TravelCenters of America Inc.

Good morning and welcome to the Travel Centers of America's 4th Quarter 2021 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I'd now like to turn the conference over to Kristen Brown, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We will begin today's call with remarks from TA's Chief Executive Officer, John Perchick, followed by Chief Financial Officer, Peter Krage, and President Barry Richards for our analyst Q&A. Today's conference call contains forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 and federal securities laws. These forward-looking statements are based on TA's present beliefs and expectations as of today, February 23, 2022. Forward-looking statements and their implications are not guaranteed to occur and may not occur. TA undertakes no obligation to revise or publicly release any revision to the forward-looking statements made today other than as required by law. Actual results may differ materially from those implied or included in these forward-looking statements. Additional information concerning factors that could cause our forward-looking statements not to occur is contained in our filings with the Securities and Exchange Commission, or SEC, that are available free of charge on the SEC's website or by referring to the investor relations section of TA's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. During this call, we will be discussing non-GAAP financial measures, including adjusted net income, EBITDA, EBITDAR, adjusted EBITDA, and adjusted EBITDAR. These reconciliations of non-GAAP measures to the most comparable GAAP amounts are available in our press release and on a schedule of our non-GAAP financial measures that can be found in the events section of our website. The financial and operating measures implied and or stated on today's call, as well as any qualitative comments regarding performance, should be assumed to be in regard to the fourth quarter of 2021 as compared to the fourth quarter of 2020, unless otherwise stated. Finally, I would like to remind you that recording and retransmission of today's conference call is prohibited without the prior written consent of TA. And with that, John, I'll turn the call over to you.

Thanks, Kristen. Good morning, everyone, and thank you for your continuing interest in TA. Our strong, consistent, and durable performance continued in the fourth quarter and further demonstrates the fundamental quality and resilience of TA's business model, as well as our ability to drive growth while enhancing profitability. We achieved these results despite ongoing COVID-related labor challenges and inflationary pressures due to our focus on operational improvements as well as pricing and labor efficiency opportunities. We believe we have positioned the company well as we enter into our 50th anniversary year, with all businesses contributing to our bottom line financial improvement and reflecting the quality of the multiple revenue streams, the strength of improved leadership, and the consistency of execution through two years of the most extraordinary and challenging external economic circumstances. Now to the results for the fourth quarter 2021 compared to the prior year quarter, we produced the following. Adjusted net income of $13.2 million, an improvement of over 800%. Adjusted EBITDA of $52.9 million, a 48% improvement. And adjusted EBITDA of $117.1 million, which is an 18% improvement. 2021 fourth quarter results also represent notable improvement relative to the pre-COVID 2019 fourth quarter, with adjusted EBITDA up by $24 million, or 83%, over that pre-COVID 2019 fourth quarter. Additionally, I would note that we recorded strong fuel margin results this quarter, and I am particularly proud of the improvement in our non-fuel gross margin, which increased 8% versus the prior year quarter and 7% over the 2019 quarter. And for the full year 2021, was up 11% and 4% versus 2020 and 2019, respectively. What excites me the most is that we have continued to see the component parts of the business contributing in varying degrees to our overall financial improvement, producing full-year 2021 adjusted EBITDA of nearly $220 million, the highest in the company's history. I say this with enthusiasm. Despite the continuing effects of the pandemic, including the impact of inflation on input costs, labor pressures, and supply chain disruption, as well as the fact that our robust capital plan had barely begun to have been deployed. We have much to look forward to in terms of the continued harvesting of operational improvement opportunities, as well as the impact of the growth capex that is underway as our transformation plan shifts gears from organizational discipline to investing in top-line growth. TA was successful in the fourth quarter at monitoring inflationary forces and carefully passing through cost increases, efficiently managing labor pressures and gaps in operating hours, sourcing products to ensure shelves remain full, and beginning to invest in growth through IT improvements, a comprehensive site refresh program, ramping up franchising pace, and developing a strong and growing pipeline of travel center acquisition opportunities. These same priorities remain as we enter 2022. I want to talk a little bit about investing in growth. First, our capital plan deployment is beginning to accelerate, which is important as we continue to maintain substantial liquidity that we understand comes at a cost. To that end, we currently have a purchase agreement in place to acquire two existing franchise locations for approximately $45 million which we expect to close in late March, subject to customary closing conditions. This acquisition is important to TA as it adds a flagship location to our company-owned sites, as this is an iconic location and will be the largest travel center in the United States based on number of truck parking spaces once current construction is completed. Financially, we are confident this transaction and these sites will exceed our minimum return thresholds. We also have a purchase agreement in place to acquire a small truck service facility, which is expected to close in late March. This strategically located acquisition will allow us to better serve our key customers in one of our highest growth business segments, mobile maintenance. We are also developing two new ground-up travel centers on land TA had previously owned, which we expect will open by the end of 2022. And we have 15 to 20 potential acquisition sites totaling approximately $150 million, moving through the later phases of consideration. Another area of investing in growth is through our franchise program. TA signed 26 new franchise locations in 2021 and a total of 59 new franchise agreements since the beginning of 2019. And we have opened 19 new franchise locations during the same period. We anticipate 40 new franchises will open and begin operations by the second quarter of 2024 as we continue toward our sustained target of 30 per year. Investing in growth also includes our robust site refresh program, which was launched this past October with the reopening of Seymour, Indiana, the first of more than 100 planned refreshes to be completed no later than early next year. Seymour represents our top-level platinum refresh level and showcases many of the new design concepts that are being rolled out amongst many of the other 100 refreshes. Updates include comfortable driver lounges, repaved parking lots, renovated restrooms and showers, new lighting fixtures, new flooring and paint, and self-checkout, along with improved signage and new store flow. We expect to complete the first 50 refreshes by the end of March. Finally, investing in growth also includes upgrades and key additions in talent and people, expanding our digital and traditional marketing and sales efforts, and investing in various operational initiatives as well as IT and systems improvements. All of these investments and improvements are designed around improving our guest experience based on a more examined understanding of their needs and intended to drive efficiency and financial performance. Overall, I remain confident in our robust capital plan and the positive impact it will have on our already established and resilient financial performance. In 2021, pace of our capital deployment was adversely impacted by supply chain disruption. TA has focused on choke points and is taking steps to assure capital can be deployed as planned in 2022, and thus far the pace has increased. Peter will discuss some of last year's challenges in his remarks. Turning now to our operational results for the quarter, overall fuel sales volume increased 3.8% compared to the prior year quarter, and 16% versus the 2019 fourth quarter, driven by a 3.7% increase in diesel fuel sales volume as a result of increased trucking activity, the addition of new fleet customers, as well as higher volume from existing customers due to the early success of a variety of initiatives. Our fuel gross margin increased 37.4% versus the prior year quarter, driven by a 32.2% increase in fuel margin CPG. We have dedicated tremendous energy and focus to driving stable and strong diesel margin, while positioning ourselves with purchasing optionality to take advantage of regional pricing dislocations. In December, certain markets in the Southwest and parts of the Midwest experienced major spikes in local diesel markets due to supply shortages that caused dislocation between our purchasing and selling indices. Improved management allowed TA to capitalize on this opportunity, and roughly 25 locations drove much of the upside in our diesel margin for Q4. Staying on diesel, we have begun the beta testing phase of using artificial intelligence and machine learning to support diesel pricing and supply decision making. Also importantly, we're about to introduce a competitive small fleet offering by mid-year, which should be particularly impactful. Gasoline sales volume increased 4.6% versus the prior year quarter, but still was about 10% below the 2019 pre-COVID fourth quarter and represents another area of additional potential upside. On the non-fuel side of the business, store and retail services revenues increased by over 9% for the quarter versus 2020 and over 16% versus 2019. Although our industry is experiencing a challenging purchasing and inflationary cost environment, we have focused on pricing to balance these forces, while our ability to drive a larger average basket is also evidence that our initiatives are working. Our customer segmentation work has provided a better understanding of who is visiting us and what their behaviors are, which in turn is allowing us to tailor our offerings to our customers' actual needs with new display areas and more meaningful product placements. I'm also very excited that we expect by year end to offer a comprehensively revised loyalty program designed around our customer segmentation work. Truck service revenue showed a solid improvement with a 9.2% increase versus 2020, and an 18.6% increase versus 2019, driven in part by an increase in average work orders. Technician staffing and retention remain important areas of focus, with compensation and training central targets to driving continued improvement in tech efficiency and driver wait times and reducing turnover. While we have added technician hours to the schedule to ensure timely service, we've also seen labor costs and margin pressures. We're actively addressing these through pricing actions, not inconsistent with competitors and market expectations. On the full-service restaurant side, we have worked to rationalize reopened locations through disciplined leadership and strategic changes to how we measure performance, as well as to our operating model through fewer, more desirable menu offerings and tighter labor controls to balance rising wages. We have opened three of the five IHOP conversions that are underway, expect to open the other two by the end of this quarter, and continue to make plans toward opening a total of 20 IHOPs. In addition, we are deep into the work of developing other concepts designed around scrutinizing understanding of our customers' needs and look forward to further announcements in the coming months. With full-service restaurant top line having been so adversely affected by the pandemic, down as low as 90% of times in 2020, and the recognition that this business is an important differentiator, this remains one of our highest areas of opportunity for improved financial performance. Non-fuel revenues also continue to benefit from strong demand for diesel exhaust fluid, or DEF, which is required by newer trucks. DEF volume increased by 5% versus the 2020 fourth quarter, and 23.9% versus the 2019 fourth quarter. As pre-2011 trucks are retired each year, we expect that the demand for DEF will continue to grow. As part of the capital plan, we are now offering DEF from dispensers on the diesel fueling island at approximately 265 of our travel centers and expect to have them available in all lanes at all TA Petros nationwide by the end of 2022. Lastly, we continue to double down on our commitment to sustainability and alternative energy with the dedicated business division formed last year, ETA. In addition to installing new EV passenger vehicle charging stations at several West Coast locations, we're very carefully preparing more comprehensive rollout plans for passenger duty EV across the country, particularly where federal and state financial incentives are being made available. The recent announcement of the Infrastructure Act passed in November has earmarked $7.5 billion of federal funds specifically targeted for installation of EV fast chargers. which will provide as much as 80% of the project cost per site. On the commercial duty and truck side of ETA, we continue to develop collaborative relationships to deliver various forms of sustainable energy as we stay close to our fleet customers' plans as well as government incentives. We've been awarded grants from multiple programs and are actively pursuing more. In addition, we are currently evaluating and expanding our sustainability programs across the organization where we see gaps as part of the development of an ESG reporting framework. We also expect to issue our first-ever sustainability report later this year outlining achievements to date, planned and ongoing investments, and longer-term goals. To conclude, I am proud of the strong positive results our team generated in the fourth quarter and for the year. On behalf of the entire TA family, we have proven that this 50-year-old American institution is strong, resilient, and consistent as we now report in our 24th month of transformative and demonstrably stable continuing improvement. Through thick and thin, we have proven to ourselves that we can unlock and release the inherent value of this great company. The transformation plan has worked and is working, and as the plan shifts gears toward investing in top-line growth Through acquisition, development, franchise, site refresh, IT improvements, and in our people, we remain confident in our ability to continue to improve and execute despite ongoing supply chain, inflationary, and labor challenges. As we celebrate our half century of history, the team not only recognizes its obligation to shareholders to create long-term value, in addition, we sense an obligation to continually improve on behalf of all those who came before us at TA. In closing, I offer gratitude to our teammates and colleagues around the country for their hard work and dedication, as well as to professional drivers and fleet managers for allowing TA to serve you. I also offer gratitude to our guests, our franchisees, and stockholders for continuing to support TA. I am pleased with the exceptional value and progress that our team has delivered over the past 24 months And as we transition into a new phase of our overall transformation plan of investing in growth, I am most excited that we're still only in the early innings of our transformation. And with that, I will hand the call over to Peter to discuss the quarter's financial results in detail. Peter.

Thank you, John. And good morning, everyone. As John mentioned, we are very pleased with our results in the fourth quarter. which we believe continue to demonstrate the ability of this business to produce strong and improving operating results and generate strong free cash flow, an important long-term objective. In my remarks that follow, I will be referring to the 2021 fourth quarter as compared to the 2020 fourth quarter, unless otherwise noted. For the fourth quarter, we improved net income by $20 million to $12.8 million, or 87 cents per share, compared to a net loss of $7.2 million, or 42 cents per share. Excluding some one-time items in both quarters, as detailed in our earnings release, we generated an improvement of over 800% in adjusted net income. EBITDA of $52.4 million represents an increase of $14.4 million, or 38%, while adjusted EBITDA, which reflects some one-time items in both quarters, increased $17.1 million, or 48%. The increase in EBITDA was primarily due to the strong results we generated in both fuel and non-fuel gross margin, partially offset by increased input labor and operating costs affecting us as well as the broader economy. Our fuel sales volume increased by 21 million gallons, or 3.8%, to just shy of 577 million gallons, with diesel sales volume improving by 3.7%, driven by increased trucking activity and new customers. Gasoline sales volume improved by 4.6%. S4 wheel traffic returns to the roads as we continue to reemerge from the depths of the pandemic. Fuel gross margin increased $29.7 million to $109 million, or 37.4%, and margin cents per gallon improved 4.6 cents, or 32.2%, versus the prior year quarter. As John discussed, we have positioned ourselves to temper volatility in CPG and to take advantage of pricing anomalies in the market when they occur, as we saw in December. However, we would note that these types of anomalies are not a given in every quarter, and therefore, we continue to expect our normalized range of 15 to 17 cents for our blended CPG fuel margins for the foreseeable future. Non-fuel revenues increased by $43.2 million, or 9.8%, and total non-fuel gross margin increased by $21.7 million, or 8%, Importantly, when compared to the 2019 fourth quarter, non-fuel revenues and gross margin improved by roughly 9% and 7% respectively. Against 2020, relative strength in truck service, store, diesel exhaust fluid, and full-service restaurants, as many locations reopened during the current quarter, were offset partially by softness in quick-service restaurants which have seen COVID related intermittent closures and labor shortages reducing operating hours. While we are laser focused on continued aggregate top line growth, we are cognizant of both input and operating cost pressures that are part of the broader economic backdrop. Non-fuel cost of goods sold and site level operating expenses increased by 21.5 and $32.9 million respectively. While these primarily reflect revenue growth and continued improved business activity, labor rate and input cost pressures continue. While we have been successful thus far in counteracting these pressures, for example, we improved non-fuel gross margin 50 basis points on a sequential quarter-over-quarter basis We remain keenly focused on measuring not only the impact of cost pressures to support appropriate pricing actions, but also ensuring demand is not significantly impacted as a result. And of course, we remain vigilant in identifying operating efficiencies to bolster profitability. Selling, general and administrative expense for the quarter increased by $6.4 million or 17.3%. In addition to the expansion of our business, the increase was driven in part by short-term consultant fees to assist with identifying and implementing efficiency and other opportunities, as well as increased incentive and stock-based compensation and our adoption of more efficient cloud-based technology solutions. As we move forward into 2022 and beyond and deploy our capital expenditure plan, plus a host of other important initiatives to further grow the company as John detailed in his remarks. We will likely see elevated one-time and in some cases run rate SG&A. Internally, we are establishing a benchmark of costs on a relative basis to the growth in the business and expect SG&A to be in the range of six and three quarters to seven and a quarter percent of fuel gross margin plus non-fuel revenue for the foreseeable future. Of course, this may be impacted up or down slightly as we toggle on and off unique or one-time costs. But in those cases, we will incur costs that promise outsized returns. Depreciation and amortization expense decreased by $14.4 million, primarily due to a $13.7 million impairment charge recognized in the prior year quarter related to the Quaker Steak and Lube restaurants we ultimately sold in April of 2021. Turning to our balance sheet for a moment, at December 31st of 2021, we had cash and cash equivalents of $536 million and availability under our revolving credit facility of $91 million for a total liquidity of $627 million and no near-term debt maturities. As of December 31st, 2021, we continue to own 50 travel centers and one standalone truck service facility that were unencumbered by debt. We invested $58.1 million in capital expenditures during the fourth quarter and $104.9 million for the full year 2021. As John mentioned, we, along with the US as a whole, continue to experience significant labor and supply chain challenges either directly or indirectly through our vendor partners that are slowing the progress and in certain cases, the start of some of our capital projects. While we are cautiously optimistic that supply chain challenges will abate somewhat in 2022, we are aggressively pursuing our capital plan with an eye to making up some lost ground from 2021. At this time, we believe we will incur a cash spend between $175 and $200 million on CapEx projects in 2022, as some of the expenditures we planned for 2021 have fallen into the early part of this year. This excludes any tuck-in acquisition activity. Lastly, in addition to CapEx, we continue to preserve significant liquidity as we evaluate a growing pipeline of potential accretive acquisitions and ground-up travel center development opportunities. We believe the preservation of this liquidity is important to the timely execution of our growth strategy. And secondarily, as we progress through the year, We will also consider opportunities to be constructive on our balance sheet and capital structure. That concludes our prepared remarks, operator. We are now ready to take questions.

We will now begin the question and answer session. If you have a question, please press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question will come from Brian Mayher with B-Rio Securities. You may go ahead.

Good morning, and congratulations on really a great year, Jonathan and Peter, and that comes from somebody who's been critical in the past, so really, really well done. Question on fuel margins. you know, this is the third quarter in a row where they've been, you know, fairly elevated. And I did hear your commentary on the Midwest diesel, uh, anomaly and your thoughts on, I think you said 15 to 17 cents expectations going forward. But when we think about the elevated fuel prices nominally, isn't it a little bit easier to kind of tuck in an extra penny or two with the higher prices in $3.50 to $4 a gallon versus a year or two ago when it was kind of $2.50 to $3?

Hey, Brian, it's John. Thank you for the question and for your kind remarks as well. And we are very proud of the year. So talking about fuel margin, and we've signaled the $15 to $17 is what we're comfortable with. And then the ultimate question is, with some of the high pricing, can we find a penny or can we find something You know, we're doing, I'm confident we're doing a much better job of managing and we find opportunities through movement, through market volatility in those times of movement. We are doing a better job of optimizing how we manage that and finding some additional margin. That said, you know, counting on, you know, maybe in a year or two from now or a year from now, some, you know, more runway behind us. If we continue the way we've been going, I might have a different answer for you then than now, but I'm just not comfortable signaling much more than the 15 to 17 blended fuel CPG, really without more runway ahead. We've made so many changes through thick and thin and crazy times and COVID and next phase of COVID and then supply chain and secondary issues to COVID and you know, through just really volatile general times and business times, we've proven we can manage this business and that this business fundamentally has a resilience between fuel and non-fuel and even to some extent gas to diesel. But with that said, we're just not at the point where we would signal anything more than the 15 to 17. That's really our comfort zone, our comfort level. And maybe we get to a place in the future that we will signal something differently. But for now, while we remain in a window of continuing to restore and build confidence in the marketplace, we want to really make sure we are getting it right. And so we're sort of holding our guns at 15 to 17. Hopefully that makes sense.

Okay. And then kind of moving on to SG&A, and that was helpful, the 6.75 to 7.25. And just to be clear, it's those percentages of the combination of fuel gross margins and non-fuel revenues on a quarterly basis. So given it's kind of a seasonal business, should we expect SG&A to kind of be seasonal as well to a degree?

Peter, if you want to take that, Peter.

Sure, yeah. I was commenting on an annual basis to give at least a gauge. what our annual SG&A would be. But on a quarterly basis, we may see some seasonality. And, you know, in a down quarter, we may be investing and incurring some costs on SG&A that's going to help the business over the longer term. I was really trying to provide some guidance on it, on what we might expect on an annual basis, given we're starting to see top-line growth. And we thought that was an appropriate way to measure this and provide that info.

Okay. Thanks. And then lastly for me, The commentary on the acquisitions was helpful. I think you said it was likely two properties for $45 million, with one of them being, upon completion or whatever, the largest travel center in the U.S. Can you give us a little bit more color on where that is, and if you don't want to share specifically, maybe regionally, and what kind of a multiple of EBITDA would you be paying for those types of properties, if you could share that?

Sure. So, you know, I guess we're comfortable. So, first of all, to acknowledge you did hear correctly, it's two locations, two packs, so to speak. We did mention separately a small truck service acquisition, which, again, was a separate point from the 4045. I would say, we'll say it's in the southeast U.S. That is true. It is an existing travel center that just has some expanding parking and some other work. So that's what we're referring to when we say completion of that active construction. At that point, the largest based on truck parking. You know, in terms of a multiple, you know, four to five times in that realm is, you know, plus or minus is what we're looking at. Anything to add to that, Peter?

Yeah, I think you look at that on a synergy-adjusted basis, four to five times. On a non-synergy, maybe closer to six.

Okay, thank you. That's all for me, and I'll jump back into Q. Thanks again, Brian.

Appreciate it, and I appreciate the kind remarks as well. Take care.

Our next question is coming from Paul Lewis with Citibank. You may now go ahead.

Hey, thanks, guys. I'm curious if you can give a little bit more info on the list that you expect from the site refreshes once each is complete. And then second, curious what sort of volume revenue increase you've seen in the 26 new franchise locations you took on in F21. Thanks.

Do you want to take the latter part of that first, Peter, and then I'll talk about the refreshments on the franchise?

The lift we've seen on franchises? Traditionally, I don't have exact numbers for each franchise, but franchises, once they enter our system, can achieve 30% to 40% improvement in revenue. Now, granted, that doesn't automatically equate to bottom line because quite a bit of that is fuel. But we've seen improvements in those franchises in that range.

And just to reemphasize that last point, and then I'll talk about the site refreshes. When a franchise joins our network, and these are real numbers, we measure that 30% to 40% lift when a independent truck stop joins the network. The fact of joining the network gives them now access to these large fleet volumes that are some discounting with these large fleets that we offer. And while they see, the franchisees, sees a 30% to 40% lift, it's a little less than that in terms of lift on EBITDA just because those are discounted. But nonetheless, it's still very significant. And that's one of the reasons why that program, I think, is accelerating, because it's a It's very obvious to understand the upside to an independent truck stop. On the lift we expect, and the way we think about it, on the site refreshes, which, again, we're working our way through now, and we expect by the end of March to have about 50 completed. Really excited for that. In fact, I'm going on a little road show to visit some of these over the next several months to really touch and see them. On the dollars invested, which range from the low of maybe $300,000 to $400,000 on the silvers, to a gold, these are levels that we define, silver, gold, and platinum. The gold that could be a million, even a hair more, we expect a 15% to 20% threshold return on that. And we don't discern yet between fuel and non-fuel. It's just sort of a punch line. And some locations will get there by one path that may be a little bit different than another. But we're pretty confident in our ability to achieve those results.

Got it. Thank you. Good luck, guys.

Thanks, Paul. Appreciate it.

Our next question comes from Ari Klein with BMO. You may now go ahead.

Thank you, and good morning. Jonathan, you spent some time talking about investing for growth. Can you give us a sense on how you expect that to manifest in the model? Maybe you can talk to your longer-term expectations for EBITDA from here.

Yeah, we've been debating really heavily at what point are we ready to signal something longer term, and again, it's an ongoing healthy debate within the organization, and I do still fall back. Well, we've had eight quarters, 24, many months, now two years of sequential performance. I want to get a little further along, and I'm optimistic we're not far away from signaling something a little bit longer term. than we have to date, because we really haven't signaled much of anything in terms of EBITDA and where we can take the company. I know to, you know, pre-COVID, you know, we've gone from the low 100s to now north of 200 and almost 20 million in EBITDA. You know, we're facing, and we have a lot of momentum from that, and the capital plan is key to our success this coming year, the year we're actually in. On the other hand, you know, we have these inflationary forces, supply chain, and we talk about words like supply chain, What does that mean? It means that our procurement people and our hospitality people are fighting and scratching to find something to fill our shelves because we can't get our hands on one item. So we're scratching and kicking and fighting to fill with the other. And so these really are very sort of concrete challenges we face every day. When we say labor pressures, what that means is finding folks to work the full hours so that our quick service restaurants can be open full hours. And COVID, when somebody gets sick or when somebody tests positive, We have to quarantine people who are around them. And now we've had, and this is what we saw throughout all of last year, at least heavily in the second half of last year, and it persists, you know, our gaps in hours of our ability to stay open. So because of those, you know, on the one hand, that momentum and this great, exciting capital plan, on the other, some of these headwinds that the world faces, not unique to us, we're just not comfortable signaling anything yet. on how these plans will manifest. And hopefully, you know, where we've taken the company so far speaks volumes for itself. But on the other hand, tempered by some of these headwinds that the world is facing. Again, I gave you some examples in a very sort of visual, concrete way you can appreciate what we have to do every day to fight these. And I think we've done a really, not we, I mean really more the team, people out in the field and people at corporate have done an amazing job, an amazing job, better than most, of fighting through some of those challenges. And we'll continue that fight, but I just am not comfortable yet signaling anything sort of numerical or specific. And hopefully that's understood for now. At some point, I think we'll get to that place, but we're not quite there just yet.

Okay, thanks for that. And then just on the inflation side, you mentioned some of the headwinds from a cost perspective. What about from a CapEx perspective? Some of the CapEx plans that you had were delayed from 21 to 2022. You know, have you seen that impact, you know, you on the cost side for Pat?

Sure. Well, you know, so first of all, just one point. If you – I think Peter's remarks, he mentioned that – We had spent, and this is CapEx now, just specifically, we had spent, I think, 58 million in the fourth quarter of last year, 58 against 104 for the year. So we spent more than 50% in one quarter. What that should tell everybody is that when we say it's accelerating, that's mathematically making that point that it is accelerating. Our ability to do this is accelerating. Doesn't mean supply chain challenges have gotten any easier. They haven't. We're just getting better at dealing with them. And the team, which was just constituted a year and a half ago, or so is really starting to execute. You know, we do bake into all of our plans when we do pro forma and we continue to update and all of that. We look at our performance and we look at cost increases and we look at performance increases in the context of those headwinds. And we continue to sort of revise our thinking on how we're going to achieve thresholds. And so far we remain just as confident as before that we're going to continue to maintain our ability to execute at those threshold levels despite some of these increases but you're right it's a real challenge across the board again not unique to us to everybody every company in this country and most probably around the globe just focusing on this country are facing these increases and part of our opportunity is to and it's and so far you know it continues to be successful to some extent is managing our input costs and an output pricing is a really, really, it's as much science as art as it is science, and we're very, very focused on that. We've reorganized a little bit of how we sort of manage that with a special oversight committee that includes Peter and myself actively engaged in those decisions and those discussions regularly to make sure we're really on top of that. That's a really important part of the success we've had to date, and I think the success, you know, I'm optimistic we'll continue to have.

Okay, and then just last one for me on the fuel volume side. We've seen a lot of growth in that piece the last year or so, but the volume of growth has moderated as comps have gotten a bit tougher. How are you thinking about that moving forward and your expectations to continue to grow diesel volumes?

Well, first I would say it's mathematically impossible to have say, very high double-digit or, you know, low but still really significant double-digit growth compounded over many, many years, right? Mathematically, it becomes impossible. And so, you know, we have still a few hours. And so part of it is just a mathematical thing where you can't continue to have kegerian growth of anything. It's just a math question. So that's, you know, sort of point A. You know, and point B, we still have some opportunities in front of us that are very significant. You know, there are two primary areas that we're focused on here. One is this AI and machine learning to support both fuel pricing and also supply management. That is still ahead of us. That's sort of mid-year and beyond. We're in the beta testing mode there. And then separately, we really retooled our organization around a small fleet business. And we've never really been focused on it in a very meaningful way. And so now when we talk about investing and growth, we've added some salespeople to that area. We've developed and we're just a few months away from releasing, sort of call it mid-year, a real program, a program that will provide discounting and it'll provide the ability to... to extend credit on somebody else's balance sheet. And so for the first time, we're going to have a meaningful program for small fleets, which is our highest margin part of our business. So again, we have those opportunities in front of us. That'll be really the back half of this year. Even our loyalty program will be comprehensively retooled toward the end of the year. I think directly or indirectly, that'll be helpful as well. And on the other hand, there's all, again, supply chain disruption, driver shortage, I don't feel like I sound like a broken record, but these are very real challenges we face every day that temper some of the otherwise great enthusiasm we have. So again, it's a balanced view where, A, we have a mathematical challenge of keggering at a certain high level. B, we continue to do, I think, the right thing, putting one foot in front of the other, and we'll continue to grow, but at a more modest rate, all within a context that has a lot of really unusual challenges, again, driver shortage and supply chain related.

Thank you for all the color.

Thanks for the questions, Ari.

Our next question comes from Brian Mayher with B. Reilly Securities. You may now go ahead.

Hi. Just a follow-up question on your kind of build-by thoughts for this year. First of all, what do you anticipate, you know, ground-up development costing these days? I mean, I remember a time when it was kind of 15, 17, 18 million, and then, you know, kind of low to mid 20 million's. When you're contemplating buying new facilities versus building, how are you weighing that and how should we think about the total dollars allocated between those two ways to grow?

First, high teens is still the target range. High, high teens, so I think directionally that's about right. One of the reasons I like acquiring existing truck stops. You're buying EBITDA on cash flow immediately. You're not waiting two to three years of outflows to get inflows. And where we sit in our transformation, if you think back, my first few months here, we were focused exclusively on franchise for growth because it's a way of effectively raising, leveraging other people's balance sheets to grow. Once we started to strengthen ourselves, we said, well, geez, the next iteration of that is to buy existing truck stops because you buy them and the spigot is turned on, so to speak, not after a lag of two years of development. We're at the point of maturation in our evolution, and the math still flushes, where there are opportunities to both build and cherry-pick, either build in really, really great locations while cherry-picking great sites to buy that are existing. In either case, and well, one more point about... about buying existing truck stops. They come in all flavors and colors. So long as they fit our basic parameters and criteria for financial performance and for our network, even the one we referred to, one of the two in the transaction we mentioned, it's the largest in the US, so the EBITDA is extraordinary, not typical. A more typical site may have a couple of million dollars of EBITDA, one and a half to two and a half, maybe three in that realm. know they come in different sizes and flavors so to speak you know in the end we're going to be doing a little bit of both because the ground up machine we you need to start now to have it doing something in a few years and one of our competitors is doing 45 to 50 a year of ground up and they're they're doing a great job of that and they have a machine going and i'd like to see directionally down the pike filling in great carters with a machine that eventually many years from now gets to a pace Whether we'll get to that pace or not, I'm not really setting. We're not setting our sights there exactly, but we do need to get that machine going. And so that's what it's about. In the end, we look at this as the minimum threshold of 15% to 20% returns. And in any case, that's what we will expect, whether we're doing ground up. And even with ground up, maybe even a little bit higher than that, just because you're undertaking some development and risk and cycle risk and all of that. So hopefully that's responsive, Brian.

Yep, that's perfect.

Thank you very much. Again, thanks for the follow-up.

This concludes our question and answer session. I'd like to turn the conference back over to John Petrick, CEO, for any closing remarks.

Again, thank you for your interest in TA and your attention this morning, and have a great day. Thanks, everybody. Bye-bye.

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