Patriot Transportation Holding, Inc.

Good day, everyone, and welcome to the Patriot Transportation Holdings, Inc. earnings call for the third quarter. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rob Sandlin, CEO and President of Patriot Transportation Holdings, Inc. Sir, the floor is yours.

Good afternoon, and thank you all for being on the call today and for your interest in Patriot Transportation. I am Rob Samlin, CEO of Patriot Transportation, and with me today are Matt McNulty, our Chief Financial Officer and Chief Operating Officer, and John Klopfenstein, our Chief Accounting Officer. Before we get into our results, let me caution you that any statements made during this call that relate to the future or by their nature subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated by such forward-looking statements. Additional information regarding these and other risk factors and uncertainties may be found in the company's filings with the Securities and Exchange Commission. For the third quarter results, today the company reported net income of $1,187,000, or 33 cents per share, for the quarter ended June 30, 2023, compared to $771,000 or 22 cents per share in the same quarter last year. Operating revenues for the quarter were $24,253,000 up $752,000 from the third quarter last year due to rate increases, increased miles, and an improved business mix. Miles this quarter increased 379,000 over last year's same quarter, mainly due to improving driver counts. Operating revenue per mile was down 16 cents or 3.6% versus last year's same quarter due to lower fuel surcharges on lower diesel prices, which was reflected in the $1,242,000 less fuel costs. Compensation and benefits increased $1,490,000 mainly due to increased driver count and compensation package, including an increase in the driver training pay of $126,000 versus the same quarter last year and an increase in owner-operators. Gains on sale of equipment was $432,000 compared to $163,000 gain in last year's quarter. and the operating profit this quarter was $1,499,000 compared to $913,000 in last year's third quarter. Now on to the nine months' results. The company reported net income of $2,147,000, or 60 cents per share, compared to $6,720,000 in the same period last year, which included $6,281,000 from gains on real estate net of income taxes. operating revenue for the period was $70,568,000, an increase of $5,568,000 due to rate increases, increased miles, and an improved business mix. Operating revenue per mile was up 29 cents, or 7.2%, and the miles for the period increased $177,000 versus last year's same period. Compensation and benefits increased $4,692,000 due to the increases in driver compensation, including a $422,000 increase in driver training pay versus last year's period and increases in owner-operators. Fuel expense decreased $802,000 for the period due to declining fuel prices. Insurance and losses decreased $1,022,000 due to lower health and risk claims, and depreciation expense was $313,000 lower versus the same period last year. Gains on sale of equipment was $773,000 compared to $642,000 in the same period last year. SG&A increased during the period $787,000 due mainly to bonus accrual and increased travel. Operating profit was $2,703,000 compared to $8,815,000 for last year's first nine months. Prior year gain on real estate was $8,330,000 due to the sale of our Tampa terminal. Operating ratio for the nine months was 96.2. Now for the summary and outlook. Over the first nine months of fiscal 2023, we added 42 drivers, which allowed us to add business with new and existing customers and increase our miles. While summer petroleum and cement volumes have been softer than expected, we are confident that our current partnerships will allow continued growth into the future with our efforts to expand our customer base. We will continue to focus our growth with new and existing customers in all segments of our business that will allow us to improve our return on investment. We had $7,400,000 of cash at the end of the third quarter with no outstanding debt. We will have added $73 million New tractors during our year 44 will replace company-owned tractors, and 29 are replacing leased tractors with company-owned tractors. We believe replacing the 29 leased tractors with company units will provide a better financial result and is a good use of our cash. We continue to focus on our driver hiring and retention. While the driver hiring market is still challenging, Our driver count increased during the year, which allowed us to add miles throughout the period. The training cost increased, but we believe the increased driver count positions us well as we complete this fiscal year in September and look to continue to improve our results during fiscal year 2024. Due to previous driver pay increases, turnover results have been lower among our drivers with one year or more of seniority. we still see a higher than acceptable turnover in our first-year driver. The continued trend of general freight spot rates declining has allowed us to add more owner-operators in several markets, and we will continue to monitor and balance with company drivers. In some of our markets, we have reached our driver goal and have cut back on hiring and associated recruiting and training. However, we will closely monitor each location for needed adjustments to our plan on a weekly basis. In closing, our safety goals are on target for the year with the exception of product mixes, and we will continue our efforts to keep preventable incidents and related expenses in check while also staying focused on quality customer service. I am proud of our team's safety and customer service performance thus far in fiscal 2023 and look to finish the year strong. Thank you again for your interest in our company, and we will be happy to answer any questions.

Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while we poll for questions. Your first question is coming from Steve Rudd from Blackwall. Your line is live.