TravelCenters of America LLC (NYSE:TA) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 10:00 am ET


TravelCenters of America LLC (NYSE:TA) Q2 2020 Earnings Conference Call - Final Transcript


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Jonathan M. Pertchik

begun to make, we have a long way to go to show the true and full impact of our transformational plan, some of which will not manifest for some time.

I will discuss our quarterly results further in a minute, but wanted to start off with the strategic progress we made during the second quarter, which I believe has set the groundwork to drive operational improvements we plan to achieve moving forward. First, we implemented a strategic reorganization in late April, with a focus on right-sizing historical SG&A growth, which had significantly outpaced revenue growth for many years. As I've talked about on previous calls, TA's SG&A had been growing at an unsustainable compounded annual growth rate of 7% since 2012, grossly outpacing top-line performance in a declining overall fuel sale volume environment.

The corporate reorganization resulted in a headcount reduction of approximately 130 and a corresponding annual reduction in corporate SG&A of $13.1 million. In addition, and most significantly, our strategic reorganization was designed around assembling the right team to drive change and to create value. To that end, we brought on several new Senior Vice Presidents in the key areas of corporate development, hospitality, procurement and fuel, as well as a new Chief Information Officer. These new leaders bring close to a century of combined subject matter experience, as well as can-do attitudes and fresh outside perspective. They are beginning to serve as change agents. By enhancing our overall leadership team with new key leaders and attacking operational efficiencies, we are on our way to creating a better-running organization with improved visibility and accountability, as well as improved financial performance.

Our mission, vision and values work is nearly complete, and our transformation playbook includes nearly 50 distinct initiatives, many of which we have begun to formally pursue. With this backdrop, we decided to raise equity to position the company to successfully carry out these initiatives and to create a foundation for allowing these initiatives to fully take hold. In early July, we raised approximately $80 million in an equity offering, intended primarily to create a liquidity cushion and to fund deferred maintenance and other catch-up capital expenditures necessary to update property conditions, deferred IT systems, as well as for general corporate purposes.

While the Company was sensitive to the dilutive effect of such a raise, it was an important part of positioning the company for long-term success and to create long-term shareholder value. Q2 2020 was an important quarter. Through the quarter, we have been able to put in place the plan, the team and the capital necessary for the company to focus on execution and improving operational and financial efficiency. The company has provided important early improvements over Q2 2019, a net income of 78.3% and EBITDA of 24.2% despite a global pandemic. And going forward, we are focused on execution. Many initiatives will not realize material results for some time. However, Q2 2020 has shown we are beginning down the right path.

Turning to our results