- Revenue (excluding fuel surcharge): Increased 18.1% year-over-year due to the acquisition of US Xpress.
- Adjusted Operating Income: Declined by 22.8% year-over-year.
- GAAP EPS: $0.13 for the second quarter of 2024.
- Adjusted EPS: $0.24, negatively impacted by a $12.5 million pretax charge for a large auto liability claim.
- Net Interest Expense: Increased by $17.8 million year-over-year.
- Effective Tax Rate: Increased by 11.3% on GAAP results and 5.3% on non-GAAP results year-over-year.
- Truckload Revenue (excluding fuel surcharge): Increased 33% year-over-year, with a 5.7% decline in the legacy truckload business.
- Miles per Tractor: Increased 8.5% year-over-year.
- Revenue per Tractor (excluding fuel surcharge): Increased 3.5% year-over-year.
- LTL Revenue (excluding fuel surcharge): Grew 15.1% year-over-year.
- Shipments per Day: Increased 8.4% year-over-year.
- Revenue per Hundredweight (excluding fuel surcharge): Increased 13.4% year-over-year.
- Adjusted Operating Income (LTL): Grew 8.2% year-over-year.
- New Locations: Opened 11 new locations in the second quarter, with plans to open another 20 terminals by the end of 2024.
- Logistics Revenue: Increased 11.8% year-over-year.
- Revenue per Load (Logistics): Increased 10.8% year-over-year.
- Intermodal Load Count: Grew sequentially by 10.8%.
- Intermodal Revenue: Decreased 6.5% year-over-year.
- Operating Ratio (Intermodal): Improved by 460 basis points year-over-year.
- Other Segments Revenue: Declined 47.5% year-over-year.
- Operating Income (Other Segments): $3.9 million, the first operating profit in seven quarters.
- Guidance for Adjusted EPS (Q3 2024): $0.31 to $0.35.
- Guidance for Adjusted EPS (Q4 2024): $0.32 to $0.36.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue excluding fuel surcharge increased by 18.1% year-over-year due to the acquisition of US Xpress.
- LTL segment experienced a supportive market with consistent rate increases, leading to a 15.1% year-over-year revenue growth.
- Intermodal segment saw a sequential load count growth of 10.8% and an improved operating ratio by 460 basis points year-over-year.
- Logistics segment improved profitability sequentially, with an 11.8% year-over-year revenue increase driven by higher revenue per load.
- US Xpress integration showed progress with a 33% year-over-year increase in truckload revenue excluding fuel surcharge.
Negative Points
- Adjusted operating income declined by 22.8% year-over-year.
- GAAP earnings per diluted share were negatively impacted by a $12.5 million pretax charge for a large auto liability claim.
- Net interest expense increased by $17.8 million year-over-year.
- Effective tax rate increased by 11.3% on GAAP results and 5.3% on non-GAAP results year-over-year.
- Truckload segment continues to face challenges with demand and excess capacity, leading to a 5.7% decline in legacy truckload business revenue.
Q & A Highlights
Q: How close are we to a balanced market in the truckload segment, and what is included from a seasonal perspective in the outlook for Q3 and Q4?
A: We are getting closer to a balanced market, indicated by customers securing additional capacity and increased rejections. We expect an improving environment with OR improving by 100-150 basis points from Q2 to Q3 and another 150-200 basis points from Q3 to Q4. Historically, OR improves by around 200 basis points from Q3 to Q4, but this can vary based on supply-demand dynamics. (Adam Miller, CEO)
Q: Given the commentary of an improving backdrop, why are spot rates on load boards near decade lows?
A: We have a different purview of the market due to our various brands and networks. Indicators like increased rejections and ongoing premium freight projects suggest capacity is tightening. Discussions with customers also indicate comfort with inventory levels and potential fourth-quarter lift. (Adam Miller, CEO)
Q: What would you need to see to believe that the market improvement is a trend?
A: We need to see consistent seasonal uptick in demand in the third quarter, particularly in late August and September. Conversations with customers and freight behavior outside of seasonal patterns will also be key indicators. (Adam Miller, CEO; Andrew Hess, CFO)
Q: Can you clarify the impact of the higher tax rate on the guidance and the expected truckload margin improvement from Q2 to Q3?
A: The higher tax rate is due to lower operating income, which amplifies permanent differences. Despite this, we forecast stronger performance to offset the higher tax rate. We expect close to 100 basis points improvement in truckload OR, excluding the claim. (Adam Miller, CEO; Andrew Hess, CFO)
Q: How do you plan to fill the new LTL capacity, and what are the expected impacts on margins?
A: Initially, we will leverage 3PLs, sales efforts, and national bids to fill new capacity. Relationships with large truckload customers will also help. While new terminals create short-term margin headwinds, we expect long-term top-line growth and margin expansion. (Adam Miller, CEO; Andrew Hess, CFO)
Q: Can you provide more color on the sequential improvement in logistics gross margin from Q1 to Q2?
A: The improvement is largely due to pricing discipline and the addition of the US Xpress team, which has niche customers and has helped improve overall logistics capabilities and profitability. (Adam Miller, CEO)
Q: What is the outlook for US Xpress in terms of profitability and market contribution?
A: Progress at US Xpress has been largely self-help despite market headwinds. We expect it to contribute more meaningfully in the fourth quarter with market support. Long-term, as the market strengthens, US Xpress should close the gap with Knight and Swift, achieving higher profitability. (Adam Miller, CEO; Andrew Hess, CFO)
Q: How do you view the balance between organic and inorganic growth in the LTL segment?
A: Both organic and inorganic growth are essential to meet our targets. We are actively pursuing acquisitions to fill regional gaps, particularly in the Southwest and Northeast, while continuing to expand organically. (Adam Miller, CEO; Brad Stewart, SVP of Investor Relations)
Q: What are the key drivers behind the improvement in the intermodal segment's operating ratio?
A: Sequential growth in load count and stable revenue per load have helped improve the operating ratio. We anticipate further volume growth in the second half, which should enhance business mix, reduce empty moves, and lower costs, making the business modestly profitable by Q4. (Andrew Hess, CFO)
Q: How do you plan to manage the seasonal slowdown in the all other segments in Q4?
A: The seasonal slowdown in warehousing and equipment leasing businesses is expected, but it has a more significant impact now due to lower truckload margins. We are focusing on maintaining margin stability and leveraging our diversified business mix to offset seasonal fluctuations. (Adam Miller, CEO; Andrew Hess, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
