TravelCenters of America announced financial results for the quarter ended June 30, 2021. The chain reported improved net income up just over $2 million over the previous year and increases of 60.6% EBITDA and 26% EBITDAR.
“TA’s Transformation Plan has been underway for approximately 15 months, and our operating results for the second quarter demonstrate that the changes we are making are taking hold, as we improved net income from $2.2 million to $28.9 million and adjusted EBITDA 60.6% to $73.5 million from $45.8 million compared to the prior year,” said TA CEO Jonathan M. Pertichik in a statement. “The improvements were driven primarily by a $60.5 million increase in nonfuel gross margin, which was the result of operating improvements across nearly all business lines.”
Pertchik added that the company believes that the many transformation initiatives we put in place are driving better financial results throughout the organization.
“Our discipline in managing expenses also continues to be an important factor in delivering improved results, helping to drive a 90 basis point improvement in adjusted EBITDAR margin versus the prior year second quarter,” said Pertchik.
Second Quarter 2021 Highlights:
- Cash and cash equivalents of $583.3 million and availability under TA’s revolving credit facility of $98.4 million for total liquidity of $681.7 million as of June 30, 2021.
- On April 21, 2021, TA completed the sale of its Quaker Steak & Lube, or QSL, business, which included 41 standalone restaurants, for $5.0 million, excluding costs to sell and certain closing adjustments.
- Net income of $28.9 million improved $26.8 million, or 1242.6%, and adjusted net income of $29.7 million improved $18.9 million, or 176.2%, as compared to the prior year period.
- Adjusted EBITDA of $73.5 million increased $27.7 million, or 60.6%, as compared to the prior year period.
- Adjusted EBITDAR of $137.1 million increased $28.3 million, or 26.0%, as compared to the prior year period.
- Adjusted EBITDAR margin increased to 22.8% from 21.9% for the prior year period.
Growth and Cost Control Strategies
During the 2020 second quarter, TA commenced a strategic transformation, or its Transformation Plan, consisting of numerous initiatives across its organization for the purpose of expanding its travel center network, improving and enhancing operational efficiencies and profitability, and strengthening its financial position all in support of its core mission to return every traveler to the road better than they came.
Among these initiatives was a corporate restructuring that resulted in immediate selling, general and administrative expense savings and included significant leadership appointments of qualified candidates who bring new and valuable experiences as well as initiative, critical skills and new visions and approaches to TA’s business.
TA also created a centralized procurement group to drive economies of scale in pricing, increased leverage in vendor negotiations which we believe will ultimately lead to substantial purchasing savings and a streamlined operation. Other key initiatives are focused in areas of liquidity, expanding TA’s franchise base, increasing diesel fuel and gasoline gross margin and fuel sales volume, increasing market share in the truck service business, improving merchandising and increasing gross margin in store and retail services, improving operating effectiveness in TA’s food service offerings and improving information technology systems, while focusing on opportunities to rationalize and control costs.
Since the beginning of 2019, TA has entered into franchise agreements covering 46 travel centers to be operated under its travel center brand names; four of these franchised travel centers began operations during 2019, 10 began operations during 2020, one began operations during the first quarter of 2021 and two began operations during the second quarter of 2021 and TA expects the remaining 29 to open by the 2023 third quarter.
As a result of some external labor and supply chain constraints, TA’s capital expenditures plan for 2021 now contemplates aggregate cash investments in the range of $130.0 million to $150.0 million targeted towards improving and growing TA’s core travel center business. The 2021 capital expenditures plan includes projects to enhance the guest experience through significant site level upgrades at TA’s travel centers and advanced technology systems infrastructure. Approximately half of TA’s capital expenditure plan for 2021 is focused on growth initiatives that TA expects will meet or exceed TA’s 15% to 20% cash on cash return hurdle.
Embracing Sustainable Energy
Importantly, TA is committed to embracing environmentally friendly sources of energy and has formed a new business division, eTA, that will seek to deliver sustainable and alternative energy to the marketplace and focus on partnering with the public sector, private companies and customers to facilitate industry transformation.
The business division will extend TA’s commitment to providing the widest range of non-fuel offerings across its sites. Recent accomplishments include continued expansion of TA’s biodiesel blending capabilities, availability of DEF at the pump and placement of electric vehicle charging stations. Moreover, TA has hired a senior leader to lead eTA and has begun to onboard additional dedicated internal resources, as well as create relationships within the supply, storage and distribution chain, with respect to its alternative energy initiative.
TA believes its large, well-located sites and its focus as a pure supplier may provide TA with the opportunity to make both fossil and, eventually, non-fossil fuels available and to potentially balance or adjust its product and service offerings as it may determine and subject to availability.
TA’s nationwide business includes travel centers located in 44 U.S. states and in Canada and standalone truck service facilities located in three states. TA’s travel centers operate under the “TravelCenters of America,” “TA,” “TA Express,” “Petro Stopping Centers” and “Petro” brand names and offer diesel fuel and gasoline, restaurants, truck repair services, travel/convenience stores and other services designed to provide attractive and efficient travel experiences to professional drivers and other motorists. TA’s standalone truck service facilities operate under the “TA Truck Service” brand name.