Multi-Faceted Growth Strategy
5 Multi-Faceted Growth Strategy 17 ONGOING MERCHANDISE AND SUBSTANTIAL REMODEL CONTINUE BOLT-ON FUEL INITIATIVES DRIVING WHOLESALE EXPANSION OPPORTUNITY ACQUISITION STRATEGY GROWTH AND PROFITABILITY Numerous in-store sales growth Plan to optimize acquired assets; Low overhead wholesale Highl
Slide 18: Roughly Half of Existing Company Operated Stores Are Candidates for High Return Store Remodel
Roughly Half of Existing Company Operated Stores Are Candidates for 5 18 High Return Store Remodel Program Following significant acquisition growth, ARKO is re-investing in the in-store experience with numerous initiatives to drive sales and enhance returns SIGNIFICANT STORE REMODEL PROGRAM (1) PROG
Slide 19: Remodeling Efforts in the Past Have Generated Significant Returns
5 Remodeling Efforts in the Past Have Generated Significant Returns 19 RAZE & REBUILD – STORE 57 (Quinton, VA) ($ in 000’s) $750 $651 Investment: $2,174 ARKO HAS EXPERIENCED SIGNIFICANT EBITDA $500 SUCCESS WITH PAST REMODEL EFFORTS ROI: 29% $250 GENERATING RETURNS IN Payback: 3.5 years $27 $0
Slide 20: Illustrative Remodeling Platform (Exterior)
5 Illustrative Remodeling Platform (Exterior) 20 BEFORE AFTER
Slide 21: Illustrative Remodeling Platform (Interior)
5 Illustrative Remodeling Platform (Interior) 21 Remodel Platform to Drive Increased Foot Traffic and Inside Sales
Slide 22: Dedicated M&A Team with Well-Developed Target Diligence and Integration Capabilities
Dedicated M&A Team with Well-Developed Target Diligence, Transaction 5 22 Execution, and Integration Capabilities ARKO has consistently acquired quality assets at attractive multiples relative to publicly disclosed industry transactions. The Company has exercised demonstrable price discipline and cr
Slide 23: Strong Return on Capital: Sustained Price Discipline Augmented by Synergies
Strong Return on Capital: Sustained Price Discipline Augmented by 5 23 Significant Synergies Opportunities ARKO has maintained purchase price discipline over time and focused intently on capturing cost savings and synergies post-transaction. Thorough diligence on the front end has been key to avoid
Slide 24: Capturing Synergies Has and Is Expected to Continue to Create Substantial Value
Capturing Synergies Has and Is Expected to Continue to Create Substantial 5 24 Value ARKO’s scale and purchasing power are leveraged to significantly improve the performance of acquired operations HURST HARVEY VPS – SOUTHEAST DIVISION AREY OIL Purchase Price: $4.8 million Purchase Price: $45.9 milli
Slide 25: ARKO and GPM Teams with Talent and Track Record to Execute Growth Plan
6 ARKO and GPM Teams with Talent and Track Record to Execute Growth Plan 25 ARIE KOTLER Acquired GPM Investments, LLC in 2011; operated and supplied 320 sites at the time ~20 YEARS Founder, Chairman & CEO and Chairman of ARKO Holdings Ltd., a public company traded on the Tel Aviv Stock Exchange
Slide 26: Historical Financial Performance
HISTORICAL FINANCIAL PERFORMANCE
Slide 27: Consistent In-Store Merchandise Revenue Growth
Consistent In-Store Merchandise Revenue Growth 27 GPM has continued to post strong merchandise revenue growth, even during the peak COVID period in 2020 2-Year Stack SSS (excluding Cigarettes) 12.0% 10.2% 9.2% 8.7% 8.0% 8.0% 6.2% 4.0% 1.4% 0.0% Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 1-Year (0.5%) 5.9%
Slide 28: Historical Financial Performance
Historical Financial Performance 28 Store Count Merchandise and Fuel Gallons Same Store Sales Retail Merchandise Revenue (incl. Cigarettes) Fuel Gallons Wholesale 2,944 3,028 3.5% 2.4% 11.9% 1.3% 1.0% 1,614 1,647 1,341 1,400 1,103 126 128 130 (1.1%) (2.3%) (1.8%) 1,215 1,272 1,330 1,381 973 (2.3%) 2
Slide 29: Historical Financial Performance (Cont'd)
Historical Financial Performance (Cont’d) 29 (millions) Gross Profit (1) (millions) Adjusted EBITDA(2) Merchandise $216 Fuel $887 (3) $183 $791 $643 $371 $612 $321 $492 $221 $217 $82 $78 $171 $66 $406 $436 $346 $373 $279 2017 2018 2019 2020 LTM June 2017 2018 2019 2020 LTM June 2021 2021 (1) Include
Slide 30: Historical Financial Performance (Cont'd)
Historical Financial Performance (Cont’d) 30 Cumulative Free Cash Flow (1) CapEx (millions) (millions) $139 $216 $159 $58 $57 $52 $45 $39 $20 $30 $27 2017 2018 2019 2020 Total LTM June 2017 2018 2019 2020 LTM June 2021 2021 (1) Free cash flow defined as Adjusted EBITDA less capital expenditures. See
Slide 31: Q2 2021 Performance
Q2 2021 Performance 31 Q2 2021 Results +10.2% +11.9% 34.3 $85M Merchandise SSS Fuel Gallon Retail Free Cash Flow (1) 2-Yr Stack (ex Cigarettes) SSS Cents Per Gallon Merchandise Margin Adj. EBITDA (2) +140bps 28.7% +10.5% $75.7 $68.5 27.3% Q2'20A Q2'21A Q2'20A Q2'21A (1) Free cash flow defined as Adj
Slide 32: ARKO Capital Structure
ARKO Capital Structure 32 ($ in millions) As of 6/30/21 Maturity Pricing Ca s h a nd ca s h equi va l ents (1) $261 GPM Investments PNC Li ne of Credi t ($140) -- 12/22/2022 L+125 Ares Term Loa n 215 2/28/2027 L+450 M&T Loa ns 39 2024 - 2026 Va ri es Ins ura nce Premi um Notes 5 -- -- GPM Petroleum
Slide 33: Appendix
APPENDIX , ai 4 eT) : eT J a \ 4 i . Si AAR , : —AAAGG
Slide 34: Continued Enhancement of Product Offering and Customer Engagement
Continued Enhancement of Product Offering and Customer Engagement 34 Numerous in-store sales growth and margin enhancement opportunities exist across the Company’s expansive footprint; despite its size, ARKO is extremely nimble as evidenced by its ability to fully stock stores with essential items a
Slide 35: Reconciliation of ARKO GAAP Net Income to Adjusted EBITDA and Free Cash Flow
Reconciliation of ARKO GAAP Net Income to Adjusted EBITDA, Adjusted 35 EBITDA, Net of Incremental Bonuses and Free Cash Flow ($ in millions) Full year ended 6 months ended June 30, 2018 2019 2020 2020 2021 LTM (6/30/21) Net income (loss) $23.5 ($47.2) $30.1 $19.7 $10.9 $21.4 Interest and other finan