Q4 2021 Travelcenters of America Inc Earnings Call
Yeah.
Good morning, and welcome to the travel centers of America fourth quarter 'twenty, one financial results.
Conference call.
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Ill turn the conference over to Kristin 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, Jon <unk>, followed by Chief Financial Officer, Peter <unk>, and President Barry Richards for our analyst Q&A.
Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and Federal Securities laws.
These forward looking statements are based on Tas 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 <unk>.
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 Tas website invest.
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 EBITDAR and adjusted EBITDAR.
These reconciliations.
non-GAAP measures to the most comparable GAAP amounts are available in our press release and on our schedule of our non-GAAP financial measures that can be found in the investor section of our website.
The financial and operating measures implied <unk> 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, 'twenty 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 Don I'll turn the call over to you.
Thanks Kristen.
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 Tas business model as well as our ability to drive growth while enhancing profitability.
We achieved these results despite ongoing COVID-19 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 EBITDAR of $117 1 million, which is an 18% improvement.
2021 fourth quarter results also represent a 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 cost 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 shift gears from organizational discipline to investing in top line growth.
Ta was successful in the fourth quarter and 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 improvements a comprehensive.
A 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 wanted 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 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 at 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 for.
Internationally, we are confident this transaction in 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.
Strategically located acquisition will allow us to better serve our key customers and 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 as growth in growth is through our franchise program.
<unk> 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.
We anticipate 40, new franchises will open and begin operations by the second quarter of 2024, as we continued toward our sustained target of 30 per year.
Investing in growth also includes our robust site refresh program, which was launched launched this past October with the reopening of Seymour, Indiana. The first of more than 100 plan refreshes to be completed no later than early next year.
<unk> 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, repave parking lots renovated restrooms, and showers, new lighting fixtures, new flooring and pain 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 in key additions in talent and people expanding our digital and traditional marketing and sales efforts and investing in various operational initiatives as well as IP and systems improvements.
All of these investments and improvements are designed around improving our guest experience based on our 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.
<unk> is focused on Chokepoints 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 three 8% compared to the prior year quarter and 16% versus the 2019 fourth quarter driven by a three 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 of certain markets in the southwest in parts of the Midwest experienced major spikes in local diesel markets due to supply shortages that cause 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 are about to introduce a competitive small fleet offering by mid year, which should be particularly impactful.
Gasoline sales volume increased four 6% versus the prior year quarter, but still was about 10% below the 2019 pre COVID-19 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 an inflationary cost environment. We are 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 am 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 nine 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 comprehensive call.
<unk> and training central targets to driving continued improvement in <unk> 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 cost and margin pressures. We are actively addressing these two pricing actions not inconsistent with competitors and market expectations.
On the full service restaurant side, we have worked to rationalize reopen 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 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 IHOP.
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 topline, having been so adversely affected by the pandemic down as low as 90% at 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 continued to benefit from strong demand for diesel exhaust fluid or Def, which is required by newer trucks.
Def volume increased by 5% versus the 2024th 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 death from dispensers on the diesel fueling island at approximately 265 of our travel centers and expect to have them available in all aimed 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.
In addition to installing new EV passenger vehicle charging stations at several west coast locations, we're very carefully preparing more comprehensive rollout plan for passenger duty EV across the country particular, where federal federal and state financial incentives are being made available.
The recent announcement of the infrastructure Act passed in November is earmarked seven $5 billion of federal funds, specifically targeted for installation of EV fast Chargers, which which will provide as much as 80% of the project cost per site.
On the commercial duty and truck side of ETE, 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 have been awarded grants for multiple programs and are actively pursuing more.
In addition, we are currently evaluating 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.
Okay.
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 <unk> 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 is what has worked and is working and is the plant 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.
Continued 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 of 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 the professional drivers and fleet managers for allowing <unk> to serve you.
I'd 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.
<unk> 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 objectives.
In my remarks that follow I will be referring to the 2021 fourth quarter as compared to the 2024th quarter unless otherwise noted.
For the fourth quarter, we improved net income by $20 million to $12 8 million or <unk> 87 per share compared to a net loss of $7 2 million or.
<unk> 42 per share.
Excluding some onetime items in both quarters as detailed in our earnings release, we generated an improvement of over 800% and 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 cost affecting us as well as the broader economy.
Our fuel sales volume increased by 21 million gallons or three 8% to just shy of 577 million gallons with.
With diesel sales volume improving by three 7% driven by increased trucking activity and new customers gas.
Gasoline sales volume improved by four 6% as four wheel traffic returns to the roads as we continue to re emerge from the depths of the pandemic.
Fuel gross margin increased to $29 7 million to $109 million or.
Or 37, 4% and margin per gallon improved $4 six.
Or 32, 2% versus the prior year quarter.
As John discussed, we have positioned ourselves to temporary volatility in CPG and to take advantage of pricing anomalies in the market when they occur as we saw in December however.
However, we would note that these types of anomalies or not a given in every quarter and therefore, we continue to expect our normalized range of 15 to 17.
Our blended CPG fuel margin for the foreseeable future.
Non fuel revenues increased by $43 2 million or nine 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-19 related intermittent closures and labor shortages.
<unk> operating hours.
While we are laser focused on continued aggregate topline 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, five 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.
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 7%.
Percent of fuel.
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 onetime costs, but in those cases, we will incur costs that promise outsized returns.
Depreciation and amortization expense decreased by $14 4 million.
Really due to a $13 $7 million impairment charge recognized in the prior year quarter related to the Quaker steak <unk> lube restaurants, we ultimately sold in April of 2021.
Turning to our balance sheet for a moment.
At December 31, 2021, we had cash and cash equivalents of $536 million and.
And available 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 31, 2021, we continue to own 50 travel centers and one stand alone truck service facility that were unencumbered by debt.
Okay.
We invested invested $58 1 million in capital expenditures during the fourth quarter and $104 9 million for the full year 2021.
As John mentioned, we won with the U S. As a whole continued 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 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 one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Brian <unk> with B Riley 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.
This is the third quarter in a row, where they've been.
Fairly elevated.
And I did hear your commentary on the Midwest diesel.
Normally and your thoughts on I think you said 15 to 17 and 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 and $3 50 to $4 a gallon versus a year or two.
When it was kind of $2 50 to $3.
Hey, Brian It's John and 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 end of the 15% to 17 is what we're comfortable with.
And then Youre sort of the ultimate question is with some of the high pricing can we find a penny or can we find something.
We are doing.
I'm confident we're doing a much better job of managing and when 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 counting on maybe in a year or two from now or a year from now some more runway behind us if.
If we continue the way we've been going I might have a different answer for you than the 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.
In supply chain and secondary issues to Covid.
Through just really volatile general times in 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 Thats really our comfort.
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 store 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 and hopefully that makes sense.
Okay, and then kind of moving on to SG&A and that was helpful.
$6 75 to seven in the quarter and just to be clear those percentages of the combination of fuel gross margin 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.
Yes, Peter if you want to take that sure yes.
I was commenting on an annual basis to give you at least a gauge.
When 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 what we might expect on an annual basis, Kevin we're starting to see top line growth and we thought that was an appropriate way to.
A measure this and provide that info.
Okay. Thanks, and then lastly for me.
Commentary on the acquisitions was helpful. I think you said it was likely to properties for $45 million with one of them being.
Upon completion of 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.
I guess were comfortable so first of all to acknowledge you did hear correctly its two locations.
Two packs so to speak we did mentioned separately a small truck service Act.
Acquisition, which again was a separate point from the $40 45.
I'd say it will say, it's in the southeast U S that is true with it is an existing travel center that has 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 that will become a wet that point the largest based on truck parking.
In terms of a multiple.
Four to five times in that realm.
As you know plus or minus is what we're looking at anything to add to that Peter Yes, I think as you look at that on a synergy adjusted basis four to five times on a non synergy may be closer to six.
Yeah.
Okay. Thank you that's all for me and I'll jump back in the queue. Thanks.
Thanks, again, Bryan appreciating and I appreciate the counter marks as well take care.
Our next question is coming from Paul <unk>.
Louis <unk> with Citibank.
Go ahead.
Hey, Thanks, guys I'm curious if you can give a little bit more info on the lift that you expect from the site refreshes one 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 F. 'twenty one.
You want to take the latter part of that first Peter and then I'll talk about the refreshes.
<unk>.
The lift we've seen on France franchise franchises.
Traditionally.
I don't have.
That number is reached 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 we've seen improvements in those franchises and sort of in that range.
Yeah, and so and just to reemphasize that last point that I'll talk about the.
The site refreshes.
When a franchise joins our network and we measure we've actually met these are real numbers, we measure that 30% to 40% lift one independent truckstop 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 we see they see the franchisees are $40, 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 if it is.
Obvious to understand the upside to an independent truck stop.
On the on the lift we expect in 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 complete it really excited for that and in fact I'm going on a little roadshow 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 <unk>.
The $3 to 400000 to Amit.
On the silvers two goals. These are levels that we declined silver gold and platinum the goals that could be $1 million, even a hair more we expect a 25% to 20% threshold return on that so you can and we don't discern yet between fuel and non fuel is just sort of a punch line and some locations that we'll get there.
In sum by one path, but maybe 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 I appreciate it.
Our next question comes from Ari Klein with BMO you May now go ahead.
Thank you in the 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.
Yes, we've been debating really heavily at what point are we ready to signal something longer term and I guess, an ongoing healthy debate within the organization.
I do still fall back while we've had.
Eight quarters 20 for many months or two years of sequential performance.
I wanted to get a little further along.
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 pre COVID-19 .
We've gone from the low one hundreds to now north of 200, and almost $20 million in EBITDA.
We're facing and we have a lot of momentum from that in our capital plan is key to our success this year coming into the year, we're actually we're in.
On the other hand, 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 are at 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 over the other and so these really are very sort of concrete.
Challenges, we face every day, when we say labor pressures and what that means is finding folks to work the full hours. So that our quick service restaurants can be opened full hours.
Covid when somebody get sick when somebody test positive we have to quarantine people who are around them and now we have 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.
Gaps in hours of our ability to stay open so because of those on the one hand that momentum on this great exciting capital plan on the other some of these headwinds that the world faces not unique to us we're not just not comfortable signaling anything yet on how these to these plans will manifest in a hopefully where we've taken the company so far speaks.
Volumes for itself, but on the other hand tempered by some of these headwinds that that the world is facing that and 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 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 I'm not comfortable yet signaling anything sort of numerical or specific and hopefully that's understood for now at some point I think we will 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.
Yeah. The Capex plans that you had were delayed from 'twenty, one 2022 .
Have you seen that impact.
You are you on the cost side for sure.
Well so first of all just one point if you I think Peter's remarks, he mentioned that we.
We expect this is capex now just specifically we had spent I think $58 million in the fourth quarter of last year 58 against the 104 for the year. So we spent more than 50% in one quarter what that should tell everybody is that when we say its 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.
We do baked 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 when we look at performance increases in the context of those headwinds and we continue to sort of revise our thinking on on mint.
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 are 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 call.
<unk> are facing these increases in part of our opportunity is to and so far.
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 is art as it is science and we're very very focused on that.
Reorganized a little bit of how we how we sort of manage that with a special oversight committee that includes Peter and myself are actively engage 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 I'm off.
Domestic will continue to have.
Okay, and then just last one for me on the fuel volume side, we've seen a lot of growth.
And that piece of the last year or so but the volume growth.
Has moderated at Pos.
I've got a bit tougher.
How are you thinking about that moving forward.
Patients to continue to.
Hello diesel volumes, well first I would say, it's mathematically impossible to have saved very high double digit or low, but still really significant double digit growth compounded over many many years right mathematically it becomes impossible.
So we have still a few are and so part of it is just a mathematical thing where thing you can continue to have CAGR growth.
Anything just a math question, so that's sort of point a.
<unk>.
In <unk>, we still have some opportunities in front of us that are very significant.
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 sort of mid year and beyond we are in the beta testing mode. There and then separately, we're really retooled our organization around our small fleet business and we've never.
<unk> really been focused on it and in a very meaningful way and so now when we talk about investing in growth. We've added some salespeople to that area. We've developed and we're many just a few months away from a leasing sort of call it mid year.
A real program a program that will provide discounting and it will 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 will be really the back half of this year, even our loyalty program will be comprehensively retool toward the end of the year I think directly or indirectly that will help be helpful as well and on the other hand, theres all against supply chain.
And 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 we have a mathematical challenge of CAGR 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 will.
Continue to grow but at a more modest rate at all within a context that has a lot of really unusual challenges again driver shortage in supply chain related.
Thank you for all the color.
Thanks for the question sorry.
Our next question comes from Bryan Meher with B Riley Securities You May now go ahead.
Hi, just a follow up question on your kind of build buy.
Thoughts for this year first of all.
What do you anticipate grant of developing costing these days I mean, I remember a time when it was kind of 15 to 17 18 million and then kind of low to mid $20 million when youre constantly.
Constant plating buying new facilities versus building.
How are you weighing that and how should we think about the total dollars allocated between those two two ways to grow.
So first high teens is still the target range.
Hi, Hi team, so I think directionally, that's that's about right.
And one of the reasons.
We like I like acquiring existing truck stops as you get youre buying key EBITDA and cash flow immediately youre not.
<unk> 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're 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 Gee. 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, where they are and the math still flushes, where there are opportunities to both build and cherry pick either build and really really great locations.
Cherry picking great sites to buy that are existing.
In either case and <unk>, one more point about.
About <unk>.
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 though one we referred to one of the two and that the transaction. We mentioned, it's the largest in the U S. So the EBITDA is extraordinary not typical more typical site may have.
A couple of million dollars of EBIT at one five to two and a half maybe three in that realm and so on.
They come in different sizes and flavors so to speak in the end, we're going to be doing a little bit of both because the ground up machine you need to start now to have it doing something in a few years in one of our competitors is doing 45 to 50, a year of ground up in there. They are doing a great job of that and they have a machine going and I would like to see directionally down the pike filling in great Carters.
With a machine that eventually many years from now it gets to a pace, whether we'll get to that pace or not I'm 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 yen.
We look at this as well.
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 youre undertaking some development and risk and cycle risk and all of that so hopefully that's responsive Brian .
Yes, that's perfect. Thank you very much.
Yes, thanks for the follow up.
This concludes our question and answer session I would like to turn the conference back over to John Patrick 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 has now concluded. Thank you for taking today's presentation you may now disconnect.