Universal Logistics Holdings, Inc.

Hello and welcome to Universal Logistics Holdings' second 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 the words such as belief, expect, anticipate, and project. Such statements are subject to risk 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 Perez, Chief Financial Officer, and Mr. Steven Fitzpatrick, Vice President of Finance and Investor Relations. Thank you. Mr. Phillips, you may begin.

Good morning, and thank you for joining Universal's second quarter 2025 earnings call. The second quarter of 2025 remained a challenging environment across the transportation and logistics industry. We saw freight market, slightly lower automotive production, and tough comps from a prior year all contributed to a muted but better overall result sequentially. However, our performance was broadly in line with our expectations, and we continued to take the necessary steps to manage costs, enhance efficiencies, and position the business for long-term growth. Before diving into the numbers, I would like to recognize the efforts of our over 11,000 employees and contractors. Their continued dedication and effort have consistently provided our customers with a seamless, best-in-class service in a difficult environment. Let's review the results for the quarter. Universal reported second quarter 2025 operating revenues of $393.8 million, with net income of $8.3 million, or 32 cents per diluted share. Operating income for the quarter was $19.9 million, representing a 5.1% operating margin. EBITDA came in at $56.2 million, or 14.3% of revenue. While down from the prior year, these results reflect our continued ability to generate solid cash flows and maintain profitability in a persistently soft freight market. Now let's look at performance by segment. Our contract logistics segment remains the cornerstone of our results. Revenues were 260.6 million, down slightly from Q2 of last year. The integration of Parsec continues to progress smoothly and contributed 55 million in revenue during the quarter. As a reminder, the prior year includes included $44.6 million of revenue related to our now-completed development project in Stanton, Tennessee. Contract Logistics' operating income was $21.8 million, with an 8.4% margin. While margins were lower year-over-year due to the absence of the special development project and increased depreciation and amortization on our recent PARSEC acquisition, the core business remains healthy. We continue to operate 87 value-added programs, including 20 rail terminals, up from 68 programs a year ago. We are confident in the stability and long-term growth prospects of this segment, especially as we integrate our expanded footprint and pursue new contract opportunities. Turning to trucking, revenues were $64.1 million, down nearly 30% year over year. This was primarily due to the 22.6% drop in load volumes and an 8.9% decrease in revenue per load, excluding fuel surcharges. That said, I'm encouraged by the 5.2% operating margin, up from 4.8% a year ago, and the $3.3 million in operating income. Our focus on specialized freight including our wind energy business, continues to support more resilient margins, even in the depressed market. Sequential improvements from the first quarter signal we are on the right path, and we expect improvement in the second half of the year. Our intermodal segment remains under pressure, but we are seeing signs of progress. Revenues were $68.9 million, down 13.5% year over year. Load volumes declined nearly 13%, but pricing showed some stability with a slight improvement in revenue per load excluding fuel. We narrowed our operating loss to $5.7 million from $10.7 million in the first quarter and sequentially improved our operating ratio 108.2 from 115.1 in Q1. While we are not where we want to be, the quarter-over-quarter progress is encouraging. Our focus remains on optimizing operations, exiting an unprofitable business, rationalizing all costs, and positioning this segment to return to profitability. Across all segments, we remain focused on cost discipline, operational execution, and expanding our sales pipeline. Our diverse service portfolio continues to provide balance and stability as we manage through cyclical pressures. As we continue to navigate a softer freight market, we are doubling down on strategic initiatives to strengthen our sales engine and drive long-term profitable growth. We have a new executive leadership shaping our enterprise-wide sales and business development initiatives. This role reflects our commitment to building a more integrated and customer driven sales organization that aligns with Universal's long-term strategic objectives. In addition, we've expanded our sales organization with hiring of several senior sales directors across key regions and service lines. These hires bring deep experience and strong customer relationships in core industries, including automotive, industrial, and retail. We also began rolling out a new customer relationships management solution to unify sales activity across the company and provide better visibility into our growing $1 billion sales pipeline. These enhancements are already yielding improved coordination and accelerating the pace at which we are able to identify and presenting customer centric solutions. We expect our enhanced commercial capabilities to play a critical role in achieving our margin growth targets over the coming quarters. To close, while the macro environment remains challenging, I am confident in our team our strategy, and our ability to adapt and execute. We're taking the right steps to weather the near-term storm while positioning Universal for sustained, profitable growth over the long term. Thank you again to all our team members for your continued dedication and to our customers and shareholders for your ongoing trust and support. I will now turn the call over to Jude to provide additional details on the financials in our outlook going forward. Jude?

Thanks, Tim. Good morning, everyone. Yesterday, Universal Logistics Holdings reported consolidated net income of $8.3 million, or 32 cents per share, on total operating revenues of $393.8 million in the second quarter of 2025. This compares to net income of $30.7 million, or $1.17 per share, on total operating revenues of $462.2 million during the same period last year. Consolidated income from operations was $19.9 million for the quarter compared to $47.1 million one year earlier. EBITDA decreased $28.6 million to $56.2 million, which compares to $84.8 million during the same period last year. Our operating margin and EBITDA margin for the second quarter of 2025 are 5.1% and 14.3% of total operating revenues. These metrics compared to 10.2% and 18.4% respectively in the second quarter of 2024. Looking at our segment performance for the second quarter of 2025, in our contract logistics segment, which includes our value add and dedicated transportation businesses, income from operations decreased 31.1 million to 21.8 million on 260.6 million of total operating revenues. This compares to operating income of 52.9 million on $263.6 million of total operating revenue in the second quarter of 2024. For comparison purposes, in the second quarter of 2025 included $55 million of revenue attributable to our recent acquisition of Parsec, while the second quarter of 2024 included $44.6 million of revenue attributable to our specialty development program, which was completed in late 2024. Operating margins for the quarter were 8.4% of total operating revenues, compared to 20.1% one year earlier. Onto our intermodal segment. Operating revenues decreased $10.7 million to $68.9 million, compared to $79.7 million in the same period last year. And operating results improved $3 million to an operating loss of $5.7 million. This compares to an operating loss of $8.6 million in the second quarter of 2024. Operating ratios for the quarter were 108.2 versus 110.8 last year. In our trucking segment, operating revenues for the quarter decreased 27.4 million to 64.1 million compared to 91.4 million in the same quarter last year. And income from operations increased 1 million to 3.3 million. This compares to 4.4 million in the second quarter of 2024. Operating margins for the quarter were 5.2 versus 4.8% last year. For comparison purposes, one additional item of note. 26.7 million of brokerage revenues are included in the second quarter last year from our now closed company managed brokerage operation in Nashville. On our balance sheet, we held cash and cash equivalents totaling 24.3 million and 9.9 million of marketable securities. Outstanding interest-bearing debt net of $3.1 million of debt issuance costs totaled $795.5 million at the end of the period. Excluding lease liabilities related to ASC 842, our net interest-bearing debt to reported trailing 12-month EBITDA was 3.13 times. Capital expenditures for the quarter were $84.3 million. For the third quarter of 2025, we are expecting top line revenues between 390 and 410 million, operating margins in the 5% to 7% range, and EBITDA margins between 14% to 16%. For the full year, we are expecting top line revenues between 1.6 to 1.7 billion, with operating and EBITDA margins similar to our range in our Q3 guidance. For the full year, we are expecting capital expenditures for equipment to be in the $100 to $125 million range, and real estate between $50 and $65 million. Interest expense is expected to come in between $48 and $51 million as well. 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 September 1st, 2025, and is expected to be paid on October 1st, 2025. With that, Chloe, we're ready to take some questions.