Proficient Auto Logistics, Inc.

Good day, and thank you for standing by. Welcome to the Proficient Auto Logistics third quarter 2024 earnings conference call. At this time, all participants are in 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, Brad Wright, Chief Financial Officer. Please go ahead.

Good morning, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thank you for joining us on Proficient's third quarter 2024 earnings call. Under SEC rules, our Form 10-Q, which we expect to file next week, covering the three and nine-month periods ending September 30, 2024, includes financial statements for both the predecessor accounting entity, Proficient Auto Transport, and the successor entity, Proficient Auto Logistics, Inc. We are not required to provide in the form 10Q will not contain pro forma financial data for the combined companies. However, our earnings release provided comparative summary on audited combined financial information for the third quarter and the nine months ended September 30 for the combined companies. Our earnings release can be found under the investor relations section of our website at proficientautologistics.com. Our 10Q, once 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 measures that include adjusted operating income, EBITDA, and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to gap measures such as operating earnings, earnings before income taxes, or net income. Joining me on today's call are Rick Odell, Proficient's Chairman and Chief Executive Officer, and Amy Rice, 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 third quarter. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may get back into the queue if you have additional questions. Now, I'd like to introduce Rick Odell, who will provide the company update.

Thank you, Brad, and good morning, everyone. I'll start out with an overview of our operations during the third quarter and some trends that provide insight into our expectations for the remainder of this year. As we discussed in our last earnings call, July even volumes were up by 2.1% versus the same month in 2023. However, revenue was down by 11% in July of 2024 versus the comparable month of 2023. This disparity between unit volume and revenue comparisons continued for the duration of the third quarter, with a full quarter volume decline of 0.4%. Total revenue was down by 12.5%. The macro auto industry environment exhibited weakness in the third quarter, with seasonal plant shutdowns in July, followed by an even weaker August, and only a modest acceleration in September toward the quarter close. Slack demand resulted in an outside impact to certain of our premium price services. For example, our dedicated fleet service generated revenue of $4.7 million. during the third quarter compared to $16.2 million in the third quarter of 2023. Our revenue from spot buy opportunities during the quarter comprised only 4% of total revenue in the recent quarter versus 10% a year ago. The revenue per unit from spot buys fell by 40% year over year. There was both a significant reduction in the spot buy opportunity made available to the market, as well as much less spot pricing power due to significant available capacity to address limited demand. Seasonally adjusted annual sales rates were lower by 1.9% in the third quarter compared to a year ago, hitting a low of $15.1 million in August before recovering to $15.8 million in September. In recent earnings releases, major auto manufacturers have continued to reference high inventories at dealership lots, declining profitability reduce full-year outlooks and related cost-cutting initiatives. While the fourth quarter typically exhibits stronger seasonal volume relative to the third quarter, an early feedback from the OEMs called for this seasonal uptick. Cautionary language from several carriers recently indicates that the lift in 2024 might not be as pronounced as in the recent past. There are some positive takeaways from October. saw our top $16 million, and we saw increases in our unit deliveries year over year versus the first month of quarter three. However, the pressure on revenue per unit persists, and we have mixed signals on the expectations for the remainder of the quarter. As such, we remain cautious in our outlook for this quarter and into early 2025. Brad will speak to this in more detail in a moment. We continue to be positive on a relative market position and see opportunities for 2025 and beyond that gives us confidence in the business and investment thesis for proficient auto logistics. We've noted in previous calls the addition of new contracts in 2024. 14 net new through our call in August and another three since that time. The third quarter also included increased renewal activity with a total of seven meaningful contracts renewed. most with three-year terms and one with a five-year term. We're pleased with the level of ongoing conversations with customers about ways that we can work more closely together across the entire footprint of our expanded operation and provide solutions that enhance our partnership with these customers further. We continue to progress with our key operating initiatives, Cost synergies have been identified in the areas of fuel, tires, and parts with national contracts now in place or in the late stages of negotiation. Additional opportunities are being pursued with travel, lodging, and employee benefit programs. We continue to target $8 to $10 million in annualized savings from this initiative. The shift to company deliveries has been further enabled through the addition of 66 truck and trailer units since the initial mergers. an increase to the owned fleet of approximately 10%. Although partly driven by revenue mix during the quarter, we note that the company deliveries in the most recent quarter were 39% of the total, which is an increase from 34% in the same quarter a year ago. Technology investments are 75% complete with respect to the transportation management system, with full completion to be accomplished this quarter. Cost allocation technology continues to evolve but requires further customization to recognize the unique nature of auto hauling compared to the truckload and the LTL users. Utilization improvements are primarily focused on load sharing between the merged companies to fill empty lanes. During the third quarter, approximately 3% of units and revenue were generated through the load sharing opportunities identified across our network. Finally, the acquisition of Auto Transport Group was completed during the third quarter as planned, and they're rapidly integrating into the proficient umbrella of companies. They continue to exhibit the performance and profitability characteristics that we anticipated, and they should contribute approximately 10% of the company's revenue in the current quarter. I'll now turn it back to Brad to cover key financial highlights.