- Revenue before fuel surcharge: $1.96 billion, up 27% year-over-year.
- Operating Income: $208 million, up from $192 million in Q2 2023.
- Operating Margin: 10.6%, down from 12.4% in Q2 2023.
- Adjusted Net Income: $146 million, up from $139 million a year earlier.
- Adjusted EPS: $1.71, up from $1.59 in the prior year.
- Net Cash from Operating Activities: Nearly $250 million, up from $200 million in Q2 2023.
- Free Cash Flow: $151 million, up from $138 million.
- Daseke Acquisition Impact: Added $329 million to revenue and over $23 million to operating income.
- Nonrecurring Restructuring Charge: $20 million related to the Daseke acquisition.
- US LTL Revenue before fuel surcharge: $548 million, flat year-over-year.
- US LTL Operating Income: $51 million, up from $47 million.
- Canadian LTL Revenue before fuel surcharge: $144 million, up 12% year-over-year.
- Canadian LTL Operating Income: $35 million, up from $34 million.
- Truckload Revenue before fuel surcharge: $738 million, up from $411 million, benefiting from the Daseke acquisition.
- Truckload Operating Income: $83 million, up from $66 million.
- Logistics Revenue before fuel surcharge: Up 22% year-over-year.
- Logistics Operating Income: Up 54% year-over-year.
- Logistics Operating Margin: 11.4%, up from 9.1% a year earlier.
- Funded Debt-to-EBITDA Ratio: 2.15.
- Quarterly Dividend: $0.40 per share, 14% higher than a year earlier.
- Full-Year EPS Guidance: $6.75 to $7.
- Full-Year Free Cash Flow Guidance: $825 million to $900 million.
- Net CapEx Guidance: $275 million to $300 million.
- Debt Repayment Target: $500 million to $600 million for the year, with over $100 million repaid in Q2.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue before fuel surcharge increased by 27% year-over-year to $1.96 billion.
- Operating income rose to $208 million from $192 million in the same quarter last year.
- Adjusted net income grew to $146 million from $139 million a year earlier.
- Free cash flow generation improved to $151 million from $138 million.
- The Daseke acquisition added $329 million to revenue and $23 million to operating income.
Negative Points
- Operating margin decreased to 10.6% from 12.4% year-over-year.
- The freight environment remains very challenging, with no significant improvement expected in the near term.
- US LTL operating ratio remains high at 90.8%, indicating inefficiencies.
- Canadian LTL saw a decline in weight per shipment and revenue per shipment by 4.5% and 1.2%, respectively.
- A nonrecurring restructuring charge of $20 million related to the Daseke acquisition impacted consolidated results.
Q & A Highlights
Q: We've heard from some of your US trucking peers that they're seeing better seasonality in 2Q, some signs of project business and some tightening in the market. Are you getting any more optimistic by the cycle in the back half? Or do you think it's still too early?
A: It's too early. The market is still very difficult. We haven't changed our guidance and expect Q3 and Q4 to be challenging. Our focus remains on efficiency and cost management, especially with the Daseke integration.
Q: How are you seeing the environment in the LTL side? Do you think the market is tightening enough to support pricing to the cycle?
A: We need to reduce our costs to improve our operating ratio. The market is not strong, and our shipment count is steady but not growing. We need to focus on efficiency and cost reduction.
Q: Can you touch on your trends towards your target of US LTL 88% OR? Is that still an achievable target?
A: No, achieving 88% OR for the year is impossible. Our focus is on breaking the 90% OR in Q3 and Q4 through cost reduction, as shipment counts are not growing as expected.
Q: Do you see the market bottoming, and are you seeing any impact from shipper diversions due to the Canadian rail strike?
A: The market is likely bottoming, but we don't see major improvements in 2024. The potential rail strike is a concern, but we have plans in place to mitigate its impact.
Q: What's the mandate for salespeople in US LTL right now?
A: The focus is on increasing weight per shipment, picking up more shipments per stop, selling our GFP solution, and growing business around terminals to reduce P&D miles. We are also improving linehaul service by reducing reliance on rail.
Q: Are you seeing any pressure developing on price in US LTL?
A: There could be pressure on rates due to added capacity by some players, but we are focusing on reducing costs to remain competitive.
Q: Can you elaborate on your plans for M&A in the LTL sector?
A: We aim to become a larger player in the US LTL market. By the end of 2025, we plan to be well-positioned for significant M&A activity, potentially in the $2 billion to $3 billion range.
Q: Can you provide more details on the Daseke integration and its impact on OR?
A: Daseke's Q2 OR is close to 90%. We are addressing underperforming units and improving efficiency. We expect to achieve a sub-90% OR within a year of acquisition.
Q: How do you perceive the potential divestiture of FedEx Freight?
A: If FedEx Freight spins off, it would be positive for the market and beneficial for us. We have a good relationship with them and see potential opportunities.
Q: Can you discuss the trends in your logistics segment?
A: Our last mile and equipment moving operations are performing well, while our brokerage operations are facing revenue challenges but maintaining profitability. Overall, we expect continued improvement in logistics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
