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spk00: Good day, and thank you for standing by. Welcome to the Proficient Auto Logistics First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Wright, Chief Financial Officer. Please go ahead.
spk03: Thank you, Shannon, and good morning, everybody. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thank you for joining us on Proficient's first quarter 2024 earnings call. As you probably know, on May 13, 2024, we completed our initial public offering and the combination of our five founding companies. Under SEC rules, we are required to file first quarter financial statements for Proficient Auto Logistics, the designated accounting acquirer of each of the founding companies, and Proficient Auto Transport, the designated accounting predecessor to the company. These financial statements will be filed on a Form 10-Q later this week. We are not required to provide, and the Form 10-Q will not contain pro forma financial data for the first quarter. However, our earnings release provided summary, unaudited, combined financial information for the first quarter for the five founding companies. Our earnings release can be found under the investor relations section of our website at proficientautologistics.com. Our 10-Q, when filed, 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 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 be referring to EBITDA. Please refer to the portions of our earnings release that provide a reconciliation of EBITDA to gap measures such as earnings before income taxes or net income. Joining me on today's call are Rick Odell, Proficient's Chairman and Chief Executive Officer, and Randy Beggs, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the first quarter. After our prepared remarks, we'll open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may then get back into the queue if you have additional questions. Now, I would like to introduce Rick Odell, who will provide the company update. Rick?
spk04: Thank you, Brad, and good morning, everyone. The closing of our IPO and the founding company acquisitions on May 13th represented the culmination of significant efforts over the past year by everyone from the transaction organizers to the management teams of Proficient Auto Logistics and each of the five founding companies, our legal and investment banking teams, and of course the investors who did the analysis and showed their interest and confidence in our story to become the holders of equity in our new combined enterprise. While we were pleased with the accomplishment of completing those transactions, it merely marks the beginning of the real work in front of us to execute against the plan that we describe to investors in the lead up to our IPO. There are many initiatives requiring execution over the near to intermediate term, but we are particularly focused on five. Cost synergies. The enhanced national scale afforded by our combination provides leverage in our procurement efforts that is expected to reap immediate benefits in our operating ratio. Within 10 days of closing our transactions, We had implemented an improved fuel contract with a national provider. We expect the savings to equal or exceed $3 million on an annualized basis. Increased utilization. The reduction of empty miles across our network may well be the highest impact initiative on our operating ratios over time. To that end, we're currently in the process of implementing our common transportation management system at the fourth of our five founding companies. We expect all five companies to be active on this system during the third quarter. In the meantime, our management teams are evaluating high-volume lanes with typically empty backhauls and sharing loads to fill these miles as often as possible. This will be an ongoing effort and will become increasingly efficient as the TMS systems get integrated. Increasing company deliveries. Improving our operating ratio by shifting more units and revenue to company trucks versus sub haulers is an initiative that not only improves the profitability of existing lanes, but also provides more opportunities to increase our utilization efforts as described previously. We've developed a fleet plan for the remainder of 2024 that will result in an increase of approximately 10% in company owned assets. These new units will be put immediately to use covering newly contracted business and also to reduce the sub-haul activity in select lanes where we can improve our efficiency and profitability. Activity-based cost analysis. We have initiated implementation of a third-party software that is transportation-specific and provides profitability by customer, delivery, lane, and even down to the truck level. Full implementation will take six to nine months that will allow for much higher precision in our profit analysis and our contract bidding process. Used car and fleet marketing. Our marketing team is in place nationally and has begun building the relationships in each geographic market that will allow us to grow this largely untapped revenue potential. From an operating perspective, we've been in active communication with our OEM customers describing the impact of our recent combination on our ability to deliver increased geographic coverage and the availability of increased and enhanced service capability that the new structure provides. As we noted in our earnings release earlier this morning, we experienced reduced demand early in the first quarter. However, volumes began showing improvement around the middle of February and have continued to strengthen since then. In addition, our companies continue to add new contract business with nine net new contracts between the beginning of 2024 and the end of May. There were also 13 renewals of existing contracts during that time span. While our primary focus is the integration and growth of the founding companies, we also continue to see a number of interesting strategic opportunities, and in each case we'll evaluate their potential for accelerating the achievement of our coverage and profitability goals. We are encouraged about the prospects for continued growth over the coming months, and look forward to providing you with another update when we report the second quarter results. I will now turn it back to Brad to cover key financial highlights.
spk03: Thank you, Rick. I'll start by reiterating some of the highlights that we called out in the earnings press release earlier this morning. All financial references are for the combined founding companies. Operating income of $6.5 million in the first quarter was an increase of 7.9% over the same period in 2023. Operating ratio improved from 94.1% in the first quarter of 2023 to 93.2% in 2024. Income before taxes of $5.4 million in the first quarter was an increase of 12.1%. These profitability measures are up in spite of an approximately 5% decline in revenue before fuel surcharge. As we also noted, the lower customer demand during the first quarter felt disproportionately to the dedicated fleet business, which is geared for resolution of excess inventory hotspots. While that portion of our business represented approximately 15% of total revenue before fuel surcharge in 2023, It comprised approximately 7% of total revenue in the first quarter of this year. On a units delivered basis, the dedicated fleet business comprised 3.7% of total units in 2023 and 2.1% of all units delivered in 2024. The disparity in these two measures reflects the fact that this business is billed by the hour rather than by units. Removing the impact of the dedicated fleet business, total units delivered increased by 3.7% year over year. and revenue per unit delivered increased from $180 per unit to $184 per unit, or approximately 2%. As it relates to the balance sheet, on May 13th, we closed on the initial public offering of 14,333,333 shares of our common stock at $15 per share. On June 4, the company sold an additional 1,435,000 shares of our common stock through a partial exercise of the underwriter's green shoe option, also at a price of $15 per share. As we've previously disclosed, a significant portion of the IPO proceeds were used in the purchase of the five founding companies. Net of underwriter's fees and other transaction expenses and the cash portion of the combination purchase price The combined company had approximately $40 million of remaining cash and equivalents available for future operations and other strategic opportunities. Aggregate long-term debt, predominantly for the financing of revenue-generated equipment, totaled approximately $56 million following the combinations, for a net debt position of approximately $16 million. Total common shares outstanding are $26.1 million. Operator, we're now ready to take questions.
spk00: Thank you. As a reminder, to answer questions, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Bruce Chan with Stifel. Your line is now open.
spk01: Thank you, operator, and good morning, gentlemen. Great to get some confirmation here with these results that the predecessor business is in good shape. but obviously investors are going to be a little bit more focused on the post-deal results. And Rick, you already gave us some great color on that process so far, but it sounds like there may be a couple of, I'd say, new developments here, and I just want to make sure that I have those right. So first of all, you've got that fuel savings program and the $3 million in annual savings. I know you talked about that possibility around the IPO, but it was not in our model. Is it safe to say that those savings are now in the bag at this point?
spk04: Yes. Yeah, that's under contract, and it's progressing.
spk01: That's great to hear. And then it sounds like that activity-based cost analysis program may be a little bit faster to inure and maybe more meaningful than we'd initially thought. Is there a good way to think about how that benefits the model, whether it's on the pricing side or the cost side?
spk04: I think it's a little bit of both. The analytics are very good on the pricing side with the new system. And we're lacking a little bit of sophistication in some of the founding companies with our pricing analytics. So it'll be a really nice enhancement. And then furthermore, once you have profitability by lane, you know, then you can kind of target market and know what you're going after business that operates well.
spk01: Okay, great. That's good to hear. And then, you know, maybe just for my follow-up, and then I'll turn it over and get back to you. On the units delivered, you know, you had $460,000 in the first quarter. You know, Brad, maybe, you know, if you have a monthly ramp on that number, just given, you know, some of the disruption earlier in the quarter, And I know you're still dealing with some of that residual strike drag. And then, you know, when you think about that result, you know, how do those compare to your model? And just, you know, given some of the news around, you know, recent star numbers, how are you feeling about current volume trends?
spk04: Yeah, the trends in the second quarter today have been very positive. We're trending up about 10% quarter to date in the second quarter. which is obviously a big step up from the first quarter.
spk01: OK, perfect. That's good to hear. Appreciate it, and I'll hop back into here.
spk04: And I would just comment, too, on the volume side. I think it's encouraging to see we've actually signed nine new contracts since the combination was announced. So we'll continue to see. good reception from customers to the combined entity.
spk01: Okay, great. Appreciate that caller.
spk02: I'll let you know when I'm in the queue here.
spk00: Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touch-tone telephone. Our next question comes from the line of Ryan Merkle with William Blair. Your line is now open.
spk02: Hey, good morning, everyone. I just wanted to follow up on the quarter-to-date revenue up 10%. How did things look sort of February, March, April?
spk04: That was, just for clarity, that was units, not revenues.
spk02: Got it. Can you just talk about how the volumes improved since February and sort of where we're at, sort of May-June timeframe, if we've seen a lift?
spk03: Yeah. So, Ryan, this is Brad. So, and I think Bruce asked the question, too, in terms of January versus the remainder of the month. So, you know, in January, or I should say in let's just say in February versus January, we were up about 15% month over month, and then kind of maintained that same pace in March. As we get into April, much more strength, up probably, I think Rick mentioned 11%, and we've maintained that through the end of May. So really good strength. Once you get to basically mid-February, year-over-year increases have been in the low double digits.
spk02: Okay, got it. And then can we talk about price? I think it was 2% in the quarter. Should we expect that to be trending up through the rest of the year as some of the new contracts come on?
spk03: Yeah, well, you're going to see – you'll see it even in the second quarter that price is up, and that's not necessarily all, you know, new contract. It's some, you know, renewals, and I think Rick mentioned that we've got net new contracts that added to the business mix in the form of about nine net new. But, yes, you'll see the – the overall price and revenue numbers moving north, even in the second quarter. Got it. Great to hear.
spk04: I'll pass it on. Thanks. Thanks, Ryan.
spk00: Thank you. Our next question is a follow-up from Bruce Chan with Stifel. Your line is now open.
spk01: Yeah, appreciate the double dip here. Just, you know, maybe a follow-up on some of that line of questioning. Just want to know if there have been any customer concerns expressed, you know, post-deal as a result of the consolidation. You know, it sounds like from the nine new contracts and the 13 renewals that, you know, the answer is that, you know, it actually may have been a boon for you. But, you know, just want to hear if there's been any pushback on the combination here.
spk04: No, it's been well received by the customer base, sir. They like the commitment to capacity, company trucks, the coverage area that we have, and the service that the five founding companies have been providing continues to be enhanced by some of our technology implementations. So it's been well received. We haven't really had any negative feedback.
spk01: OK, great. good to hear and then just you know maybe one final one here and it's sort of a prospective question but you know just given the upcoming election I'm wondering if any customers have you know kind of discussed their expectations around you know what potential tariffs could look like and how that would impact the business I know you know again that's somewhat of a hypothetical but you know if you had any thoughts there that now it has hasn't really been a topic of Okay, hopefully we don't have to worry about that.
spk04: Yeah, right.
spk00: Thank you. And I'm currently showing no further questions at this time. This does conclude today's conference call. Thank you all for your participation, and you may now
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