Universal Logistics Holdings, Inc.

Hello and welcome to Universal Logistics Holdings first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. A brief question and answer session will follow the formal presentation. During the course of this call, management may make forward-looking statements based on their best view of the business as seen today. Statements that are forward looking relate to Universal's business objectives or expectations and can be identified by the use of words such as belief, expect, anticipate, and project. Such statements are subject to risks and uncertainties, and actual results could differ materially from those expectations. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tim Phillips, Chief Executive Officer, Mr. Jude Barris, Chief Financial Officer, and Mr. Stephen Fitzpatrick, Vice President of Finance and Investor Relations. Thank you. Mr. Phillips, you may begin.

Thank you, Andrew, and good morning, everyone, and thank you for joining Universal's first quarter 2025 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 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 $382.4 million in total operating revenue for the first quarter of 2025. Net income was $6 billion, or 23 cents 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 remained stable, with encouraging progress in several key areas. Our contract logistics segment continues to be a critical part of our business, contributing 255.9 million in revenue and delivering a solid 9.3% operating margin despite the absence of last year's 95.3 million specialty project revenue. We are on track to book over 1.1 billion in contract logistics revenue in 2025. Additionally, we continued to integrate and optimize our PARSEC acquisition, which contributed 56.4 million revenue this quarter. We now operate 87 value-added programs, including 20 rail terminal operations, a significant increase from the 70-run programs at this same time last year. As mentioned, auto 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 million 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 $55.6 million, 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 $2.2 million 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 $70.7 million, and we reported an operating loss of $10.7 million. 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 million in charges related to unemployment-related matter. While these results are disappointing, we believe we've hit bottom in this segment. Our new intermodal sales team is gaining traction, and we have 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 2025 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 rails, 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 our customers, thank you for your continued trust in 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 million, or $0.23 per share, on total operating revenues of $382.4 million in the first quarter of 2025. This compares to net income of $52.5 million or $1.99 per share on total operating revenues of $491.9 million during the same period last year. Consolidated income from operations was $15.7 million for the quarter compared to $75.1 million one year earlier. EBITDA decreased $45.2 million to $51.7 million, which compares to $96.9 million during the same period last year. Our operating margin and EBITDA margin for the first quarter of 2025 are 4.1% and 13.5% of total operating revenues. These metrics compare to 15.3% and 19.7% respectively in the first quarter of 2024. Looking at our segment performance for the first quarter of 2025, in our contract logistics segment, which includes our value add and dedicated transportation businesses, income from operations decreased 57.6 million to 23.9 million on 255.9 million of total operating revenues. This compares to operating income of 81.5 million on 313.5 million of total operating revenue in the first quarter of 2024. For comparison purposes, in the first quarter of 2025 included $56.4 million of revenue attributable to our recent acquisition of Parsec, while the first quarter of 2024 included $95.3 million 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 26% one year earlier. Overall, the decline in operating margin for our contract logistics segment was 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 $7.7 million to $70.7 million compared to $78.4 million in the same period last year. And income from operations decreased $2.4 million to an operating loss of $10.7 million. This compares to an operating loss of $8.3 million in the first quarter of 2024. Operating ratios for the quarter were 115.1% versus 110.6% last year. In our trucking segment, operating revenues for the quarter decreased 14.1 million to 55.6 million, compared to 69.7 million in the same quarter last year, and income from operations decreased 1.5 million to 2.2 million. This compares to 3.7 million in the first quarter of 2024. Operating margins for the quarter were 3.9% versus 5.3% last year. On our balance sheet, we held cash and cash equivalents totaling $20.6 million and $12 million of marketable securities. Outstanding interest-bearing debt net of $3.3 million of debt issuance costs totaled $736.7 million at the end of the period. And excluding lease liabilities related to ASC 842, our net interest-bearing debt to reported TTM EBITDA was 2.6 times. Capital expenditures for the quarter were $52.6 million. Excluding any impact of tariffs, for the second quarter of 2025, we are expecting top-line revenues between $390 and $410 million and operating margins between 5% and 7% 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 to $125 million range and real estate between $55 and $65 million. Interest rate is expected to come in between 48 and 51 million. Finally, Wednesday, our Board of Directors declared Universal's 10.5 cent per share regular quarterly dividend. This quarter's dividend is payable to shareholders of record at the close of business on June 2nd and is expected to be paid on July 1st, 2025. With that, Andrew, we're ready to take some questions.