What are the CapEx needs for the USPP assets relative to the $30 million EBITDA forecast, and how will the generated free cash flow be allocated (deleveraging vs. dividends)?

The terminal business is a very low CapEx operation, primarily a storage unit. ARKO will continue to utilize its balance sheet and maintain a disciplined approach to leverage, implying a balanced allocation of funds. “So just for your benefit, this is a very low CapEx business. The terminal business is really a storage unit out there. So that's not required basically a lot of CapEx, very minimal CapEx in this business.”

Could you describe the contract length and margin determination (cost plus or mix) for USPP's business, and how it compares to ARKO's existing volumes?

The USPP business is very similar to ARKO's, with the majority of its 400 accounts operating on a fixed-fee or cost-plus basis, mirroring the 85% fixed-fee structure of ARKO's core business. This consistency reinforces the durable earnings profile. “They have 400 accounts. The majority of those accounts are on fixed fee, similar to 85% of our business, which is also basically a fixed fee of cost plus.”

How does the $30 million expected EBITDA for USPP reconcile with the higher earn-out target of $31.7 million plus $2.2 million from fuel-related components?

The $30 million represents the expected base EBITDA for the acquired business. The higher earn-out target is tied to achieving additional financial goals, for which ARKO is confident the USPP team will strive. The $30 million is the core figure to consider. “No, the $30 million is the expected EBITDA for the business, for the current business right now that we're buying. This is on an annualized basis. There is a few components over here that can just increase EBITDA above the $30 million.”

APC

ARKO Petroleum (APC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 6, 2026

Source: earnings call transcript

Executive summary

ARKO Petroleum Corp. Q2 FY26 — Strong Execution and Strategic USPP Acquisition

ARKO Petroleum Corp. delivered a strong Q2 FY26, marked by solid financial performance and the strategic acquisition of U.S. Petroleum Partners. This acquisition is expected to significantly expand the company's scale, infrastructure, and earnings profile, reinforcing its long-term growth strategy and commitment to shareholder value. The company maintains financial flexibility and a disciplined approach to capital allocation.

Highlights

Adjusted EBITDA grew approximately 4% year-over-year to $39.8 million.
Discretionary cash flow increased approximately 12% year-over-year to $27.1 million.
Wholesale fuel contribution rose 3.7% to $26.3 million.
Net income was $12.2 million, up from $10 million in the prior year period.
The USPP acquisition is expected to add approximately $30 million of annual adjusted EBITDA.

Concerns

Wholesale gallons declined 4.6% to 240.8 million gallons.
Fleet fueling blended margin decreased by $0.02 per gallon year-over-year due to margin compression.
Net cash provided by operating activities decreased to $10.4 million from $23.2 million, primarily due to increased working capital.

Guidance & targets

Category	Target	Timeline	Confidence
Full year Adjusted EBITDA	$156 million high materiality	FY26	High
Full year Discretionary Cash Flow	$110 million high materiality	FY26	High
USPP Acquisition Annual Adjusted EBITDA Contribution	approximately $30 million high materiality	Annualized post-closing	High
Pro forma Net Debt to Adjusted EBITDA	3x to 3.5x medium materiality	Annualized post-closing	High
Quarterly Dividend	$0.50 per share medium materiality	Q3 FY26	High
New Cardlock Locations	20 low materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Wholesale Fuel contribution increased despite a decline in wholesale gallons, primarily due to incremental dealer locations from ARKO Corp.'s dealerization program and higher prompt pay discounts on increased fuel costs. Fuel contribution: $26.3 millionFuel contribution growth YoY: 3.7%Wholesale gallons: 240.8 millionWholesale gallons decline YoY: 4.6%Blended fuel margin: $0.109 per gallonBlended fuel margin prior year: $0.101 per gallon	—	—	—	$26.3 million
Fleet Fueling Fuel contribution slightly decreased due to margin compression as index prices declined faster than the cost of weighted average inventory, but the segment's durable earnings profile maintained healthy contribution. Investment continues in new cardlock locations. Fuel contribution: $17.1 millionFuel contribution prior year: $17.8 millionFleet fueling gallons: 36.4 millionFleet fueling gallons prior year: 36.3 millionBlended margin: $0.469 per gallonBlended margin prior year: $0.489 per gallon	—	—	—	$17.1 million
GPMP (Related Party Locations) Fuel contribution slightly increased, while gallons declined primarily due to the active conversion of ARKO retail sites to dealer locations. Fuel contribution: $11.5 millionFuel contribution prior year: $11.3 millionRelated party gallons: 191.4 millionRelated party gallons prior year: 225.3 million	—	—	—	$11.5 million

Deals & partnerships

U.S. Petroleum Partners Acquisition of a vertically integrated fuel distribution platform, including wholesale fuel volume, 400 wholesale locations, 2 fuel storage terminals, and a fleet of trucks. $205 million in cash plus the cost of inventory, and $30 million in Class A common stock to be held in escrow

The acquisition will add approximately 280 million gallons of annual wholesale fuel volume, increasing APC's fuel volumes by about 14%. It will expand APC's network to more than 2,500 locations. Includes 2 fuel storage terminals along the Buckeye Pipeline system in Novi, Michigan, and Toledo, Ohio, and a fleet of trucks and trailers. The $30 million in stock is subject to the acquired business achieving certain EBITDA-based financial targets ($31.7 million EBITDA and $2.2 million fuel-related EBITDA) in the first 4 full quarters after closing.

Risks & headwinds

Volatile fuel price environment Q2 FY26

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Mitigation:Durability of platform, strength of cash flow generation, and team's ability to execute effectively.

Fuel margin compression in fleet fueling Q2 FY26

Blended margin down $0.02 from prior year

Mitigation:Contribution remained healthy, reinforcing the durable earnings profile of this segment.

Increase in working capital due to higher cost of fuel Q2 FY26

Net cash provided by operating activities decreased from $23.2 million to $10.4 million

Mitigation:Strong balance sheet and significant liquidity with $710 million in credit lines.

What to watch in Q3 FY26

USPP acquisition closing

next quarter

Current expected to close later this year

Target Closed

Why it matters

The acquisition of U.S. Petroleum Partners is a major strategic move expected to significantly expand ARKO's scale, infrastructure, and earnings profile, reinforcing its long-term growth strategy.

We expect to close the transaction later this year.

Find out whether APC delivers this. Inve re-checks your case every morning.

Q&A highlights

How will the USPP acquisition's transport and terminal infrastructure offerings integrate with ARKO's footprint and generate synergies?

The USPP business is complementary, adding 400 dealers to ARKO's platform and expanding the network to 2,500 locations. The acquired fleet of trucks enhances last-mile delivery, especially in the Great Lakes region. The terminals provide fee-generating storage and greater flexibility for ARKO to source its own products, expanding participation across the fuel value chain.

“So my point is that everything that we're buying over here, which is adding another 400 dealers to basically to our platform, increasing our -- basically our business to 2,500 dealers is absolutely complementary.”

asked by Joshua Silverstein · answered by Arie Kotler

2 min read 6 chapters

Detailed narrative

Strategic USPP Acquisition

ARKO Petroleum Corp. announced the signing of a purchase agreement to acquire U.S. Petroleum Partners (USPP), a vertically integrated fuel distribution platform. This acquisition will add approximately 280 million gallons of annual wholesale fuel volume, increasing APC's fuel volumes by about 14%.

It will expand the company's network by over 400 wholesale locations to more than 2,500 total locations. The transaction also includes two fuel storage terminals and a fleet of trucks, enhancing infrastructure and logistics capabilities.

Financial Impact and Synergies of USPP

The USPP acquisition is expected to be accretive and contribute approximately $30 million of annual adjusted EBITDA, enhancing discretionary cash flow. Synergies are anticipated to begin in 2027, with opportunities for additional operational efficiencies. The consideration for the acquisition includes $205 million in cash plus the cost of inventory, along with $30 million in Class A common stock held in escrow, subject to USPP achieving certain EBITDA-based financial targets.

Balance Sheet and Capital Allocation

APC maintains a strong balance sheet with a leverage ratio of 2.2x net debt to adjusted EBITDA at quarter-end, well below its post-IPO target of 2.5x. The company has significant liquidity, with approximately $710 million available under its credit lines.

Following the USPP acquisition, the pro forma Net Debt to Adjusted EBITDA is expected to be in the range of 3x to 3.5x, remaining comfortably within the communicated target range of 3x to 4x, reflecting disciplined capital allocation.

Wholesale Segment Performance

The Wholesale segment reported a 3.7% increase in fuel contribution to $26.3 million for the quarter. This growth occurred despite a 4.6% decline in wholesale gallons to 240.8 million, primarily due to incremental dealer locations resulting from ARKO Corp.'s ongoing dealerization program.

The blended fuel margin improved to $0.109 per gallon from $0.101 in the prior year, benefiting from higher prompt pay discounts on increased fuel costs.

Fleet Fueling Segment Performance

The Fleet Fueling segment's fuel contribution was $17.1 million, a slight decrease from $17.8 million in the prior year. Fleet fueling gallons were slightly up at 36.4 million. The blended margin was $0.469 per gallon, down $0.02 from the prior year, reflecting a more normalized margin rate and compression due to index prices declining faster than inventory costs.

The company continues to invest in new cardlock locations, with 3 opened and 17 in development for 2026.

GPMP Segment and Operational Highlights

The GPMP segment's fuel contribution from related party locations was $11.5 million, a slight increase from $11.3 million last year. Related party gallons totaled 191.4 million, a decrease from 225.3 million gallons in the prior year, driven by the conversion of ARKO retail sites to dealer locations.

The company declared a quarterly dividend of $0.50 per share, consistent with its annual target of $2 per share, reinforcing its commitment to shareholder returns.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.