TA - Earnings call transcript Q3 2019 | TravelCenters of America Inc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, and welcome to the TravelCenters of America Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Kristin Brown, Director of Investor Relations. Please proceed.

Unidentified Company Representative

you. Thank everyone. morning, Good

have today's the Rebholz; remarks federal Officer, followed Financial Litigation contains of We'll and begin analysts. Act questions Executive conference Reform of Today's Barry TA's laws. the Officer securities Chief call also Myers. Bill Andy by statements Officer, and time call will for from from within with forward-looking Chief Richards; enough meaning We XXXX Chief Securities Operating Private

expectations based These today, TA's on as forward-looking and of X, beliefs are XXXX. statements November present

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

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

well comments EBITDA. XXXX, measures amounts to non-GAAP will website. as financial reconciliations we operating this compared quarter measures performance otherwise qualitative be on quarter our can XXXX, including found available third as regard be stated third During to of and any be of call non-GAAP and/or our the in assumed the press noted. The call, financial to implied today's on on should measures regarding unless to as of the adjusted are most be GAAP discussing The comparable release that

recording to TA. you with conference that, turn I'll Finally, that of of without over prohibited Andy, you. and like today's I'd the And the written consent remind transmission to is call call the

Andrew Rebholz

interest TA. Thanks, And us and Kristin. your joining thank everyone. for for in Good morning, you

XXXX net We the of a virtually quarter, despite third million from market. to $X.X momentum $XX.X important metric, of results headwinds operating in certain last had every in income showing loss million freight Our year. positive showed net compared improvements overall the

Our this operations XX.X% continuing income from year year. last from increased

year, by of quarter's success quarter. that back volume fuel X% the third total healthy adjusted we've to from and consecutive million EBITDA an of second rebounded and Nonfuel basis. of had of same by the the believe X.X% believed second improved by growth same-site anomaly. improved sales third revenues versus of third $XX.X service we X.X% improvement our we last last volume was quarter million increased Fuel decline Dating something XXXX on over the increased in quarter, X% fuel by steady $X.X Truck reflects as a by This X.X% same-site site sales on a rough quarter total initiatives. the revenues same in site a quarter by that X.X% a is basis. The sales I business in in volume. of

down revenues, driven of and options, Fluid Exhaust this grew our and associated slightly as sales service retail that by revenues customer was in categories truck fuel and growing well gross program reductions by rebrandings that improved increase per linked the other implemented loyalty is Diesel Restaurant and volume $X.XXX for Fuel to year. place. believe demand services hours revenue our growth compared led with grew for as to offset which Store points, quick restaurant demand margin was earlier certain gallon, last in XX operation X.X%, solid full-service parking basis took we year. by reduced some

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

recognized the address these credit chance for question of the cost retroactive the first federal in credit the of we reductions is If enacted tax tax fuel on from The to one credit biodiesel extend of reinstatement tax result $XX U.S. tax to our enacted most Congress, XXXX would Based blenders frequently asked the might to XXXX. the should cost of about not current this date, the benefit the It's goods industry sold. year. trending the for a environment be sales legislation seems before as of and to to government. our of but the year, is of and passes. million so has credit, of as status XX% Washington the will or quarter credit might this me days, TA reinstated will that recognize be for X of XXXX like it by credit. this a downward this Any be reports months in we for amount XXXX first in The was that retroactively reinstated XXXX, association, time recognize probability benefit recognize, enacted likely million trade tax end there's the for credit $XX.X XXXX, is I'd

Now on highlights. some to TA

attract we potential program site continue progressing, Our is franchisees. new and expansion franchisees to and

so have We develop goals parcel transactions to expect we we buy additional and or to Barry year site our And X a and on as in more we to also an place early through next TA of a to a expansion this TA moment. have achieve about currently late which center. expected as franchised contracts are X opened open plan primarily expect to by this will in end. talk existing travel expansion year, well site travel although, Express Express our far close center travel These land centers an year year franchising,

as with of IHOPs. our earn centers XX, restaurants our existing travel October our up each To plan end, is that agreement at to full-service convert aspect on as of to sites. of our XX X entered much to to possible we in Another growth from IHOP

IHOP. Note our and our TA continue Over next the company-operated these a our with at XX are to restaurants opened complete in to location. we there in will years, that IHOP will X will discussion. to the the X center at pay rest Currently, fees the including employees first network, travel Jackson operate one and be obligated are conversions October restaurants XX franchise Georgia,

the will achieved is this restaurant, on to to survey million. on their an Based We plan about return investment from site XXXX. IHOP is about of our restaurants expected be we initiative spending. our after We on revenues an increase underway, investment estimate we is experiencing in this due conversions XX%. increases IHOP increases, basis revenue results franchisees be part XX have in new site the operating that XX and $X.X August to and for certain kept at expenses, The in per begin nonlabor with opening point starting in in remain travel site expect The quarter same additional level next nonfuel centers nonfuel a our phase project our the those open average we will expenses that to IHOPs focused in expenses of line year. including ratio sites We costs our that maintenance. in

and the of continue compared and productivity, to first somewhat constrained diesel as quarters year. third in quarter, the to made During be but gains by we areas have second those this technician supply

maintenance sites year. effort Spending to a our increase in spending remain keep partially to to least certain without total and rein this expense in forgoing due top We on fall contain cash is allowing a an also control to disrepair. into at tight capital reductions spending, capital priority. continue The expenditures

those the we increase growth over conclude, this we beliefs. for to share time business company the they continue our programs. the of who To believe for that have and cost profitability company, plans will control in established present including opportunity believe and an initiatives We investors

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

Barry Richards

our year. good remote of positively from with customers freight despite the third travel saw trends. continuing Thanks, revenues certain sales locations, trending unit same strong services increased morning the programs which good ahead to center to -- some to in same inactivity led softness service our with last in operations our looking growth. quarter Andy, the Higher nonfuel large higher quarter new sales everyone. year the We was versus in versus in quarter, add momentum overall has Growth

the to part volume loyalty by member We respectively. X.X% to XX.X Overall on improvement well generate our gallons in support expansion property or this fuel sales fuel in and sale Total taxes our to insurance customer increased million or prior margin increases of January revenue X.X%, due in effort increases drivers. professional a increase to was saw operating our increased and continues and the same-site gallons UltraONE of million excess was as increased quarter. gallons sales driven areas we center year, gross embraced are call average by nonfuel our and be by both loyalty headway expenses Although, continuing maintenance, believe recruit and in volume introduced technicians train and which program, these over expenses staff X.X% primarily XX.X X.X%. and of business, and of

with loyalty Our reward the goals continue results program solid in membership and progress. demonstrate customer count, and to this our quarter are grow

RoadSquad growth, last year, increase larger maintenance sales. a service despite Within for same manufacturers truck association our share year-to-date. producing sales and tire and unit to XX% show X.X% U.S. our tire sales September have same tires year, in a tire service, the decrease up decline last scales an by imported strong XX% unit a versus quarter tire mix. and of continued become quarter versus mobile in were reporting the Retreads XX.X% XX.X% sales increased

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

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

to to showing business revenue number closed having restaurant the locations ultimately to handful that time. concepts adjustments of as , as IHOP regard. had Our rationalizing We're healthy, a restaurant rebranding increases with for these operation over business hours been despite brings recent restaurants basis boost in nationally believe and recognized opportunity remains and looking of previously quarter the will total for XX operated that points We during night. rebranding forward agreement XX this the margins well full-serve our a of hour $XXX,XXX stronger, restaurants over

program ahead, truck that see mobile as opportunities for and continue programs, TechOn-SITE. growth we potential Looking brand to service the especially our we maintenance that

led earned number of uptime confidence the reliability who confidence services. and improved additional equipment has have their large enjoy from a the to customers properly of This We being increased maintained. the

handle their which center, fleet emergency fleet retain call repair breakdown allows calls focus vehicles, us them that of to national Our deliveries. to on continues attract and a to customers RoadSquad supports

saw add our quarter customers, we nights, which weekends, third fleets dedicated cases call agreements calls XX/X. for either XXX their total for handle most, us to new with center bringing the X The in

each will results to Manager site restructuring, this and undertaken initiative we was was meaningful at a a we district employed. on implemented managers General site structure Another number of X. a management believe the have our realignment effect Persaunt we for have of reduced that that operations our October we've operating all on responsible activities single

believe focus structure keep We new efforts higher rates, facilitate improved a operating and this management site on will and better sales expenses. employee recruiting level retention growth nonfuel

expect will annualized basis. of we expense immediate Managers, result a that over we as restructuring fruition, to expectations related profitability level and district of cost expense expense increased on smaller of million approximately an in While new net an number SG&A come these $X the to expect managers from saving increase estimate will time the site General operating the we the in to reduction. reduction There related an be site

this and to of we're in second TA Dakota and Finally, Hot third launched expansion, new franchises South Express of announce network Springs Texas, our pleased Baytown, X under openings brand. the in the newly locations terms

We franchise to third XX. the to-date have the in year total this X bringing new quarter, signed agreements

[indiscernible] expect end be in the XXXX. by be XXXX of these to will sites, will of yet not added operating our We of network, part to added four remain as

sites. addition, X with are franchise stages another for In in we of currently an engaged discussion agreements of operators and X and additional centers are negotiating later travel negotiation

a various sites to process. to are of expected have which we Andy XXXX. January as There well contracts close buy December expected diligence and will close currently XXXX. to an as the as is develop also in approximately in travel center application that And mentioned, phases parcel is the half we TA open that that plan XXX anticipate of Express on in in center And place travel land second other XXXX we a in existing to of

these excited the with to even I about that, date and they We over And potential in continue the call to to hand our be will more excited about hold. Bill. progress areas

William Myers

and Barry, everyone. you, Thank good morning,

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

estate Barry of in margin margin X.X% EBITDA third $XX.X was declined margin approximately we in reported just The XXXX, almost gross gross and fuel gallon to fuel expense improvement gallon real primarily EBITDA a diesel quarter $X.X as the adjusted $XXX,XXX. an million, sold. due margin For increases to of gross the as largely nonfuel increase decline by rent of increase the adjusted million in increased an Diesel was X% drop discussed. Fuel in in by slightly X.X%. or per offset due that well

increased Gasoline primarily diesel increased realized On higher X%, by decline increased The gross $X.X gross under cost fuel balance biodiesel due was new X.X%. a and million basis to a at fuel per result pricing from basis, as benefit volume primarily we program profitability. as or loyalty reduced margin margin million managed the to purchase volumes associated increase sales $X.X same-site with $X.X on to Nonfuel blending. new in in to revenues increased a sites. or margin of higher sales an incentivize a and from rewards gallon sales fuel drivers million our same-site by

revenues to operating the of new on of primarily by a a positive nonfuel to pricing revenue DEF gross to an of number prior as of which, was labor was balance services and to million XX.X%. increase The decline $X.X as in in primarily nonfuel as same-site property total, point X.X% increased percentage products by nonfuel due increase level the $X.X trucks basis impact for as in tax as gross $X.X as a experienced the insurance million quarter. In year operating due support a change and of increase compared sites. on in nonfuel margin same-site well basis or site well XXXX The or initiatives. to The growth of $X.X as basis, this Site XX.X% road increased result due compared XX.X% marketing the gross third on increased was our basis to our the maintenance, expense, X.X%, to same-site to Nonfuel and margin a was expense nonfuel of level expense. to million partially revenues due costs mix due offset sold. margin the decline in a percentage million percentage on revenues, by in XX increase higher higher

October basis of level approximately a X, will expense increase revenues, management of as operations an $X earlier, million percentage we our nonfuel that that expense, As implemented Barry that on result estimate restructuring, discussed proportionately. annual site level operating site and operating by will increase a on

savings, was profitability. this overall $X.X However, SG&A XXXX new over for an immediate expense increase time will an addition million, we in quarter SG&A third to boost our $XX.X structure, XX.X%. or the believe million of

the and annual expectations. roughly just costs support was cost in for relocation estimate restructuring, SG&A an mentioned, We that annual of expenses approximately the as will incur implement I quarter approximately basis, management restructuring, with increased $X.X the business. in SG&A in salary growth in a legal expense we of increase reduce will as increases result and $X from by million our $X.X $XXX,XXX expense line fourth from The SG&A was operations headcount our costs. increased onetime and severance million although to million the such increased compensation to to due on

expense taken in should quarter the With be believe or unforeseen XXXX, approximately absent any account, those expenses factors currently legal of that fourth million into we unusual SG&A $XX items.

Trust XXXX. quarter, XX.X% in $X.X by expense rent in XXXX to travel decreased XX Service third primarily January centers due million Properties the purchasing estate Real from or

$XX.X to SEC by annual previously this the minimum As rent we reduced million. pay discussed,

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

our cash on of matters, investment had September at availability and was our facility. million, liquidity our million credit $XX.X $XXX and to XX, Turning we balance

charged our of in extending XXXX each highlighted XXXX. by December of X last the points facility from quarter's July, XX basis for of pricing premiums the in the we we to As reducing maturity credit unsecured and call, amended July revolving tiers

XX, we truck a service debt. facility stand-alone X As that by restaurants own travel September and are unencumbered of XX centers, stand-alone

we with borrow As discussed part of to our from convert earlier, agreements $XX may IHOP, with hope up the to IHOPs. our cost in restaurants connection to million our

have for capital far not year any During we $XX the expenditures in to invested sold improvements the million quarter, SVC. thus and

million, to $XX That prepared are Lastly, questions. we remarks. capital $XXX acquisitions. ready be to we which concludes any take approximately expect million, would now our be we XXXX Operator, approximately excluding reported plan, previously investment to our you

Operator

Today's FBR. [Operator first B. from question comes Maher Instructions]. from Bryan Riley

Bryan Maher

IHOP quo bit franchise status was applaud, over On those to deal? into who some spending talk you though get $XXX share? conversions, years that, the demand unit about property. to the fee what between more analysis going Can convert properties? that think the relative which could you we is the and that we to annual little per a who that Also next the few over on million approached if And the

Andrew Rebholz

those path we've amongst in our calls facilities the on just and than of guess, end, of Skillet but they care strategy of sort at that this that an we we that's of number similar of motorists for something bigger well-known Georgia branding ones hit the three do a about. IHOP about in not change the underway Country upon in something I gotten residents us we IHOP conversations, a truckers. agreement, months opened hey, talking first down order And -- local of the or And franchise about driving that do but the to the had the with -- restaurants. a where two the drivers, highway, and had when day Honestly, that at we've necessarily came or deal. or think that seen to that Iron we've were are truck coincidently to that Pride that know to an respected to with they've talked brands the we success started and on And signed not started idea the -- our site well IHOP the the to the initiative touch others few given them I let's increase more they sitdown rebranding conversion. much Starting had restaurants IHOP a sites, that appeal as been process now. had as some now of

And conversations. that a led to lot of

as franchise is agreement, pretty system truckers correct segments fee. think we -- I the the the can generally, opposed what that each the are at the customer of past the likely each us as as sales one drivers. the to -- properties doing maximize of the for earnings Bill the why appeal on of and important But going to changes do started hauls as than few we And at continue. that for as logistics is to me, this other declining to best of sure I out, -- years, truck I'm it's far that's and just mean the X.X% the the to amount average length we're with think that that's happening to I this maybe -- looking On we the restaurants. with just not franchise if generate

of do to to branded is, things that say, motorists. for and years think the in done gasoline those one we've I And draw the years

them. some think another continue I as or fast service that and extent to to something food I just this And need branded in restaurants we call it's think the restaurants with. So step to experiment And watch continue we is quick continuum.

we're we a the all the of operated always the to have don't all not of relationship outlets that certain certainly space maybe at allowed not but looking like QSRs. an Right at out and of our to that with I And of McDonald's detail. or because we now, restaurants, as talking that Burger know have almost we're we're sitdown instead example We that. franchisee McDonald's restaurants, local have one Wendy's those restaurants essentially local, operate necessarily or site, for leasing that possibilities operating A all to, King. something

to to want we then those if may a need we of one get travel So center, lease the be into space. brands

at of sort business. the And -- so those restaurant of kinds as testing part just with we're looking things the of our well

about very buildings. of So on projects but that the have we're or the another part we general do were the talked locations I with just also I built, interstate IHOPs, highways mean called some highways that some of of can customer built being said, part interstate great on some out the be And these there are return will of -- updating some as And I appeal of all I segments. our up think there'll tired them projects. If old good to sprucing together, increase looking. as we and we these the get investment. think other that a

Bryan Maher

it like signage? of is they giving What X.X% kind And property, when are we money? at roughly aside lodging costs any think and key with relationship repeating relationship? for is this about it's the And is you sure take. upfront contribution I'm million all anything from $X.X in the the any there IHOP per give anything? the franchise to their But Are of there -- or

Andrew Rebholz

fee per towards may initial initial that it they've have our fees come really that. made of the million some as of And contributions financing like like this the start and straight startup reductions expenses and upfront as of them in things the And so. able I -- facility sort form of were available with number that far kind like we things $X.X gave, whatever training training as franchise the restaurant. and construction cost. million like the -- as the even of included costs, but the the Their the That No. -- sort in that to includes nothing up negotiate initial us, to fees, all -- really far franchise $XX investment contribution,

Bryan Maher

biodiesel the the chance driver? moving and credit. just year is a in And this do pushing is do to main not okay, going there And guy to this the the Congress 'XX? on down that fuel get look, is key to end water Like forward? say, river, the going we're the we're we 'XX, then kind to of of Who they

Andrew Rebholz

and the been package. biodiesel one Representative has particular primary of end that I is of constituent, good discussion has sort of house. one negotiated this an think of the and extenders I've and number aisle are the as up important the Senator are I -- Democrats that least I and a his there and kind some on Senator extenders. the in Grassley, at one camp is component Grassley's particular maybe understand been from extenders. be of that as of the ones getting to happens he -- there, Iowa the and going that the I fans. on sides probably of tax Senator both supported Grassley there And out think There between leading a told, support think as other them that have But their then to Neal

this become that they of tax overall think who tax of of the I package sort lot the X -- provision. a negotiating extenders of part an would are hopefully

to right what XX. that And funding other the the tax can important the -- the on And -- continuing like looks the step November resolution expires now get government right current I now is second be to mean provisions it agreement the some the tax need vehicle are attached. legislative need And then the to provisions. I you on the which think is

there's month where something and so maybe or little year. the with going mean happen have CR maybe could December. doesn't they the then there's another a term path the happen December. doesn't it longer -- something, a the strike if up it Congress And term to potential I something short the another there happen. kick government a but chance -- at that bite can pass that's give to that then, opportunity to deal down what really down come longer-term short another we're probably they do apple shut then bit deal to And term, November. with And -- so If a then, in next in late is themselves who to If the knows or next again. maybe

there believe will -- of think I 'XX I -- bit. mean I reinstated happen, likelihood XXXX retroactively our a and And that that's a go industry-related laying like district. employees biodiesel, but being down having and for does off and shutting what businesses down I who -- the never quite that mean knows out good there that, a thing businesses lot things your of in

credit And here including I that's -- sit includes of well that impeachment process. hopefully So here as and the burner, kind back which then votes how wildcard particular it that back think burner. the to out whole that the How the not to other Congress. on I impeach in take we'll up. all But see for provisions, the us. how And a a tax is whole big quickly house that takes long the that could plays just our that could said, push would but extenders, very required Senate maybe longer is good and ugly to that, gets, the

everything less situation last from the before there is or a hearing, probable certainly quarter still alive quarter that, a that still and we're So than it's chance. but

Bryan Maher

here efforts me since maybe I is cost X effort last cost, you be can standpoint drops bottom question. making the the the line mean do you And that stock's sure mean guys Okay. the call company control a last cap from $XXX down And revenue. analyst, or down? saw year done is are a but then this I morning, continued a in so lastly below for million of you're be think, I'm guys valuation. $X you or in know look, issue. comment down as an covering billion But an keep do our in year-to-date. And I XX% to What to and note extreme so. this I'm more I to the than

I calls could don't constantly at who million be today the I profit are profit in $X What And million from done? stretch. driving to or per -- that's the on $X involved think per a you what in net If generate more $X earnings. $X just still billion and $XX a zillion share emails can buy side, get about you announced name cost. the phone besides that,

Andrew Rebholz

allow management don't I can that done. be are reducing things pursue but the day-to-day of whatever be that think just those of can the everyday much change to then things think for I that going improve initiatives. done tomorrow, results lots at lots that perspective from are there focus which there to instituted level, us we to necessarily is bring we a and/or this initiatives cost enhancing more I site think of that revenue

issue I have mean opportunities with the last the was the do but like third this for merchandise really as with our how quarter when a labor on more for quarter, different sales -- look here I of a as I things same-site price in think and in labor. of percentage the the I the wasn't year. we business, same various nonfuel at market that, think our the we numbers basis exactly parts products things to

because yes, acquire. maintenance taxes up quarter this are a of third in versus related point last sites that year, roughly is the of to property year's $X basis XX increase entirely we the insurance almost and million all Really, taxes. And expense, ratio quarter this that property

So saving it's $X us in operating expenses. $XX but costing million in million rent,

such we but taxes those necessarily occurring a of example. coming still didn't there, one just it's as large ahead increase property an in out foresee So we're things

I'll it's And that of an it ratios. sort I getting know as do our increasing in issue But is have lot honestly, say, into in particularly baked opportunity expectations. just issue, of of like of it but cutting things it we a think that area. some quite more So to, rightsize revenue if truck least costs, as I'll at is don't much an see I I say as, service the our

to that that people. the investments to beginning has don't but -- you turnover's going. way. if of it -- connotations, That in the right investments mean we have that all third And our need than talked rebound And keep the quarters or employees, that we've this on there. of site And use those a retention I really moving I making saw those will, thing. we particularly of take And about so those word indications few those we people. in to quarter payoff, going what's direction, our rebounding We've had the past some turnaround, so improve may of months, need the it on beginnings are we're last but want few but more over quarter in been in costly And been the we the always the far. employees, the

Operator

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

Andrew Rebholz

we'll Again, Chris. Thanks, to your quarter. the in this interest your after everybody, a for attention you thank And you great talk day. Have TA. morning, fourth

Operator

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

disconnect. You may now

TravelCenters of America (TA) 5 Nov 192019 Q3 Earnings call transcript