WESTLAKE, Ohio — TravelCenters of America enjoyed a solid first-quarter 2022 with substantial improvement in net income and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) over 2021’s first quarter, which ended March 31.
Adjusted net income was $15.2 million, an improvement of more than 380% compared with first-quarter 2021, Jonathan Pertchik, managing director and chief executive officer, said during an earnings call May 3.
- TravelCenters of America is No. 28 on CSP’s 2022 Top 40 Update to the 2021 Top 202 ranking of U.S. c-store chains by store count. Watch for the full 2022 Top 202 ranking in the June issue of CSP magazine and in CSP Daily News.
Adjusted EBITDA was $55.4 million, a 94% improvement over 2021’s first quarter.
The company, celebrating 50 years in business in 2022, also enjoyed an adjusted EBITDA of $247 million for the trailing 12-month period, a 53% increase.
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Fuel Fuels Gains
The biggest contributor to TravelCenters of America’s success was strong fuel margins, a gross increase of 45.8% versus the prior year’s quarter, Pertchik said. Overall fuel sales volume increased by 11.5 million gallons to more than 555 million gallons, 2.1%, versus the prior year’s quarter. This was driven by a 2.7% jump in diesel and offset by a 3.2% decline in gas sales volume.
The company also increased nonfuel gross margin by 7.1% versus the prior year’s quarter, Pertchik said.
“I want to remind everyone that these results are on top of the prior year, 2021 growth over 2020 growth, that was very significant,” he said on the earnings call. “So once again, TA’s demonstrating multiyear improvements that are extraordinary. Component parts of the overall business contributed in varying degrees to this financial improvement for the quarter.”
Cash on Hand
Another first-quarter highlight for the Westlake, Ohio-based company is cash and cash equivalents of $544.2 million, and availability under TA’s revolving credit facility of $185.1 million, for total liquidity of $729.3 million as of March 31, 2022, Pertchik said.
Plan of Attack
The first quarter at TA, Pertchik said, required:
- Intensive focus on monitoring inflationary forces and carefully passing through cost increases.
- Managing labor pressures and gaps in operating hours to ensure shelves remain full while continuing to carry out TA’s broad-based transformational initiative across all parts of the business.
- Ramping up execution of the company’s capital plan.
“With CPI (Consumer Price Index) breaching 8% in March versus prior year, and PPI (Producer Price Index) breaching 11% for the same period, these challenges were very real, and some relative margin compression was experienced,” Pertchik said. “However, the impact was within expected levels. Also, some cost increases were realized during the quarter as planned, resulting from our commitment to investing in growth.”
One investment is TA launching a robust small fleet program, which includes the program development itself, adding numerous sales staff and increasing marketing spend in advance of generating the first new sales or benefiting from new revenue, Pertchik said.
Another first quarter move involved TA investing significantly in developing a comprehensive new customer loyalty program as well as in machine learning and artificial intelligence to support diesel fuel pricing decisions.
“These are illustrative examples of a much larger list of investments in growth TA is making today that will impact top line growth in the future quarters,” Pertchik said.
TA also continues to invest in upgrades in talent and people, training and excellence.
“The good news here is that recent investments will bear future fruit, which we expect will continue to create a tailwind as we go forward,” he said. “In addition, TA’s investing in growth includes capital deployment into site refreshes, acquiring existing travel centers, engaging in greenfield development and growing our franchise footprint, leading to an overall capital plan execution that is accelerating.”
Growing With Acquisitions
Regarding growing the franchise footprint, Pertchik said, TA in April closed on acquisitions totaling in excess of $50 million for two high-performing travel centers and a strategically located truck service facility.
“We’re currently evaluating additional acquisitions in our pipeline, which stands at approximately $130 million with more announcements to come in the near future,” he said. “While network expansion is a key pillar of investing in growth, we are disposing of TA’s only non-U.S. site located in Canada, given its underperformance and lack of strategic fit in our other otherwise all-U.S. network at very favorable economics.”
Restaurant revenues increased in the first quarter 0.6%, to $74.3 million from $73.9 million, versus the prior year, as revenues at full-service restaurants were boosted by inflation-driven price increases and the reopening of about 90 more FSRs versus 2021, the CEO said.
“The revenue increase at our FSRs was offset by a small decrease in quick-service restaurant revenues due to persistent staffing shortages that negatively impacted QSR operating capacity,” Pertchik said. “Staffing shortages continue to be a unique challenge across the food side of the business, which we are mitigating through streamlining menus, and competitive compensation programs.”
TravelCenters of America, a publicly traded, full-service travel center network, has more than 275 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. Offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants (QSR), travel stores, car and truck parking and other services. The company operates more than 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet and Country Pride.