TA - Earnings call transcript Q2 2019 | TravelCenters of America Inc

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Operator

Good morning, and welcome to the TravelCenters of America Second Quarter 2019 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Katie Strohacker, Senior Director of Investor Relations. ahead. go Please

Katherine Strohacker

good and Thank morning, you, everyone.

We'll begin TA's from will Barry and Bill with from for Chief remarks Executive Officer, Richards; Myers. Officer, Financial call Chief Chief have Andy analysts. Officer, time questions We Operating today's also Rebholz; by followed

Litigation X, laws. present call Securities August These of are on forward-looking TA's forward-looking and the contains XXXX expectations today, of conference within the statements Act Today's of and beliefs as meaning XXXX. statements Private Reform federal securities based

and obligation statements not any included in to or from Forward-looking by statements implications their guaranteed statements. required Actual forward-looking occur. these release as forward-looking law. occur, are materially not those may results made implied TA and than differ today revision publicly to or they to the undertakes other no revise may

that Commission cautioned occur to the Additional or Relations place TA's the Investor cause information are is Securities statements. website. are section filings at undue of referring to concerning to SEC's that and charge available our any contained factors statements forward-looking our of upon the with Investors forward-looking not reliance not Exchange by could in website free

we our adjusted are income our in reconciliations non-GAAP on adjusted measures these including available of release financial to discussing be common The be fuel gross common comparable operations share EBITDA. to most GAAP adjusted gallon, attributable adjusted amounts per and shareholders that income margin, During non-GAAP website. from the found press call, fuel this per will margin operations, gross measures, adjusted continuing continuing from can

otherwise comments be quarter to XXXX regard as be today's to to the well unless quarter implied compared noted. measures operating regarding The in financial and on stated as second XXXX, assumed call as should qualitative of performance the second of any or

call prohibited like consent would TA. you of the of remind retransmission is prior without I today's and the to that recording conference written Finally,

you. the Andy, call I'll with over turn that, And to

Andrew Rebholz

this and everyone. and TA. Barry I'll that I morning, for business over few operational performance quarter's and your Thanks for first, events joining regarding good this to on turn interest Katie, in Bill initiatives, and a our have remarks quarter-end I occurred Thanks, and call two us let the then for financial are But subsequent point call. me comments worth discussing out that to matters. believe on and prepared their

of we from due to company converted X, company. investors conversations to changed Delaware TA and with our from investment firms From a we August been liability been certain the owning corporation over or On interested TravelCenters in have shares a doing know limited limited America a our being have name dissuaded of so Maryland Inc. to years, prohibited liability TA but

addition, index attempted and status address with investment our We've has conversion barrier the as excluded this some ETFs. by In funds TA investment an a in LLC to to corporation.

stock. While change TA encourage will there ETFs funds expect of is or to investors that we conversion corporation will attract investors TA to a will enable invest no group guarantee TA, this index a broader and our own in to or that

as no stockholder limited they General change From comply or TA conform in significant we perspective, the obligations statute, a distinguished and Delaware rights said, an of with were have company same in now requirements The liability to Law I to made as did governance the stockholders were resulted changes the the from as Maryland substantially LLC. and when Corporation rights.

teens. with a treading the the TA One-for-Five and high price X, of proportionately. Split in split One-for-Five share ratio split-adjusted reverse completed August are TA's outstanding Stock an share outstanding has been per mid- basis, our a Board a for now on on shares count of a TA reduced to Also objective post-split our Reverse shares. selected

what is Given sense. the then-current ratio made the One-for-Five price per share of $X.XX,

time, of the believe ownership they believe group of who I established for a those with will company that investors plans the an increase been broader over share beliefs. to opportunity business this profitability accordingly, We including the growth company, in We programs. and for have want our present

Now to second performance. quarter

showed wetter this results quarter improvement million in year. income operating net net We non-fuel weather Our business. our held $XX of million that of last spite $X.X to a compared had of back loss

certain $XXX,XXX this operations from slight from onetime of After last continuing adjustment for year. decline showed items, a income year our

by improved second was The second standpoint, and quarter's non-fuel quarter XXXX an areas. fuel by $XX.X EBITDA and the aided of growth operating adjusted from $X.X both over our million million in

total, consecutive improvement quarter in our fuel in by same second to of site fuel last a is believe Fuel healthy growth same a same-site site on X.X% we've volume. I had sales basis. business sales that, This volume success volume back of the Dating steady and by initiatives. reflects X.X% of year, second quarter increased the the sales in

basis. same-site revenue improved retail program part our X% revenues services UltraONE total embrace. Non-fuel in by led X.X%, customers Store X.X% revamped customer and loyalty by grew that on by to and a continue in

for with rebrandings X.X%, service of operation hours and by full-service solid some options, that reductions certain offset our grew place. reduced restaurant demand revenues by Restaurant took driven quick revenues associated

case service the X.X%. Truck and truck than hard demand on But service revenue expected. especially weather had revenues. our was declined tire service revenues levels. truck the was and believe weaker suppressed the for we in this than last fell XX% tire several of by was has result sales we the Unfortunately, been quarters

wettest wetter our the non-fuel our nation's first big growth revenue and detriment sales, history been truck other quarter. a month. The to as wettest XXXX affecting this adversely set and were recorded trend have to months tire in U.S. back service XXXX, five conditions the nearly May The record of all-time a

revenue third much quarter. flat the year. With behind which adverse us, per expect gallon, the be will was was compared over gross to non-fuel weather we stronger in Fuel margin growth $X.XXX last trend

by margin of $X.X result million. gross in a increase fuel increased fuel As sales the X.X% volume,

for this tax sold. goods reinstated tax a recognize If to benefit XXXX. will retroactively XXXX is XXXX, has extend legislation TA credit U.S. Congress enacted to The to-date for fuel biodiesel of million or cost not the $XX blenders credit

recognize, should The of benefit year. for this recognized in recognize, $XX quarter first tax a million the retroactive reinstatement cost we enacted. of the of credit result is was we for amount as be the of credit this might XXXX, enacted be Any would sales six tax months the might reductions of tax the credit

and pipeline but me our Our makes first talk can this in expansion franchising. this And Barry, continue progressing, more acquisition opened program site franchisees will franchised attract travel site to targets. primarily we we is franchisees expansion through this center. potential achieve quarter, potential and confident about our we new Express identify TA our goal a moment, and year,

expenses on and of to focused revenue revenues. for kept growth sites It with the remain those our part and our non-fuel truck non-fuel slightly was expected. level service same points site lower to We than spending. experiencing We non-fuel operating in revenue expenses due increased increases, in a in ratio XX line costs and training increase basis staffing

will continue fall to keep a of tight on into reductions also mind. sites allowing control We rein and to Spending without top capital disrepair. remain spending our

his turn I'll With for to Barry comments. the that, over call

Barry Richards

good Andy, and Thanks, morning, everyone.

our from travel see center operations second continued to positive We in quarter. the signs

in the increases efforts led volume and to quarter business initiatives marketing year prior over sales fuel and Our revenues. non-fuel

have TA's Class sales have of year. for same isn't year great time, on trucks parts for trends the half down certain last first in strong of this the to At a new truck of reported slowed the compared more always freight trucks manufacturers in bit. Overall business. increases the the X Having road service market,

repairs, and in an Add in believe still just U.S. for to explains overall expanding, we truck show mentioned, slight this that this that this factors the suppressed is tires economy the and revenues quarter. Andy We GDP trend. topline demand and a should believe short-lived service be continued trends growth the the decline

large continues customers the which our new decline activity in gross services our to to ahead our sales led looking contributed the and margin of remote level has growth. in service site locations, excess This site Growth hiring expense. slight operating add level programs continued certain and to of with

January introduced be continues embraced loyalty professional program customer by UltraONE The to in drivers.

gallons the These both attracted per and progress approximately have members date. so and new year. XXX,XXX indicators to fill reactivated results member are our good over average member success far our per year, of We increased prior this and/or and

Fuel XX.X million quarter. million of volume increased gallons gallons or or XX.X margin gallons, in by closed gross of $X.X Fuel million same-site a XXXX sales or Fuel second increased increase the volume fuel X.X% by or increased sites volumes since due X X.X%. to million X.X%. the beginning by opened net a

and volume gallon increase per for margin cents to per flat rising increased as was sales was to partially by responsible Diesel due costs last overall year gallon. the compared team volume. our Gasoline balanced gross offset primarily margin margin

$X.X or increased basis, or Same-site service increased positive offset the to or On by marketing $X.X by impact margin the revenues partially the the $X.X revenues by same-site revenues. were in fuel million increased X.X% X.X% truck of Non-fuel million, million, due that gross initiatives X%. X.X%. decrease non-fuel

in were by XX% unit maintenance and up orders last versus orders. work our continued year. increase Within X.X% growth, X.X% sales a tire strong work to producing Truck service service, increased mobile RoadSquad show

driven, was revenue Exhaust division and sales. grocery large Fluid increased demand store in Our by part, increase Diesel

We pre-XXXX continue each as retired expect are year. the more DEF trucks to year model demand for growing

to gross of non-fuel handful despite to total of restaurants X.X% increased business million, Our for increase increases rebranding to million Non-fuel $X.X $X.X restaurant all-serve a margin in due decline point percentage by nationally recognized or the X.X% XX non-fuel sales, concepts. the offset remains a revenue million closed basis healthy, margin gross by showing or having $X.X in XX.X%.

same-site was by decline and as Site-level percentage million, margin basis $X.X non-fuel a experienced of non-fuel the new The XXXX quarter. second on operating mix $X.X change of revenues or products of was X.X%, to to In for sites. due which XX.X% percentage due a to XX% sold. expenses in operating increased expenses a million the compared site-level total, service as slight

great from as a that see who reliability Their ahead, uptime and TechOn-SITE. enjoy We've service properly earned confidence growth fuel increased of continue number programs, provide potential to large our and further sales we confidence us customers, being program in improved branded maintained. to equipment maintenance opportunities. their continues have Looking mobile us truck the of the and opportunities growth especially the we for

that nights, calls retain XXX Our supports their we XX/X. to in call to either vehicles, fleet for our national have allow their us Currently, handle fleet repair on fleets most focus breakdown calls deliveries. attract customers of them and agreements and continues which handle weekends, to emergency to RoadSquad with center, cases,

travel to this And Steele, We we frequenting brand. launched and newly terms the in experienced franchise team now Business North a second finally, center the of Dakota at announce we're first both this Coffee what TA pleased drivers Cup under have as had opening agreements TA trends Fuel expected. Coffee of Fleet this network in to being Express, signed to Express. Stop seven. expansion, the franchise our date former branded the to ways quarter Cup bringing five year the not are prior total in been

be sites will as XXXX end We of expect part of few yet added six the network that by our first months the the XXXX. operating not or of

addition, discussions and detailed in In about XX legal we engaged sites review under which have nine currently or agreements negotiations. we are

approximately XXX process. in other phases diligence of are have applications sites We various and that

quarter for development We end acquire travel year. to two but of and negotiations this have to due hope continue this the through diligence two we centers anything not and work before acquired parcels operating

excited in these more continue they We be date and areas, about to to the hold. even excited progress about our potential

I'll that, the with over call And to Bill. hand

William Myers

morning, you, and Barry, everyone. good Thank

results, Before the events ended. few our discuss second quarter let I me a discuss since first quarterly occurred that

points maturity unsecured the amended security revolving loan each XX, First tiers and facility increased December $XXX was from charged for three extended we XXXX. pricing credit the credit things, were the Under among XX amended the by to basis XX, million governing other agreement facility. premiums XXXX, on July July of XX, revolving our the and

not have XX, As credit amounts outstanding of June any facility. we did on the

to pursuant were a stock. conjunction stock X, to corporation, our of completed five Second, common exchanged of as on August in our common a conversion our with Andy reverse which outstanding we share split for one shares shares, mentioned,

this As we I'm issued our today. shares we noticed, Form and amounts in the morning, sure we press in all for periods XX-Q and you file restated presented later EPS will the release

quarterly our to Now results.

the reported to of per loss quarter second compared share of or XXXX, $X.X in or net million last The was a For we net loss $X.XX of million of income taxes. million year XXXX. per a net $XX $X.XX loss of net the largely to from due operations quarter discontinued share $XX.X second

XXXX was from second income quarter for net share. million or adjusted of $X per continuing items, onetime the Excluding operations $X.XX

due or of adjusted increase fuel expense, of decline EBITDA million, EBITDA For $XX.X earlier. X.X%. margin improvement the in as we an gross the a non-fuel adjusted million, was $X.X XXXX, primarily as well second quarter The reported increases rent in of in discussed to and

three XXXX for expense was $XX.X June million, months $XX.X SG&A an million. of the ended XX, increase

in compensation items headcount million reported of the salary increases expense year, increase Excluding growth. result the in second of support to one-time attributable annual quarter and that was or was last increase XX.X% an a increased to primarily as $X.X

centers XXXX. million due travel SG&A was in million expense currently expenses any Real believe second of We line XXXX, remainder the unforeseen purchasing our per that XX $X.X the estate be primarily items. HPT January the absent should $XX X.X% or unusual expense from in by quarter, quarter to expectations. with for or SG&A in XXXX legal approximately decreased other rent

this rent As previously annual $XX.X reduced by discussed, minimum million.

continue leasing expense and increased run purchase $XX XX primarily real approximately quarterly amortization our to Given January expense million centers travel rent from estate expect HPT. at $X.X we rate our to of million. the current or in a to X.X%, due of by arrangements, Depreciation

balance investment that liquidity travel under matters. stand-alone restaurants, our facility. are We available million we XX, had approximately stand-alone and also million our and and unencumbered X XX owned to $XX.X $XXX.X June us a credit debt. facility was Turning to At revolving and by truck service centers our cash

our have intention the in sold to to quarter, Thus the sell XXXX. improvements of and million for the remainder expenditures. year, not we During HPT we improvements far $XX.X is invested any capital for any not

plan million of investment to capital XXXX expenditures. capital our approximately continues Lastly, contemplate $XXX

That concludes take Operator, our we ready are prepared remarks. to now questions.

|Question-and-Answer Session

Operator

Thank you.

And [Operator Bryan question comes will first Please with ahead. We Riley B. now Instructions] from question-and-answer session. the go begin our FBR. Maher

Bryan Maher

morning, guys. Good

Andrew Rebholz

morning, Good Bryan.

Bryan Maher

take things. got lot the in couple of a I've quarter. on So there a

mistake? there truck How stuck and servicing, and reversible? control these and that hiring what's just kind you've again? that hindsight, or it training, there? you can happens because you of the ended we the Is flexibility when In up was On a the them a quarter. ramped trained having the hired then not-so-great that if people it Is money

Andrew Rebholz

is you simply we the the We now. that believe it that was to without flexibility do. staffing That business right is to right thought reduce that's There didn't believe if then believe do, thing it the don't thing business. the to don't unfortunately get one and people, can't

to lining a So grow we've up that. as lot we of we're their more than operations, been technicians have, customers that new that a with some going serving that need is we've business the while and going to for to they need continue and we're

they of tech productivity a who's the been a to And the they're also typically those work the in after is work quickly folks as need training we so kinds of say, both that the a well as their – for continue work of through the and how productive training new the maybe just through folks, that hiring folks, I'll and those years, – get of do can to growth doing. tech they as number of those not that's working as brand

maybe year. number, newly June, techs, what the of will level, So gaining and and But seeing because had them we're productive. a techs that I amount that falls of category training, more lower part here of more hired. We experience kind experience. we that techs just as of maybe, the maybe besides of are all become of did similar those many but is last of on-the-job under guess, training, more Each actually was relative for – the

the I of were for sales to going sure matter would be site. knew we think we we were they fact levels times to quarter, I our the in that continued track wait what have mean if so hire. second the And by is the

a wait when truck. how we says hey, long create work do I want on truck, to the before know So addressed customer's comes my in, order, customer we we was you that this work a time and

to use many times in experience And techs growth out could they are means longer techs would the could the looking some and/or and more forward from areas have we and we we the or use wait that be, like right to be, experienced than there more now. which techs them

Bryan Maher

quarter picture at call $XX a a kind I SG&A people million know you and I bigger this projection. it of in Okay, listening are was get now, said we interested may of that concerns. and this made then on my when guess look to I because to addition lot be the in But expense, own e-mails

XX.X% the operating the in through we would XXXX said share split, salary site-level share this a into And for back for before EPS, increases, XX% see on you EPS see we think And look about $X we quarter average from, to the was hear when $X we earning I and go which and in XXXX, year-over-year. TA now. reverse – translate a

kind now level be to earnings be from And back of And XXXX? can in you flattish. picture so we done there's know that just saw on on cost the question, to things lot some bigger the that doing? the of the share we What get that run maybe per a I XXXX to can focus side

Andrew Rebholz

have any now. I to XXXX think of that me compare numbers front to of the in without

of transaction very regard the cost incurred XX to that trying or by in did the We rent to the with parts rent increases cost we we was the increases. things with our big us to addressing biggest we after can least of and One with January. at did that one help

we there do. of lots are things doing. at we lots things certainly is looking than there's Other of that, can

year. to consolidating last or site this at throughout As the an site went the previous initiative example, about here function centralizing cost at headquarters. in talked by accounting reduce We as calls level maybe we through

increase $X.X in to $X.X million million, with SG&A cost brought total get $X a million in that order it So net a reduction.

you increases So don't did, I but just see it's reduces reduction in that that much SG&A, would've they might higher. we say, that's that site-level one expenses, and is It's well. something there. which maybe expenses, that operating operating site-level

things and was and the were the so you being the there think, think of ratio, this they to issue – property revenues, in issue want if the managers the it I be that. this site-level the the the particular and expenses quarter in quarter, much and way really fixed, utilities, call the not I non-fuel expected expenses operating are an to sales biggest fact to taxes with like

One the haven't it's luck just of slightly with higher we're we higher. the slightly I mentioned the that this other in maybe you know prior seen but yet, is expenses things year. the which XX-Q, dealing maintenance draw, year, the this MD&A in of versus

a that's cracks in and to controlling function maybe to $X I spending of, to repave we're reflected lot extent, capital some of or fill potholes in or somewhere, fill million think that or curtailing that. spending. a parking like those that's things Instead or $XX,XXX spending maybe expenditure restricting numbers in

X and a the things. prices there wasn't turning so review we little cost looking processes know, with had We've and frankly, firm we're don't savings bit cost have work we rocks both we're there We're trade-off procurement for hopefully much there. some to and, that in I that that I'd operations. in here Big things of structure So – get other or at our the we in you of over were fix quite that other there and on, but procurement, there's lots to us, honestly, the improve to did to could paying, a they consulting can a where tell thought purchasing like both do

this maybe is long-winded. because then answer point, And getting a as final

But the big tend levels in costs. and still reflects both of say, our get labor are our might all we just like. they the increases? of increase in that I now, employment accounting to to that, make and the like and the lower wage other, to reality. increasing I'll everywhere retail that also changes to a something both be rates that's minimum not to think situation locations, minimum How right across of having wage the people of to pay more IT in I suppose. does the a story And our rule while change states or unemployment say, all of country staff that department, regard department, Impossible percentage many a things that

So lot it's a going on.

Bryan Maher

industry last and like rest the the of to or anything Is Congress quite with What's that. turn time anybody the whim for at credit? now? queue. actually It in over in are you to is just for doing on I'll the up me, passed Thanks trucking the there biodiesel the is seems ever one And just of long hold fuel going get lobbying a Washington that in this term? it it's who

Andrew Rebholz

part committee the are not – for primarily The And from, is the the some we're charged obviously, from biodiesel. comment both think, Washington people but they're this your with many the this, the crops producing whim farm the last Senator of we're into at states, Senate turn I – Grassley There of heads in is who both could government. of Iowa, I this. many, it's that that there, – from where lobbying mean Senator

all be the confidence that that not situation, I'm belief one following get that's done. enough to for that a there stuff, to is there politician right enjoys the date, the why to it but just people going it aisle that Washington the relationships is but And done fantastic done. of parties are on I there that together, something think that two or want not now a is will get because obviously, working sides both in

it be as from this This to finding I sense. to legislation the the the are litigation of has and or in that that's their Association that to I've make that for part get September, and hard is Trade that it Truck there of the got that would several up tax is that everybody a why our suppose. Stop folks one I I extenders, because belief And and really favorites, lobbying some will of But sorry, way it attach understand maybe – of done. extenders right there's it's heard need a guess taking these will there's type passed chance get legislation good it's

So than than hopefully, probably has has case I the – in past. it's September, the happens to delayed current fair say that obviously, it's delayed something much been this the it's political that longer environment in believe but much longer

So we suppose. just have up, all it to suck I

Bryan Maher

Okay. Thanks Andy.

Andrew Rebholz

Bryan. Thanks

Operator

This concludes any would conference turn our back question-and-answer like session. to over Andy to remarks. for I Mr. Rebholz closing the

Andrew Rebholz

Thanks morning. Nancy. Again, everybody, in your TA a this and Have interest your attention thank you, for great day.

Operator

The conference is attending presentation. now for concluded. Thank you today's

disconnect You your may now and rest enjoy week. of the

TravelCenters of America (TA) 5 Aug 192019 Q2 Earnings call transcript