Arko - Earnings Call - Q4 2021
February 23, 2022
Transcript
Speaker 0
Greetings, and welcome to the Arco Corporation Fourth Quarter and Full Year twenty twenty one Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Ross Farman, Vice President of Investor Relations and Government Affairs.
Thank you. You may begin.
Speaker 1
Thank you. Good morning, and welcome to Argo's fourth quarter and fiscal year twenty twenty one earnings conference call and webcast. On today's call are Ari Kotler, Chairman, President and Chief Executive Officer and Don Bissell, Chief Financial Officer. By now, everyone should have access to the company's earnings press release that was furnished to the SEC this morning and is also available on the Investor Relations section of Arco's website at arcocorp.com. Unless otherwise stated, during our call today, we are comparing results to the same periods in 2020.
All fourth quarter and fiscal year twenty twenty one financial information is unaudited. And during this call, management may make forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words such as will, may, expect, plan, intend, could, estimate, project, and similar references to future periods. These statements speak only as of today, are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements. Today's press release and the company's filings with the SEC include detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.
The company expects to file its annual report on Form 10 ks for the year ended 12/31/2021, on 02/25/2022. Except as required by federal securities laws, Arco does not undertake to publicly update or revise any forward looking statements subsequent to the date made as a result of new information, future events, changing circumstances or for any other reason. Please note that on today's call, will refer to non GAAP financial measures, including same store measures, EBITDA, adjusted EBITDA and adjusted EBITDA net of incremental bonuses. While the company believes that these non GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for reconciliations of our non GAAP measures to the most directly comparable GAAP measures.
I would also like to note that we are conducting our call today from our respective remote locations. As such, there may be brief delays, crosstalk, or other minor technical issues during this call. We thank you in advance for your patience and understanding. On today's call, Ari will review the quarter and year ended 12/31/2021. Don will then review our financial results in more detail before they take your questions.
And now I would like to turn the call over to Ari.
Speaker 2
Good morning, everyone. We are pleased to report strong results for the fourth quarter and fiscal year 2021. For the full year, adjusted EBITDA net of incremental bonuses was a record $256,600,000 Fourth quarter twenty twenty one adjusted EBITDA net of incremental bonuses was $58,400,000 a 44% increase versus the 2020. We have undertaken long term strategic initiative in our convenience stores and in our wholesale division that we believe position us well for considerable long term profitable growth. Inside the store, merchandise margin expanded two ninety basis points in the fourth quarter to 30%.
We continue to drive margin expansion broadly and in key categories. We also saw considerable margin growth in grab and go and frozen food, a strategic pivot that has been a hit with our customers and currently continues to see substantial growth. In fuel, we were able to grow our retail margin to 33.5¢ per gallon for the fourth quarter despite rising fuel prices. In May, we acquired 60 Express stop stores and gas stations in Michigan and Ohio. In November, we acquired 36 company operated Andy Mark convenience stores and gas stations, plus the development sites all located in North Carolina.
And during 2021, we rapidly integrated and realized significant synergies with Empire. For the year, this acquisition added $36,800,000 of merchandise contribution and $53,900,000 in retail fuel profitability. We recently announced that we have agreed to buy the cardlock business and certain other assets of Quarles Petroleum. Quarles footprint is in prime locations along with the Northeast And Southeast Seaboard, our own territory. These are easily accessible commercial sites exclusively for fleet fueling of light industrial trucks and commercial vehicles.
This is an exciting and unique deal that we believe will drive strategic growth. With 185 cardlock sites, Quartz is the largest fleet fueling cardlock operator on The US East Coast. This is a business that we believe cannot be replicated today. The acquisition of this asset complements and expands our core wholesale strategy as a mature fleet fueling platform and boost our supply and distribution capabilities within our 33 states and Washington D. C.
Fuel supply footprint. At the time of signing the asset purchase agreement, using estimated forward looking non GAAP measures, the company expects that this acquisition will approximately $17,300,000 of adjusted EBITDA on an annualized basis after incremental rents of approximately $7,700,000 to be paid to Oak Street, the private equity real estate firm that will fund approximately $130,000,000 of the purchase price. The company intends to finance from its own sources the value of inventory acquired at the closing and the remaining approximately $40,000,000 of this purchase price. Most importantly, we believe we can rapidly synergize and strategically grow this business. Moving to some of our strategic longer term initiatives.
On a remodel and organic growth opportunity, we believe that we have an expensive embedded opportunity to enhance our existing store base through multiple organic growth initiatives. We constantly monitor macroeconomic factors such as rising material costs, shortages, construction industry price fluctuations and label shortages. And we closely analyze key performance indicators in our remodel program. Two stores were remodeled in 2021, and we completed the raze and rebuild in Rock Hill, South Carolina in November 2021. We have seen encouraging results so far from these locations.
We opened one new Dunkin' location in 2021. Six stores are undergoing remodels to be completed in the 2022. We plan to break ground on a new To Industry store in Atlanta, Texas in the 2022. And we are planning to open additional Dunkin' location in 2022. We also routinely remodel our Dunkin' location.
While we plan our pace moving forward, including review of further raze and rebuild and MTI opportunities, there are several organic growth strategies that we intend to deploy in 2022. I will detail our key areas of focus now. One area of focus is quick serve restaurant partnerships. Last December, we launched a pilot program with two in store Sabahra's Pizza. Pizza is one of the top food service items in convenience stores.
We think this is an excellent program that aligns with key elements of our remodel program and enhance the in store experience. Customer feedback has been extremely positive. Based on preliminary results, including very promising early sales and margin growth, we are planning to build out approximately 50 more in store Sbarro in 2022. Importantly, because of our partnership with Sbarro, we plan to move forward very fast with this initiative. The second area that drives growth and enhance the overall customer experience has been to cup coffee.
Consumption habits are changing. We believe that being in the always fresh hot, and iced coffee business twenty four hours a day, seven days a week is very important. We are rapidly expanding this program with an initial target of 525 stores. This program eliminates waste and allows for the store associate to spend less time making coffee and more time on customer service. We are also working to expand our successful grab and go freezer strategy to even more stores.
Another long term strategic initiative that we are excited about is our fast rewards customer relationship marketing program. We're investing heavily in this program. We know our most loyal customers bid just more often and have larger baskets. One area of investment is the upgrade of our mobile app. This will be a significant redesign with a better user experience.
The new app will also enhance analytic capabilities to make us even more competitive across the footprint. This is important work that we believe will enable even deeper engagement and connection with our customers to drive trips, sales, and overall enrollment in the rewards program. There are exciting new features on the app. Customers will have the ability to order through the app for in store pickup or delivery. There'll be in app messaging and advertising, customer specific offers and deals.
We will also enable geofencing for local fuel pricing and brand customization so user are sent to their local brands such as Fast Smart, Easy Mart, and Village Pantry, just to name a few of our community brands. On our ESG and EV initiative, we have two important areas where we continue to make progress. We take our responsibility to society very seriously. We believe that we manage this company in a highly responsible manner. It is an expectation of our stakeholders, including the communities where we operate, that we adopt formal environmental, social, and governance practices.
We are working with the global service firm to help us establish an ESG framework aligned with the global standard. We will keep you updated on our progress. We also take the EV opportunity very seriously. Arco successfully won grant for EV chargers to be installed in two stores in Colorado that we expect will come online in third quarter twenty twenty two. We are applying the learning from this process to future activities and building our capabilities.
While we believe near term adoption will center around allocation on high traffic corridors, we are pursuing grants across our footprint. It is important to remember that our stores are primarily located in smaller towns and rural areas. As demand builds, we believe we are well positioned to make EV charging a serious part of our business and make EV drivers loyal customers of our stores. We also continue to pursue acquisitions. As you know, we look at many potential transactions.
After more than 20 deals since 2013, we believe we have a winning strategy and can continue to acquire and successfully integrate at any scale. We have many levers for growth and we are very opportunistic and deliberate about pursuing them. We always consider the best way to strategically deploy capital in a highly disciplined manner. From enhanced marketing initiative to food service opportunities, we are highly focused on growth. We will continue to pursue acquisition of convenience stores as well as bolt on acquisition like the Carlslook, World Assets.
And in wholesale, we continue to pursue renewals and new independent dealer businesses. Today, we announced that our Board of Directors declared our first ever quarterly dividend of $02 per share of common stock and authorized a share repurchase program for up to an aggregate amount of $50,000,000 Our ability to return cash to our stockholders is consistent with our capital allocation framework and reflects our confidence in the strength of our cash generation ability and strong financial position. We ended fiscal twenty twenty one in a very strong position. We were able to successfully grow our business while navigating a challenging environment. We look forward to building on these successes in 2022 and behind.
I would like now to turn the call over to Don, who will walk you through our financial results in detail.
Speaker 3
Thanks, Ari. It's great to be speaking with you all today about both our strong fourth quarter and full year 2021 results. Beginning with the quarter, total revenue excluding fuel was $418,000,000 a 6% increase from the prior year period. Merchandise margin dollars increased by $17,100,000 versus prior year, while merchandise margin increased to 30% from 27.1%, largely due to our continued strategic efforts in the high growth categories such as frozen food and grab and go. Retail fuel profitability, excluding intercompany charges for the quarter, increased $16,600,000 compared to the prior year period.
With Empire, Express Stop and Handy Mart accounting for $9,300,000 of the increase, coupled with same store fuel profit increasing by $7,500,000 Retail fuel margin in the quarter was $0.03 $35 per gallon versus $0.02 $93 per gallon for the prior year. For the 2021, wholesale fuel profitability, excluding intercompany charges, increased $7,600,000 compared to the prior year, with most of the growth result of the Empire acquisition. Fuel contribution from fuel supply locations grew by $5,000,000 for the quarter compared to the prior year, driven by an approximate 15,000,000 gallon increase in fuel volume and a 2.1¢ increase in fuel margin per gallon for these locations versus the 2020. Fuel contribution from consignment agent locations grew $2,600,000 for the quarter compared to the prior year due to an increase in fuel margin cents per gallon of $0.65 Volume was flat compared to the prior year period. Fourth quarter store operating expenses were up $20,700,000 or 14% versus prior year due to incremental expenses related to the Express Stop, Handy Mart and Empire acquisitions, in addition to higher credit card expenses and increase in expenses at same stores.
General and administrative expenses increased $3,800,000 or 13% for the fourth quarter as compared to the prior year, primarily reflecting support for our recent acquisitions as well as annual wage increases, incentive accruals, and stock compensation expenses. Net interest and other financial expenses decreased $4,300,000 to $16,200,000 in the quarter, primarily due to fair value adjustments or warrants and a net period over period increase in foreign currency gains. Net income for the quarter was $12,900,000 versus a loss of $6,200,000 for the prior year. Adjusted EBITDA, net of incremental bonuses for the quarter, was $58,400,000 an increase of 44% compared to the 2020. Turning to our full year results.
Total revenue excluding fuel was 1,700,000,000 a 9% increase from the prior year. Merchandise margin dollars increased by $66,600,000 versus the prior year. The increase in merchandise margin dollars was primarily due to the acquisition of the Empire, Express Stop and Hanymore businesses coupled with 1.6 same store merchandise sales increase. Merchandise margin increased two ten basis points to 29.3% as a result of changes in the sales mix and improved purchasing economics. Retail fuel profitability, excluding intercompany charges for the year, increased $50,800,000 as our strong fuel margin capture of $0.03 $37 per gallon versus $0.03 $19 per gallon in the prior year enabled us to more than offset same store volume losses of 1.3%.
For the full year, wholesale fuel profitability, excluding intercompany charges, increased $66,500,000 compared to the prior year, with most of the growth a result of the Empire acquisition. Fuel contribution from fuel supply locations grew by $37,400,000 compared to the prior year, driven by an approximate $6.00 5,000,000 gallon increase in fuel volume and a 1.3 increase in fuel margin per gallon for fuel supply locations versus 2,020. Fuel contribution from consignment agent locations grew $29,100,000 compared to the prior year due to increases in both volume of approximately 106,000,000 gallons and fuel margin cents per gallon of 3.5¢. Store operating expenses for the year were up 18.4% versus prior year due to incremental expenses related to the Empire acquisition and our 2021 acquisitions and increased expenses at same stores. General and administrative expenses increased 32% for the year compared to the prior year, primarily due to expenses associated with the Empire acquisition, annual wage increases, incentive accruals, and stock compensation expenses.
Net interest and other financial expenses increased by 21,300,000 to $71,200,000 for the year, primarily due to higher interest expense for outstanding debt, $4,500,000 additional interest for the early redemption of the Israeli bonds, $6,300,000 write off of deferred financing costs, and $6,000,000 fair value adjustment of our warrants, net of period over period increase in foreign currency gains recorded of $8,100,000 Full year net income was $59,400,000 compared to $30,600,000 for the prior year. Incremental earnings in 2021 were related to strong contribution from the Empire acquisition, coupled with strong same store merchandise gross margin with partial offsets coming from higher expenses, including credit card fees and depreciation related to the acquisitions. Adjusted EBITDA, net of incremental bonuses for the year, was $256,600,000 an increase of $73,200,000 or 40% compared to 2020. Increased merchandise contribution at same stores and approximately $78,000,000 of incremental adjusted EBITDA from the 2021 acquisitions and the Empire acquisition were partially offset by higher credit card fees, a slight decrease in gallons sold and fuel profit at same stores. Our balance sheet remains very strong.
On 12/31/2021, our total liquidity was approximately $754,000,000 consisting of cash and cash equivalents and short term investments of approximately $310,000,000 and approximately $444,000,000 available under our lines of credit, with net debt excluding capital leases was approximately $4.00 $8,000,000 putting our net leverage at 1.6 times. For the full year, net cash provided by operating activities was $159,200,000 Capital expenditures were approximately $73,000,000 for the year, representing capital expenditures of $226,200,000 net of $152,900,000 of proceeds paid by Oak Street for two transactions accounted for as sale leasebacks and the purchase of certain fee properties compared to $44,600,000 in the prior year. Today, we announced that our Board of Directors declared our first ever quarterly dividend of $02 per share of common stock. This is be paid on 03/29/2022 to stockholders of record as of 03/15/2022. The company's board of directors also authorized a share repurchase program for up to an aggregate amount of $50,000,000 of our outstanding shares of common stock.
As of 12/31/2021, there were 124,400,000.0 shares of our common stock outstanding. We ended the year with fourteen oh six retail sites and sixteen twenty eight wholesale sites. I'm pleased that we have demonstrated our strength and capabilities through our strong financial results for the year. We continue to execute as we navigated through a constantly changing consumer environment, and we believe we are positioned to take our business to the next level. And with that, I'll turn it back over to Ari.
Speaker 2
Thanks, Don. I'd like to thank our over 11,000 team members for their exceptional efforts to exceed our customers' expectation. That's why we achieved these excellent results. We are excited to continue to execute, drive growth and increase stockholders' value. We believe that we are a unique business and differentiated market leader, and I'm pleased with the progress we have made so far.
Thank you for joining the call today and your interest in Arco. I would now turn it over to the operator for questions. Operator?
Speaker 0
Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Kelly Bania with BMO Capital Markets. Please proceed with your questions.
Speaker 4
Hi, this is Ben Wood on for Kelly. Thank you for taking our questions. So first off, in light of guidance, could you explain some of the puts and takes in the model for 2021? Maybe what came in better than expected or lighter than expected? Seems like Empire and fuel margins were a little better, but gallons, particularly same store gallons might have been lighter.
Hoping you can help us think about how the model changed over the course of the year and then maybe where you see the most opportunity for upside going forward in 'twenty two.
Speaker 2
Sure. I will let Don take over the question for the model.
Speaker 3
Yeah, sure. And again, without looking at the specific, numbers, from BMO, just looking at consensus, I mean I think the beats were in wholesale fuel margin and retail. I think the takes were in SG and A overall. I saw those two as the biggest differences in the model.
Speaker 4
Okay. Thank you. Thank you. And then, the fuel margin outlook for 2022, hoping maybe you could speak a little bit about that. We're thinking with, like, the political environment and crude prices, they're pressuring margins recently.
But is it reasonable to think that CPG margins could be flattish or north of 30 in 2022? And then if kind of margins do rise with this, higher oil prices, what what impact of higher gas prices would we see, on the consumer, whether it's trips or basket size? Thank you. Sure.
Speaker 2
Thank you for your question. Well, you know, if you're really looking on 2021 for a second and you're looking on the same store gallons at 2021, so the gallons were slightly down a little bit for the quarter. However, as you can see, the retail margin expand to 33.5¢ per gallon versus the 29.3, you know, last year same time. You know, I can't talk about, you know, about the situation in Ukraine right now. I think it's too early to talk about any, effects from the situation, but I just wanna remind everybody that we do not take any commodity position.
You know, it's very you know, it really remind me what happened in 02/2008, you know, similar situation when oil went from, you know, $60.80 to a $140, in a very short order. You know, we saw very, very, you know, high prices. But, eventually, you know, those prices actually settled down, at the end of the day. And there is no question that the minute price of oil goes up, you know, people maybe, drive less, but that's, you know, that's in terms of fuel. However, you know, when it's you know, when we're talking about the store and especially now in light of COVID nineteen, you know, we already see that people are, you know, spending less time on the road.
They're coming, less time to the store. However, I mean, their basket is much larger than the basket that we actually saw before. So I don't have any reason to believe that anything is gonna change. You know, that's me. That's my belief right now.
I don't think anything will change, between '21 to '22, you know, for the time being. Thank you. That's helpful. Thank
Speaker 0
you. Our next questions come from the line of Bobby Griffin with Raymond James. Please proceed with your questions.
Speaker 5
Good morning, buddy. Thank you for taking my questions.
Speaker 0
I guess
Speaker 5
first, Ari, there's a lot of moving parts, you know, with gallons moving around, with the variance breaking out different things and then margins. But, you know, when you look at the year to date period of January and February 2022 and then compare it to kind of 4Q, are you starting to finally see some leveling out of the gallons from retail perspective? And maybe we're getting back to closer to normal. Not back to 19 levels, of course, but we're starting to see less variability on a weekly basis or a monthly basis. Is that fair?
Speaker 2
Well, you know, Bobby, I can't really talk about q one, but what I can tell you is that, you know, you see the trend in q four. And, obviously, in q four, you saw that, you know, basically, our gallons are almost flat to the same basically last year. So, yes, I think people are driving more often versus and I think, you know, as COVID continue to, you know, to get lighter over here, there is no question that we see gallons coming back. The one thing I will refer to is that, yes, gallons are coming back, but as you can see, the margin continue to be very, very strong in light of those, basically, gallons coming back. So I think that's the only difference probably from what we saw in 2021, first quarter to 2022.
Speaker 5
Okay. That's very helpful. And then we continue to show great progress on the merchandise margin. You know, another great quarter up close to 300 basis points. I think 290 basis points to be exact.
You know, where are we in the journey what you're working on there? I know there's multiple initiatives going on. But, you know, when we think about 2022, is is it gonna be a year more modest improvement, or can we still is there still a lot of low hanging fruit where we could see kind of the big, step function changes in the merchandising margin?
Speaker 2
First of all, it's a great question because, you know, as you mentioned and as you as I detailed earlier, you know, if you're looking on our performance, this is not a onetime show. This is a a long term initiative. You know, we started, and I'm gonna just gonna use a couple of examples because I think it's very important, to basically, to to to mention them. So the first one is, you know, if you remember all year 2021, I was speaking about our initiative of grab and go and frozen food. And if you're really looking on this category in q four, you know, we saw a 16% I'm sorry, 1,600 basis points increase in frozen food in q four versus q four twenty twenty.
We saw a 580 basis points increase in grab and go in q four twenty twenty one. And if you remember, we started this initiative at the beginning of 2021. And now, you know, we basically completed the initiative. We have 600 and close to 690 freezers that we added and 525 grab and go cases that we added. And I think that's one of the key things that actually drive those margin substantially.
You know? The margin on frozen food for q four was 39.1%, and the margin for grab and go was close to 39% in q four. The same thing we see in some other categories. You know? One of the best categories for the quarter was PacBev.
I mean, PacBev, we saw a margin increase of a 130 basis points, and we saw a sales increase of 6.3%. Why? Because people spend more time out. People are going out and basically increasing their purchases. So as I said, I think those are really, the categories that are here to stay.
I don't need to tell you that, you know, nicotine is one of, one of the areas that we we like to concentrate. You see that consumptions on cigarettes is going down quarter after quarter, year over year. However, if you're looking on our nicotine category, the OTP category, the or the OTP category grew 900 basis points in q four, and we saw a sales increase of 8.4. So, you know, when you're talking about those categories, when you're talking about the center of the store, you know, the store category, that's really what drove margin. In terms of, you know, what do we have moving forward, you know, as I detailed earlier, you know, we have the, you know, the six remodel and, you know, the NTI that are coming on board.
I mentioned the 500, and this is another big initiative for 2022, coffee. You know, we wanna make sure that, you know, we serve coffee twenty four hours a day, seven days a week. And since consumer habits change dramatically, you know, people are not you know, a lot of people are still working from home, and they're not, you know, driving in the morning to the convenience store. They may show up a little bit later. We wanna be in the fresh coffee business.
We are, installing 525 bean to cup coffee machines. So we're gonna have coffee fresh coffee twenty four hours a day, seven days a week. In addition to that, of course, you know, we are adding 50 per barrel. I mean, I don't need to tell you. You know, pizza is the number one, basically, the number one food service in a convenience stores.
And, you know, so far from the results that we saw, you know, we have a great relationship with Sbarro. We started that last year, and, you know, we are adding 50 Sbarro pizza in 2022. So, you know, all of those things that I mentioned, as you can understand, those are, you know, the things that will drive margin and keep margin higher, you know, moving forward. And that's at least the trend that we see over here.
Speaker 5
Okay. I appreciate that detail. Best of luck here in 2022.
Speaker 2
Thank you.
Speaker 0
Thank you. Our next questions come from the line of Markus Schracken with Stifel. Please proceed with your questions.
Speaker 6
Hey, guys. Good morning. This is actually Chris Arms on for Mark. Just wanted to start off here on the cost side. Obviously, in an inflationary environment here.
So if you could just talk a little bit to kind of success in passing through inflation in the store and then maybe also comment on what you're seeing in terms of wage inflation.
Speaker 2
Sure. Sure. I'll start with, you know, with inflation. I mean, obviously, everybody knows when you have a 7% inflation, you know, this is of course, most most of that is associated with increase of quotes from manufacturers. And, you know, at the end of the day, what we have to do is basically to cast those calls to consumers.
You know, it also include, you know, freight and supply chain issues that everybody is, you know, foreseeing, including ourselves. I think we've been very, very successful, remaining competitive. Even though we are passing prices to the consumer, at the same time, we make sure that we are competitive, on our prices, and at the same time, know, we're maintaining maintaining our margin over here. And, you know, just to remind you, Chris, you know, our strategy was always to, you know, maintain margin rates, and penny profit. That was always the strategy.
And, again, this is what we have no choice. This is the thing. I think the one thing that I can talk about labor is that, you know, our labor model, I think it's a little bit different than some of the, you know, some of the competition. We can run you know, our average store is 2,500 to 3,000 square foot per store. And, you know, we can run some of those stores, with one, to two, basically, people, to the extent we see a crunch over here.
And, you know, there is no question that, you know, that, you know, that this is a very, very tight labor market. But, you know, in order to to manage that, and we manage it very well, you know, we have program to keep our you know, to keep us competitive. We have, like you know, we have sign on retention bonuses. We have, you know, some all kind of program in order to make sure that, you know, our stores will have the appropriate labor to run those stores.
Speaker 6
Got it. Thank you. If I could just follow-up on M and A. Congrats on the acquisition. It does kind of seem like the pace of acquisitions is increasing.
Ari, is that evidence of maybe market multiples are becoming more reasonable? And then also on the specific acquisition, primarily a fuel play, How do you guys think about kind of an acquisition like you announced today versus those with more of an in store footprint?
Speaker 2
Sure. Sure. Sure. Sure. Good question.
So, you know, first of all, as you saw in 2021, you know, we, we completed the Empire acquisition at the 2020. So, you know, I would say that we had we spent a lot of time to make sure that, you know, we synergize the two companies, and we make sure that, you know, we capture those synergies, after, you know, doing such a large acquisition at the 2020. At the same time, you know, we did two acquisitions, you know, 60 stores in May, the Express Up acquisition in the Midwest. We completed another acquisition in November, 36 stores, great stores, Andy Marge brand, over a hundred years brand in the car lineup. And while we're doing that, you know, we start working on the Quoz acquisition.
You know, the the interesting this is a very unique deal that we believe will actually drive strategic growth for us. You know, the team did a great job over here. And, you know, what's interesting about this particular deal is that this is the largest cloud look operator on the East Coast, as I mentioned. And remember, the East Coast, I mean, I'm talking Virginia, North Carolina. This is really our own territory.
So, you know, the the good thing about this business is that, you know, this is a very attractive diesel and gasoline mix. I mean, approximately 80% of those stores actually of those locations are actually selling diesel to to basically to to to large trucks. It's a lot of you know, it's basically the largest East Coast fleet business, that is actually there, and it's gonna be very, very difficult to replicate that. So, you know, that's that's something that, you know, we felt that can help us to actually boost our business in respect to, you know, to basically to Empire. You know, from a multiple standpoint, I think I mentioned it almost on every call.
It's not the amount of acquisition. It's basically the quality of the acquisition. And as I refer on the call, you know, we are adding $17,300,000. You know, when everything is set and done, we are adding $17,300,000 of adjusted EBITDA, and we end up paying $40,000,000 when everything you know, after rent, after we're utilizing the line from Oak Street, I mean, we are paying $40,000,000. So in if you're really looking on an EBITDA multiple for us, you know, presynergies, you know, you're talking about a little bit over 2.3, 2.4 times.
And and I think that's that's the one thing that I think different between us and some others. I mean, we know or we do a lot of accretive deals, to basically to enhance our profitability over here. So I I don't think anything's changed in terms of multiples. I just think that, like, every year, the beginning of the year, there is a slowdown in acquisition. And I think after Q1, usually the beginning of Q2, people basically start to basically to think about selling, and we see a lot of more opportunities coming in the second and the third quarter.
That's usually what we saw in the past.
Speaker 3
Yes. Chris, if I could add one other thing to what Ari said, and it is a unique acquisition. And you've probably passed a lot of these CARLux all throughout Richmond when you've been driving around. But again, as Ari said, it's 80% diesel. And while we are making efforts on EV, as you heard Ari talk about, we're doing two in Colorado and we believe we're going to jump on EV wherever there is.
We believe that the trucking side of this is going to be a later adopter of EV. So we think of this strategically as a good move for us because obviously there's more trucks on the road with things being ordered online, big fleet business. So we think there's less risk here, although we're not ignoring it. So we think it's a good strategic move for us.
Speaker 2
And just to finish on this line, Chris, remember, this is a 20 fourseven business, and all of those locations are unmanned location. So going back to what we discussed earlier about labor and inflation, I mean, that's one of the things we like about that that, you know, those locations are actually unmanned facilities, and they're built specifically for commercial fleets and light industrial vehicles that actually visit those locations.
Speaker 5
That's helpful. Thanks, guys.
Speaker 2
Of course.
Speaker 0
Thank you. Our next questions come from the line of William Reuter with Bank of America. Please proceed with your question.
Speaker 7
Good morning. I just have two. The first is I don't think I saw a CapEx expectation for fiscal year 'twenty two. Do you have an estimate of what you expect to spend this year?
Speaker 2
We don't put projections for 2022, but, you know, we can refer. If you want, Don can refer to, basically, to 2021, what we spend in 2021, if that's gonna be helpful for you.
Speaker 7
Yeah. I I think the
Speaker 2
best way, again, because we don't put our
Speaker 3
projections and, you know, you've heard our initiatives and what we're doing. So I would just look at our trend and just go from there. There's nothing specific we're going to put out in of projections of CapEx. But you've heard of efforts we're doing as already outlined with the Sbarros also outlining what we're doing on the remodels we have scheduled, the new to industry
Speaker 7
and also
Speaker 3
with the raze and rebuild. And again one of the things I want to point out too, and this is not something we specifically said, but did have not a lot, but roughly about $10,000,000 of our CapEx last year was spent on EMV, which we project we'll probably spend again this year. But that's not something that's going be going on and on and on. So you have different things going back and forth. We also spend about $9,000,000 in just purchase of land.
And we're opportunistic where we have rights of first refusal, we'll take them. So I think we're looking at capital allocation going forward. I will tell you roughly about one third of our CapEx of the 73,000,000 was from maintenance. The rest was from the investment.
Speaker 2
And I think that's very important to point over here. Sorry to jumping in. I think it's very important to point that if you're really looking on the net net CapEx dollars that we spend of $73,000,000, only $26,000,000 was really for maintenance CapEx, and the rest of it was investment CapEx, you know, including, you know, purchasing some pieces of real estate, the remodel that we mentioned over here, the, you know, the the the coolers and freezers and you know? So I think those are the things to think about it. So, you know, in terms of CapEx, you know, with all of the initiative, we at least lay down, you know, for 2022.
You know, I'm talking about 525 bin to cop coffee machine, an additional 50 borrowers. Those are not the big, big, you know, investment that you will see when you actually do a raze and rebuild.
Speaker 7
Okay. On the topic of raise and rebuild, I you know, when you guys did your high yield offering, that was certainly one of the an issue that you guys were pretty excited about. So I guess right now, you have six planned for the '22. Will you kind of evaluate the performance of those and then think about the pace with regard to the second half of the year?
Speaker 2
The answer is yes. This is you know, what we have to do is because you know, I don't need to tell you. You know, across the board, there's been a lot of shortages of material, construction increase. And we wanna make sure that, you know, we continue to do what we said we're gonna do, which is actually looking on return on capital. So, you know, we finished the first, you know, two stores, which those are really the, I'll call it, the the the blue the blueprint for the stores moving forward.
We finished the two. We had the the one store that we opened. And if you guys have access to our presentation that we published today, the first page of the presentation, the picture, this is a big the raze and rebuild that we actually just completed in 2021. The results so far are very, very promising. I mean, the store looks terrific.
The results are great. And, you know, to answer your question, what we're doing because of that, we are completing the six stores. We're gonna learn from those six stores. But at the same time, we are not waiting until we're gonna finish the six stores. That's the reason we decided to basically move forward with the 50 to borrow.
The investment, it's basically this is part of the remodel, as you know, with QSR. So we felt that this is a great opportunity for us to, you know, continue to expand our remodel with basically additional 50 to borrows that we're actually gonna build in and, you know, and, of course, some other initiatives that will help us to, of course, increase profitability and increase margin.
Speaker 7
Okay. And then just lastly for me. Sorry. I said I only have two. But the share repurchase authorization was a little surprising to me.
I view this as a growth story with lots of organic, opportunities to invest as well as potential m and a, that you've consistently pursued. I guess, what is the thought process on repurchasing shares versus some of these other initiatives that probably have or may have higher IRRs?
Speaker 2
Sure. Sure. Sure. Sure. So I'll basically, you know, just for your benefit, you know, over the past two years, we generated over $300,000,000 in cash from operation.
So this is something to make sure that, you know, you're aware of that, everybody aware of that. And in lieu of that, our liquidity is well over 700,000,000 right now. So nothing is really going to change from an, basically, growth strategy or, you know, this is not something gonna change. You know, what you know, if all of the remarks that I made earlier and, of course, you saw the results for 2021, you know, we are performing very, very well. We show great results.
And, you know, with our cash flow right now, at this current price, I mean, we believe that we have a good opportunity. As simple as that. I mean, that's not going to take away any of the other initiative or any other things that we actually said last year and this year. We're gonna continue to do that. But, you know, we have plenty of liquidity out there between, you know, over $700,000,000 in liquidity and over $750,000,000 on the commitment with Oak Street, you know, we felt that, you know, the price is just it's a great price for us.
And, you know, we would like to, of course, utilize this opportunity.
Speaker 7
Understood. All right. Thank you.
Speaker 2
Of course. Thank you.
Speaker 0
Thank you. There are no further questions at this time. I would like to turn the call back over to Ari Kahler for any closing comments.
Speaker 2
Thank you very much, everybody, for participating. And I'm very excited. This is just the beginning of the year. And as you can see, you know, we are just in February, the February, just announced today in the morning. You know, the Qualys opportunity, great opportunity for us.
You know, I'm very, very proud of the progress that we made over here so far, you know, and I'm looking towards the future, of course. And, you know, in my opinion, this is a very exciting time for Arco moving forward. You know, we had a lot of initiatives that, you know, that I mentioned over here. You know, the the remodel of the six stores, the NTI that we are planning on breaking ground in, basically in Atlanta, Texas in q four, the 50 Seborr stores that we are planning on opening this year, along the the rest of the initiative being to cup and, of course, you know, continue with the grab and go and freezers. And, you know, the only thing I can tell you is that, you know, this is going to be a great year for us.
I mean, the core deal is a very unique opportunity, that we just got into. And we, of course, will continue to pursue strategic acquisitions in the convenience stores and in the wholesale basically business as we did over the past eight years. So thank you, everybody, for your time today, and I wish you all the best.
Speaker 0
Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.