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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024.


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-39828

ARKO Corp.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		85-2784337
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

8565 Magellan Parkway

Suite 400

Richmond, Virginia 23227-1150

(Address of Principal Executive Offices) (Zip Code)

(804) 730-1568

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share	ARKO	Nasdaq Capital Market
Warrants to purchase common stock	ARKOW	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO

As of August 5, 2024, the registrant had 115,771,318 shares of its common stock, par value $0.0001 per share (“common stock”) outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited)	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities, and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures		46

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described below and in “Item 1A-Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 and this Quarterly Report on Form 10-Q, and described from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). We do not undertake any obligation to update forward-looking statements, except to the extent required by applicable law. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

Risks and uncertainties, the occurrence of which could adversely affect our business, include the following:

•

changes in economic conditions and consumer confidence in the United States;

•

our ability to successfully develop, implement, and achieve the anticipated benefits of the Transformation Plan (as defined below), including the planned conversion of certain retail stores within our retail segment to dealer sites within our wholesale segment, which may not occur on commercially reasonable terms, if at all;

•

significant changes in the current consumption of, and related regulations and litigation related to, cigarettes and other tobacco products;

•

changes in the wholesale prices of motor fuel;

•

significant changes in demand for fuel-based modes of transportation;

•

the highly competitive fragmented industry in which we operate, characterized by many similar competing products and services;

•

our ability to make acquisitions on economically acceptable terms;

•

our ability to successfully integrate acquired operations or otherwise realize the expected benefits from our acquisitions;

•

negative events or developments associated with branded motor fuel suppliers;

•

we depend on several principal suppliers for our fuel purchases and one principal supplier for merchandise;

•

a portion of our revenue is generated under fuel supply agreements with dealers that must be renegotiated or replaced periodically;

•

the retail sale, distribution, transportation and storage of motor fuels is subject to environmental protection and operational safety laws and regulations that may expose us or our customers to significant costs and liabilities;

•

failure to comply with applicable laws and regulations;

•

the loss of key senior management personnel or the failure to recruit or retain qualified personnel;

•

unfavorable weather conditions;

•

payment-related risks that may result in higher operating costs or the inability to process payments;

•

significant disruptions of information technology systems, breaches of data security or compromised data;

•

evolving laws, regulations, standards, and contractual obligations related to data privacy and security regulations, and our actual or perceived failure to comply with such obligations;

•

our failure to adequately secure, maintain, and enforce our intellectual property rights and third-party claims of infringement upon their intellectual property rights;

•

our dependence on third-party transportation providers for the transportation of most of our motor fuel;

Table of Contents

•

our operations present risks which may not be fully covered by insurance;

•

our variable rate debt;

•

the agreements governing our indebtedness contain various restrictions and financial covenants;

•

the majority of our common stock is held by a limited number of stockholders and management and their interests may conflict with yours;

•

our corporate structure includes Israeli subsidiaries that may have adverse tax consequences and expose us to additional tax liabilities;

•

we may not be able to maintain an effective system of internal control over financial reporting and we may not be able to accurately report our financial results or prevent fraud;

•

the market price and trading volume of our common stock may be volatile and could decline significantly; and

•

sales of a substantial number of shares of our common stock in the public market could cause the prices of our common stock to decline.

Table of Contents

PART I. FINANCIAL INFORMATION

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company,” “ARKO,” “we,” “our,” “ours,” and “us” refer to ARKO Corp., a Delaware corporation, including our consolidated subsidiaries.

Item 1. Financial Statements

ARKO Corp.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


	June 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	231,647		$	218,120
Restricted cash		19,392			23,301
Short-term investments		4,860			3,892
Trade receivables, net		155,578			134,735
Inventory		251,142			250,593
Other current assets		107,145			118,472
Total current assets		769,764			749,113
Non-current assets:
Property and equipment, net		740,004			742,610
Right-of-use assets under operating leases		1,418,778			1,384,693
Right-of-use assets under financing leases, net		160,280			162,668
Goodwill		299,972			292,173
Intangible assets, net		194,151			214,552
Equity investment		2,935			2,885
Deferred tax asset		60,822			52,293
Other non-current assets		53,163			49,377
Total assets	$	3,699,869		$	3,650,364
Liabilities
Current liabilities:
Long-term debt, current portion	$	18,184		$	16,792
Accounts payable		239,169			213,657
Other current liabilities		151,434			179,536
Operating leases, current portion		68,725			67,053
Financing leases, current portion		10,856			9,186
Total current liabilities		488,368			486,224
Non-current liabilities:
Long-term debt, net		871,678			828,647
Asset retirement obligation		86,872			84,710
Operating leases		1,434,238			1,395,032
Financing leases		211,760			213,032
Other non-current liabilities		233,852			266,602
Total liabilities		3,326,768			3,274,247
Commitments and contingencies - see Note 13
Series A redeemable preferred stock (no par value) - authorized: 1,000,000 shares; issued and outstanding: 1,000,000 and 1,000,000 shares, respectively; redemption value: $100,000 and $100,000, in the aggregate, respectively		100,000			100,000
Shareholders' equity:
Common stock (par value $0.0001) - authorized: 400,000,000 shares; issued: 130,153,836 and 125,268,525 shares, respectively; outstanding: 115,771,318 and 116,171,208 shares, respectively		12			12
Treasury stock, at cost - 14,382,518 and 9,097,317 shares, respectively		(106,123	)		(74,134	)
Additional paid-in capital		270,455			245,007
Accumulated other comprehensive income		9,119			9,119
Retained earnings		99,638			96,097
Total shareholders' equity		273,101			276,101
Non-controlling interest		—			16
Total equity		273,101			276,117
Total liabilities, redeemable preferred stock and equity	$	3,699,869		$	3,650,364

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
Revenues:
Fuel revenue 1	$	1,887,531		$	1,957,100		$	3,518,863		$	3,618,764
Merchandise revenue		474,248			484,561			888,903			884,849
Other revenues, net		26,384			27,480			52,851			53,904
Total revenues		2,388,163			2,469,141			4,460,617			4,557,517
Operating expenses:
Fuel costs 1		1,726,761			1,801,103			3,229,063			3,338,985
Merchandise costs		318,489			329,903			598,226			607,226
Site operating expenses		223,691			218,002			442,622			410,685
General and administrative expenses		42,436			42,660			84,594			83,076
Depreciation and amortization		33,577			32,837			65,293			61,236
Total operating expenses		2,344,954			2,424,505			4,419,798			4,501,208
Other expenses, net		261			4,956			2,737			7,676
Operating income		42,948			39,680			38,082			48,633
Interest and other financial income		3,384			2,428			25,297			9,630
Interest and other financial expenses		(24,751	)		(22,588	)		(49,121	)		(43,392	)
Income before income taxes		21,581			19,520			14,258			14,871
Income tax expense		(7,546	)		(5,014	)		(839	)		(2,856	)
Income (loss) from equity investment		28			(27	)		50			(63	)
Net income	$	14,063		$	14,479		$	13,469		$	11,952
Less: Net income attributable to non-controlling interests		—			48			—			101
Net income attributable to ARKO Corp.	$	14,063		$	14,431		$	13,469		$	11,851
Series A redeemable preferred stock dividends		(1,445	)		(1,434	)		(2,859	)		(2,852	)
Net income attributable to common shareholders	$	12,618		$	12,997		$	10,610		$	8,999
Net income per share attributable to common shareholders – basic	$	0.11		$	0.11		$	0.09		$	0.07
Net income per share attributable to common shareholders – diluted	$	0.11		$	0.11		$	0.09		$	0.07
Weighted average shares outstanding:
Basic		115,758			119,893			116,512			120,073
Diluted		116,880			121,280			117,073			120,767
Supplemental information:
1 Includes excise tax of:	$	301,030		$	307,244		$	573,230		$	571,499

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Changes in Equity

(Unaudited, in thousands, except share data)


	Common Stock					Treasury			Additional			Accumulated Other		Retained			Total			Non-
	Shares			Par Value		Stock, at Cost			Paid-in Capital			Comprehensive Income		Earnings			Shareholders' Equity			Controlling Interests			Total Equity
Balance at April 1, 2023		120,305,008		$	12	$	(42,352	)	$	234,158		$	9,119	$	74,143		$	275,080		$	(45	)	$	275,035
Share-based compensation		—			—		—			4,555			—		—			4,555			—			4,555
Transactions with non-controlling interests		—			—		—			(96	)		—		—			(96	)		96			—
Distributions to non-controlling interests		—			—		—			—			—		—			—			(60	)		(60	)
Dividends on redeemable preferred stock		—			—		—			—			—		(1,434	)		(1,434	)		—			(1,434	)
Dividends declared (3 cents per share)		—			—		—			—			—		(3,607	)		(3,607	)		—			(3,607	)
Common stock repurchased		(1,498,630	)		—		(11,452	)		—			—		—			(11,452	)		—			(11,452	)
Vesting and settlement of restricted share units		36,084			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		14,431			14,431			48			14,479
Balance at June 30, 2023		118,842,462		$	12	$	(53,804	)	$	238,617		$	9,119	$	83,533		$	277,477		$	39		$	277,516

Balance at April 1, 2024		115,743,761		$	12	$	(106,055	)	$	267,671		$	9,119	$	90,493		$	261,240		$	—		$	261,240
Share-based compensation		—			—		—			2,784			—		—			2,784			—			2,784
Dividends on redeemable preferred stock		—			—		—			—			—		(1,445	)		(1,445	)		—			(1,445	)
Dividends declared (3 cents per share)		—			—		—			—			—		(3,473	)		(3,473	)		—			(3,473	)
Common stock repurchased		(11,866	)		—		(68	)		—			—		—			(68	)		—			(68	)
Vesting and settlement of restricted share units		39,423			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		14,063			14,063			—			14,063
Balance at June 30, 2024		115,771,318		$	12	$	(106,123	)	$	270,455		$	9,119	$	99,638		$	273,101		$	—		$	273,101


	Common Stock					Treasury			Additional			Accumulated Other		Retained			Total			Non-
	Shares			Par Value		Stock, at Cost			Paid-in Capital			Comprehensive Income		Earnings			Shareholders' Equity			Controlling Interests			Total Equity
Balance at January 1, 2023		120,074,542		$	12	$	(40,042	)	$	229,995		$	9,119	$	81,750		$	280,834		$	56		$	280,890
Share-based compensation		—			—		—			8,624			—		—			8,624			—			8,624
Transactions with non-controlling interests		—			—		—			(2	)		—		—			(2	)		2			—
Distributions to non-controlling interests		—			—		—			—			—		—			—			(120	)		(120	)
Dividends on redeemable preferred stock		—			—		—			—			—		(2,852	)		(2,852	)		—			(2,852	)
Dividends declared (6 cents per share)		—			—		—			—			—		(7,216	)		(7,216	)		—			(7,216	)
Common stock repurchased		(1,773,109	)		—		(13,762	)		—			—		—			(13,762	)		—			(13,762	)
Vesting of restricted share units		541,029			—		—			—			—		—			—			—			—
Net income		—			—		—			—			—		11,851			11,851			101			11,952
Balance at June 30, 2023		118,842,462		$	12	$	(53,804	)	$	238,617		$	9,119	$	83,533		$	277,477		$	39		$	277,516

Balance at January 1, 2024		116,171,208		$	12	$	(74,134	)	$	245,007		$	9,119	$	96,097		$	276,101		$	16		$	276,117
Share-based compensation		—			—		—			6,113			—		—			6,113			—			6,113
Transactions with non-controlling interests		—			—		—			(2,984	)		—		—			(2,984	)		(16	)		(3,000	)
Dividends on redeemable preferred stock		—			—		—			—			—		(2,859	)		(2,859	)		—			(2,859	)
Dividends declared (6 cents per share)		—			—		—			—			—		(7,069	)		(7,069	)		—			(7,069	)
Common stock repurchased		(5,285,201	)		—		(31,989	)		—			—		—			(31,989	)		—			(31,989	)
Vesting and settlement of restricted share units		1,467,396			—		—			—			—		—			—			—			—
Issuance of shares		3,417,915			—		—			22,319			—		—			22,319			—			22,319
Net income		—			—		—			—			—		13,469			13,469			—			13,469
Balance at June 30, 2024		115,771,318		$	12	$	(106,123	)	$	270,455		$	9,119	$	99,638		$	273,101		$	—		$	273,101

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	For the Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net income	$	13,469		$	11,952
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		65,293			61,236
Deferred income taxes		(5,929	)		(14,115	)
Loss on disposal of assets and impairment charges		3,385			3,278
Foreign currency loss		57			58
Gain from issuance of shares as payment of deferred consideration related to business acquisition (see Note 4)		(2,681	)		—
Gain from settlement related to business acquisition (see Note 4)		(6,356	)		—
Amortization of deferred financing costs and debt discount		1,332			1,213
Amortization of deferred income		(6,369	)		(3,929	)
Accretion of asset retirement obligation		1,243			1,118
Non-cash rent		7,171			6,558
Charges to allowance for credit losses		641			573
(Income) loss from equity investment		(50	)		63
Share-based compensation		6,113			8,624
Fair value adjustment of financial assets and liabilities		(12,206	)		(5,248	)
Other operating activities, net		686			976
Changes in assets and liabilities:
Increase in trade receivables		(21,484	)		(18,173	)
Decrease (increase) in inventory		2,772			(8,208	)
Decrease (increase) in other assets		5,843			(10,965	)
Increase in accounts payable		26,477			14,580
Decrease in other current liabilities		(5,924	)		(7,651	)
(Decrease) increase in asset retirement obligation		(120	)		46
Increase in non-current liabilities		16,611			4,000
Net cash provided by operating activities	$	89,974		$	45,986

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Cash Flows (cont’d)

(Unaudited, in thousands)


	For the Six Months Ended June 30,
	2024			2023
Cash flows from investing activities:
Purchase of property and equipment	$	(48,512	)	$	(50,038	)
Purchase of intangible assets		—			(35	)
Proceeds from sale of property and equipment		50,295			296,485
Business acquisitions, net of cash		(54,458	)		(481,636	)
Loans to equity investment, net		28			—
Net cash used in investing activities		(52,647	)		(235,224	)
Cash flows from financing activities:
Receipt of long-term debt, net		47,556			74,233
Repayment of debt		(13,849	)		(10,511	)
Principal payments on financing leases		(2,306	)		(2,912	)
Early settlement of deferred consideration related to business acquisition		(17,155	)		—
Proceeds from sale-leaseback		—			80,397
Payment of Ares Put Option		—			(9,808	)
Common stock repurchased		(31,989	)		(13,563	)
Dividends paid on common stock		(7,069	)		(7,216	)
Dividends paid on redeemable preferred stock		(2,859	)		(2,852	)
Net cash (used in) provided by financing activities		(27,671	)		107,768
Net increase (decrease) in cash and cash equivalents and restricted cash		9,656			(81,470	)
Effect of exchange rate on cash and cash equivalents and restricted cash		(38	)		(21	)
Cash and cash equivalents and restricted cash, beginning of period		241,421			316,769
Cash and cash equivalents and restricted cash, end of period	$	251,039		$	235,278
Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents, beginning of period	$	218,120		$	298,529
Restricted cash, beginning of period		23,301			18,240
Cash and cash equivalents and restricted cash, beginning of period	$	241,421		$	316,769
Cash and cash equivalents, end of period	$	231,647		$	220,142
Restricted cash, end of period		19,392			15,136
Cash and cash equivalents and restricted cash, end of period	$	251,039		$	235,278

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Condensed Consolidated Statements of Cash Flows (cont’d)

(Unaudited, in thousands)


	For the Six Months Ended June 30,
	2024		2023
Supplementary cash flow information:
Cash received for interest	$	3,730	$	4,274
Cash paid for interest		45,872		38,402
Cash received for taxes		322		512
Cash paid for taxes		2,786		20,845
Supplementary noncash activities:
Prepaid insurance premiums financed through notes payable	$	7,167	$	5,619
Purchases of equipment in accounts payable and accrued expenses		13,553		9,367
Purchase of property and equipment under leases		41,104		3,034
Disposals of leases of property and equipment		12,219		2,669
Issuance of shares as payment of deferred consideration related to business acquisition		22,319		—
Deferred consideration related to business acquisition		—		45,845

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARKO Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. General

ARKO Corp. (the “Company”) is a Delaware corporation whose common stock, par value $0.0001 per share (“common stock”), and publicly-traded warrants are listed on the Nasdaq Stock Market (“Nasdaq”) under the symbols “ARKO” and “ARKOW,” respectively.

The Company’s operations are primarily performed by its wholly owned subsidiary, GPM Investments, LLC, a Delaware limited liability company (“GPM”). Formed in 2002, GPM is primarily engaged directly and through fully owned and controlled subsidiaries in retail activity, which includes the operations of a chain of convenience stores, most of which include adjacent gas stations. GPM is also engaged in wholesale activity, which includes the supply of fuel to gas stations operated by third-parties and, in fleet fueling, which includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations) and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites. As of June 30, 2024, GPM’s activity included the operation of 1,548 retail convenience stores, the supply of fuel to 1,794 gas stations operated by dealers and the operation of 294 cardlock locations, in the District of Columbia and throughout more than 30 states in the Mid-Atlantic, Midwestern, Northeastern, Southeastern and Southwestern United States (“U.S.”).

The Company has four reportable segments: retail, wholesale, fleet fueling, and GPMP. Refer to Note 12 below for further information with respect to the segments.

2. Summary of Significant Accounting Policies

Basis of Presentation

All significant intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Interim Financial Statements

The accompanying condensed consolidated financial statements (“interim financial statements”) as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited and have been prepared in accordance with GAAP for interim financial information and Regulation S-X set forth by the Securities and Exchange Commission (the “SEC”) for interim reporting. In the opinion of management, all adjustments (consisting of normal and recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included in the accompanying interim financial statements. However, they do not include all of the information and disclosures required by GAAP for complete financial statements. Therefore, the interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “annual financial statements”).

The same significant accounting policies, presentation and methods of computation have been followed in these interim financial statements as were applied in the preparation of the annual financial statements.

Accounting Periods

The Company’s fiscal periods end on the last day of the month, and its fiscal year ends on December 31. This results in the Company experiencing fluctuations in current assets and current liabilities due to purchasing and payment patterns which change based upon the day of the week. As a result, working capital can change from period to period not only due to changing business operations, but also due to a change in the day of the week on which a period ends. The Company earns a disproportionate amount of its annual operating income in the second and third quarters as a result of the climate and seasonal buying patterns of its customers. Inclement weather, especially in the Midwest and Northeast regions of the U.S. during the winter months, can negatively impact financial results.

Use of Estimates

In the preparation of interim condensed consolidated financial statements, management may make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual

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results could differ from those estimates. Significant estimates include right-of-use assets and lease liabilities; impairment of goodwill, intangible, right-of-use and fixed assets; environmental assets and liabilities; deferred tax assets; and asset retirement obligations.

Cash and Cash Equivalents

The Company considers all unrestricted highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents are maintained at several financial institutions, and in order to have sufficient working capital on hand, the Company maintains concentrations of cash at several financial institutions in amounts that are above the FDIC standard deposit insurance limit of $250,000.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the customers. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a single point in time or over time, based on when control of goods and services transfers to a customer. Control is transferred to the customer over time if the customer simultaneously receives and consumes the benefits provided by the Company’s performance. If a performance obligation is not satisfied over time, the Company satisfies the performance obligation at a single point in time.

Revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services.

When the Company satisfies a performance obligation by transferring control of goods or services to the customer, revenue is recognized against contract assets in the amount of consideration to which the Company is entitled. When the consideration amount received from the customer exceeds the amounts recognized as revenue, the Company recognizes a contract liability for the excess.

An asset is recognized related to the costs incurred to obtain a contract (e.g. sales commissions) if the costs are specifically identifiable to a contract, the costs will result in enhancing resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered. These capitalized costs are recorded as a part of other current assets and other non-current assets and are amortized on a systematic basis consistent with the pattern of transfer of the goods or services to which such costs relate. The Company expenses the costs to obtain a contract, as and when they are incurred, in cases where the expected amortization period is one year or less.

The Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or a net basis. In performing this analysis, the Company considers first whether it controls the goods before they are transferred to the customers and if it has the ability to direct the use of the goods or obtain benefits from them. The Company also considers the following indicators: (1) the primary obligor, (2) the latitude in establishing prices and selecting suppliers, and (3) the inventory risk borne by the Company before and after the goods have been transferred to the customer. When the Company acts as principal, revenue is recorded on a gross basis. When the Company acts as agent, revenue is recorded on a net basis.

Refer to Note 12 for disclosure of the revenue disaggregated by segment and product line, as well as a description of the reportable segment operations.

3. Limited Partnership

As of December 31, 2023, GPM, directly and through certain of its wholly owned subsidiaries, held approximately 99.8% of the limited partnership interests in the Company’s subsidiary, GPM Petroleum LP (“GPMP”) and all of the rights in the general partner of GPMP. A non-controlling interest had been recorded for the interests owned in GPMP by the seller in the Company’s 2019 acquisition of 64 sites from a third-party (the “Riiser Seller”) and was classified in the consolidated statements of changes in equity as “Non-controlling interests.”

At December 31, 2023, the Riiser Seller owed GPM approximately $3.375 million with respect to a post-closing adjustment, in addition to other amounts, including interest and expenses. The Riiser Seller satisfied $3.0 million of such adjustment by tendering all of its limited partnership units in GPMP to GPM in January 2024. As a result, GPM, directly and through certain of its wholly owned subsidiaries, holds 100% of the limited partnership interests in GPMP.

4. Acquisitions

Transit Energy Group, LLC

On March 1, 2023, the Company completed the acquisition of certain assets from Transit Energy Group, LLC and certain of its affiliated entities (collectively, “TEG”) pursuant to a purchase agreement entered on September 9, 2022, as amended (the “TEG

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Purchase Agreement”), including (i) 135 convenience stores and gas stations, (ii) fuel supply rights to 181 dealer locations, (iii) a commercial, government, and industrial business, including certain bulk plants, and (iv) certain distribution and transportation assets, all in the southeastern United States (the “TEG Acquisition”). The purchase price for the TEG Acquisition was, as of closing, approximately $370 million, plus the value of inventory at the closing, of which $50 million was to be deferred and payable in two annual payments of $25 million (the “Installment Payments”), which the Company was entitled to elect to pay in either cash or, subject to the satisfaction of certain conditions, shares of common stock (the “Installment Shares”), on the first and second anniversaries of the closing. Pursuant to the TEG Purchase Agreement, at closing, ARKO and TEG entered into a registration rights agreement, pursuant to which ARKO agreed to prepare and file a registration statement with the SEC, registering the Installment Shares, if any, for resale by TEG.

Pursuant to the TEG Purchase Agreement, on March 1, 2024, the Company issued 3,417,915 Installment Shares to TEG in respect of the first installment payment (the “First Installment Shares”) at a price per share of $7.31, which was based on the 10-day volume weighted average price calculation contained in the TEG Purchase Agreement. As a result, the Company recorded a gain of approximately $2.7 million as a component of interest and other financial income in the condensed consolidated statement of operations for the six months ended June 30, 2024.

On March 26, 2024, the Company and TEG entered into a second amendment to the TEG Purchase Agreement (the “TEG Purchase Agreement Amendment”), pursuant to which, in full satisfaction of all Installment Payments, (i) the Company repurchased the First Installment Shares from TEG for an aggregate purchase price of approximately $19.3 million in cash, or $5.66 per share, and (ii) the Company paid to TEG an additional amount in cash equal to approximately $17.2 million in satisfaction of the second Installment Payment, which would have otherwise been due on March 1, 2025. The $36.5 million was financed with the Capital One Line of Credit (refer to Note 5 below). The TEG Purchase Agreement Amendment additionally terminated the registration rights agreement, terminated TEG’s indemnity obligations under the TEG Purchase Agreement and extended the transition services agreement entered into between the Company and TEG. As a result of this transaction, the Company recorded a net gain of approximately $6.4 million, out of which approximately $6.5 million was recorded as a component of interest and other financial income in the condensed consolidated statement of operations for the six months ended June 30, 2024.

WTG Fuels Holdings, LLC

On June 6, 2023, pursuant to an asset purchase agreement entered on December 6, 2022, certain of the Company’s subsidiaries completed the acquisition of certain assets from WTG Fuels Holdings, LLC and certain other sellers party thereto (collectively, “WTG”), including (i) 24 Uncle’s convenience stores located across Western Texas, and (ii) 68 proprietary GASCARD-branded cardlock sites and 43 private cardlock sites for fleet fueling operations located in Western Texas and Southeastern New Mexico (the “WTG Acquisition”).

In the second quarter of 2024, the Company updated the initial accounting treatment of the WTG Acquisition, including the valuation of some of the assets acquired, liabilities assumed and the goodwill resulting from the acquisition. As a result, the Company primarily reduced property and equipment by approximately $1.2 million and intangible assets by $9.1 million, and increased the deferred tax asset by $2.6 million. The adjustments to the assets acquired and liabilities assumed resulted in an increase in goodwill of approximately $7.8 million, which was allocated to the GPMP segment attributable to the opportunity to add significant volume to the GPMP segment. These adjustments resulted in a net increase in depreciation and amortization expenses recorded, approximately $0.2 million and $0.5 million of that related to amounts recorded for the three months ended March 31, 2024 and for the year ended December 31, 2023, respectively.

SpeedyQ Acquisition

On April 9, 2024, the Company acquired certain assets from a third-party, including 21 SpeedyQ Markets convenience stores and eight additional landbank sites located in Michigan (the “SpeedyQ Acquisition”), pursuant to a purchase agreement entered into on November 21, 2023 (the “SpeedyQ Purchase Agreement”). The consideration at closing was approximately $52.5 million as adjusted in accordance with terms of the SpeedyQ Purchase Agreement, plus the value of cash and inventory in the stores on the closing date, of which $6.0 million was financed with the Capital One Line of Credit and approximately $45.0 million was paid for fee simple ownership in 19 of the properties by an affiliate of Oak Street Real Estate Capital Net Lease Property Fund, LP (including its affiliates, “Oak Street”) under the standby real estate purchase, designation and lease program agreement (the “Program Agreement”) (as further described in Note 8 to the annual financial statements). At the closing, pursuant to the Program Agreement, the Company entered into a master lease with Oak Street for the sites Oak Street acquired under customary lease terms. The Company leases one site from the seller, for which the seller received a put right to require the Company to purchase the site and the Company received a call right to require the seller to sell the site, both for a purchase price of $7.0 million, subject to terms set forth in the SpeedyQ Purchase Agreement.

The details of the SpeedyQ Acquisition were as follows:

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	Amount
	(in thousands)
Fair value of consideration transferred:
Cash	$	4,472
GPMP Capital One Line of Credit		6,000
Payable to seller		371
Consideration provided by Oak Street		45,017
Total consideration	$	55,860
Assets acquired and liabilities:
Cash and cash equivalents	$	31
Inventory		3,321
Other assets		266
Property and equipment, net		52,794
Intangible assets		1,050
Right-of-use assets under financing leases		6,905
Environmental receivables		26
Total assets		64,393
Other liabilities		(367	)
Environmental liabilities		(39	)
Asset retirement obligations		(1,255	)
Financing lease liabilities		(6,872	)
Total liabilities		(8,533	)
Total identifiable net assets		55,860
Goodwill	$	—

Consideration paid in cash	$	10,472
Consideration provided by Oak Street		45,017
Less: cash and cash equivalent balances acquired		(31	)
Net cash outflow	$	55,458

The initial accounting treatment of the SpeedyQ Acquisition reflected in these interim financial statements is provisional because the Company has not yet finalized the initial accounting treatment of this acquisition, including the valuation of some of the assets and liabilities acquired and the goodwill resulting from the SpeedyQ Acquisition, mainly due to the limited period of time between the SpeedyQ Acquisition closing date and the date of these interim financial statements. Therefore, some of the financial information presented with respect to the SpeedyQ Acquisition in these interim financial statements remains subject to change.

The Company included identifiable tangible assets and identifiable liabilities in these interim financial statements at their respective fair values based on the information available to the Company’s management on the SpeedyQ Acquisition closing date, including, among other things, a preliminary valuation performed by management and external consultants for this purpose. The useful life of the trade name was estimated at five years.

As a result of the initial accounting treatment of the SpeedyQ Acquisition, no goodwill was recorded.

Acquisition-related costs of approximately $0.9 million and $1.2 million have been excluded from the consideration transferred and have been recognized as an expense within other expenses, net in these interim financial statements for the three and six months ended June 30, 2024, respectively. No acquisition-related costs were recognized for the three and six months ended June 30, 2023.

Results of operations for the SpeedyQ Acquisition for the period subsequent to the acquisition closing date have been included in these interim financial statements for the three and six months ended June 30, 2024. For the period from the SpeedyQ Acquisition closing date through June 30, 2024, the Company recognized $20.3 million in revenues and $0.2 million of net loss related to the SpeedyQ Acquisition.

Impact of Acquisitions (unaudited)

The unaudited supplemental pro forma financial information presented below was prepared based on the historical information of the Company and the acquired operations and gives pro forma effect to the acquisitions using the assumption that the SpeedyQ Acquisition, Speedy’s Acquisition (as further described in Note 4 to the annual financial statements), the WTG Acquisition and the TEG Acquisition, had occurred at the beginning of each period presented below. The unaudited supplemental pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating

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efficiencies or cost savings that may result from the acquisitions or any integration costs. The unaudited pro forma financial information is not necessarily indicative of what the actual results of operations would have been had the acquisitions occurred at the beginning of each period presented below nor is it indicative of future results.


	For the Six Months Ended June 30,
	2024		2023
	(unaudited)
	(in thousands)
Total revenue	$	4,485,398	$	5,024,201
Net income		13,559		6,822

5. Debt

The components of debt were as follows:


	June 30, 2024			December 31, 2023
	(in thousands)
Senior Notes	$	444,840		$	444,432
M&T debt		63,684			65,228
Capital One Line of Credit		375,224			332,027
Insurance premium notes		6,114			3,752
Total debt, net	$	889,862		$	845,439
Less current portion		(18,184	)		(16,792	)
Total long-term debt, net	$	871,678		$	828,647

Financing agreement with a syndicate of banks led by Capital One, National Association

GPMP has a revolving credit facility with a syndicate of banks led by Capital One, National Association with an aggregate principal amount of availability of $800 million (the “Capital One Line of Credit”). At GPMP's request, availability under the Capital One Line of Credit can be increased up to $1.0 billion, subject to obtaining additional financing commitments from current lenders or from other banks, subject to certain other terms as detailed in the Capital One Line of Credit. On March 26, 2024, GPMP, Capital One and the guarantors and lenders party thereto entered into an amendment to the Capital One Line of Credit, which facilitated the borrowing and use of up to $36.5 million of the Capital One Line of Credit for the settlement of the Installment Payments as provided for in the TEG Purchase Agreement Amendment. The other material terms of the Capital One Line of Credit remain unchanged.

M&T Bank Credit Agreement

On January 31, 2024, GPM entered into an additional term loan under the credit agreement with M&T Bank for the purchase of real estate for $5.1 million, resulting in an aggregate original principal amount of real estate loans of $49.5 million as of June 30, 2024 (the “M&T Term Loans”). The Company has granted a mortgage in the real estate of 50 sites and certain fixtures at these and other sites as collateral to support the M&T Term Loans.

6. Leases

As of June 30, 2024, the Company leased 1,279 of the convenience stores that it operates, 207 dealer locations, 155 cardlock locations and certain office and storage spaces, including land and buildings in certain cases. Most of the lease agreements are for long-term periods, ranging from 15 to 20 years, and generally include several renewal options for extension periods for five to 25 years each. Additionally, the Company leases certain store equipment, office equipment, automatic tank gauges and fuel dispensers.

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The components of lease cost recorded on the condensed consolidated statements of operations were as follows:


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2024			2023		2024		2023
	(in thousands)
Finance lease cost:
Depreciation of right-of-use assets	$	2,530		$	2,785	$	4,982	$	5,638
Interest on lease liabilities		4,353			4,142		8,653		8,304
Operating lease costs included in site operating expenses		47,844			45,752		94,519		87,336
Operating lease costs included in general and administrative expenses		530			587		1,068		1,121
Lease cost related to variable lease payments, short-term leases and leases of low value assets		502			711		1,130		1,401
Right-of-use asset impairment charges and loss (gain) on disposals of leases		(806	)		1,994		730		1,454
Total lease costs	$	54,953		$	55,971	$	111,082	$	105,254

Supplemental balance sheet data related to leases was as follows:


	June 30, 2024			December 31, 2023
	(in thousands)
Operating leases
Assets
Right-of-use assets under operating leases	$	1,418,778		$	1,384,693
Liabilities
Operating leases, current portion		68,725			67,053
Operating leases		1,434,238			1,395,032
Total operating leases		1,502,963			1,462,085
Weighted average remaining lease term (in years)		14.1			14.0
Weighted average discount rate		7.7	%		7.8	%
Financing leases
Assets
Right-of-use assets	$	217,405		$	215,174
Accumulated amortization		(57,125	)		(52,506	)
Right-of-use assets under financing leases, net		160,280			162,668
Liabilities
Financing leases, current portion		10,856			9,186
Financing leases		211,760			213,032
Total financing leases		222,616			222,218
Weighted average remaining lease term (in years)		20.8			21.2
Weighted average discount rate		7.9	%		7.9	%

As of June 30, 2024, maturities of lease liabilities for operating lease obligations and financing lease obligations having an initial or remaining non-cancellable lease terms in excess of one year set forth in the table below. The minimum lease payments presented below include periods for which an option is reasonably certain to be exercised and do not take into consideration any future consumer price index adjustments that may become applicable under these agreements.


	Operating			Financing
	(in thousands)
July 2024 through June 2025	$	180,168		$	27,738
July 2025 through June 2026		180,907			21,374
July 2026 through June 2027		178,938			21,228
July 2027 through June 2028		177,375			28,208
July 2028 through June 2029		174,212			21,310
Thereafter		1,658,032			388,413
Gross lease payments	$	2,549,632		$	508,271
Less: imputed interest		(1,046,669	)		(285,655	)
Total lease liabilities	$	1,502,963		$	222,616

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7. Financial Derivative Instruments

The Company makes limited use of derivative instruments (futures contracts) to manage certain risks related to diesel fuel prices. The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features. The Company currently uses derivative instruments that are traded primarily over national exchanges such as the New York Mercantile Exchange (“NYMEX”). For accounting purposes, the Company has designated its derivative contracts as fair value hedges of firm commitments.

As of June 30, 2024 and December 31, 2023, the Company had fuel futures contracts to hedge approximately 1.7 million gallons and 1.2 million gallons, respectively, of diesel fuel for which the Company had a firm commitment to purchase. As of both June 30, 2024 and December 31, 2023, the Company had an asset derivative with a fair value of approximately $0.1 million recorded in other current assets and a firm commitment with a fair value of approximately $0.1 million recorded in other current liabilities on the condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, there was $0.1 million and $0, respectively, of cash collateral provided to counterparties that was classified as restricted cash on the condensed consolidated balance sheet. All cash flows associated with purchasing and selling fuel derivative instruments are classified as other operating activities, net in the condensed consolidated statements of cash flows.

8. Equity

The Company’s board of directors (the “Board”) declared, and the Company paid, dividends of $0.03 per share of common stock on each of March 21, 2024 and May 31, 2024, totaling approximately $7.1 million for the six months ended June 30, 2024. The amount and timing of dividends payable on the common stock are within the sole discretion of the Board, which will evaluate dividend payments within the context of the Company’s overall capital allocation strategy on an ongoing basis, giving consideration to its current and forecasted earnings, financial condition, cash requirements and other factors. As a result of the aggregate amount of dividends paid on the common stock through June 30, 2024, the conversion price of the Company’s Series A convertible preferred stock has been adjusted from $12.00 to $11.73 per share, as were the threshold share prices in the Deferred Shares agreement (as defined in Note 17 to the annual financial statements). The Board declared a quarterly dividend of $0.03 per share of common stock to be paid on August 30, 2024 to stockholders of record as of August 19, 2024.

In February 2022, the Board authorized a share repurchase program, and in May 2023 and May 2024 increased the amount authorized to be repurchased, for up to an aggregate of $125.0 million of outstanding shares of common stock. The share repurchase program does not have an expiration date. During the six months ended June 30, 2024, inclusive of the repurchase of the First Installment Shares from TEG, the Company repurchased approximately 4.8 million shares of common stock under the share repurchase program for approximately $28.3 million, or an average price of $5.89 per share. No shares of common stock were repurchased during the three months ended June 30, 2024 under the share repurchase program. As of June 30, 2024, there was $25.7 million remaining under the share repurchase program.

9. Share-Based Compensation

The Compensation Committee of the Board has approved the grant of non-qualified stock options, restricted stock units (“RSUs”), and shares of common stock to certain employees, non-employees and members of the Board under the ARKO Corp. 2020 Incentive Compensation Plan (as amended, the “Plan”). At the Company’s 2024 annual meeting of stockholders held on June 6, 2024, the Company’s stockholders approved an increase in the total number of shares of common stock authorized for issuance under the Plan from 12.4 million shares to 23.8 million shares. Stock options granted under the Plan expire no later than ten years from the date of grant and the exercise price may not be less than the fair market value of the underlying shares on the date of grant. Vesting periods are assigned to stock options and RSUs on a grant-by-grant basis at the discretion of the Board. The Company issues new shares of common stock upon exercise of stock options and vesting of RSUs.

Additionally, a non-employee director may receive RSUs in lieu of up to 100% of his or her cash fees, which vest immediately and will be settled in common stock upon the director’s departure from the Board or an earlier change in control of the Company.

Stock Options

During the six months ended June 30, 2024, 447 thousand stock options vested. There was no other activity related to stock options during the six months ended June 30, 2024.

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As of June 30, 2024, total unrecognized compensation cost related to unvested stock options was approximately $1.0 million, which is expected to be recognized over a weighted average period of approximately 1.4 years.

Restricted Stock Units

The following table summarizes share activity related to RSUs:


	Restricted Stock Units			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested RSUs, December 31, 2023		3,869		$	8.65
Granted		3,335			5.91
Released		(1,604	)		8.88
Forfeited		(107	)		5.63
Performance-based share adjustment		(607	)		7.50
Nonvested RSUs, June 30, 2024		4,886		$	6.92

During the six months ended June 30, 2024, 186,982 RSUs were issued to non-employee directors. These awards are included in the table above under both Granted and Released RSUs. In addition to the Nonvested RSUs shown in the table above, there were 440,532 and 303,850 RSUs issued to non-employee directors outstanding as of June 30, 2024 and December 31, 2023, respectively.

The fair value of RSUs released during the six months ended June 30, 2024 was approximately $12.0 million.

During the six months ended June 30, 2024, the Company granted 2,021,193 performance-based RSUs (“PSUs”), which, subject to achieving certain performance criteria, could result in the issuance of up to 3,031,790 shares of common stock (representing 150% of the number of PSUs granted). The PSUs were awarded to certain members of senior management and cliff vest at the end of a three-year period, subject to the achievement of specific performance criteria measured over such period. The number of PSUs that will ultimately vest is contingent upon the recipient continuing to be in the continuous service of the Company and related entities through the last day of the performance period and a certification by the Compensation Committee of the Board that the applicable performance criteria have been met. The Company assesses the probability of achieving the performance criteria on a quarterly basis. In the first quarter of 2024, the Compensation Committee of the Board approved the performance criteria for the performance period ended December 31, 2023 such that the percentage of PSUs that vested with respect to the target amount for the 2021 PSU grants was 100%. In the second quarter of 2024, the number of PSUs was adjusted for the probability of achieving the performance criteria, resulting in the recording of a reduction of expense of approximately $1.9 million in the three and six months ended June 30, 2024 based on the grant date fair value.

As of June 30, 2024, total unrecognized compensation cost related to RSUs and PSUs was approximately $22.6 million, which is expected to be recognized over a weighted average period of approximately 2.1 years.

Share-Based Compensation Cost

Total share-based compensation cost recorded for employees, non-employees and members of the Board for the three and six months ended June 30, 2024 and 2023 was $2.8 million, $4.6 million, $6.1 million and $8.6 million, respectively, and included in general and administrative expenses on the condensed consolidated statements of operations.

10. Earnings per Share

The following table sets forth the computation of basic and diluted net income per share of common stock:

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	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Net income available to common stockholders	$	12,618	$	12,997	$	10,610	$	8,999

Weighted average common shares outstanding — Basic		115,758		119,893		116,512		120,073
Effect of dilutive securities:
RSUs		1,122		1,387		561		694
Weighted average common shares outstanding — Diluted		116,880		121,280		117,073		120,767
Net income per share available to common stockholders — Basic	$	0.11	$	0.11	$	0.09	$	0.07
Net income per share available to common stockholders — Diluted	$	0.11	$	0.11	$	0.09	$	0.07

The following potential shares of common stock have been excluded from the computation of diluted net income per share because their effect would have been antidilutive:


	As of June 30,
	2024		2023
	(in thousands)
Stock options		1,306		1,306
Ares warrants		1,100		1,100
Public and Private warrants		17,333		17,333
Series A redeemable preferred stock		8,525		8,439
Ares Put Option		—	*

* See Note 10 to the annual financial statements.

11. Fair Value Measurements and Financial Instruments

The fair value of cash and cash equivalents, restricted cash, short-term investments, trade receivables, accounts payable and other current liabilities approximated their carrying values as of June 30, 2024 and December 31, 2023 primarily due to the short-term maturity of these instruments. On October 21, 2021, the Company completed a private offering of $450 million aggregate principal amount of 5.125% Senior Notes due in November 2029 (the “Senior Notes”). Based on market trades of the Senior Notes close to June 30, 2024 and December 31, 2023 (Level 1 fair value measurement), the fair value of the Senior Notes was estimated at approximately $390.9 million and $391.8 million, respectively, compared to a gross carrying value of $450 million at both June 30, 2024 and December 31, 2023. The fair values of the other long-term debt approximated their respective carrying values as of June 30, 2024 and December 31, 2023 due to the frequency with which interest rates are reset based on changes in prevailing interest rates. The fair value of fuel futures contracts was determined using NYMEX quoted values.

The contingent consideration from the acquisition of the business of Empire Petroleum Partners, LLC in 2020 is measured at fair value at the end of each reporting period and amounted to $3.3 million and $3.4 million as of June 30, 2024 and December 31, 2023, respectively. The fair value methodology for the contingent consideration liability is categorized as Level 3 because inputs to the valuation methodology are unobservable and significant to the fair value adjustment. Approximately $0.1 million, $0.1 million, $0.2 million and $0.2 million was recorded as components of interest and other financial expenses in the condensed consolidated statements of operations for the change in the fair value of the contingent consideration for the three and six months ended June 30, 2024 and 2023, respectively, and approximately $0.3 million, $0.9 million, $0.3 million and $1.6 million of income were recorded as components of other expenses, net in the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, respectively.

The public warrants to purchase the Company’s common stock (the “Public Warrants”), of which approximately 14.8 million were outstanding as of June 30, 2024, are measured at fair value at the end of each reporting period and amounted to $6.0 million and $16.3 million as of June 30, 2024 and December 31, 2023, respectively. The fair value methodology for the Public Warrants is categorized as Level 1. Approximately $1.3 million, $0, $10.3 million and $3.8 million were recorded as components of interest and

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other financial income in the condensed consolidated statements of operations for the change in the fair value of the Public Warrants for the three and six months ended June 30, 2024 and 2023, respectively.

The private warrants to purchase the Company’s common stock (the “Private Warrants”), of which approximately 2.5 million were outstanding as of June 30, 2024, are measured at fair value at the end of each reporting period and amounted to $0.9 million and $2.5 million as of June 30, 2024 and December 31, 2023, respectively. The fair value methodology for the Private Warrants is categorized as Level 2 because certain inputs to the valuation methodology are unobservable and significant to the fair value adjustment. The Private Warrants have been recorded at fair value based on a Black-Scholes option pricing model with the following material assumptions based on observable and unobservable inputs:


	June 30, 2024
Expected term (in years)		1.5
Expected dividend rate		1.9	%
Volatility		46.0	%
Risk-free interest rate		4.9	%
Strike price	$	11.50

For the change in the fair value of the Private Warrants, approximately $0, $0.1 million, $1.5 million and $1.1 million were recorded as components of interest and other financial income in the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, respectively.

The founders of Haymaker (as defined in Note 11 to the annual financial statements) will be entitled to up to 200 thousand shares of common stock to be issued subject to the number of incremental shares of common stock issued to the holders of the Series A redeemable preferred stock not being higher than certain thresholds (the “Additional Deferred Shares”). The Additional Deferred Shares are measured at fair value at the end of each reporting period and amounted to $1.0 million and $1.3 million as of June 30, 2024 and December 31, 2023, respectively. The fair value methodology for the Additional Deferred Shares is categorized as Level 3 because inputs to the valuation methodology are unobservable and significant to the fair value adjustment. The Additional Deferred Shares have been recorded at fair value based on a Monte Carlo pricing model with the following material assumptions based on observable and unobservable inputs:


	June 30, 2024
Expected term (in years)		2.9
Volatility		38.9	%
Risk-free interest rate		4.5	%
Stock price	$	6.27

For the change in the fair value of the Additional Deferred Shares, approximately $(0.1) million, $0.1 million, $0.3 million and $0.1 million were recorded as components of interest and other financial (expense) income in the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, respectively.

12. Segment Reporting

The reportable segments were determined based on information reviewed by the chief operating decision maker for operational decision-making purposes, and the segment information is prepared on the same basis that the Company’s chief operating decision maker reviews such financial information. The Company’s reportable segments are retail, wholesale, fleet fueling and GPMP. The Company’s chief operating decision maker (“CODM”) utilizes operating income from each segment to assess its operating performance and to make decisions about allocating resources to each segment.

The retail segment includes the operation of a chain of retail stores, which includes convenience stores selling fuel products and other merchandise to retail customers. At its retail convenience stores, the Company owns the merchandise and fuel inventory and employs personnel to manage the store.

The wholesale segment supplies fuel to dealers, sub-wholesalers and bulk and spot purchasers, on either a cost plus or consignment basis. For consignment arrangements, the Company retains ownership of the fuel inventory at the site, is responsible for the pricing of the fuel to the end consumer, and shares the gross profit with the dealers.

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The fleet fueling segment includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations), and commissions from the sales of fuel using proprietary fuel cards that provide customers access to a nationwide network of fueling sites.

The GPMP segment includes GPMP and includes its sale and supply of fuel to substantially all of GPM’s sites that sell fuel in the retail and wholesale segments, at GPMP’s cost of fuel (including taxes and transportation) plus a fixed margin (currently 5.0 cents per gallon), and charges a fixed fee primarily to sites in the fleet fueling segment which are not supplied by GPMP (currently 5.0 cents per gallon sold). GPMP also supplies fuel to a limited number of dealers and bulk purchasers.

The “All Other” segment includes the results of non-reportable segments which do not meet both quantitative and qualitative criteria as defined under ASC 280, Segment Reporting.

The majority of general and administrative expenses, depreciation and amortization, net other expenses, net interest and other financial expenses, income taxes and minor other income items including intercompany operating leases are not allocated to the segments.

With the exception of goodwill, assets and liabilities relevant to the reportable segments are generally not assigned to any particular segment, but rather, managed and reviewed by the CODM at the consolidated level. All reportable segment revenues were generated from sites within the U.S. and substantially all of the Company’s assets were within the U.S.

Inter-segment transactions primarily included the distribution of fuel by GPMP to substantially all of GPM’s sites that sell fuel (both in the retail and wholesale segments) and charges by GPMP primarily to sites that sell fuel in the fleet fueling segment which are not supplied by GPMP. The effect of these inter-segment transactions was eliminated in the condensed consolidated financial statements.


	Retail		Wholesale		Fleet Fueling		GPMP			All Other			Total
For the Three Months Ended June 30, 2024	(in thousands)
Revenues
Fuel revenue	$	976,372	$	762,693	$	140,140	$	990		$	7,336		$	1,887,531
Merchandise revenue		474,248		—		—		—			—			474,248
Other revenues, net		16,735		6,850		2,284		222			293			26,384
Total revenues from external customers	$	1,467,355	$	769,543	$	142,424	$	1,212		$	7,629		$	2,388,163
Inter-segment revenues	$	—	$	—	$	—	$	1,282,870		$	4,886		$	1,287,756
Operating income (loss) from segments	$	73,823	$	9,131	$	11,833	$	25,756		$	(383	)	$	120,160
Interest and financial expenses, net							$	(8,583	)				$	(8,583	)
Income from equity investment										$	28		$	28


	Retail		Wholesale		Fleet Fueling		GPMP		All Other		Total
For the Three Months Ended June 30, 2023	(in thousands)
Revenues
Fuel revenue	$	1,015,365	$	811,139	$	121,146	$	1,057	$	8,393	$	1,957,100
Merchandise revenue		484,561		—

ARKO Corp. 10-Q