Proficient Auto Logistics, Inc. Common Stock Price & Performance (PAL)

Our 10 ks win file can also be found under the Investor Relations section of our website. During this call, we will be discussing certain forward looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release to describing factors that could cause actual results to differ from those expressed by the forward looking statements. Further information can be found in our SEC filings During this call, we may also refer to measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA.

Please refer to the portions of our earnings release to provide reference GAAP measures such as operating earnings and earnings before income taxes. Prepared [indiscernible] We will open the call to questions. During the Q and A, please limit yourself to 1 question plus 1 follow-up. You may get back into the queue if you have additional questions. Now, I would like to introduce Rick O'Dell, who will provide the company update. Thank you, Brad, and good afternoon, everyone. I'll start out with an overview of our operations during the and some trends that provide insight into our The macro auto industry environment in was largely a continuation of the weakness we described in the Oct. 0 unit volumes were relatively strong, up approximately 6% versus the same month in 2023. But by the pace of volume slowed. Ending down 4% for the quarter versus the As in the the larger issue was unit prices at Slack transportation capacity and relatively high dealer inventory resulted in ongoing limited spot opportunities. Persistent downward pressure on spot pricing when opportunities present and a weak demand for dedicated fleet services. Our dedicated fleet service generated revenue of $370,000,0.0 during the compared to $1,420,000,0.0 in the Our revenue from spotbuy opportunities during the quarter comprised 5% of total revenue versus 14% a year ago.

The revenue per unit from Spot Buy fell by [indiscernible] was 16% in the compared to over 100% during the or this past year. While we believe this current spot market to be unusually weak we also do not expect to return to the levels a year ago as opposed to COVID through time period, it was marked by unique industry supply chain dislocation that drove transportation premiums well above a typical market. Seasonally adjusted annual sales rates or SAAR increased over the course of the to industry estimates for all three months above 16000000 units peaking at $1,680,000,0.0 in Dec. 0. The increased sales particularly in the second half of the quarter however came through a combination of reduction in dealer inventories, and new shipments into dealer lots. Average day sales in dealer inventory ended 2024 at approximately forty six days, down from fifty eight days at the November, and between sixty and ninety days throughout the While the lower level of year end inventory would be more promising for replenishment, demand with sustained sales momentum in Jan. 0 SAAR declined to 15600000.0 units Despite these various industry headwinds, Perficient achieved approximately 4% growth in both units delivered and total revenue during the versus the We also continue to strengthen the foundations that will set the stage for future growth and profitability at Perficient Proficient.

Improving adjusted operating ratio by 50 basis points during a period of persistent [indiscernible] There's recently been a significant amount of media attention regarding disruption in the auto hauling landscape and speculation about the impact to Perficient and others in our industry, as a matter of policy and to adhere to confidentiality around OEM carrier relationships Proficient will not comment about specific competitors or customers. That being said, the weak external environment has been challenging for [indiscernible] Reported closure of a top 5 carrier will reduce near term and likely has widespread impact in the industry. We remain confident that with our service capabilities and the related value proposition, we'll be able to do more for our OEM customers and expect to benefit over time through market share gains. Also, we should note that in addition to some of the recorded auto haul in the media, there are several OEMs in the midst of scheduled regional or national bid processes such that a meaningful amount of new vehicle volume transfer Proficient is positioning itself and competing for incremental market share that should be sustainable and accretive to our portfolio over the long term. With regard to major integration and strategic initiatives, we continue to progress nicely.

On the technology front, all of our operating companies are now using Magnus Technologies transportation management system The data captured in this common system is providing key insights into our customer base operational efficiency and profitability metrics. We continue to advance integration efforts to back office systems and tools including a common accounting platform, a cohesive HRS platform, and cost accounting methodology. For example, particularly in a weaker market through consistent though consistent with our strategic objective, we've prioritized company driver Proficient, and mix and have a pipeline of backhaul target proceeds identified and being worked in both new vehicle and the secondary market. To capture these opportunities. National procurement efforts continue with signed contracts being fully implemented and a broader set of smaller target areas identified to drive ongoing incremental cost savings. That said, we have some inflationary and structural headwinds to offset this [indiscernible] With items such as insurance costs and expanded coverage driving some unfavorable near term variance in that cost line. I'll now turn it back to Brad to cover some key financial highlights. Thank you, Rick. I'll start with a few summary statistics. All prior year compares are for the combined companies. Operating revenue of $9,510,000,0.0 in the quarter was up 4% from last quarter, but down 15.9% the prior year.

Units delivered of 521476 represents a 4% increase over the but a 4% decline from the Revenue per unit excluding fuel surcharge was approximately $169 unchanged from the but down approximately 14% from 197 in the Company deliveries were 37% of revenue in versus 39% in the Sub haul deliveries therefore were 63% of revenue in versus 61% in the prior quarter. The company had approximately $1,580,000,0.0 of cash and equivalents on December '31, 2024, Aggregate debt balances at quarter end were approximately $8,240,000,0.0 or net debt of $6,660,000,0.0 The increase in net debt from last quarter reflects our financing and fleet growth during quarter Total common shares outstanding ended the quarter at $27,000,000 which is unchanged from that disclosed in our Form 10 you. Looking ahead to the Jan. 0 was challenged by not only a weak STAR month, and the typical post year end seasonal and volume weakness, but also significant weather events in many areas of the country. Such as the Northeast, Mexico and Oklahoma, Texas and the Gulf Coast that shut down local operations for days at a time. Wildfires in Southern California also delayed loading and delivery intermittently over a period of a few weeks.

As a result, quarter to date unit volumes and revenue are lower by 17.5% versus the comparable period of last year. However, we expect to recover much of this short call through the end of the quarter based on visibility to the near term pipeline, such that full quarter revenue and profitability are likely to be similar Full year outlook for 2025 remains marked by some large uncertainties in the macro environment though we do expect sequential momentum as we move into and the second half of the year. With expectation of improved full year 2025 results over 2024. Operator, we'll now take questions. Our first question comes from the line of Bruce Chan with Stifel.

Your line is now open.

Good afternoon, Tim. This is Matt Myles calling for Bruce Ken, how are you? Good, Matt. Good, Matt. Excellent.

Just to start off, I know there's likely limited information that you'd like to share or can share at this time, but we're looking to get a better sense of the market share that might be a stake here. During the IPO roadshow you discussed with both you and Jack Cooper, had about low teens market share. However, it seems Jack Cooper might have north of $1,000,000,000 of top Is there any way without maybe going too deep to help us put a finer point on those numbers? At a minimum maybe from a volume or revenue perspective how much opportunity could be headed to the market? We really don't have visibility into their revenue levels.

So I don't know that we could be very helpful with that. We know fleet wise they have are larger than us.

So Okay. [indiscernible] Is that low teen market share figure something that you're comfortable communicating?

We don't have any updated view of the market relative to what we shared at the end of the roadshow. So that would be a reasonable estimate of our understanding at the time.

Fair enough. And then just on network density, how should we think about prioritization of volume and share here versus density? Is your approach going to be to take as much high quality share as possible and then sort of optimize density after the fact?

Or are we planning to take a more measured approach to what volumes that you guys take on board?

Yes, I can speak about a little bit. So So volume that fits our existing network, is very attractive to us and we're bidding on all of those opportunities. Adjacent volume that ties into an existing base of driver assets terminal is a good growth fit.

We are very calculating before we enter an entirely new market and for new drug traffic, we'd be looking for a concentrated sustainable level of volume to go into new markets and then we build around that both organically and through acquisition. So to answer your question, It's a bit of both, right? Driving density particularly with that call opportunity in the existing network. Is the most attractive price to us. Building in adjacent territories is also a pursuit that we have in mind and they're really not 1 or the other. We have the bandwidth or more thoughtful, I would say, around new market builds.

Super helpful. I will hop back in the queue. Thanks.

Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Your line is now open. Hey, good afternoon guys. Good afternoon, Tyler.

Hey, so obviously there's a lot going on, lots of dynamic things. I get you're not going to address it all head on. Let me come at it a little bit differently. If I looked at it in real time, are you guys seeing incremental spot opportunities in the market today? And is that spot market premium Firming up basically in real time, We are seeing what I would describe as episodic opportunities and not not pervasive spot opportunities in general.

Okay.

Okay. So episodic. Okay.

If I go back to Pro Fleet, so I think Pro Fleet is running at around $4,000,000 a quarter with [indiscernible] in revenue, number 1, is that basically at a minimum And 2, how would Profleet react in a capacity challenged market Could we see that number jump quite a bit if there's a lot of market disruption?

So to answer your first question, yes. What you're seeing is kind of at that minimum level and we guided last quarter that at minimum levels we see roughly $4,000,000 5,000,000 a quarter depending upon volume and like the fall where we have those drivers running If you had dislocation and higher demand for those services, you could see some increase there. But our conservative outlook continues to be that we're going to be at or near contracted minimum as we look to the near term.

Okay. So to be clear, that's kind of implied in the guidance? Yes. Okay. Rick, you mentioned that spot market premium I think was 16% of contract and that was versus say 100. Also said that 100% was effectively unusually high. So what would be kind of a normal we try to learn the auto hauling industry more, what would be kind of a normal spot Premium to contract.

So Tyler, I think we're also trying to learn what a normal automobile market looks [indiscernible] Patricia came into this at a time that was pretty atypical for the market. So to Rick's comment, the spot premium in the 2022, 2023 time period I think was elevated in a manner that we're not likely to see again in the current environment.

But we think we're on the low side of that continuum now. So what we think might be typical is a box premium that looks a little more like [indiscernible] 40%. And don't take any out exact numbers there. But directionally that would feel a little more like where capacity is in shorter supply.

Okay.

That's helpful.

Even just the range, very helpful. And then any just I know that you have this heavy subcontractor capacity pool, but how much slack capacity do you have in the company owned fleet? And maybe even to that, how much do you have? It's hard I know it would be harder to say in the subcontractor piece, but how much slack capacity do you feel like you have ready at Yes. So on the company fleet side of things, we're call that we invested roughly $30,000,000 of capital in new equipment through the So we have 1 of the newer fleets in the industry. Some of that was replenishment. A lot of that was investment for future growth. And those orders were placed in a market that was relatively stronger than the time at which those orders were delivered. So we do have open assets available We will be hiring to fulfill those assets and deploying those assets into markets where we see growth come online. We will continue to invest in truck capacity with growth. And have a capital plan to do so again this year.

That of course is commensurate with opportunity that we see and will we'll measure and balance accordingly. On the sub haul side of things, I would say there is a great deal of capacity available in the marketplace. We have 2500 sub haul carriers or more across our network that that are embedded by us, that are able to do work on behalf of our various operating companies. And as there is very little broker freight in the current environment, on work and and providing services. So I would say there's a lot of flat taxes currently.

Okay, lots of slack capacity.

So Brad, last 1. Just any thoughts on CapEx in 2025? And what would be a reasonable number for 2024?

Actually? So Amy alluded to that somewhat. I mean, I think we from the time of the IPO through the end of the year, Tyler, we probably had right around just over $30,000,000 of fleet CapEx. And we're expecting for the current year to be in the $25,000,000 to $35,000,000 range as well. And that just and that will evolve as we see opportunities, but that's our expectation.

Okay. Perfect.

Excellent. Thank you for the time. Thanks, Tyler.

Our next question comes from the line of Ryan Merkel with William Blair. Your line is now open.

Hey, everyone. Thanks for taking the question. I wanted to ask on a little bit more. I think you said kind of trending down or at least quarter dates trending down 17.5%. Then you said you thought you'd make up some of that shortfall and you had some visibility Could you just talk about what that visibility is and why you think you'll make it up?

Sure. This is Amy. So we get depending on the OEM and the mode by which the cars are positioned to us, We get visibility of anywhere from one to three weeks for example, import part on the water, we get some of longer visibility. So we do have an idea of what is coming in the New York Times pipeline as well as in the customer conversations. And And generally what we're hearing is a cautious outlook but some reassurance that volume should continue or should begin to ramp up here particularly as we move through March 0 and into April 0. So OEMs are at least guiding us that they think volume will earn up a bit more. March 0 into April 0 and then looking to the back half of year. So as we look at the we said to date near term pipeline in the locations where we participate we expect to see some stronger volume coming.

Got it. Okay.

And then just a clarification, I think you said, you think will look like So should that we take that to mean revenue and EBITDA will look like Revenue and OR, I would say, yes. Okay.

And then then I know you're not giving official guidance here, but should we just assume that the spot business and the premium of spot over contracts, we assume that really doesn't change for the next couple of quarters? Any reason that it would improve There are reasons that it could improve, but I think you're on the right track there. We don't have a crystal baller here and we are coming into the practice of reporting both the portion of our SaaS portfolio and what we are seeing in price premium there. So So sequentially, I think we will be able to give you additional information as as the market for 2025 becomes clearer. But conservatively, I would say it as you suggested.

Okay. And then I would add to that just that we're not anticipating current market dynamics, I said there's probably more opportunity for dislocations where people are taking on new business and they may struggle with that and some of that may come back to the spot market. Yes, that makes sense, Rick.

Okay.

Last 1 for me.

You mentioned the press release strength of our balance sheet will be a differentiating factor in the marketplace. Can you just talk about does 2025 feel like there's a lot of new business to win just broadly? How are you thinking about that? And am I thinking about that the right way, just given the challenges that the industry is facing and you're probably in a pretty good position relative?

Yes, I would think about it in 2 ways. 1 is over the last couple of quarters, we've shared with you our figures on net new contract wins. And asked us to give an update there since the last earnings call we have had 3 net new contract wins. 2 of which are larger than average size. But the point on bringing that up is each quarter we have had net new contract wins but we have been in a weak market. If the market starts to improve, the benefit of those market share gains should become more visible in our results. And we've talked quite a bit, particularly in the last quarter of call, Contract business is stable profitable business for us. And we want to partner with customers in a way where we show up for them after day with a high service level and work complex with their needs and its volatility. So we want to win in the contract space.

We want to participate in the spot market when opportunities present and with capacity up against it. But our main focus is sustainable, free to market share growth in the context of The other way I would think about that, your question is Rick mentioned in his opening comments, there are several open bids that are material in scale. A handful or so of OEMs have done either I would describe as super regional bid or national bid. That become effective anywhere from to as late as But we have We have gone and positioned ourselves to gain incremental business with those key customers with the strength of our solar network and the offering. And we feel pretty good about how we are positioned to grow coming out of those bids. So as we look at market share through the year, as those are disposition and those new contract terms take effect, we would look to some additional opportunity in the back part of the year from that. Got it.

Very helpful. Thank you.

Pass it on.

Thank you. Our next question comes from the line of Alex Paris with Barrington Research.

Hi, guys. Thanks for fitting me in and taking my questions. Rick, I want to come at that big question another way.

Given your experience in the LTL space, And I'm wondering if you could maybe create a parallel and even a timeline? What should we expect first? I would think if the number two player in the auto hauling business exits the business, that volume needs to find a new way to the dealerships. So does it start with brokers Does it include bids? Whatever parallel you can make to the LTL business, if there is a parallel to make, would be helpful, I think. Yes. I think, if you look at the cycle and how customers would generally react to situation like that is they may have a backup contracted carrier and that business would potentially move to that backup carrier. Right out the gate and then they would probably put it out to bid over a period of time. So there's probably there's some immediate impact depending on how your position with the OEMs with pricing in place. [indiscernible] This business is a little different than LTL where you may have business that's under contract, but you're not getting any shipments, and then they can just begin shipping with you This business is a little different than that just because we don't have as it's not as much of a network capacity business where you could just pick up more business that you have to have.

The [indiscernible] and the driver in the right location to be able to service the requirements. So our solution to that obviously is to near term would be to source with subcontractor capacity and then optimize with in source your own drivers there over some period of time. And we're positioned to react to that those opportunities quickly. And then as you probably would expect, as the industry goes through a transition of the incremental business, Some carriers handle it better than others. A lot of times the customers again will try to re optimize over a period of time. So I would imagine there's kind of a two leg impact to to the closure would be some immediate sourcing of the business and then there's probably going to be a second round of opportunities coming at us Has Proficient any impact from that first round yet?

We are seeing some impact The other thing I would share, Alex, is from our conversations with the OEMs, this situation is is broader than just the transportation of the cars. It really is a risk management exercise the OEMs from their production to the dealer supply chain. So both of them upstream They are looking to be sure they don't see can't shut down as a result of disruption in transportation carriers. And so there's a puzzle with a lot of pieces here that our customers are trying to solve. And some of those things have to be solved in multiple sequences and rounds. And to Rick's point, I think that will some sense play out over time.

I would just comment there is some near nearly immediate short term impacts that we feel will offset some of the current market weakness that we're experiencing and that would that would be indicative of a recovery of volumes particularly in March from the softness that we've seen year to date So is that part of that that Q1 forecast? Is there some sort of assumption for some volume pick up from that event?

Yes, it is.

Got you. And then as you both said, then there's that second opportunity once they go through the risk management exercise to take on more volume down the road.

Right.

And is there any reason that Perficient shouldn't get its fair share of this incremental volume that's coming on to the market for the other players, these market share opportunities?

The only caveat I would I would place on that is geographic. Again, the earlier comments of where our network is strong and where we have existing density, There has not necessarily been a high overlap With certain competitors, [indiscernible] bet there's a component there, but all else equal, Precision is well positioned to participate in in sort of reallocation amongst industry players should that occur.

Got you. That's helpful.

Our next question is a follow-up from Bruce Chan with Stifel. Your line is now open. Great. Thanks for allowing us to follow-up here.

Just curious to hear about how you're thinking about M and A Is there an appetite for it from your side?

Especially with your needed capacity requirements Does the M and A market potentially get more competitive from here? Any color around that would be great.

Yes, I guess what I would tell you is, I mean, we have a pipeline of opportunities that will be a nice fit for us providing synergies and adjacent geographical capacity I would say we're obviously managing that or balancing that against other priorities and opportunities that we have. But I would say we're still active in the marketplace and we would probably expect one to two smaller acquisition to occur this year.

Great. Great color. Thank you.

Thank you. And I'm currently showing no further questions at at this time. I'd like to hand the call back over to Rick O'Dell for closing remarks. All right. Well, thank you so much for your interest in Perficient Auto Logistics.

We're very excited about the opportunities in the marketplace and confident in our execution capabilities.

This concludes today's conference call.

You for your participation. You may now disconnect. [indiscernible]