TravelCenters of America (TA) Q2 2022 Earnings Call Transcript

TravelCenters of America (TA)
Q2 2022 Earnings Call
Aug 02, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to TravelCenters of America second quarter 2022 investor call. This call is being recorded. At this time for opening remarks and introductions, I would like to introduce TA's director of investor relations, Ms. Kristin Brown.

Please go ahead.

Kristin Brown -- Director of Investor Relations

Thank you. Good morning, everyone. We will begin today's call with remarks from TA's chief executive officer, Jon Pertchik, followed by chief financial officer, Peter Crage, 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 TA's present beliefs and expectations as of today, August 2, 2022. Forward-looking statements and their implications are not guaranteed to occur and they 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 at the SEC's website or by referring to the Investor Relations section of TAs 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, and adjusted EBITDA. The reconciliations of these non-GAAP measures to the most comparable GAAP amounts are available in our earnings press release that can be found in the news section on 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 regarding the second quarter of 2022, as compared to the second quarter of 2021 unless stated otherwise. Finally, I would like to remind you that the recording and retransmission of today's conference call is prohibited without the prior written consent of TA. And with that, Jon, I'll turn the call over to you.

Jon Pertchik -- Chief Executive Officer

Thanks, Kristin. Good morning to everyone and thank you for your continuing interest in TA. Strength, resilience, consistency, the ability to optimize opportunity and outperformance. My 18,000 teammates at TravelCenters of America have increasingly demonstrated these qualities in recent years.

And the benefits of their efforts were fully on display in the outstanding second quarter results we reported yesterday. I believe that TA's performance and execution during what has been a challenging and dynamic past 30-months provides the best evidence that these results are sustainable and repeatable moving forward. For the second quarter of 2022, as compared to the prior year quarter, TA produced the following: a 117% improvement in adjusted net income to $64.4 million; a 67% improvement in adjusted EBITDA to $122.8 million and a 56% increase in trailing 12-month adjusted EBITDA to nearly $300 million versus the prior-year period. In short, healthy top-line growth translated into even greater operating leverage generating significant increases in income and operating cash flow.

Remember that our Q2 2021 growth over Q2 2020 results were significant, which makes this quarter's outcome even more impressive against a difficult comp. So once again, TA demonstrated multi-year improvements that are both consistent and extraordinary. I want to draw attention to TA's multi-year financial improvement. TA's 2019 adjusted EBITDA was $131 million.

In 2020, our newly combined team generated an adjusted EBITDA of $147 million, despite facing the adverse effects of COVID. In 2021, we broke the $200 million mark with $220.2 million of adjusted EBITDA. And now, we have generated just under $300 million of trailing 12-month adjusted EBITDA. These results demonstrate consistency, resilience, growth, and significant value creation.

While much of this upside this quarter resulted from fuel margin, strength can be found across our businesses. Most obviously within fuel margin, TA's fuel team has intensively refined the supply management process, enabling the team to leverage a favorably volatile period to efficiently maximize diesel margins, which led to strong results. I would underscore that this was not merely favorable market forces, but circumstances combined with excellent team performance and execution. Starting with the commercial division, margin expansion was driven in large part by strong truck service performance with substantial growth coming from our mobile maintenance business, solidly outpacing any inflationary impact.

And many initiatives relating to technician compensation and retention, improving tech efficiency, and leveraging technology to improve the professional driver experience remain in front of us with value yet to be harvested. Shifting to hospitality. We have been largely successful in thoughtfully increasing prices to offset labor and operating cost pressures. Here too many initiatives have just gotten underway, including for example TA's customer loyalty program, improving food operations and merchandising efficiency through leveraging technology with impacts that have not yet begun to take hold.

Moreover, we are carefully working on our various food and c-store offerings to continue to find ways to improve top-line, as well as bottom-line efficiencies. And non-fuel revenues were again strengthened by demand for diesel exhaust fluid or DEF. We remain on track to have DEF dispensers on the diesel fuel Island at all TA Petros nationwide by the end of this year. Importantly, I also wanted to touch on the resiliency of TA's business model.

While volatility and uncertainty has created challenges for our national economy, as well as for the consumer motorists side of our business with inflation and wage compression impacting discretionary spending at the c-stores and on food. These same uncertainties and volatility are also creating the favorable fuel market conditions from which our team has been successful at generating diesel margin upside. Herein lies the resiliency of TA's business model. And on this point of resilience, I do want to offer my outlook for the remainder of 2022.

My belief is that we can reasonably expect persistent volatility to remain at least through the end of 2022, led by the war in Ukraine, continuing supply constraints, persistent inflation, and GDP contraction. While we expect this volatility to continue to modestly suppress gasoline volumes and hospitality, we also expect to benefit from favorable diesel margin conditions that we saw in Q2. With continued excellent execution by our fuel team, we should expect TA's fuel margins to remain robust and mitigate macroeconomic-driven softness in other areas, which in turn should provide continuing solid overall performance. We are not increasing our long-term fuel CPG guidance.

However, we are clearly signaling a strong likelihood that higher than typical fuel margins should persist through the remainder of this year. In addition, we are not content to rest in our existing performance and momentum. We continue to pursue transformational initiatives in fuel, including expanding TA's new small fleet program and the development of artificial intelligence to support diesel street pricing among other initiatives. We expect these activities will begin to contribute new and higher margin volumes by the end of '22 and also may contribute more non-fuel retail and hospitality sales.

Moving to growth initiatives. Our robust acquisition pipeline totaling five highly probable opportunities and more than 25 locations under serious consideration positions us to add independent sites along active corridors to strengthen the TA network's geographic coverage. Also, I am happy to report that the first two acquisitions we closed in April are significantly outperforming our proforma EBITDA return expectations of a minimum mid-teens return on investment, largely due to synergies. Acquisitions will provide substantial incremental run rate EBITDA next year and beyond.

Furthermore, since the beginning of 2022, we have entered into 50 TravelCenter franchise agreements. Five of these franchise sites began operations during 2020, two during 2021, and one during the second quarter of 2022. We expect to open the balance of these 40 plus TravelCenters between now and the third quarter of 2024 and have a go-forward target of opening 30 annually. These will begin to contribute meaningful incremental EBITDA starting at the end of 2022 and into 2023.

Looking ahead, we are making capital allocation decisions to achieve the best returns and continue to anticipate our non-acquisition capital spend in 2022 to be between $175 million and $200 million. Beyond baseline amounts for standard break-fix capital, these expenditures focus heavily on growth opportunities and important remedial expenditures with the primary focus on customer-facing and customer-impacting opportunities and investments that generate efficiencies. Key areas include the physical plant of our locations and IT systems. In addition, I would like to share a couple of points about our capital allocation philosophy as follows.

First, we do not expect money spent to yield a one-and-done performance, but rather contribute a cumulative effect from the many improvements we have made that should clearly demonstrate greater earnings capacity over time. Second, even when considering our ongoing capital needs, we continue to generate substantial amounts of cash flow, which provides significant firepower to drive growth and generate shareholder value. Third, despite our resilient business model as I discussed earlier, we believe that maintaining a liquid and robust balance sheet is the important foundation for any deep-value growth company. Moving beyond capital allocation, we have spent substantial time in recent years, reshaping the profile and prospects of TravelCenters of America.

Having achieved strong operating and financial results over the past few years, we are now committed to closing our valuation gap to reflect our greatly improved company. Our current enterprise value in no way reflects the robust earnings and cash flow capacity of TA. We will expand on this message and make the case for a higher valuation during our Investor Day on September 20 in New York City. Before I turn things over to Peter, I would like to take a moment to share important non-financial achievements and recognition that demonstrate TA's commitment to leadership and excellence.

In recent months, TA has been awarded the following. One, return to the Fortune 500 at number 461. Two, the name by Cranes as a top workplace for large companies in Northeast Ohio. Three, being selected by USA Today as a Top 10 best gas station brand nationwide.

Also looking forward, TA is excited about the following. Ringing the closing bell at NASDAQ on September 19, hosting a targeted Investor Day September 20 at NASDAQ, where we will showcase the depth of our management team and highlight TA's value proposition in tangible ways, and releasing our first ever ESG report in the next month. We have worked hard to transforming this great 50-year-old company over the past few years. I think our Q2 results show we are now graduating to a reliable, durable, and resilient company that consistently executes and strongly warrants consideration from deep value to growth-oriented investors.

Finally, and as always, I would like to end with an expression of gratitude to our teammates, guests, customers, analysts, and shareholders. Thank you all for your continuing commitment to TA Petro. And with that I will hand over the call to Peter Crage, our CFO. Peter?

Peter Crage -- Chief Financial Officer

Thank you, Jon, and good morning, everyone. As Jon mentioned, this was another excellent quarter for the company. When you consider these results not only on their own, but as measured against our improved performance over the past two years. They clearly demonstrate the ability of TA's business to continue to improve operating results and generate strong cash flow.

Now to more detail on our results. For the second quarter, we reported net income of $64 million or $4.31 per share, which more than doubled from last year's $2.02 per share. Excluding small one-time items in both quarters, as detailed in our earnings release, we generated 117% improvement in adjusted net income, against what was a very strong comp in 2021. Adjusted EBITDA which excludes two one-time items in each quarter, increased by $49.2 million or 67%, primarily due to strong diesel CPG margin and non-fuel gross margin, particularly in our truck service business.

This was partly offset by elevated inflation-induced labor and operating costs, which are prevalent across the broader economy. Our fuel sales volume was slightly reduced by 9.3 million gallons, or 1.6% to just over 574 million gallons. The mix shows diesel sales volume largely stable and a 10.7% decrease in gasoline sales volume that likely reflects temporary demand destruction related to increases in retail pump pricing. Fuel gross margin increased $56.3 million to $156.6 million or 56.2%.

And combined margin cents per gallon improved $10.01 or 58.7% to $0.27 over the prior year. This increase grew from unusual fuel market volatility at the macro level and solid execution by the TravelCenters fuel team. I will add that in July, market volatility has abated somewhat from the levels we saw in the second quarter, but we continue to generate a solid blended CPG margin of approximately $0.26 per gallon. For the time being, we believe it is prudent to maintain our long-term guidance of $0.15 to $0.17 for blended fuel gross margin per gallon.

However, as Jon mentioned, we do believe that volatility will remain elevated, at least through this year, due to broader supply and economic uncertainty. And this volatility combined with excellent execution by our fuel team will generate higher CPG for the remainder of 2022. In the future, as we begin to see volatility stabilize and realize meaningful impact from our recently launched initiatives such as AI in diesel pricing and our small fleet program, these sustainable drivers of higher fuel margin will lead us to revisit this long-term guidance and make appropriate upward adjustments that we are confident or sustainable. Non-fuel revenues increased by $51.6 million or 10.3% and total non-fuel gross margin increased by $28.7 million or 9.5%.

Operating costs increased $26.1 million or 11.2%, because of stronger business activity and continued inflationary wage and opex pressures. Against 2021, strength in truck service revenue is up 12.4% and diesel exhaust fluid up 44.7%. We're largely price driven as we adjust to address inflationary cost pressures and continued growth in our mobile maintenance business. Variable costs were well-controlled in truck service relative to the solid revenue increases, driving improved profitability.

Revenues from store and restaurant which includes both full service and quick service increased by 3.1% and 8.4%, respectively. Sales here were offset by increased inflationary, labor and operating costs. We have been successful in managing these costs to dull the impact and are making adjustments to mitigate these inflation-induced cost pressures on a site-by-site basis. In advance, of the improvements Jon discussed relating to customer loyalty, operations, and technology.

SG&A expense for the quarter came in at 6.5% of total fuel gross margin plus non-fuel revenue, as we continue to support our growth and efficiency initiatives. As a reminder, we have established a benchmark of costs on a relative basis to the growth in business and expect annual SG&A to be in the range of 6.75% to 7.25% of fuel gross margin plus non-fuel revenue. We were below this range for the quarter and are comfortable that we can continue carrying our growth initiatives at this level of spend. Touching on our balance sheet for a moment, at June 30, we had cash and cash equivalents of $565 million and availability under our revolving credit facility of $185 million for total liquidity of $750 million and no near-term debt maturities.

We invested $39.4 million in capital expenditures during the second quarter and $90 million for the year thus far. We continue to anticipate a cash spend between $175 million to $200 million on capex projects in 2022. While supply chain challenges continue to exist, we have been largely successful this year in completing projects on time and at levels at or near our original budgets. In addition to capex spend we also invested $52 million total cash consideration to acquire two franchise locations in April and a third added in July for approximately $15 million.

Our typical mid-year reassessment of our capital allocation plan is particularly important this year given growing recession expectations. To be sure we deploy capital on projects that generate the best returns most quickly, we are filtering our spend for the remainder of the year. But to be clear, any potential adjustments to our spend will not affect our long-term plan to continue investing in our TravelCenters and continue our growth trajectory. We believe our strong liquidity position is important, not only to the execution of our organic and inorganic growth strategy, but also to position ourselves defensively against economic headwinds.

That concludes our prepared remarks, operator. We are now ready to take questions.

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] The first question comes from Bryan Maher with B. Riley Securities. Please go ahead with your question.

Bryan Maher -- B. Riley Securities -- Analyst

Good morning, Jonathan and Peter. Thank you for the comments so far. Couple of questions, on the pipeline for acquisitions, can you drill down a little bit more on how deep that is? I think you said in your prepared comments you're looking at five properties. Can you discuss may be pricing either on an absolute basis or on maybe a multiple of EBITDA and who might be the potential sellers?

Jon Pertchik -- Chief Executive Officer

Yes. Sure. Thanks, Bryan. Good to connect this morning really like to share our earnings this quarter.

The pipeline as we noted, there are five that we call sort of highly probable. We tend to look at things pretty conservatively. So you can read into that as you may what we mean with a highly probable. 25 that are under very, very serious review.

Again, we look at things can we -- communicate conservatively there. We have a pipeline of potential other sites that is on multiple on top of that bigger number. Pricing and an upside, you know, sort of, talk about those two together, because the first couple of that closed, which frankly because they were franchise, we expected while lower execution risk we didn't expect the synergies to be as significant as they're part of our network and we're doing far, far better than what we had proformad. And I think the inbound pre-synergy multiples in general loosely speaking, meaning, I don't want to point to any one is five to six times, something like that.

And then last -- your last question is who are these folks so to speak? Or what -- who are the likely kinds of sellers? These are onesie, twosies, a single location, some double locations. There are no five, six, 10 many portfolios, unfortunately, though we're looking, we continue to look. Initially, these were just opportunistic where we found a location or two that was in a good corridor, that we were just sort of we were shaking the tree and someone would come along, we would engage and that's played out very well so far. Now, we're getting a little bit more strategic in identifying a little more assertively corridors and then looking in those corridors with a great deal of focus.

I can envision a few years down the pike not today, but a few years down the pike when the economy sort of renormalize, restabilizes, we may very well start getting into more ground up in a significant way. I don't think that will be a part of our business in the very, very near-term and again in a scaled way. In the near-term it will continue to be these onesie, twosies, one or two location, mom-and-pop existing, TravelCenters that we can roll into our network and see really significant synergies.

Bryan Maher -- B. Riley Securities -- Analyst

OK. Thanks for that. And on the capex, good to hear that you are moving along despite supply chain issues. But do you have any initial thoughts for what 2023 might look like? And then also, I know that prior c-suite management used to sell some of the improvements back to SVC on those 179 properties.

Is there any scenario kind of this year and next year where you're may be adding in a restaurant or a truck service bay that you might sell back some of those improvements to SVC?

Jon Pertchik -- Chief Executive Officer

So with the latter selling improvements no, whether it's adding a restaurant, adding a truck service pages, short answer, no, it's not part of our strategy. It's not how we plan to go forward. In terms of next year's capex and we need to run our process and we're doing a mid-year evaluation right now, which any normal healthy company should do. And as you do that in a year where we budgeted -- and this doesn't suggest there will be any change in the headline numbers.

I don't think there will be, but when you budget -- when we set our budgets last September, October, inflation was like 5.2%, it's now 9%. So the mid-year look you normally do in a healthy normal year, you look with greater care. We have to complete that. We then got it rolled into our budget process for next year to really have a good answer.

But I do think, at least through next year, we will have a output in "elevated capital budget". And I don't want to suggest the range, but I will say it will be elevated to what sort of a stable state normal renormalized capex budget would look like. I still think we have at least another year here of very significant investments greater than the normal run rate to continue to effectuate the opportunities we have and really harvest some of the opportunities that are in front of us. So I think we have at least another year of elevated capex.

Bryan Maher -- B. Riley Securities -- Analyst

OK. Thanks for that. And then just last from me, on the fuel margins and congratulations for such a profound number. It reminds me a lot of 4Q 2014, which I'm kind of dating myself covering the company where TA did I think $0.28 that quarter and then it faded off to [Inaudible] still phenomenal in 1Q '15 and kind of moved down to the very high teens and low 20s in the next few quarters.

Do you think we see something like that play out again? And Peter, is it safe to say that with $0.26 in July that the third quarter number likely has a two-handle on it?

Jon Pertchik -- Chief Executive Officer

So there's a lot there. First, on dating yourself, thank you for sticking around with us, by the way, like don't want to skip over that. We definitely appreciate that. And by the way, we look back to at least I know we're able to look at Q1 versus Q1.

And even though there were some high CPG back then. Overall Q1 to Q1 at least I know factually, our EBITDA overall was significantly better. Frankly, it's really hard to look to another period to suggest what the pattern would look like here. It could be flatter, it could be steeper, it could be -- we really just don't know.

What we do know is we are a different company now than we were back then and then we've been since then. And what we're learning and Peter and I having been here a couple of years, started to see maybe a year and a half ago, was this unusual interesting resilience of almost quasi hedge between different parts of the business. And I think as we're executing better we highlighted -- I try to really emphasize. The market was very strong for us.

But the way the fuel team executed within that was that a whole another level. And so there is just so many different variables. We're a different company today, very different than we were then. And two the circumstances are different economically and otherwise.

So it's really hard to predict what the pattern will look like in the mid to longer term. I just know we're in a really good spot between the changes we've made, the long list of yet to be harvested opportunities, the AI machine learning and small fleet, the franchise scaling up the acquisitions, the loyalty program, and on and on and on, the truck service investments we're making in, they're already performing at such a high level. I'm not really sure what the future will bring exactly, but I know whatever it will bring, we will execute at a very high level. And now that we're 2.5 years into having these great quarter over quarter over quarter performances, I have no reason to think that won't persist.

Peter, go ahead on the specific.

Peter Crage -- Chief Financial Officer

Bryan, on the two handle, we certainly hope so. I think as Jon pointed out, as we pointed out the causes for that are volatility created by external exogenous factors. And we don't see those abating over the next 90-days, so the third quarter we would expect something. And we've got obviously better at purchasing, as we pointed out, the field team has done an incredible job.

So we certainly hope that it has a two-handle we expect it will. The fourth quarter of course is more difficult to say, because it's long -- it's out further.

Bryan Maher -- B. Riley Securities -- Analyst

OK. Thank you and congratulations again on a phenomenal quarter.

Peter Crage -- Chief Financial Officer

Thank you.

Jon Pertchik -- Chief Executive Officer

Thanks, Bryan.

Operator

Our next question comes from Paul Lejuez with Citi Research. Please go ahead with your question.

Paul Lejuez -- Citi -- Analyst

Hey, thanks guys. A couple of questions, just on the lower gallons during the quarter curious how that looked on a month-to-month basis, if you saw big fluctuations throughout the quarter and even maybe if you could give us an update on what you've been seeing in July from a gallons sold perspective? And then second, would love to hear an update on the loyalty program. And then last, on the 42 franchise location. Just curious what needs to be done to get those up and running by 3Q '24 as you laid out and if you're running into any sort of timing issues with those sort of getting pushed out toward the latter end of that 2024 timing? Thanks.

Jon Pertchik -- Chief Executive Officer

Great. Thanks, Paul, and thanks for the questions. On the lower -- the reduction in gallons, that basically and I'll let Peter correct me to any extent I get this not perfectly accurately. But the reduction we've seen is pretty much entirely in gasoline, which stated another way is motorists, us, all of us our behavior, not trucker behavior.

So we still have -- we've seen a persistence of diesel -- remember we're lapping a very strong year, the prior year number one in fuel and general fuel volume growth, very, very significant last year. So we're lapping that year. And diesel volume to last year has been persistently sort of stable, and I would say flat in terms of volume growth. Now we have a bunch of initiatives, again at the AI machine learning for diesel street pricing.

The new small fleet program was just getting rolling. So there's some real opportunities we have there. But fundamentally, it's sort of flat. The entire reduction we've seen is in gasoline volumes.

And I would say, those volumes have never fully recovered to pre-COVID by the way. And if they did it was the brief is the periods where we were up to pre-COVID gasoline gallons, and so those never fully recovered. I would say we've seen a continuation of a very flat, but continuing slight drop in gasoline volumes through the quarter as we got to the end of the quarter. I think that's accurate to say.

Anything on that Peter, before I move to loyalty and franchise?

Peter Crage -- Chief Financial Officer

No. Right on. Obviously, we disclosed the $0.26 range for July so far. Volumes flat on diesel.

Gas has accelerated and is declined, slightly from the second quarter, but that's to be expected.

Jon Pertchik -- Chief Executive Officer

Right. And consistent with what sort of the armchair perspective might be on the impact of a 9% inflationary rate. And the labor participation or unemployment, so labor participation rate, which has been people are sitting on the sidelines, not looking for a job is also about a one-point to two points lower than what normal is. And so I think that there is a relationship there.

In terms of loyalty program update, there is not much of an update. We've been saying all along that really year-end is the timeframe that we will or as we end this year into next year we will introduce a really comprehensively revised loyalty program. We're basically on track for that. I'd say Q1 of next year is when that will be in the marketplace.

Again, the small fleet program, if that's what you're getting at ask a follow and I can share a little bit on that, which is not the loyalty program more comprehensively. And then on the 42 -- the number of franchises opening and delay and all of that, they're really these -- when we first started to pursue franchise I surmised, I speculated, I theorized that we would find a lot of existing TravelCenters, mom-and-pops that we would convert to a TA. And the process of conversion of an existing TravelCenter to a TA is maybe months, maybe half a year on the high end. Maybe more like a quarter to two quarters.

Most of our new franchises are ground-up builds. And ground-up just takes time. And so that's what explains the significant lag. Have we seen some delays due to supply chain and all of that and labor pressures? Probably a little bit.

Nothing major but yes, probably a little bit within that. But I feel really comfortable when we signal by that third quarter of '24 to open the 40 plus. I think that's about right. And no, I don't think that it will be backend loaded, I think it'll be a fairly even spread starting as we wrap up the end of this year into next year, I think you'll start to see these popping up every month, every few months a good handful and so on.

I think that's the way -- the pattern, we expect to see.

Paul Lejuez -- Citi -- Analyst

Got it. And Jon, you mentioned the small fleet program, it sounded like maybe add something to share there, just the progress that you're seeing on that initiative. Would love to hear more about it.

Jon Pertchik -- Chief Executive Officer

Yes. We're really -- it's something in the fuel area that -- the AI machine learning for street diesel, which by the way we talk a lot about that because we're now we finished our Phase 2 beta, and we're preparing to roll that out and scale that as we get into these next couple of quarters here. We're really, really excited about that. I also am just staying on that for a second, I believe AI is going to benefit us in how we manage our supply and there is a long list of areas where AI is going to benefit us on the fuel side.

But to your question on small fleet, that's the one other very significant area. We've had something like in the 300 plus range of active new fleet signed up with this. Remember, these are smaller fleets, you're not going to get massive gallons, but because they are smaller fleets, they're very meaningful margin CPG. We have had over 1,000 applications submitted just working our way through that process.

So we've gotten off to a really good jump-start. To really start to see it in dollars and cents is going to take a little while because again you need to scale it. They are small fleets so by definition the volumes are going to be smaller. But it's another area that as we get toward the end of this year and into next I think that's when we start to see measurably financial impact.

Paul Lejuez -- Citi -- Analyst

Great. Thank you for that.

Jon Pertchik -- Chief Executive Officer

Thanks for the questions, Paul.

Operator

[Operator instructions] Our next question comes from Ari Klein with BMO Capital Markets. Please go ahead with your question.

Ari Klein -- BMO Capital Markets -- Analyst

Thanks, and good morning. Maybe just following up on the fuel margin, you mentioned that $0.26 in July. Just curious what that peaked at during the second quarter. And you have been above the $0.15 to $0.17 per gallon range for a while now.

What would push you or what do you want to see before you increase the long-term outlook there?

Jon Pertchik -- Chief Executive Officer

I'll let Peter take the first part in a second one. On the long-term outlook, I think this company has been around a long time, and we've made a lot of changes, but because CPG is such a driver I want to continue to set a -- from a long-term perspective, set a conservative expectation, while we continue to build the basic foundation of the company. And so within that, I think what -- you may have noticed this is the first time we've really spoken about an outlook, using the word outlook and then expressing and explaining what we expect for the back half of this year. I think we're going to continue to do that.

So while we may speak in terms of a long-term guidance expectation for fuel CPG, I think we will supplement that and complement that with more short and maybe mid-term at least short-term changes to that long-term perspective. And, so I still want to get further along in building the foundation of this business, which again, we've gone from low 100s millions in EBITDA, this is the whole story, to in excess of $200 million to now trailing 12 of right around $300 million. We're really building a -- with a lot of liquidity, we really building a sound solid deep value proposition here. And I want to continue to stay conservative and so that's what we're going to continue to do.

But with emphasis, we will, as we just did in this earnings call, we gave an outlook that supplements or complements that sort of long-term base case. And hopefully, that's meaningful for folks to sort of consider us. Peter, what would you add to the first part of the question?

Peter Crage -- Chief Financial Officer

Within the quarter, we saw in the month of June CPG expanse. So early part of the quarter, low to mid-20s in June spiked up into the high 20s, low 30s for a period of time. And that in June is when we saw a little bit of the softness that you see in the second quarter on volume. So we saw that relation between spiking up CPG in June and a little bit of volume loss in that month.

But that gives you a sense of what happened in the quarter is mainly backloaded.

Ari Klein -- BMO Capital Markets -- Analyst

Got it. And then just on the diesel volumes. It was down a little bit year-over-year. Obviously, it was a tough comp.

But with the macro environment may be slowing and perhaps trucking demand being impacted how are you thinking about that moving forward?

Jon Pertchik -- Chief Executive Officer

I still I talk to my peers and some of our biggest customers, I've spoken to a couple of just in the last couple of weeks, let's say, and we stay through our fleet team stay very close with our biggest fleet customers. And the bigger fleets in particular there remains a level of persistent tempered, but persistent optimism. Again, it's tempered and the further out you look the foggier the crystal ball becomes. But at least for this as we look to finish up this year, there still is a level of, I would say tempered optimism about activity levels in freight activity on the bigger fleets.

So smaller fleets the spot business has softened a little bit and I think that's going to continue. That's what I hear from our biggest customers both directly, as well as through our fleet team. And so that's how I'm thinking about the rest of this year. As we get to next year, it will be a whole new set of challenges and variables just like from our first few months here where COVID hit and then sort of Phase 2 of COVID with supply chain and all this other stuff.

We're going to continue to see storms of all kinds coming and going like we've seen and we fought our way through and we've had 2.5 years of great success and I think that will persist.

Ari Klein -- BMO Capital Markets -- Analyst

Got it. And then maybe just one last one. Jonathan, you mentioned earlier the substantial cash flows and the company is clearly on stronger financial footing, is a dividend something that you'd consider at some point or any other form of capital return?

Jon Pertchik -- Chief Executive Officer

I wouldn't single out any one opportunity for capital allocation, but we talk actively about capital allocation, very actively, and our balance sheet. And in the context of acquisitions and some of these transformational initiatives, as well as things like dividends and whether a one-time dividend eventually maybe sometime down the line a recurring dividend. All of those things are part of our dialog. I don't want to say anything more specific as to what we might do in terms of capital allocation, because I want to make sure we give all of these things their due consideration and it'd be premature to say anything more specific at this point.

Ari Klein -- BMO Capital Markets -- Analyst

Got it. Thanks for the color.

Jon Pertchik -- Chief Executive Officer

Thank you. Appreciate it Ari.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Jon Pertchik for any closing remarks.

Jon Pertchik -- Chief Executive Officer

Again, thank you for your interest in TA and your attention this morning. We are excited to host analysts and institutional investors at our Investor Day at the NASDAQ in New York City and others via webcast on Tuesday afternoon, September 20. Invitations and details will be available soon. Everybody have a great day.

Thanks again. Bye-bye.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Kristin Brown -- Director of Investor Relations

Jon Pertchik -- Chief Executive Officer

Peter Crage -- Chief Financial Officer

Bryan Maher -- B. Riley Securities -- Analyst

Paul Lejuez -- Citi -- Analyst

Ari Klein -- BMO Capital Markets -- Analyst

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