TravelCenters of America Inc. Announces Third Quarter 2021 Financial Results

Company Delivers Continued Financial Improvement Over Prior Year

Net Income of $22.2 Million Improved $13.5 Million Over Prior Year

Net Income Per Share of Common Stock Attributable to Common Stockholders of $1.52 Improved $0.91 Over Prior Year

Adjusted EBITDA of $65.2 Million Improved $14.1 Million, or 27.7%, Over Prior Year

Adjusted EBITDAR of $129.1 Million Improved $14.1 Million, or 12.2%, Over Prior Year

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

Jonathan M. Pertchik, TA’s Chief Executive Officer, made the following statement regarding the 2021 third quarter results:

“TA’s strong operating results for the third quarter continue to demonstrate our successful execution on the transformation plan that we began implementing last year, as net income improved to $22.2 million from $8.7 million and Adjusted EBITDA improved by almost 28% to $65.2 million from $51.1 million as compared to the prior year period. We achieved resilient and improved profitability across nearly all business lines, despite significant ongoing COVID-related labor and supply chain challenges. Looking ahead, we are excited about ending this year strong and moving into next year as our capital plan will leverage our robust balance sheet through site refreshes, technology improvements and other activities, including possible acquisitions, to drive continuous, excellent performance and take our Company successfully into its 50^th anniversary year.”

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.

Third Quarter 2021 Highlights:

Cash and cash equivalents of $621.1 million and availability under TA’s revolving credit facility of $94.1 million for total liquidity of $715.2 million as of September 30, 2021.
The following table presents detailed results for TA’s fuel sales for the 2021 and 2020 third quarters.

(in thousands, except per gallon amounts)	Three Months Ended September 30,
(in thousands, except per gallon amounts)	2021		2020		Change
Fuel sales volume (gallons):
Diesel fuel	513,827		485,488		5.8	%
Gasoline	72,021		69,614		3.5	%
Total fuel sales volume	585,848		555,102		5.5	%

Fuel gross margin	$	106,010	$	80,123	32.3	%
Fuel gross margin per gallon	$	0.181	$	0.144	25.7	%

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

(in thousands, except percentages)	Three Months Ended September 30,
(in thousands, except percentages)	2021			2020			Change
Nonfuel revenues:
Store and retail services	$	197,842		$	179,517		10.2	%
Truck service	200,192			189,630			5.6	%
Restaurant	79,850			77,665			2.8	%
Diesel exhaust fluid	33,179			27,285			21.6	%
Total nonfuel revenues	$	511,063		$	474,097		7.8	%

Nonfuel gross margin	$	304,798		$	285,983		6.6	%
Nonfuel gross margin percentage	59.6		%	60.3		%	(70)	pts

Net income of $22.2 million improved $13.5 million, or 156.4%, and adjusted net income of $22.2 million improved $5.9 million, or 36.0%, as compared to the prior year period.
Adjusted EBITDA of $65.2 million increased $14.1 million, or 27.7%, as compared to the prior year period.
Adjusted EBITDAR of $129.1 million increased $14.1 million, or 12.2%, as compared to the prior year period.
Adjusted EBITDAR margin increased to 20.9% from 20.7% for the prior year period.

Growth and Cost Control Strategies

During the 2020 second quarter, TA commenced a strategic transformation and turnaround plan, 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 the hiring of many new members of management. TA also created a centralized procurement group to drive economies of scale in pricing and increased leverage in vendor negotiations which is leading 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 control and rationalize costs.

Since the beginning of 2019, TA has entered into franchise agreements for 52 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 and four began operations during the nine months ended September 30, 2021. TA expects the remaining 34 to open by the third quarter of 2023.

As a result of nationwide labor and supply chain challenges, TA’s capital expenditures plan has been impacted and it is currently expected to be in the range of $80.0 million to $100.0 million in 2021. We do not believe that this delay will have a material impact on the underlying operating business. The 2021 capital expenditures include projects to enhance the guest experience through significant upgrades at TA’s travel centers and to improve TA’s technology systems infrastructure. Approximately half of TA’s capital expenditures in 2021 are 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 through its eTA division, which seeks to deliver sustainable and alternative energy to the marketplace and focus on working with the public sector, private companies and customers to facilitate a possible industry transformation. This business division extends TA’s commitment to providing the widest range of commercially prudent and practicable non-fuel offerings across its sites. Recent accomplishments include continued expansion of TA’s biodiesel blending capabilities, availability of diesel exhaust fluid, or DEF, at the pump and placement of electric vehicle charging stations. 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 November 2, 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 September 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 877-344-7529 in the United States, 855-669-9658 in Canada, and 412-317-0088 in other countries. The replay pass code is 10160345.

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 third 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.

TravelCenters of America Inc. (Nasdaq: TA) is the nation’s largest publicly traded full-service travel center network. Founded in 1972 and headquartered in Westlake, Ohio, its more than 18,000 team members serve guests in over 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, travel stores, car and truck parking and other services dedicated to providing great experiences for its guests. TA is committed to sustainability, with its specialized business unit, eTA, focused on sustainable energy options for professional drivers and motorists, while leveraging alternative energy to support its own operations. TA operates over 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet® and Country Pride®. For more information, visit www.ta-petro.com.

TRAVELCENTERS OF AMERICA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Fuel	$	1,424,997	$	791,880	$	3,830,886	$	2,244,219
Nonfuel	511,063		474,097		1,460,787		1,304,674
Rent and royalties from franchisees	3,886		3,947		11,649		10,482
Total revenues	1,939,946		1,269,924		5,303,322		3,559,375

Cost of goods sold (excluding depreciation):
Fuel	1,318,987		711,757		3,547,154		1,990,241
Nonfuel	206,265		188,114		577,195		512,784
Total cost of goods sold	1,525,252		899,871		4,124,349		2,503,025

Site level operating expense	246,871		221,864		708,097		655,950
Selling, general and administrative expense	39,563		32,967		112,083		108,171
Real estate rent expense	63,898		65,226		191,378		191,893
Depreciation and amortization expense	24,276		32,299		72,244		89,113
Other operating expense (income), net	230		—		(642)		—

Income from operations	39,856		17,697		95,813		11,223

Interest expense, net	11,843		7,375		34,966		22,064
Other (income) expense, net	(1,034)		233		1,667		1,109
Income (loss) before income taxes	29,047		10,089		59,180		(11,950)
(Provision) benefit for income taxes	(6,847)		(1,432)		(13,776)		4,222
Net income (loss)	22,200		8,657		45,404		(7,728)
Less: net income (loss) for noncontrolling interest	—		52		(333)		104
Net income (loss) attributable to common stockholders	$	22,200	$	8,605	$	45,737	$	(7,832)

Net income (loss) per share of common stock attributable to common stockholders:
Basic and diluted	$	1.52	$	0.61	$	3.14	$	(0.76)

Weighted average vested shares of common stock	14,254		13,779		14,239		9,890
Weighted average unvested shares of common stock	327		286		334		358

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

TRAVELCENTERS OF AMERICA INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share amounts)

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 income (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 income (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 income (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, 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 and operating margin is the most directly comparable GAAP financial measure to adjusted EBITDAR margin.

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 nine months ended September 30, 2021 and 2020.

TRAVELCENTERS OF AMERICA INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share amounts)

Calculation of adjusted net income:	Three Months Ended September 30,				Nine Months Ended September 30,
Calculation of adjusted net income:	2021		2020		2021		2020
Net income (loss)	$	22,200	$	8,657	$	45,404	$	(7,728)
Add: Reorganization Plan costs⁽¹⁾	—		—		—		4,288
Add: Goodwill impairment⁽²⁾	—		—		—		3,046
Add: QSL impairment⁽³⁾	—		—		650		—
Add: Asset write offs⁽⁴⁾	—		2,372		—		8,906
Add: Field employee bonus expense⁽⁵⁾	—		—		—		3,769
Add: Executive compensation expense⁽⁶⁾	—		—		—		2,109
Add: Equity investment ownership dilution⁽⁷⁾	—		—		1,826		—
Add: Impairment of operating lease assets⁽⁸⁾	—		1,262		—		1,262
Add: Impairment of property and equipment⁽⁸⁾	—		6,610		—		6,610
Less: Gain on sale of assets, net⁽⁹⁾	—		—		(897)		—
Less: Tax impact of adjusting items⁽¹⁰⁾	—		(2,581)		(331)		(7,557)
Adjusted net income ⁽¹¹⁾	$	22,200	$	16,320	$	46,652	$	14,705

Calculation of adjusted net income per share of common stock attributable to common stockholders (basic and diluted):	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) per share of common stock attributable to common stockholders (basic and diluted)	$	1.52	$	0.61	$	3.14	$	(0.76)
Add: Reorganization Plan costs⁽¹⁾	—		—		—		0.42
Add: Goodwill impairment⁽²⁾	—		—		—		0.30
Add: QSL impairment⁽³⁾	—		—		0.04		—
Add: Asset write offs⁽⁴⁾	—		0.17		—		0.87
Add: Field employee bonus expense⁽⁵⁾	—		—		—		0.37
Add: Executive compensation expense⁽⁶⁾	—		—		—		0.21
Add: Equity investment ownership dilution⁽⁷⁾	—		—		0.13		—
Add: Impairment of operating lease assets⁽⁸⁾	—		0.09		—		0.12
Add: Impairment of property and equipment⁽⁸⁾	—		0.47		—		0.64
Less: Gain on sale of assets, net⁽⁹⁾	—		—		(0.06)		—
Less: Tax impact of adjusting items⁽¹⁰⁾	—		(0.18)		(0.02)		(0.74)
Adjusted net income per share of common stock attributable to common stockholders (basic and diluted)⁽¹¹⁾	$	1.52	$	1.16	$	3.23	$	1.43

Calculation of EBITDA, adjusted EBITDA and adjusted EBITDAR:	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	22,200	$	8,657	$	45,404	$	(7,728)
Add (less): Provision (benefit) for income taxes	6,847		1,432		13,776		(4,222)
Add: Depreciation and amortization expense	24,276		32,299		72,244		89,113
Add: Interest expense, net	11,843		7,375		34,966		22,064
EBITDA	65,166		49,763		166,390		99,227
Add: Reorganization Plan costs⁽¹⁾	—		—		—		4,288
Add: Field employee bonus expense⁽⁵⁾	—		—		—		3,769
Add: Executive compensation expense⁽⁶⁾	—		—		—		2,109
Add: Equity investment ownership dilution⁽⁷⁾	—		—		1,826		—
Add: Impairment of operating lease assets⁽⁸⁾	—		1,262		—		1,262
Less: Gain on sale of assets, net⁽⁹⁾	—		—		(897)		—
Adjusted EBITDA⁽¹¹⁾	65,166		51,025		167,319		110,655
Add: Real estate rent expense	63,898		65,226		191,378		191,893
Less: Impairment of operating lease assets⁽⁸⁾	—		(1,262)		—		(1,262)
Adjusted EBITDAR⁽¹¹⁾	$	129,064	$	114,989	$	358,697	$	301,286

Calculation of operating margin:	Three Months Ended September 30,						Nine Months Ended September 30,
Calculation of operating margin:	2021			2020			2021			2020
Total revenues	$	1,939,946		$	1,269,924		$	5,303,322		$	3,559,375
Income from operations	39,856			17,697			95,813			11,223
Operating margin	2.1		%	1.4		%	1.8		%	0.3		%

Calculation of adjusted EBITDAR margin:	Three Months Ended September 30,						Nine Months Ended September 30,
Calculation of adjusted EBITDAR margin:	2021			2020			2021			2020
Fuel gross margin	$	106,010		$	80,123		$	283,732		$	253,978
Nonfuel revenues	511,063			474,097			1,460,787			1,304,674
Total fuel gross margin and nonfuel revenues	$	617,073		$	554,220		$	1,744,519		$	1,558,652

Adjusted EBITDAR⁽¹¹⁾	$	129,064		$	114,989		$	358,697		$	301,286
Adjusted EBITDAR margin	20.9		%	20.7		%	20.6		%	19.3		%

⁽¹⁾Reorganization Plan Costs. On April 30, 2020, TA commenced a company-wide reorganization plan, or the Reorganization Plan. During the nine months ended September 30, 2020, TA recognized $4.3 million 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 nine months ended September 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 nine months ended September 30, 2021 and prior to the sale, which was 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 nine months ended September 30, 2020, TA wrote off $0.8 million of intangibles relating to three QSL franchises that closed in April 2020. During the three and nine months ended September 30, 2020, TA wrote off $2.4 million and $8.1 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 $3.8 million for the nine months ended September 30, 2020, which was 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 $2.1 million for the nine months ended September 30, 2020, which was 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 nine months ended September 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 (income), net in TA’s consolidated statements of operations and comprehensive income (loss).

⁽⁸⁾Impairment of Property and Equipment and Operating Lease Assets. During the three and nine months ended September 30, 2020, TA recognized $6.6 million and $1.3 million of impairment charges to property and equipment and operating lease assets, respectively, related to certain standalone QSL restaurants. The impairment charges were recognized in depreciation and amortization expense and real estate rent expense, respectively, in TA’s consolidated statements of operations and comprehensive income (loss).

⁽⁹⁾Gain on Sale of Assets, Net. In May 2021, TA sold a property located in Mesquite, Texas for a sales price of $2.2 million, excluding selling costs.