TravelCenters of America Inc. Announces Second Quarter 2021 Financial Results

August 2, 2021

Company Delivers Significant Financial Improvement in Second Quarter

Net Income of $28.9 Million Improved $26.8 Million Over Prior Year
Net Income Per Share of Common Stock Attributable to Common Stockholders of $2.02 Improved $1.76 Over Prior Year
Adjusted EBITDA of $73.5 Million Improved $27.7 Million, or 60.6%, Over Prior Year
Adjusted EBITDAR of $137.1 Million Improved $28.3 Million, or 26.0%, Over Prior Year

WESTLAKE, Ohio–(BUSINESS WIRE)–TravelCenters of America Inc. (Nasdaq: TA) today announced financial results for the quarter ended June 30, 2021.

Jonathan M. Pertchik, TA’s CEO, made the following statement regarding the 2021 second quarter results:

“TA’s Transformation Plan has been underway for approximately 15 months, and our operating results for the second quarter demonstrate that the changes we are making are taking hold, as we improved net income from $2.2 million to $28.9 million and adjusted EBITDA 60.6% to $73.5 million from $45.8 million compared to the prior year. The improvements were driven primarily by a $60.5 million increase in nonfuel gross margin, which was the result of operating improvements across nearly all business lines. We believe that the many transformation initiatives we put in place are driving better financial results throughout the organization. Our discipline in managing expenses also continues to be an important factor in delivering improved results, helping to drive a 90 basis point improvement in adjusted EBITDAR margin versus the prior year second quarter.”

Reconciliations to GAAP:

Adjusted net income, adjusted net income per share of common stock attributable to common stockholders, EBITDA, adjusted EBITDA, adjusted EBITDAR and adjusted EBITDAR margin are non-GAAP financial measures. The U.S. generally accepted accounting principles, or GAAP, financial measures that are most directly comparable to the non-GAAP measures disclosed herein are included in the supplemental tables below.

Second Quarter 2021 Highlights:

Cash and cash equivalents of $583.3 million and availability under TA’s revolving credit facility of $98.4 million for total liquidity of $681.7 million as of June 30, 2021.

On April 21, 2021, TA completed the sale of its Quaker Steak & Lube, or QSL, business, which included 41 standalone restaurants, for $5.0 million, excluding costs to sell and certain closing adjustments.

The following table presents detailed results for TA’s fuel sales for the 2021 and 2020 second quarters.

(in thousands, except per gallon amounts)	Three Months Ended June 30,
(in thousands, except per gallon amounts)	2021		2020		Change
Fuel sales volume (gallons):
Diesel fuel	512,943		423,082		21.2	%
Gasoline	70,687		53,134		33.0	%
Total fuel sales volume	583,630		476,216		22.6	%

Fuel gross margin	$	100,292	$	91,900	9.1	%
Fuel gross margin per gallon	$	0.172	$	0.193	(10.9)	%

The following table presents detailed results for TA’s nonfuel revenues for the 2021 and 2020 second quarters.

(in thousands, except percentages)	Three Months Ended June 30,
(in thousands, except percentages)	2021			2020			Change
Nonfuel revenues:
Store and retail services	$	194,440		$	158,240		22.9	%
Truck service	194,197			160,987			20.6	%
Restaurant	79,938			61,492			30.0	%
Diesel exhaust fluid	33,235			24,851			33.7	%
Total nonfuel revenues	$	501,810		$	405,570		23.7	%

Nonfuel gross margin	$	303,102		$	242,619		24.9	%
Nonfuel gross margin percentage	60.4		%	59.8		%	60	pts

Net income of $28.9 million improved $26.8 million, or 1242.6%, and adjusted net income of $29.7 million improved $18.9 million, or 176.2%, as compared to the prior year period.

Adjusted EBITDA of $73.5 million increased $27.7 million, or 60.6%, as compared to the prior year period.

Adjusted EBITDAR of $137.1 million increased $28.3 million, or 26.0%, as compared to the prior year period.

Adjusted EBITDAR margin increased to 22.8% from 21.9% for the prior year period.

Growth and Cost Control Strategies

During the 2020 second quarter, TA commenced a strategic transformation, or its Transformation Plan, consisting of numerous initiatives across its organization for the purpose of expanding its travel center network, improving and enhancing operational efficiencies and profitability, and strengthening its financial position all in support of its core mission to return every traveler to the road better than they came. Among these initiatives was a corporate restructuring that resulted in immediate selling, general and administrative expense savings and included significant leadership appointments of qualified candidates who bring new and valuable experiences as well as initiative, critical skills and new visions and approaches to TA’s business. TA also created a centralized procurement group to drive economies of scale in pricing, increased leverage in vendor negotiations which we believe will ultimately lead to substantial purchasing savings and a streamlined operation. Other key initiatives are focused in areas of liquidity, expanding TA’s franchise base, increasing diesel fuel and gasoline gross margin and fuel sales volume, increasing market share in the truck service business, improving merchandising and increasing gross margin in store and retail services, improving operating effectiveness in TA’s food service offerings and improving information technology systems, while focusing on opportunities to rationalize and control costs.

Since the beginning of 2019, TA has entered into franchise agreements covering 46 travel centers to be operated under its travel center brand names; four of these franchised travel centers began operations during 2019, 10 began operations during 2020, one began operations during the first quarter of 2021 and two began operations during the second quarter of 2021 and TA expects the remaining 29 to open by the 2023 third quarter.

As a result of some external labor and supply chain constraints, TA’s capital expenditures plan for 2021 now contemplates aggregate cash investments in the range of $130.0 million to $150.0 million targeted towards improving and growing TA’s core travel center business. The 2021 capital expenditures plan includes projects to enhance the guest experience through significant site level upgrades at TA’s travel centers and advanced technology systems infrastructure. Approximately half of TA’s capital expenditure plan for 2021 is focused on growth initiatives that TA expects will meet or exceed TA’s 15% to 20% cash on cash return hurdle.

Importantly, TA is committed to embracing environmentally friendly sources of energy and has formed a new business division, eTA, that will seek to deliver sustainable and alternative energy to the marketplace and focus on partnering with the public sector, private companies and customers to facilitate industry transformation. This business division will extend TA’s commitment to providing the widest range of non-fuel offerings across its sites. Recent accomplishments include continued expansion of TA’s biodiesel blending capabilities, availability of DEF at the pump and placement of electric vehicle charging stations. Moreover, TA has hired a senior leader to lead eTA and has begun to onboard additional dedicated internal resources, as well as create relationships within the supply, storage and distribution chain, with respect to its alternative energy initiative. TA believes its large, well-located sites and its focus as a pure supplier may provide TA with the opportunity to make both fossil and, eventually, non-fossil fuels available and to potentially balance or adjust its product and service offerings as it may determine and subject to availability.

Conference Call

On August 3, 2021, at 10:00 a.m. Eastern time, TA will host a conference call to discuss its financial results and other activities for the three months ended June 30, 2021. Following management’s remarks, there will be a question and answer period.

The conference call telephone number is 877-329-4614. Participants calling from outside the United States and Canada should dial 412-317-5437. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available for about a week after the call. To hear the replay, dial 412-317-0088. The replay pass code is 10157606.

A live audio webcast of the conference call will also be available in a listen only mode on TA’s website at www.ta-petro.com. To access the webcast, participants should visit TA’s website about five minutes before the call. The archived webcast will be available for replay on TA’s website for about one week after the call. The transcription, recording and retransmission in any way of TA’s second quarter conference call is strictly prohibited without the prior written consent of TA. The Company’s website is not incorporated as part of this press release.

About TravelCenters of America Inc.

TA’s nationwide business includes travel centers located in 44 U.S. states and in Canada and standalone truck service facilities located in three states. TA’s travel centers operate under the “TravelCenters of America,” “TA,” “TA Express,” “Petro Stopping Centers” and “Petro” brand names and offer diesel fuel and gasoline, restaurants, truck repair services, travel/convenience stores and other services designed to provide attractive and efficient travel experiences to professional drivers and other motorists. TA’s standalone truck service facilities operate under the “TA Truck Service” brand name.


TRAVELCENTERS OF AMERICA INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenues:
Fuel	$	1,328,631		$	577,410		$	2,405,889		$	1,452,339
Nonfuel	501,810			405,570			949,724			830,577
Rent and royalties from franchisees	3,839			3,123			7,763			6,535
Total revenues	1,834,280			986,103			3,363,376			2,289,451

Cost of goods sold (excluding depreciation):
Fuel	1,228,339			485,510			2,228,167			1,278,484
Nonfuel	198,708			162,951			370,930			324,670
Total cost of goods sold	1,427,047			648,461			2,599,097			1,603,154

Site level operating expense	233,996			197,522			461,226			434,086
Selling, general and administrative expense	36,590			37,976			72,520			75,204
Real estate rent expense	63,611			63,079			127,480			126,667
Depreciation and amortization expense	24,139			28,254			47,968			56,814
Other operating income, net	(872		)	—			(872		)	—

Income (loss) from operations	49,769			10,811			55,957			(6,474		)

Interest expense, net	11,739			7,233			23,123			14,689
Other expense, net	1,304			335			2,701			876
Income (loss) before income taxes	36,726			3,243			30,133			(22,039		)
(Provision) benefit for income taxes	(7,779		)	(1,087		)	(6,929		)	5,654
Net income (loss)	28,947			2,156			23,204			(16,385		)
Less: net (income) loss for noncontrolling interest	(409		)	32			(333		)	52
Net income (loss) attributable to common stockholders	$	29,356		$	2,124		$	23,537		$	(16,437	)

Net income (loss) per share of common stock attributable to common stockholders:
Basic and diluted	$	2.02		$	0.26		$	1.62		$	(1.98	)

Weighted average vested shares of common stock	14,236			7,944			14,232			7,924
Weighted average unvested shares of common stock	331			380			337			394

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, unless indicated otherwise)

TA believes the non-GAAP financial measures presented in the tables below are meaningful supplemental disclosures. Management uses these measures in developing internal budgets and forecasts and analyzing TA’s performance and believes that they may help investors gain a better understanding of changes in TA’s operating results and its ability to pay rent or service debt when due, make capital expenditures and expand its business. These non-GAAP financial measures also may help investors to make comparisons between TA and other companies and to make comparisons of TA’s financial and operating results between periods.

The non-GAAP financial measures TA presents should not be considered as alternatives to net income (loss) attributable to common stockholders, net income (loss), income (loss) from operations, operating margin, total fuel gross margin and nonfuel revenues or net loss per share of common stock attributable to common stockholders as an indicator of TA’s operating performance or as a measure of TA’s liquidity. Also, the non-GAAP financial measures TA presents may not be comparable to similarly titled amounts calculated by other companies.

TA believes that adjusted net income (loss), adjusted net income (loss) per share of common stock attributable to common stockholders, EBITDA and adjusted EBITDA are meaningful disclosures that may help investors to better understand TA’s financial performance by providing financial information that represents the operating results of TA’s operations without the effects of items that do not result directly from TA’s normal recurring operations and may allow investors to better compare TA’s performance between periods and to the performance of other companies. TA calculates EBITDA as net income (loss) before interest, income taxes and depreciation and amortization expense, as shown below. TA calculates adjusted EBITDA by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses.

In addition, TA believes that, because it leases a majority of its travel centers, presenting adjusted EBITDAR and adjusted EBITDAR margin may help investors compare the value of TA against companies that own and finance ownership of their properties with debt financing, since these measures eliminate the effects of variability in leasing methods and capital structures. These measures may also help investors evaluate TA’s valuation if it owned its leased properties and financed that ownership with debt, in which case the interest expense TA incurred for that debt financing would be added back when calculating EBITDA. Adjusted EBITDAR and adjusted EBITDAR margin are presented solely as valuation measures and should not be viewed as measures of overall operating performance or considered in isolation or as an alternative to net loss because they exclude the real estate rent expense associated with TA’s leases and they are presented for the limited purposes referenced herein. TA calculates EBITDAR as net loss before interest, income taxes, real estate rent expense and depreciation and amortization expense and adjusted EBITDAR by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses. TA calculates adjusted EBITDAR margin as adjusted EBITDAR as a percentage of total fuel gross margin and nonfuel revenues.

TA believes that net income (loss) is the most directly comparable GAAP financial measure to adjusted net income (loss), EBITDA, adjusted EBITDA and adjusted EBITDAR and net income (loss) per share of common stock attributable to common stockholders is the most directly comparable GAAP financial measure to adjusted net income (loss) per share of common stock attributable to common stockholders.

The following tables present the reconciliations of the non-GAAP financial measures to the respective most directly comparable GAAP financial measures for the three and six months ended June 30, 2021 and 2020.

Calculation of adjusted net income (loss):	Three Months Ended June 30,						Six Months Ended June 30,
Calculation of adjusted net income (loss):	2021			2020			2021			2020
Net income (loss)	$	28,947		$	2,156		$	23,204		$	(16,385	)
Add: Reorganization Plan costs⁽¹⁾	—			3,884			—			4,288
Add: Goodwill impairment⁽²⁾	—			3,046			—			3,046
Add: QSL impairment⁽³⁾	—			—			650			—
Add: Asset write offs⁽⁴⁾	—			1,372			—			6,534
Add: Field employee bonus expense⁽⁵⁾	—			2,381			—			3,769
Add: Executive compensation expense⁽⁶⁾	—			803			—			2,109
Add: Equity investment ownership dilution⁽⁷⁾	1,826			—			1,826			—
Less: Gain on sale of assets, net⁽⁸⁾	(897		)	—			(897		)	—
Less: Tax impact of adjusting items⁽⁹⁾	(195		)	(2,894		)	(331		)	(4,976		)
Adjusted net income (loss)⁽¹⁰⁾	$	29,681		$	10,748		$	24,452		$	(1,615	)

Calculation of adjusted net income (loss) per share of common stock attributable to common stockholders (basic and diluted):	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net income (loss) per share of common stock attributable to common stockholders (basic and diluted)	$	2.02		$	0.26		$	1.62		$	(1.98	)
Add: Reorganization Plan costs⁽¹⁾	—			0.47			—			0.52
Add: Goodwill impairment⁽²⁾	—			0.36			—			0.37
Add: QSL impairment⁽³⁾	—			—			0.04			—
Add: Asset write offs⁽⁴⁾	—			0.16			—			0.79
Add: Field employee bonus expense⁽⁵⁾	—			0.29			—			0.45
Add: Executive compensation expense⁽⁶⁾	—			0.10			—			0.25
Add: Equity investment ownership dilution⁽⁷⁾	0.13			—			0.13			—
Less: Gain on sale of assets, net⁽⁸⁾	(0.06		)	—			(0.06		)	—
Less: Tax impact of adjusting items⁽⁹⁾	(0.01		)	(0.35		)	(0.02		)	(0.60		)
Adjusted net income (loss) per share of common stock attributable to common stockholders (basic and diluted)⁽¹⁰⁾	$	2.08		$	1.29		$	1.71		$	(0.20	)

Calculation of EBITDA, adjusted EBITDA and adjusted EBITDAR:	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Net income (loss)	$	28,947		$	2,156	$	23,204		$	(16,385	)
Less (add): Benefit (provision) for income taxes	7,779			1,087		6,929			(5,654		)
Add: Depreciation and amortization expense	24,139			28,254		47,968			56,814
Add: Interest expense, net	11,739			7,233		23,123			14,689
EBITDA	72,604			38,730		101,224			49,464
Add: Reorganization Plan costs⁽¹⁾	—			3,884		—			4,288
Add: Field employee bonus expense⁽⁵⁾	—			2,381		—			3,769
Add: Executive compensation expense⁽⁶⁾	—			803		—			2,109
Add: Equity investment ownership dilution⁽⁷⁾	1,826			—		1,826			—
Less: Gain on sale of assets, net⁽⁸⁾	(897		)	—		(897		)	—
Adjusted EBITDA⁽¹⁰⁾	73,533			45,798		102,153			59,630
Add: Real estate rent expense	63,611			63,079		127,480			126,667
Adjusted EBITDAR⁽¹⁰⁾	$	137,144		$	108,877	$	229,633		$	186,297

Calculation of operating margin:	Three Months Ended June 30,						Six Months Ended June 30,
Calculation of operating margin:	2021			2020			2021			2020
Total revenues	$	1,834,280		$	986,103		$	3,363,376		$	2,289,451
Income (loss) from operations	49,769			10,811			55,957			(6,474		)
Operating margin	2.7		%	1.1		%	1.7		%	(0.3		)%

Calculation of adjusted EBITDAR margin:	Three Months Ended June 30,						Six Months Ended June 30,
Calculation of adjusted EBITDAR margin:	2021			2020			2021			2020
Fuel gross margin	$	100,292		$	91,900		$	177,722		$	173,855
Nonfuel revenues	501,810			405,570			949,724			830,577
Total fuel gross margin and nonfuel revenues	$	602,102		$	497,470		$	1,127,446		$	1,004,432

Adjusted EBITDAR⁽¹⁰⁾	$	137,144		$	108,877		$	229,633		$	186,297
Adjusted EBITDAR margin	22.8		%	21.9		%	20.4		%	18.5		%

	⁽¹⁾	Reorganization Plan Costs. On April 30, 2020, TA commenced a company-wide reorganization plan, or the Reorganization Plan. During the three and six months ended June 30, 2020, TA recognized $3.9 million and $4.3 million, respectively, of costs related to the Reorganization Plan, which were included in selling, general and administrative expense in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽²⁾	Goodwill Impairment. During the three and six months ended June 30, 2020, TA recognized a goodwill impairment charge of $3.0 million with respect to its QSL reporting unit, which were recognized in depreciation and amortization expense in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽³⁾	QSL Impairment. TA had classified its QSL business as held for sale as of December 31, 2020. During the six months ended June 30, 2021 and prior to the sale completed on April 21, 2021, TA recorded additional impairment charges of $650 relating to its QSL business, which were included in depreciation and amortization expense in TA’s consolidated statements of operations and comprehensive income (loss). Refer to note 8 below for more information on the sale of QSL.
	⁽⁴⁾	Asset Write Offs. During the three and six months ended June 30, 2020, TA wrote off $0.8 million of intangibles relating to three QSL franchises that closed in April 2020. During the three and six months ended June 30, 2020, TA wrote off $0.5 million and $5.7 million, respectively, related to truck service programs that were canceled. These amounts were included in depreciation and amortization expense in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽⁵⁾	Field Employee Bonus Expense. In March and April 2020, TA paid cash bonuses to certain employees who continued to work at its locations during the COVID-19 pandemic. These bonuses resulted in additional compensation expense of $2.4 million and $3.8 million for the three and six months ended June 30, 2020, respectively, which were included in site level operating expense in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽⁶⁾	Executive Compensation Expense. TA agreed to accelerate the vesting of previously granted stock awards and make cash payments as part of TA’s retirement and separation agreements with certain former executive officers. The accelerations and cash payments resulted in additional compensation expense of $0.8 million and $2.1 million for the three and six months ended June 30, 2020, respectively, which were included in selling, general and administrative expense in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽⁷⁾	Equity Investment Ownership Dilution. During the three and six months ended June 30, 2021, TA reduced its ownership in Epona, LLC, owner of QuikQ LLC, an equity method investment, to less than 50%, for which a loss of $1.8 million was included in other expense, net in TA’s consolidated statements of operations and comprehensive income (loss).
	⁽⁸⁾	Gain on Sale of Assets, Net. In May 2021, TA sold a property located in Mesquite, Texas, to Industrial Logistics Properties Trust, or ILPT, for a sales price of $2.2 million, excluding selling costs. The RMR Group LLC provides management services to ILPT and Mr. Portnoy serves as the chair of the board of trustee and as a managing trustee of ILPT. TA recognized a gain on the sale of $1.5 million. On April 21, 2021, TA completed the sale of its QSL business for $5.0 million, excluding costs to sell and certain closing adjustments. TA recognized a loss on the sale of $0.6 million. The gain and loss on the sale of assets were included in other operating income, net for the three and six months ended June 30, 2021.
	⁽⁹⁾	Tax Impact of Adjusting Items. TA calculated the income tax impact of the adjustments described above by using its estimated statutory income tax rates of 21.0% and 25.2% for the three and six months ended June 30, 2021 and 2020, respectively.
	⁽¹⁰⁾	Reconciliations from net income (loss), or net income (loss) per share of common stock attributable to common stockholders (basic and diluted), the financial measures determined in accordance with GAAP to the non-GAAP financial measures disclosed herein, are included in the supplemental table above.