TravelCenters of America's Second Quarter Brings 'Breakthrough' Moment

WESTLAKE, Ohio — Fifteen months into its transformation journey, TravelCenters of America Inc. (TA) is seeing the effect of its changes in the company's earnings.

"Our second-quarter 2021 results reflect a breakthrough moment in TA's history as the transformation plan that originated 15 months ago is demonstrating meaningful financial and operating improvements driven by broad-based initiatives across all business lines — all of which has contributed to these impactful results," CEO Jonathan Pertchik said during TA's second-quarter earnings call, held Aug. 3.

Compared to the prior-year quarter, TA produced the following in Q2 2021:

• Adjusted net income of $29.7 million, a 176 percent improvement;
• Adjusted EBITDA of $73.5 million, a 61 percent improvement; and
• Adjusted EBITDAR of $137.1 million, a 26 percent improvement.

As Pertchik pointed out, these results are a comparison to the prior-year quarter when the COVID-19 pandemic was most acute, but they also represent notable improvement relative to its 2019 second quarter. Specifically, adjusted EBITDA increased by $33.2 million, or 82 percent, compared to Q2 2019; adjusted fuel gross margin improved by $14.4 million, or almost 17 percent; and non-fuel gross margin improved by $14.5 million, or 5 percent, even though several of TA's full-service restaurants remain closed or are operating with reduced hours.

"These results were driven by top-line improvements in both [our] fuel and non-fuel businesses, as well as our continued focus on managing costs," he said, adding that they are not due to any singularity, like an extraordinary fuel margin, or improvement in just one or two areas. "Instead, we realized improved performance nearly across the board, which suggests a level of sustainability." 

The chief executive remains bullish about the company's future. 

"Once again, we remain in the early innings of our transformation plan and in particular, our robust capital improvement plan to invest in our asset base, and we believe there is much opportunity in front of us," Pertchik explained, noting that its transformation plans will be "highly impactful" over the next couple of years. 

"I am more confident than ever in our robust capital plan and the impact it will have on our overall experience and performance — from our site refresh program, IT system corrections and enhancements, to expanding our ability to sell biodiesel and diesel exhaust fluid or DEF," he continued. 

By the Numbers

On the forecourt, TA's overall fuel sales volume for the second quarter of 2021 increased 22.6 percent compared to the prior-year quarter, and 16.2 percent compared to 2019's second quarter. A 21.2-percent increase in diesel fuel sales volume drove the increase, which Pertchick attributed to increased trucking activity, the addition of new fleet customers, and higher volume from existing customers due to the early success of a variety of initiatives.

"We are dedicating tremendous energy and focus to unpacking and further understanding diesel margin to drive both higher margin as well as to pursue increased stability," he said.

In addition to the uptick in trucking activity, TA is seeing four-wheel traffic return, leading to a 33-percent increase in gasoline sales volume vs. the prior-year quarter and just 6.7 percent below the 2019 second quarter.

"We are encouraged by the positive data from the July 4 holiday weekend, during which we experienced the highest gasoline sales volume for Friday and Saturday so far in 2021," the chief executive pointed out.

On the nonfuel side of the business, store and retail services revenue increased by almost 24 percent for the second quarter of 2021 vs. the year-ago period, and more than 14 percent vs. Q2 2019.

According to Pertchik, improved management and merchandising have begun to have a positive impact, with TA's initiative to centralize purchasing and manage inventory more efficiently translating into a better gross margin for these businesses.

"Our customer segmentation work has provided a better understanding of who is visiting us and their behaviors, which is allowing us to tailor our offerings to our customers' actual needs. We've also completely reoriented how we merchandise," he explained. "These efforts have started to have a positive financial effect as our changes in mid-level leadership and a host of current impactful activities to drive further future value continue to take place."

TA also saw improvement in truck service revenue for the quarter, recording a 20-percent increase vs. 2020, and 12-percent increase vs. 2019.

"The strength of these results is evidence that the team we have put in place can execute effectively to transform this great half-century-old company, and the initiatives we have put in place under our transformation plan are beginning to work," Pertchik said. "I believe that we have started to deliver on the promise to rebuild trust and credibility with the marketplace. I'm confident that this team of leaders will prudently and effectively deal with whatever challenges may come along, and I'm most excited to see our capital plan just begin to take hold more aggressively later this year and into next year to effectively drive growth and long-term shareholder value."

Westlake-based TA has more than 270 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. The company is committed to sustainability with its specialized business unit, eTA, focused on sustainable energy options for professional drivers and motorists, while leveraging alternative energy to support its own operations. TA also operates more than 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet and Country Pride.