Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential improvement in earnings and margins across Truckload, Intermodal, and Logistics segments.
- Received five customer recognition awards, including Carrier of the Year and partnership and sustainability.
- Double-digit volume growth in Mexico cross-border operations.
- Improved efficiency in Intermodal segment, reducing friction costs and increasing productivity.
- Strong balance sheet with net debt leverage at 0.3 times and continued share repurchase program.
Negative Points
- Adjusted income from operations decreased to $52 million from $107 million year-over-year.
- Adjusted diluted earnings per share dropped to $0.21 from $0.45 in the prior year.
- Intermodal revenues decreased by 3% compared to last year due to lower revenue per order.
- Logistics revenues fell by 7% year-over-year, driven by lower brokerage revenue per order and volumes.
- Lower-than-expected contract price increases and volume impacts have shifted the timing of earnings improvement.
Q & A Highlights
Q: Over the last week, we've heard a lot of different accounts for pricing in the truckload market and how that's trending? Could you talk about what you're seeing in like market tightness into July? And how sustainable that is? And give any color around the pricing backdrop that you're expecting for the back half in guidance?
A: Yes. I'll try to unpack that a little bit. And I think your question was more on the truckload side of the house network specifically. As we mentioned in our opening Dan, we had modest improvement in contract pricing, which is our second consecutive quarter, but less so than we had initially anticipated as we expected the market to continue to tighten, which we're seeing, particularly as we're seeing with spot pricing now for I think the first time in two years exceed our spot -- our contract pricing in June and also a very solid performance again in the month of July. So again, too early to call an inflection, but those are encouraging signs. We have about a quarter of our allocation season left on both our Intermodal and truck network business, so we'll continue to lean into that, in quarters three and four. And we also have other levers that we are mindful of what's available relative to project work, out of spot price play, we're seeing an increased level of mini bids. So there's a series of activities that we think we can continue to adjust and improve the mix of freight across our network businesses in the second half, which is really what's embedded into our guidance.
Q: And on the Intermodal side, how has the pricing backdrop change there? Are you seeing any competitive backdrop stabilized? And you mentioned seeing the freight like, as you just mentioned, the freight market is tightening. How do you expect that to flow through to the Intermodal backdrop going forward as we've seen for volumes pick up and a lot of positive data points on that side of the business?
A: Yes, Dan, this is Jim. You have a lot of questions there. I'll try to answer this. First is we look at that market I think the area to really focus in on is the dray capacity. And as Mark was talking about earlier, is that we've really focused on improving our efficiency there. We've taken out 10% of our trucks with more volume, so we've become more efficient. That really is the most critical asset in that business segment, still have that opportunity to be able to flex up to meet customers' demand, but that's generally going to be with third parties that come at a premium price to be able to surge up and that's something that will be required to get from the market. So that's where I really see the opportunity that we'll see pricing move there. We have seen demand increase. Last quarter, we talked about IPI, the growth there hadn't really transferred over to the domestic side. That started to change late in the second quarter, and we started to see more transport activity, and that's continuing through July.
Q: Maybe if I could just touch on dedicated here. You said some nice truck additions so far. If you could maybe walk us through the outlook for fleet capacity in the back half and maybe more broadly, what the implications are there for the pipeline and how that's shaping up? And then just any updates on the competitive environment there in the dedicated market.
A: Yes. This is Jim. Thanks for the question. And we look at our growth here in Dedicated, I think we've held up very well. And a big part of that is just our customer diversity. We've been working on that for a number of years. No customer portfolio represents more than 5% for enterprise revenue. And we've just been really purposeful and remaining balanced around the verticals that we want to participate in. Mark also talked about some of the efficiency gains that we've had in our dedicated business. We still believe that we are going to have a couple of hundred of trucks of growth this year. Now some of our fourth quarter startups might get pushed into next year, but it's really a matter of timing there that the new customer acquisitions are still on the same pace. Our pipeline remains strong. I still see a lot of opportunities to grow that.
Q: Wanted to see if you could offer some thoughts on how we should model or how we should think about revenue per load in intermodal in 3Q and then revenue per truck per week in network in 3Q relative to 2Q, is there some impact from contract rates lower that caused sequential pressure? Or did you hit the trough in 2Q when it's stable sequentially?
A: Yes, Tom, it's Mark. I'll open it and Jim has anything to add. I'll let him do so. Certainly, the stabilization of intermodal, we haven't seen as of yet, material changes to contract rates. We've changed our mix. You'll see that in our results. We've been more efficient, healing the network, less of the friction cost that impact our profitability. Our commercial teams and our operations team has done a really nice job of executing, particularly our trade drivers. So that's where we've seen the lift. I think contract pricing is more in front of us. There's generally a bit of a lag to truck on that. So we don't obviously guide specific metrics to quarter. So that's kind of really was a setup for the first or the second quarter. We continue to lean in and are encouraged maybe, Jim, with some of the discussions we're planning for the second half of the year with customers that may be a little different than we experienced the last couple.
Q: Just a couple of follow-ups here. One is, just on the point of you've shifted your timing and the expectation of the inflection in the cycle. Can you just confirm from when to when kind of it is something that's moved to like 1Q '25, 2Q '25, kind of when do you think that happens now? And second, just historically, you guys have given us some pretty good color on peak season, how that's shaping up. Any sense of what this year would effect?
A: Ravi, you had a hard time maybe catching all of that first one. I think maybe you were looking for a declaration of when the inflection might occur. We're not declaring that at this juncture, probably a little bit early for us to be projecting out to 2025. So I'll stay away from a prediction there. It's been incredibly difficult to do through this most recent cycle. So we'll stand down on that one. As it relates to color towards peak, this is the season that we're in the early stages of working with customers and trying to understand and how they're seeing the world, I think we do believe that customers, in general, will need to have volume for their sales. They've been very successful at price over the last couple of years, but I think volume will come back as -- and increasingly a lever, and we have a bit more discussions this year, Jim, maybe just some context of how that plays out by our most recent discussions.
Q:
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
