TravelCenters of America's Transformation Plan Begins to Show Progress
WESTLAKE, Ohio — With a new senior leadership team in place, TravelCenters of America Inc. (TA) saw its net income, EBITDA and adjusted EBITDA tick up during the second quarter of 2020, even amidst the challenges of the coronavirus pandemic.
"I am pleased to report that our newly constituted senior leadership team, combined with our broader organization, generated a 78.3-percent increase in net income and a 24.2-percent increase in EBITDA in the 2020 second quarter over the prior year's second quarter, despite the dramatic adverse effects of COVID-19 on our topline performance as well as the broader economy," CEO Jonathan Pertchik remarked during the company's second-quarter earnings call, held Aug. 5.
Adjusted EBITDA increased 22.1 percent compared to the same period in 2019.
"I am proud to say our transformation plan is showing the very earliest signs of companywide improvement despite a historical pandemic," he continued.
According to Pertchik, TA's improved performance in Q2 was driven by an increased discipline in managing expenses; the company's prompt response to COVID-19 by implementing furloughs; and improving business management throughout the organization.
"While these results are positive and evidence of the changes we have begun to make, we have a long way to go to show the true and full impact of our transformational plan — some of which will not manifest for some time," he added.
The strategic progress TA made in its second quarter "sets the groundwork" to drive the operational improvement the retailer plans to achieve moving forward, according to the chief executive.
The change began in late April when the company focused on "rightsizing" its historical selling, general and administrative expense growth (SG&A), which had significantly outpaced revenue growth for many years.
As Pertchik explained, TA's SG&A had been growing at an "unsustainable, compounded annual growth rate of 7 percent since 2012, grossly outpacing topline performance and a declining overall fuel sales environment."
A corporate reorganization resulted in a headcount reduction of approximately 130 and a corresponding annual reduction in corporate SG&A of $13.1 million.
"In addition, and most significantly, our strategic reorganization was designed around assembling the right team to drive change and create value," the CEO said.
Notably, TA brought on several senior vice presidents in corporate development, hospitality, procurement and fuel, as well as a new chief information officer, as Convenience Store News previously reported.
"By enhancing our overall leadership team with new key leaders and attacking operational efficiencies, we are on our way to creating a better-running organization with improved visibility and accountability, as well as improved financial performance," Pertchik said.
He shared that TA's playbook currently includes nearly 50 distinct initiatives, many of which the company is already pursuing.
"With this backdrop, we decided to raise equity to position the company to successfully carry out these initiatives and to create a foundation for allowing these initiatives to fully take hold," Pertchik said, explaining that TA raised roughly $80 million in a recent equity offering that is mainly intended to provide a liquidity cushion and to fund deferred maintenance and other capital expenditures.
Calling the second quarter of 2020 "an important quarter," Pertchik said TA was able to put the plan, team and capital in place to allow the retailer to focus on execution and improving operational and financial efficiencies.
Westlake-based TravelCenters of America's business includes travel centers located in 44 U.S. states and Canada, standalone truck service facilities in three states, and standalone restaurants in 12 states. Its travel centers operate under the TravelCenters of America, TA, TA Express, Petro Stopping Centers and Petro brand names. TA's standalone truck service facilities operate under the TA Truck Service brand name. Its standalone restaurants operate principally under the Quaker Steak & Lube brand name.