Universal Logistics Holdings, Inc. Price & Performance (ULH)

Thank you, Andrew, and good morning, and thank you for joining Universal's first quarter twenty twenty five earnings call. As we kick off the New Year, we do so with an understanding of the challenges facing the broader transportation and logistics landscape. The overall freight environment remains sluggish and our largest vertical automotive saw a slowdown in in January. But improved as the quarter progressed. While the results of this quarter were below our historical benchmarks, we remain confident in the resilience of our business model and the long term strategic direction of the company. Before I begin, I want to recognize the incredible commitment of more than 10,000 employees and contractors. Their hard work in the face of poor weather, and market volatility continues to be the backbone of our operations and a key reason why we are well positioned for future growth. Let's get into the results. Universal reported $382,400,000 in total operating revenue for the first quarter of twenty twenty five. Net income was $6,000,000 or $0.23 per share and operating margin for the quarter came in at 4.1%. While this represents a year over year decline, it is important to note that the year ago quarter included our now completed development project in Tennessee.

Adjusting for that, our core performance remains stable, with encouraging progress in several key areas. Our Contract Logistics segment continues to be a critical part of our business, contributing 255,900,000.0 in revenue and delivering a solid 9.3% operating margin despite the absence of last year's 95,300,000.0 specialty project revenue. We are on track to book over 1,100,000,000.0 in contract logistics revenue in 2025. Additionally, we continue to integrate and optimize our Parsec acquisition. Which contributed $56,400,000 revenue this quarter. We now operate 87 value added programs including 20 rail terminal operations. A significant increase from the 70 RUM programs at this same time last year. As mentioned, auto production production influenced volumes early in the quarter. But activity picked up in February and then surged through March. We remain encouraged by the long term opportunities in this segment, particularly as we leverage our expanded footprint and deepen relationships with legacy and new customers. We have three key launches that will begin in the second quarter. These launches will increase our contract logistics annual revenue by $50,000,000 per year at historic margins. Contract logistics continues to drive Universal forward with massive customer interest in our customized solutions led by our world class service.

Turning to trucking, revenues came in at 55,600,000.0 down 20.2% from the prior year largely due to a 31.3% drop in volumes. However, revenue per load excluding fuel surcharges increased by more than 24%. A sign that our strategy of emphasizing specialized high yield freight is gaining traction. Operating income in the trucking was 2,200,000.0 with a 3.9% margin. We continue to see strong demand in our specialized heavy haul wind operation which remains strategic differentiator and a stabilizing force for the segment. Looking ahead, we expect this business to be a key contributor in 2025 especially as renewable energy infrastructure projects continue to move forward. Our intermodal segment remains a work in progress. Revenues decreased to 70,700,000.0 and we reported an operating loss of $10,700,000 The segment was negatively impacted by both a 3.4% drop in volumes and an 8.7% decline in rate per load excluding fuel. Additionally, the quarter included a 1,000,000 in charges related to an employment related matter. While these results are disappointing, we believe we've hit bottom in this segment. Our new intermodal sales team is gaining track and we've seen stable freight volumes. We remain committed to transforming this business into a leaner, more efficient contributor to the Universal portfolio.

Across the board, we are taking strategic actions to improve underperforming operations while remaining disciplined in our growth. Our sales pipeline remains strong and we continue to pursue new opportunities in areas where we can create long term value and achieve sustainable margins. In closing, while Q1 was clearly a challenging quarter, we are not standing still. We are focused, we are making necessary adjustments, And we believe the second half of twenty twenty five will look markedly different. Our team is committed to ever delivering for our customers our employees, and our shareholders. Finally, we are closely monitoring the impact of tariffs on our business. We are in constant communication with our customers ensuring we are ready to adapt and implement any changes that require to keep the assembly lines that we support producing. Thus far, we'll see a number of benefits to our Contract Logistics segment. As two assembly plants that we service will increase production. Although there is plenty of uncertainty with the potential outcome on tariffs, we are also looking for opportunities in this fluid environment. We are actively engaging the customers regarding our manufacturing capabilities in Louisville, Kentucky offering storage solutions at our intermodal depots that are within close proximity to several ports and inland rail.

As well as offering excess warehouse and assembly capacity to both our existing and prospective customers in strategic locations throughout our network. We are consulting with our customers to assist with their contingency planning efforts to mitigate the effects of tariffs. As well as assist in any near or reshoring planning they're engaged in. We'll have additional updates on our Q2 call. Once again, I want to thank all of our employees for their continued hard work and dedication and to customers and to our customers, thank you for your continued trust in the Universal. I'll now turn the call over to Jude for more color on our financials and expectations for the remainder of the year. Jude? Thanks Tim. Good morning everyone. Yesterday Universal Logistics Holdings reported consolidated net income of $6,000,000 or $0.23 per share on total operating revenues of $382,400,000 in the first quarter of twenty twenty five. This compares to net income of $52,500,000 or $1.99 per share on total operating revenues of $491,900,000 during the same period last year. Consolidated income from operations was $15,700,000 for the quarter compared to $75,100,000 one year earlier. EBITDA decreased 45,200,000.0 to 51,700,000.0. Which compares to $96,900,000 during the same period last year.

Our operating margin and EBITDA margin for the first quarter of twenty twenty five, are 4.113.5% of total operating revenues.

These metrics compare to 15.319.7%, respectively, the first quarter of twenty twenty four.

Looking at our segment performance for the first quarter of twenty twenty five, in our Contract Logistics segment, which includes our value add and dedicated businesses, income from operations decreased $57,600,000 to 23,900,000.0 on $255,900,000 of total operating revenues. This compares to operating income of 81,500,000.0 on $313,500,000 of total operating revenue in the first quarter of twenty twenty four. For comparison purposes, in the first quarter of twenty twenty five, included $56,400,000 of revenue attributable to our recent acquisition of Parsec, while the first quarter of twenty twenty four included $95,300,000 of revenue attributable to our Specialty Development Program, which as mentioned was completed in 2024. Operating margins for the quarter were 9.3% of total operating revenues, compared to twenty six percent one year earlier. Overall, the decline in operating margin for our Contract Logistics segment attributable to sub seasonal start to the year in auto production volumes, the completion of the previously mentioned Specialty Development Program, and the impact of both the intangibles and accelerated depreciation on equipment related to the Parsec acquisition. Onto our intermodal segment, operating revenues decreased $7,700,000 to 70,700,000.0 compared to $78,400,000 in the same period last year. And income from operations decreased 2,400,000.0 to an operating loss of $10,700,000 This compares to an operating loss of $8,300,000 in the first quarter of twenty twenty four.

Operating ratios for the quarter were 115.1%, versus 110.6% last year. In our Trucking segment, operating revenues for the quarter decreased $14,100,000 to $55,600,000 compared to $69,700,000 in the same quarter last year, and income from operations decreased $1,500,000 to 2,200,000.0 This compares to $3,700,000 in the first quarter of twenty twenty four. Operating margins for the quarter were 3.9% versus 5.3% last year. On our balance sheet, we held cash and cash equivalents totaling $20,600,000 and $12,000,000 of marketable securities. Outstanding interest bearing debt, net of 3,300,000.0 of debt issuance costs, totaled $736,700,000 at the end of the period And excluding lease liabilities related to ASC eight forty two, our net interest bearing debt to reported TTM EBITDA was 2.6 times. Capital expenditures for the quarter were 52,600,000.0 Excluding any impact of tariffs, for the second quarter of twenty twenty five, we are expecting top line revenues between $390,000,000 and $410,000,000 and operating margins between 57%. And EBITDA margins in the 14% to 16% range. For the full year, we are expecting capital expenditures for equipment to be in the 100,000,000 to $125,000,000 range and real estate between 55,000,000 and $65,000,000 Interest rate is expected to come in between 48,000,000 and 51,000,000 Finally, Wednesday our Board of Directors declared Universal's $0.01 $05 per share regular quarterly dividend.

This quarter's dividend is payable to shareholders of record at the close of business on June 2 and is expected to be paid on 07/01/2025. With that, Andrew, we're ready to take some questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, Your first question is from Bruce Chan from Stifel. Please go ahead.

Hi, good morning everyone. This is Andrew Cox on for Bruce.

Hey, Andrew.

Hey there. Hey, guys. I just wanted to kinda get a sense of how auto OEMs were trending month to date and how, you know, how the conversations with auto OEMs are going for their expectations for the rest of the year? I mean, know you guys said that saw some progression as the quarter went on and saw some improvement into March. I mean, we've all seen the SAAR data for March. Does seem like there was a pull forward there. So I'm just kind trying to understand how volumes and expectations are trending since then and things may have changed for the rest of the year. Thank you.

Yes, for sure Andrew. I'll talk about the progression in the quarter and then Tim will get to the outlook. So as we kind of mentioned in the comments, we really had a slow start to the year. And although we normally don't provide intra quarter analysis, I think it's worth mentioning it this quarter just because of how dramatic it was. So in January of this year, Universal experienced its first loss ever in January. So we went into February $0.5 in the hole, losing $05 of EPS per share, then the quarter slowly got better. We went from negative $0.5 a share in January to positive $09 a share in February. And then $0.19 a share in March. So the quarter really started out low, and the business really rebounded well. So for example, our cross stock tonnage in February was up 30% from January and then March's cross dock tonnage was up 64%. From January's levels.

Auto production was up 29% in February from January and then up 67.1% in March from January. And then lifts at our Parsec business up 24.2% from February then 43.5% from January, And we also saw some nice trends as well in our intermodal business where intermodal volumes were up 13% in February from January's numbers and then 53% from January or from March to January. So there was a lot of really great improvement as the quarter progressed, and you know if we just would have had an environment in January that was similar to February, the results would have looked a lot different. We would have definitely been within our guidance range of around $400,000,000 of revenue EPS of around 41,000,000 and well within our 14,000,000 to 16% guide on EBITDA. So a real rough to the start of the year, but the numbers that I just showed really showed the rebound in auto and of course then how our earnings were really driven by that additional volume coming into our facilities, which show the operating leverage that we have in the business. You want to go through the outlook, Tim? Yes.

And then I would extend from March on what Jude was speaking about. We've had some really good collaborative conversations with various OEMs that we serve While there is some uncertainty on sourcing of parts, has been no alarms that have been sounded on direction. In fact, we feel that our footprint within The U. S. Gives us a definite advantage on servicing some of the high production plants that the autos have. So we feel good and I think we've mentioned that in our prepared remarks that at least two of the facilities we service in The United States they're looking at ramped up production. Line speed, some facilities looking at extending from five to six days and then various things that we see over that quarter coming up and onward nothing that alarms us from a production standpoint. So I think I also mentioned in the prepared remarks, we're ready willing and able to provide other logistics solutions within The United States as well as, you know, we're in close proximity to most of these plants. So we feel comfortable that whatever their strategies are and how they realign their supply chain, we'll be there to help them consult and hopefully optimize their network.

One more final comment, dovetailing up of Tim's comments, Andrew, is that the automotive companies have really done a nice job to unwinding those large inventories that we saw in the middle of last year. So towards the end of Q4, some of the industry racks were printing, there was about 3,000,000 to 3,100,000. Units on the ground in late Q4, early Q1. Well, numbers are now down to 2,600,000. So basically, they've unwound 500,000 units net in q one, which is a reduction of, like, 16%. If you also look at the new day supply of inventory, in June of last year, that number was averaging one hundred and sixteen days that number is now seventy days. So once again, a reduction of 40%. So if tariffs don't kill the entire industry, we're really set up in the back half for some decent production numbers, which will really drive our results.

That's really good to hear. That corroborates some of the commentary we've heard where shippers at this point seem to be a little bit more afraid of rising costs than the potential for demand destruction at this point. So that's good to hear. On that front, talking about inventories maybe on a more broader sense in some of the other verticals that you serve, are you seeing a kind of wait and see approach taking hold here? I mean, there kind of to be the consensus we see forming just until we get a little bit more clarity on the tariff policy. What are you guys seeing there?

I would agree with that. We're seeing in customer communication a wait and see approach Some customers have potentially more can be more affected by the tariff than others. And they're strategizing as they went through the quarter and go into this quarter what do, where they source from. Once again, as we get in some of our other segments other than just four walls of value added, we're pretty well positioned in port and rail cities that we can offer storage we can offer metering out of our various yards and locations. So, if it is determined that they're going to pull some stuff forward, we're able help with storage solutions and metering solutions. But at this point, we have had nobody make definitive this is how we see quarter two, three, four looking. So we're kind of we're kind of aligning with you on what you're hearing from the rest.

Okay. And on the on those facilities you're speaking of where you can do some metering and some warehousing around the ports, can you remind us of the kind of geographical dispersion of those? Are you guys more West or East Coast based? Where is the dispersion there?

Well, nationally, so when it comes port alignment, in LA, Long Beach, the Inland Empire, Oakland, Inland and Stockton, Seattle and Portland, and then we got the ports on the East Coast all the way from Jersey all the way down to Jacksonville. And then if you look at the infrastructure of the rail network, we're placed in all major rail network in cities such as Chicago, Dallas, We do have a presence I mentioned on ports, we also service the Port Houston. So we're pretty well connected. I also feel really good about our potential in Atlanta. I don't think we'll miss anything on the intermodal front. I think we're positioned well And in our warehouses, in our LOCs around the country are positioned close to manufacturing. So, if you can think of major manufacturing around the country, there's a good chance we have one of our facilities there. And as a follow-up, what know, what kind of scenarios are you guys contemplating for the potential for imports to fall off kind of abruptly here beginning, it seems like May. Are the kind of scenario analysis you guys are going through there?

Yeah, I mean, we're kind of just kind of dovetailing off of some of the comments that were brought out by the National Retail Federation with the report they came out a couple of days ago or maybe late last week. They were kind of looking for about a 15% reduction in import. That should start hitting mid to late May. So we're just kind of looking at that, our intermodal business and kind of dovetailing off of what's been out there. But other than that, there's not a whole lot to report.

Okay, understood. And I guess that got one last one here on the flatbed market. We've seen some broad signs of strengthening that's been relatively stronger than the rest of the trucking modes year to date, but we have seen a little bit of rollover. It seems like there was some, maybe some pull forward in certain input materials and raw materials and certain places of the country. I just kind of wanted to see how the broader tightening of the flatbed market has impacted, you know, particularly your heavy haul business or any of your flatbed offerings. If you, you know, seen, some episodic tightening in places that have helped rates or is this really just driven by a continued expansion into the heavy haul business? Thank you.

Yes, would like on the heavy haul wind business we have seen an expansion of that, that really influences our open deck division. If you want to consider the differential between heavy haul specialized which we break off into a separate unit, open deck division is [indiscernible] I would say pretty consistent. We've seen a little bit of lift as the quarter progressed, but nothing that I would call outstanding that we could sit here on this call and tell you about So I think things are pretty status quo. Pricing has remained relatively stable. But there's been no great upward lift at this point in flatbed transportation.

Okay.

Thank you all so much for the time.

Thank you. Thank you.

Ladies and gentlemen, as a reminder, should you have any questions, please press the star key followed by the number one. There are no further questions at this time. Please proceed with closing remarks.

Thank you, Andrew. Universal will remain disciplined with our cost control initiatives. While focusing our sales efforts on new and existing customers. Helping them shape their supply chain by providing a customer centric approach to accuracy velocity, and visibility. While we realize the transportation and logistics landscape remains uncertain, we remain focused on the opportunities this will present. Thank you for joining today's call. We look forward to continued conversation next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.