Q1 2020 Earnings Call
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Hello, and welcome to Universal Logistics Holdings first quarter Twentytwenty earnings Conference call.
At this time, all participants are in listen only mode.
Brief question answer session will follow the formal presentation.
During the course of this call management May make forward looking statements based on their best field the business I've seen today.
Fitments that are forward looking at Ada to universal business objectives, or expectations and can be identified but each of the words such as so we 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 that's you can fils Chief Executive Officer, Mr., Jude yard Chief Financial Officer, I'm interested in to the Patrick Vice President Finance and Investor Relations. Thank.
Thank you Mr. Phillips you may begin.
Thank you good morning.
Joining universal Logistics Holdings first quarter 2020 earnings call you started you're under drastically different operating environment incurred I'll leave it into first quarter.
We create wafers.
Expectations for the year, but even if not one plans often need adjustment.
Universities poison associate responded and amazing fashion to the condition you challenges they made a comment 19 kinda together.
Over the last six weeks.
[laughter] over I still see as a company adjusted core is going to drastically changed operating environment.
First off I like recommend sacrifices them or drugs and congrats granted the call you kept it makes its critical that moving extremely tough environment.
Our warehouse workers and got personnel and remain committed to the constant right. There on that front line sporting the flow the central good.
Things are all personnel continue for a high level delivering solutions to our value added customers and supporting our attitude on the front lawn.
Extremely fraud, the entire universal team.
Before moving into that you believe in quarter, one first take American provide an overview on where we are waiting for a readiness in response to the cold 19 outbreak.
With operations located in the UK, Mexico, Canada in Colombia, we realized early on that want to be managing through this Craig would be time communication with our employee contractor customers in fan.
I was in constant communication with their senior leadership to evaluate welfare safety volume trends in customer needs to quickly react wouldn't be changing landscape.
We provide real time lumpy I think people up at least guidelines for the tender disease control World Health organization State government as well as providing targeted local information to ensure our people up to date on the latest information and best practices to keep them state not only at work, but under law.
You mean.
We continue to fall back [laughter] being personal protection cleaning, Brad and features and how we're forced fraud.
The overall Barbie began to change rapidly into the first quarter because shock to the system came in late March when North American auto in truck production want to spend.
Representing over 25% American line, rather his leadership reacting quickly the founder workforce with Boeing.
[laughter] offend somebody automotive production very deep local government, yeah issuing expanded shelf placed orders that limited continue operations to sanction businesses.
We do you see that they're having a longer impact on the business volumes.
We made the decision in late March furlough, approximately 70% on the direct workforce and 30% administrative personnel crop circles lives.
These are really difficult decisions necessary preserved the integrity of the business model.
Accelerating or cost containment reduction strategy, we evaluated aren't list of essential operating expenses adjusted our capital expenditure expenditure deployment.
Taking all necessary death preserve liquidity.
We're actively managing the situation will continue to rightsize the business to ensure success when will like returns to normal.
I would like to now provide some kind of like from the first quarter.
Yesterday afternoon, Universal released its first quarter financial results reporting 382.2, making topline revenue a new record highs in first quarter operating revenues and earnings of 45 cents a share wins included nine cents per share chart for noncash holding losses on our.
Marketable securities portfolio.
Given the rapidly jury business climate, we experienced in late March I'm pleased with the results of the core and so proud of the weight Universal Universal team jumped into action to tackle went back and become Corona buyers can get example.
What hotaling from production checked out hey, solving a fair on ended the month several me over the differences I imagine headwinds as well.
Chinese new year came early in 2020 with factory I only have ended January.
Which is normally a seven to 14 game theory in China. It lasted longer view these write a virus outbreak.
Chinese imports never rebounded in the first quarter as demand in the U.S. also contracted the virus.
Our own count was down 40% at our southern California operations.
We also continued to experience some rate pressures on the truckload sector for my for the first quarter.
Excluding the effects of the ongoing for upside down and the inclusive of Coke Nike operate normalized first quarter results would have been universal highest revenue for any quarter on record.
Our estimate in our estimate co and related revenue losses in Southern California operations.
Not at the eight point, assuming it on top line revenue and lower operating income by 2.7 million.
The impact of topline rather from auto and truck manufacturing shutdowns with 8.3 billion and it reduced operating income by 2.6 million.
We believe the cumulative effect on these new service line second TPS by 15 cents per share.
Now for some color what each service line.
Truckload finished the quarter with 58.9 million topline revenue, which was a decrease of 10.3% compared to 2019.
The decrease was primarily driven by 7.2% decline in both compared to the same period in 2019.
Open depth movements accounted for roughly two thirds of the truckload Didnt move.
And the quarter progressing quite sharp drop drop off open deck movement, particularly in doing that.
Our local and regional operating networks focused on food beverage and consumer goods to mitigate to be equally.
Brokerage services, whether till two vastly different operating environment entering and exiting the quarter.
Although revenue was flat 85.9 million load count was up 13.9%.
The number show a very aggressive rate driven environment, coupled with very small gross margins at the beginning of the core.
Our company brokerage operations are heavily involved in food and beverage and experienced a drastic change in the last two weeks of Mark.
Spot rates rose.
Consumer stocking up on food and beverage is because the pair down. It. It's worked ended the quarter. We saw an increase in our gross margin and industry began to experience.
The capacity on our brokers to secure a lower transportation lower transportation rate.
[noise] intermodal services revenue increased 19.2 million or 21% to 110 million I 110.3 million.
Load count was up 19.7%.
And revenue per load was relatively consistent.
Legacy intermodal terminal performed well I'm going to condition with the biggest attributed to attribute it to acquisitions made in 2019.
Offsetting some of the positive momentum with a drag from our southern California operations.
In this market, we experienced a significant drop in Logan county, with their customers heavily weighted towards retail.
We're very pleased with our acquisition integration in intermodal great sector. We are looking forward to completing integration for the most recent acquisition really for intermodal services by the end of the second quarter. This year.
I'm extremely happy with their with intermodal teens teen combining the very thin he employees contractors and drive we're extremely satisfied with the talent and endpoint reached customer base realized throughout these acquisitions.
Our dedicated services revenue was down 14.7% 31.6 million.
Loan out slightly for the core to 139000 love due to additional settlement as compared to the same quarter 2019.
The closing of North American Auto Assembly plants pay severe back on revenue in the last few weeks in March.
Hi comparison, our dedicated fleet a handle 21.1% more move during January February 2020, compared to the same period in 2019.
But due to the automotive shutdown ended the quarter, Oh only 3.8%.
That you haven't services revenue decreased 2.2 main to 95.5 main.
I wanted to talk plant shutdowns and a negative effect on our revenue in late March our value added group is running on all cylinders before plant began to shut down at the end of first quarter and we were on track with Oh, I'm traffic, having a record quarter.
[noise] Universal have worked hard to diversify our service lines with automotive still the largest Pete 29%.
All by retail consumer goods at 22%.
Industrial, including heavy trucks next to 12% and aerospace add comprising about 2%.
Universal continues to support a robust pipeline as well.
Last quarter when minerals Mystic segment.
While the effects of Copenhagen is expected to have some impact on on the timing of implementing those wins, we're confident that we will realize the benefits of those customer departments <unk> partnership.
The second half of 2020 and into 2021.
To add a little color or add value added services group booking 60 million in winter thus far this year.
And our dedicated transportation group, another 40 to 40 million in wins this year.
We're also very optimistic about our Asian, Firefly and the fact that we bought 22 new agent in the first 13 weeks to 2020.
[noise] ARPU busbar combined pipeline still stands at 500 million opportunities.
Hi seems challenging now we're excited about future what the future will bring in remains very bullish long term outlook of our business.
To provide some insight.
And what we are seeing for for April rather revenues as a month, it's down approximately 30% compared to last April.
To respond to these declines we undertook a thorough review of our operating expenses and continue to adjust accordingly.
We also evaluated our capital expenditures and were able to delayed and number of purchases.
Later, this year or net.
We will also realize the cost savings of completing the integration of our roads matter acquisition by the end second quarter.
I understand got one of our larger cost is direct personnel related benefit we continue to look for ways to identify copy.
We're doing that across the board, including executive management team, where we're having folks take them on paid time off each month throughout the second quarter.
Before turning it over if you I wanted to reenter I wanted to reiterate my appreciation in gratitude to the entire universal family for their dedication to operating safely and effectively through a variety of state shutdown and local government restrictions across the United States.
Good.
Thanks, Tim Good morning, everyone Universal Logistics Holdings reported consolidated net income of 12.2 million or 45 cents per share on total operating revenues of 382.2 million and the first quarter up 2020.
This compares to net income of 17.3 million or 61 cents per share on total operating revenues up 377.4 million and the first quarter of 2019.
Consolidate consolidated income from operations decreased 2.6 million to 23.9 million compared to operating income of 26.5 million in the first quarter of 2019, EBITDA decreased 4.6 million to 39.8 million in the first quarter of 2020, which compares to.
44.4 million one year earlier, our operating margin EBITDA margin for the first quarter of 2020 are 6.3% and 10.4% of total operating revenues.
These metrics compared to 7% and 11.8%, respectively, and the first quarter up 2019.
Universal financial results were negatively impacted by a 40% reduction in intermodal loads in southern California, the loss of automotive production during the last two weeks at the quarter and finally pretax losses related to the mark to market revaluation of our securities portfolio.
Combined so we have estimate at these events to have impacted our topline revenues by 16.5 million for the quarter and operating income by 5.3 million or 15 cents per share below the line the loss on securities accounted for pre tax charge of 3.4 million or nine cents per share.
On a pro forma basis. The combination of these factors reduced universal's operating margin by 100 basis points and earnings per share by 24 cents.
Looking at our segment performance for the first quarter 2020 in our transportation segment, which includes our truckload and intermodal and freight brokerage businesses operating revenues for the quarter rose, 3.2% to 254.7 million compared to 246 million and the same quarter last year, while income from operations.
Decreased $400000 to 12.1 million to 12, and a half million and the first quarter of 2019.
And our logistic segment, which is comprised of our value added services, including where we service the class eight heavy truck market and our dedicated transportation business income from operations decreased 2.1 million to 11.7 million 127 million up total operating revenues compared to operating income.
Up 13.8 million on 130.4 million of total operating revenue and the first quarter of 2019.
On our balance sheet, we held cash and cash equivalents totaling 8 million and 6.3 million of marketable securities.
Outstanding debt outstanding interest bearing debt net of 2 million of debt issuance costs totaled 478.8 million happy end up the period.
At the end of the first quarter, we had 41 point sevenmillion available under our existing revolving credit facility.
Excluding lease liabilities related to a SD 842, our net interest bearing debt to reported TTM EBITDA was 3.48 times.
Capital expenditures for the quarter totaled 32.8 million.
For the remainder of the year, we're expecting capital expenditures to be in the $35 million to $45 million range and interest expense between 14 and $16 million.
As mentioned in the release to further preserve our liquidity during these unprecedented about we've decided to temporarily suspend our quarterly dividend. In addition to the cost cutting measures Tim discussed earlier in his comments our goal is to preserve cash in the short term until there was more clarity on automotive production as well, let's future import and.
Trucking volumes.
As a reminder, universal's dividend policy allows the company to pay out up to 40% of our net income each year with a target dividend healed up 2% on the stock the quarterly dividend as an important part of our long term capital allocation strategy is universal has played out over 143 million and dividends since the inception of this Paul.
Lastly, we expect to review the considerations for reinstating our dividend in the back half of the year.
With that Amy we're ready to take some questions.
Not at this time, ladies and gentlemen.
The question. Please go ahead. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the to enable faster.
[noise]. Your first question today comes from the line of Chris Wetherbee of Citi. Your line is open.
Okay, great. Thanks, and good morning, guys.
Morning.
I guess it was helpful to get the update on April as well as some of the vertical concentrations within the revenue for you guys as well given that you have a decent amount of customer exposure to end markets that are currently serves shut down can you give us a sense of maybe how to think about sort of the restart.
Does that happen into Q is it sort of a may and June type of event any color you can give to give us a sense of maybe what that negative 30 for April you know kind of cadence might be as we move throughout the quarter.
Well, Chris This is Tim you know I guess you can see there is a ton of uncertainty and talking to many of our after you're done all with the customer from day to day and I think there's a lot of uncertainty in their minds based on some of the government sheltered a play.
Im just up the whole blowdown and yet, but what we can say is back you know in conversations on the auto space. We're we're highly hopeful and I used the word hopeful that we've been seeing ceasing starts to start back up somewhere mid to late May you know, it's like your kicking the can down there.
Well, we never had a true read on it until it actually get here, but that's what we're hopeful or actually.
You know we mentioned we mentioned some of the the Downfalls in Southern California, well, Southern California intermodal side.
It's heavily flavor in retail and some of the some of the conversations we've had on the retail space as you know many many of the clothing retailers or whatnot. You know we can't go into the store to firing houses are in a little bit of Oh quandary to say what are what do we do because we're I'm sure. All the states are going to lift the shelter leased or.
Orders excuse me and what the deep in are we going to be buying into so we can make sure. We set up our stream of a free flowing in United States. So there's also theres a great deal of uncertainty there.
And then you know the one of the one space that seem to have been.
Pretty spot on and continues to give it system flavor is food beverage and consumer good.
You know through some of the work we do that that we stayed relatively consistent.
Yeah.
Yes.
Hey, good morning.
It's going to be when we originally predicted.
Hey, there.
I'm here I think.
And as well.
Yeah, it's something one of the lines just went and non online.
One of the might finish my mom and on that we'll try to frac elsewhere.
What we're seeing a lot on Merseyside and they are backing off a little bit on our Q2 backing off a little bit on their Q2 original projection, but it's not it's not graphic and we're still in you know or are our beverage type customers still stay they're going to be within five to <unk>.
10% of their original forecast to up food needed a little less than that maybe less than five words that and in a consumer goods are anywhere from 5% to 10% one of the areas that we haven't got a lot of clarity, but we know short term as if some of our open deck stuff like steel a mental Uh huh.
Taking a pretty good hit and we expect the gas is really hit it until some of the industrial things.
Come up and running.
Okay. Then your next question comes from the line of Bruce Thames Oh, Yeah.
Line is open.
Yes, good morning, gentlemen, and thanks for the question and send my apologies if I missed this to some.
Echo were aligned interference, but you were talking about the $40 million 60 million dollar wins and dedicated and value added respectively and.
Maybe just want to understand a little bit better how much of that is bankable and what the effect is of the current situation on all those numbers.
And then also where those wins are coming from as far as end market and customer type.
Yeah, you think you I apologize pretty appears paired up the the end market. If those wins are coming from is the automotive sector and we expect there there could be so you know pushed out of the initial launch it up those projects just based on.
The uncertainty it when the odds are going to start back up again.
What we would expect is that we will realize an experienced some of the revenues and later in the second half of the year and in in 2021, but you know through constant conversation. We're very optimistic that these launches will still will still take place. We think that you know there.
Probably going to be pushed back several months and I'd say that with an accurate with of course, because it seems like every week.
Communication things get pushed out around in a lot of it isn't because the industrial one was just because we're all trying to figure out what the individual state shelter in place rules, all right and when we can safely go back door.
Okay. That's great color that makes sense and then maybe just a follow up on your comments about the agent additions in the first few weeks of the year.
Hello, those trended now given you know what's been going on in late March and April or those you know de celebrating our they accelerating as maybe doing onto a bigger system on a bigger network looks more attractive than kind of flying solo and what are your expectations for those trends in the future.
Yes, and yes, I guess, we've seen a couple different phenomena.
There are a unique opportunity after arriving here early in the second quarter because decisions made by other companies or how they want it pretty lend their processes.
Our pipeline remains a very cool you don't into one of them. We have in there that we feel we haven't really good chance of getting there's a high level of interest from from an aging through the only thing that holding them back as you know they want to make sure as they make transitions that their customer base is onboard with that so.
Hi that they haven't drug therapy, there just kind of meat hearing it out to make sure their customers are comfortable with it you know we're open for business and ready to make this transition as they become comfortable with it and we can do they had a pretty quick amount of time. So if I look at the back in the quarter.
Yeah pipeline I'm still very optimistic we still have been traction. So I don't see a decelerating atmosphere. The only thing that change really is your face to face conversations now with those type of lot of has done remotely and on the phone. So you lose a little bit with back and we're still making some pretty good headway.
Okay. That's helpful. Then maybe just one last one here on the fleet capacity side, what are you seeing as far as.
Retention and what's going on with the capacity pool, both within Universal and then outside.
What are you doing to maybe sort of protect some of those some of those numbers in something like retention.
Yeah from a capacity side of things other transportation and a couple different things. We can look at here, we know that.
Of course with business being down the amount of active drivers both contractors and driving drivers that are being utilized is less than it would be under normal virus environment. You know the funny thing about it.
We've tried to keep a large group to them because even though we've had a stretch the work out a little bit Ah I look at turnover numbers or actually looked at locked in or the other day and our loss of contractors and driver over the last Ah eight weeks and specifically into the April has been married.
A minimal I want to stay Thunder for center to so basically basically are contractors in drivers are staying put up right now and as things up.
Constant communication with them as things start to ramp up it will meet or what we entered the drivers backend and contractors back into the accident lose a that paper it prior to slowdown.
Great well turn it over appreciate the time has always.
Thanks first thank you.
Well, we had mr. whether be a line open again, we did have some interference airseal outselling men's whether it be.
Next question.
Perfect Great anything because you hear me.
Yes, we cant figure yet.
Great. Thanks for letting me back in I know it must have been somewhat going all the line. There so sorry about that but in terms of I guess my follow up question was going to be on the flip side is sort of revenue variability. When do you think about sort of the cost side. You mentioned some of the direct labor can you talk a little bit about a you know how you're positioning.
Sort of the the downside on the cost side, how much of the costs are truly variable.
Given the business model as we think about sort of this this decline in revenue.
Hey, Chris its June so you know when we look at Q2 based on the ramp up of the automotive I mean, the delta on our topline revenue could be at a law or a low end to 250 million at the high end 300 million. So we have about a 50 million dollar delta based on when if the automotive companies.
As can restart a in the middle of May and commit to the production schedules that they've laid out to watch over the past couple of weeks. When you look at our cost I mean across most of the service lines. The variable nature of the cost is anywhere between 70% to 80% also.
Our total of our total revenues. So it's a material amount of those of our business is a variable cost structure, which is the reason why no. We're still paying down debt, we're still able to pay our bill. We just don't have a fixed cost that many of our competitors do in the space. So that's the benefit of our business model.
Will the reason why we've continued to invest in businesses and our M&A strategy related around a these independent contractor businesses and we'll continue to do that once we get out of this rough.
Yep, Okay, no that's super helpful and obviously, the first quarter performance was quite strong kind of excluding some of the dynamics that you highlighted there.
You know I guess, when we start to think bigger picture in sort of beyond this I guess, maybe trying to understand your positioning in terms of upside you know sort of dare to dream about when we come out of this and thinking about the potential opportunities there.
I guess, maybe the question is more around you sort of the pipeline of new business opportunities and how quickly you think you can kind of convert those and then maybe as you think about 21.
Maybe this has to do with the shape of the recovery, but you can get yourself in a scenario where revenues are kind of at least approaching where they had been on a run rate basis before that so there's a lot of bought it sort of pieces in that question, but wanted to get a sense there because clearly you're beginning to show some of that operating leverage some margin expansion just wanted to get a sense of how you're thinking about the pipeline of business.
Maybe existing business ramping back up in new business wins.
Yeah, I'll start and then Tim can answer the questions on the pipeline and the conversion so Chris I mean, our you know as we've had been saying over the past couple of years I mean, we believe that's a business volumes that we have currently pre cobot 19, the business should be operating between 7% to 9% operating margins and we are we believe that you know up as you know.
I wanted to path, we've had the legal headwinds we've had some odd drama with launches and all that kind of stopped but on a run rate basis, 7% to 9%. We believe is where the business stands today on a long term basis as we continue to gain leverage and gain scale with the investments that we're making an additional real estate properties as well as our.
Gee, how we were going to start then focusing as we grow to get that 8% to 10% margin and long term our long term operating margin target for Universal is 10% it'll take us a while to get there, but we firmly believe with the service lines that we happened to waiting up those lines as they grow particularly our interim.
Total our value added our dedicated business because the margins are within those ranges already that we can expand upon them as we get scale and I'll turn it over to tamper discussion on the pipeline yeah. Thank you our pipeline customer perspective, it feels like I mentioned still remains robust our communication in contact with.
<unk> has been a little bit or a little bit darker over the last four weeks, but you know everything that we had the pipeline on all sides of the business has responded well you know we so on the on at about the activity into when we had on the logistics side. There's some other things that are.
Pipeline right now that we've built pretty strongly now we haven't channel we have enhanced to add to that got pretty large number and were truly sure that we can execute on its just a matter what price point that you know permit trucking perspective, we mentioned you know the new agent at and some other things in the pipeline that they'll be bringing.
On my more snow, the local and regional side of it really taken apart looked at redirecting our services to more of a local food beverage and consumers do it. So we're heavily out there looking at actively taking some additional swings that type of freight.
A continued to build out that network. So we're pretty were pretty positive an optimistic on that pipeline.
And then finally intermodal side.
Oh the pipeline all the customers just can you know they can't that's for sure when some of that that's going to come back we have to be up a pretty substantial things in the pipeline working just waiting to see what the cadence is going to be of international freight and hopefully we'll knows.
Although some of that sooner or later and then you know you can kind of fee right now.
Well I thought our customer by customer base were pretty heavily ball.
Around the automotive and that that's another area that will take up a hard okay and in our book, we're looking at not only in current customers to transition.
Some of that do but also some conversions that we can go after so the pipeline, helping where I'm sure how how long it takes to come out of this coded or drag that we're in right now, but we're pretty confident that as we stretch or at least later in the.
Second half a year that we would we would see continued results from as a result for the pipeline.
Okay. Okay. That's really helpful. I appreciate the time, thanks, guys like trip.
And again, ladies and gentlemen, if he would like to ask a question. Please go ahead. Please press Star then the number one on your telephone keypad.
Your next question comes from the line Jeff Kauffman.
Well Michael your line is open.
Thank you very much good morning, everyone point, Jeff Gordon.
I just wanted to go back and make sure I interpreted some of your commentary correct or did you say on Capex you spent about 33 million year to date.
I'm, assuming this is gross not net.
And the rest of year was gonna be 35 to 45 million. So we're going to total something in those 69 to 75 million right Yep, Yeah, probably it will end up being more in the 70 to 80 range, but yeah, you're you're in the ballpark.
Okay got you and the decision to postpone the dividend.
And I again your guidance is that your goal has always been about a 2% yield so I am I right to think that we're not going to worry about what we used to pay if we reconsider reinstating. It that the goal is about a 2% yield and you can spend up to 40% of net income.
Yeah. So what we trust tried to do with that Jeff is that we want to have <unk> IDE study quarterly dividend right and so we grew the dividends now depend and a half cents per share and we'll continue to grow that dividend. Once we get out of you know the situation that we find ourselves then it's just that the abrupt nature of what happens universal and.
Third week of March and of course, you know the volumes on our dedicated business going from 12 million a month is zero and our value add business going from 30 million amongst the zero. We just had to make some very difficult decisions and of course, you know up 10 myself in conjunction with conversations with the board just felt it was.
Prudent for us to do that in particular with a number of people that we havent have laid off and in addition to the uncertainty related to the future, but the dividend is a huge part of what we do at the huge part of our capital allocation strategy. You know like I mentioned in my comments I mean, we've returned $143 million to shareholders since the policy was implement.
At a number of years ago, and we'll continue that policy once we have a little more clarity on the future.
Okay. So I guess my question is by getting rid of the dividend and abolishing is basically for an unknown period of time.
You're driving away investors that would own the stock for yield or have a yield requirement why not since we're talking about a savings in the $2 million to $4 million range based on my understanding your language why not reduce the dividend.
To a 2% yield and at least send the signal that we think we're fine and our cash flows are okay.
Yeah, I mean, I think I think that was just a decision that that we feel very comfortable Jeff with what we did we have to make sure that we can preserve the integrity of our balance sheet that we can find to be a business that we have today that we can find the capital expenditures for the launch.
It is and the business wins that Tim mentioned earlier in his comment and it was a decision that we made on our capital allocation strategy and yes. There may be some investors that are pushed that are pushed away as a result of that but if you can't pay or build a there's a lot bigger problems. Then you can have then boring.
About someone that's chasing yield it's just the reality of where we are today and like I said, we'll look at it in the back half of the year and make the decision at that time.
Okay I understand thank you and on the Mark to market adjustment for the quarter I understand that the market was down substantially can you talk a little bit about marketable securities and give me on the back in the market are we gonna have a potential mark to market adjustment upward just based on where today is let's say markets didn't change.
Change to the end of June Oh, yes.
Yeah.
Absolutely Jeff. So you know normally the portfolio doesn't cost us this much drama as it did in Q1, our portfolio is heavily weighted towards the banks and oil companies that pay dividends and so we kind of use it as a mitigation against our interest expense and generate a little bit of cash. So you know you think about what happened in Q1 with the banks obviously.
Interest rates going basically to zero and of course as a result, there net interest margin going to zero were negative and of course, the oil price war between Saudi Arabia, and Russia. That's put pushed at one time, you know, while west Texas to negative 30, a barrel. It's just had a real.
Detrimental impact on that portfolio in Q1.
We've already experienced some of those games back in Q2. So yeah. Our expectation is that you know that single slowly crawl back to hopefully, even which is about nine point threemillion that we finished the year with and yeah. We should expect some gains in Q2 based on at least what we've seen up until yesterday.
Okay, and then just when one detail question then a far question because I couldn't hear you with the the line interference that we had when you were giving guidance on on interest expense I thought I heard you say rest of year 14 to 15 million does that sound right Swiss 14 to 16 million I believe in the commentary.
The rest of year not full year correct, Oh, that's full year, okay full year alright.
So given this.
Unusual environment, we're in you're not the only company to be conserving cash and.
Generally you're in an acquisition mode and I got a picture there's a lot of opportunities you've been looking at that have become distressed.
Over the last couple of weeks.
Given what you're doing with dividend given what you do with cash flow conservation is it fair to assume that strategic decisions are off the table at this point.
No I I. This is Jude I know I would not say that at all I mean, I think we've laid out.
What are what our focus is as a company I mean, we mentioned that a number of times, we're paying down debt Devaluating operates acquisition opportunities and returning capital to shareholders.
Universal has not changing that strategy. We believe that's the right strategy for the company work always looking at acquisition opportunities the difficult <unk>. The difficult thing is just like with Tim mentioned with the pipeline is that everything is over the phone or via email, there's no way to visit management or fly someplace.
So I think you know if there if any of these up if any deal comes to fruition. It'll just have to be later when things open back up and were able to talk to people and get more information as you guys are probably well aware of and Theres. So many people working from home that don't necessarily have access to all of the things that they do when they are at their job. So our policy isn't going to change were.
So looking at M&A and so we'll continue to do that of course, if the opportunities right well look at it in the back half of the year.
Well. Thank you for the answers is terrific results in a very difficult environment and good luck. Thank you.
Good.
And again, ladies and gentlemen.
Hi, My one question.
And that is why no no further questions.
I will turn call back to the fortress frame warmer.
Yes. Thank you are once again apologize for any interference that we had it sounds as if we're looking at right now that the second quarter. There's no clarity. So a lot of things hopefully I answered the question gain some indication the best viability pre.
Hey, everybody dialing in and we'll talk to you to thank you.
And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation you may now disconnect.
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