Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Universal Logistics Holdings Inc (ULH, Financial) reported a 12% increase in top-line revenue for Q2 2024.
- Earnings per share increased by 30% compared to the same period last year.
- The contract logistics segment saw a 26.2% increase in revenues, driven by a specialty development program.
- The trucking segment performed well, with a 12.6% increase in revenues, bolstered by the specialized, heavy-haul wind business.
- The company has a robust sales pipeline, with value-added and dedicated opportunities alone accounting for nearly $750 million.
Negative Points
- The intermodal segment faced significant headwinds, with revenues decreasing by 14.8% and an operating loss of $8.3 million.
- The company-managed brokerage segment underperformed, with revenues decreasing by 4.9% and an operating loss of $2.2 million.
- Depreciation expense increased by $11.3 million due to revisions in the useful lives and salvage values of certain equipment.
- Flatbed volumes in the trucking segment were down, and the expected increase in rates did not materialize.
- The broader truckload market remains soft, with overcapacity putting pressure on pricing and gross margins.
Q & A Highlights
Q: You showed some really nice growth in the contract logistics division even if you strip out the special project business. But it does look like programs are down from 71 quarter-over-quarter to 68. Is there anything to read from that or was that just kind of the normal cadence of contracts rolling off?
A: No. That's just the normal cadence of contracts rolling off. In this particular situation, we had some end-of-life agreements that were moved out, and we continue to move new opportunities in to replace those. And as the pipeline continues to fill, we have the hope and the opportunity that we'll continue to build on the 68 that we exited on Q2 with. (Tim Phillips, CEO)
Q: Given the softer backdrop, do you expect any changes in the rate of conversion of the pipeline or any elongation in the sales cycle, or are customers still making decisions as normal?
A: So far, customers are making decisions as normal. If I debundle the transportation from the four-walls type of activity in the contract logistics, there's been more pressure put on the transportation sector as we look to advance in new bids or even renew bids. We are cautiously optimistic as we work our way through that. (Tim Phillips, CEO)
Q: You talked about residual values on used trucks falling and that was a big factor in the depreciation revision. Does that raise any concerns about what Class 8 activity might look like as we move into 2025 and beyond?
A: All companies in the space just have to be really smarter about what these residual values are going to be in a post-COVID environment. There seems to be a glut of trucks on the market. We really haven't seen a decline in prices of the Class 8 trucks though, which would be a great indication for us that the OEMs are recognizing some form of oversupply. (Jude Beres, CFO)
Q: We've seen some good inbound volumes to the West Coast ports. Can you walk us through the disparity between those numbers and what you're seeing in terms of load volumes?
A: The inbound into the West Coast is up. We have not experienced that type of double-digit uptick from the customer base we are moving freight for right now in the West Coast. However, we have seen some uptick in the inbound coming off the West Coast into Chicago. (Tim Phillips, CEO)
Q: You mentioned trucking and the increases in revenue and revenue per load attributed to the specialized, heavy haul. You said that you were expecting that to be a secular headwind in subsequent years. Can you clarify?
A: That should be a good tailwind for us. (Tim Phillips, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
