APC — Q2 2026 Financial Report Analysis

Lower interest costs, not fuel sales, lifted APC's second-quarter profit

ARKO Petroleum Corp. (APC) is the fuel-distribution business that ARKO Corp. floated on Nasdaq on February 13, 2026. It buys gasoline and diesel and delivers it to about 3,500 locations: independent dealer gas stations (wholesale), unstaffed truck-fueling sites called cardlocks (fleet fueling), and almost all of its parent ARKO's own convenience stores (the "GPMP" segment). Most of its income is a fixed or near-fixed number of cents per gallon, so the revenue line mostly tracks the price of fuel.

In the quarter ended June 30, 2026, total revenue rose 27.4% to $1.84 billion. Net income rose 22.0% to $12.2 million. Neither number says much about how the business itself did. Revenue grew because fuel was more expensive: the 10-Q says it was "attributable primarily to an increase in average price of fuel", while fewer gallons were sold. Operating income, the profit from running the business before interest and tax, slipped to $23.5 million from $23.8 million. Almost all of the profit gain came from lower interest costs after APC used its IPO money to pay down debt. Diluted earnings per share fell from $0.29 to $0.26, because there are now about 36% more shares.

At a glance

• Operating income $23.5M, down 1.1%. The core business was roughly flat. Stations converted from ARKO's own stores to dealers added profit, and weaker margins at sites APC already supplied took some away.
• Net interest expense $7.2M, down from $10.4M. APC used the IPO money to repay about $206.7 million of its Capital One credit line. That saved about $3.2 million before tax in the quarter, more than the whole $2.2 million rise in net income.
• Discretionary Cash Flow $27.1M, up 12.0%. This is the company's own measure of cash available for dividends, debt and deals. The new $0.50 quarterly dividend costs about $23.8 million a quarter on roughly 47.6 million shares, so it is covered about 1.1 times.

Key figures

*Our sum of the gallon figures in each segment table (wholesale fuel-supply and consignment, both kinds of cardlock, and GPMP sales to ARKO stores). It leaves out GPMP's internal sales to APC's other segments, so no gallon is counted twice.

A 1.3% operating margin (the share of revenue left after running the business) looks very thin. That is normal for fuel distribution: revenue includes the full pump price of fuel that APC passes straight through. Margin per gallon, shown below, says more.

What happened in each segment

All three segments grew. Consolidated operating income still fell, because company-wide general and administrative costs rose 13.2% (mostly share-based pay granted to directors and management after the IPO) and depreciation rose 10.6%. Neither of those costs is assigned to a segment.

Wholesale. The growth came from ARKO's restructuring, not from more demand. ARKO converted another 21 of its own stores to dealer-run stations in the quarter, 471 since 2024. When a store converts, APC keeps supplying the fuel but now also books rent and site costs. Other revenues rose $4.5 million and site operating expenses rose $4.2 million in the segment. On the existing network, the release says operating income was "reduced... at comparable wholesale sites." The two parts of wholesale went in opposite directions:

• At fuel-supply sites (APC sells fuel to the dealer at a set markup), margin rose from 6.3 to 7.6 cents per gallon. The company says this was "primarily as a result of increased prompt pay discounts related to higher fuel costs." In other words, discounts APC earns from its own suppliers grow when fuel is expensive. That help depends on the fuel price, and it would shrink if prices fall.
• At consignment sites (APC owns the fuel until it is sold at the pump), margin fell from 30.6 to 29.1 cents. Pump prices fell faster during the quarter than the average cost of the fuel APC already had in its tanks.

Fleet fueling. Gallons were roughly flat at 36.4 million. Fuel profit fell $0.7 million. At third-party cardlocks, margin halved from 21.2 to 9.0 cents. The company blames unusually high margins a year earlier plus the same squeeze from falling prices. Segment profit still edged up, because other revenues rose $0.7 million and site costs fell $0.2 million. APC plans 20 new fleet sites in 2026: one opened in March, two in July and 17 are in process.

GPMP. Gallons sold to ARKO's stores fell 15.1% to 191.4 million. Part of that is stores moving to the wholesale segment as they convert, and part is what management calls "the challenging macroeconomic environment." Profit still rose, because the fixed markup APC charges its parent went from 5.0 to 6.0 cents a gallon. That rate is set by a related-party contract, the fuel distribution agreement signed at the IPO, not by the market.

What the headline numbers hide

• The profit gain is a financing story. Net interest fell by about $3.2 million. At the quarter's roughly 25% tax rate (25.1% this year, 25.3% last year), that is worth about $2.4 million after tax, slightly more than the $2.2 million rise in net income. With the tax rate unchanged and operating income slightly down, the business's own earnings were flat to slightly lower.
• Per-share earnings fell. The IPO sold about 12.6 million new shares at $18. Diluted shares rose from 35.0 million to 47.6 million, so EPS fell 10.3% even though total profit rose 22%.
• Cash lagged profit. Operating cash flow was $10.4 million in Q2, against $12.2 million of net income. For the first half it was $17.0 million against $20.3 million. The cause is working capital: receivables (money customers owe APC) rose from $80.8 million at year-end to $142.0 million, up 76%, while first-half revenue rose 14%. Higher fuel prices make every invoice bigger, and payables rose $32.7 million at the same time, which offset part of it. This is mostly a price effect, not a sign customers are paying late, but it does tie up cash while fuel stays expensive.
• Adjusted figures are close to GAAP here. EBITDA (earnings before interest, tax, depreciation and amortization) of $38.2 million becomes Adjusted EBITDA of $39.8 million after adding back $1.0 million of share-based pay, a $0.4 million loss on asset disposals, $0.2 million of acquisition costs and other small items. Discretionary Cash Flow ignores working-capital swings by design. That is why it rose 12% while operating cash flow fell 55%.
• A large share of profit depends on ARKO. GPMP's $26.6 million of segment income comes from supplying ARKO's stores at a contracted markup, and ARKO also provides APC's back-office services for fees. Those fees are set between related companies, not negotiated at arm's length.
• No unusual one-offs in either year. IPO costs ($0.6 million) fell in earlier periods and are not part of Q2.

Takeaway: APC's first full quarter as a public company showed a business that was roughly flat (operating income down 1.1%) with a much lighter balance sheet. Net income rose because the IPO paid down debt, not because more fuel was sold. Gallons fell about 9%, and the margin gain at fuel-supply sites relies on high fuel prices. The flat core is why the USPP acquisition matters for growth.

The acquisition: U.S. Petroleum Partners

On August 4 APC agreed to buy substantially all the assets of U.S. Petroleum Partners (USPP). USPP is a fuel supplier based in Royal Oak, Michigan, with supply rights to more than 400 dealer stations, two fuel terminals (Novi, Michigan and Toledo, Ohio) on the Buckeye pipeline, and more than 50 trucks and trailers. The price is about $205 million in cash plus the value of inventory, funded from APC's credit lines. APC will also issue $30 million of Class A stock into escrow. USPP receives those shares only if the business meets EBITDA targets in its first four full quarters; the main targets are $31.7 million of EBITDA plus $2.2 million from certain fuel-related components.

Management expects about 280 million more gallons a year (about 14% of trailing volume) and about $30 million of annual Adjusted EBITDA. That works out to roughly 6.8 times EBITDA in cash, or about 7.8 times counting the escrowed stock, before inventory. Net Debt was 2.2 times trailing Adjusted EBITDA at June 30; APC's Net Debt counts financing leases and other financial liabilities, not just loans. Adding $205 million of borrowing and $30 million of EBITDA would take it to roughly 2.9 times by our arithmetic, before inventory. No 8-K reporting the deal's closing had been filed by early October.

Outlook

APC reaffirmed the guidance it first gave in March: about $156 million of Adjusted EBITDA and about $110 million of Discretionary Cash Flow for 2026. First-half results were $76.2 million and $52.1 million. Hitting the full-year numbers needs about $79.8 million of Adjusted EBITDA in the second half, close to the $39.8 million earned in Q2, repeated twice. Discretionary Cash Flow needs $57.9 million, a little above the H1 pace. The guidance was not changed for USPP, which had not closed.

Our view: guidance looks achievable without USPP, because more ARKO conversions are coming (about 70 more sites committed or already converted since quarter-end). The two risks are the ones visible this quarter. First, gallons keep falling at existing sites. Second, the prompt-pay-discount tailwind at fuel-supply sites reverses if fuel prices drop. The dividend is the clearest test: at $2.00 a year on roughly 47.6 million shares (about $95 million), the $110 million Discretionary Cash Flow target covers it about 1.16 times. That leaves little spare cash to pay for USPP, so the next few quarters should show debt rising after the deal closes. In Q3, watch whether the new USPP volume shows up and whether comparable-site margins recover.

The full 10-Q for the quarter is the source for the MD&A explanations quoted above; the segment margin and site-count detail is from the earnings release filed the same day.