Q1 2023 Yellow Corp Earnings Call
Speaker 1: That.
Speaker 2: Good afternoon, everyone, and welcome to Yellow Corporation's first quarter 2023 earnings call.
Speaker 2: All participants will be in a listen-only mode. After today's presentation, there will be a question and answer session.
Speaker 2: Please note, this event is being recorded.
Speaker 2: At this time, I'd like to turn the conference call over to Tony Carino, Senior Vice President of Treasury and Investor Relations.
Speaker 2: Sir? Please go ahead.
Speaker 3: Thank you, operator, and good afternoon, everyone. Welcome to Yellin Corporation's first quarter 2023 earnings conference call.
Speaker 3: Joining us on the call today are Darren Hawkins, Chief Executive Officer, and Dan Olivier, Chief Financial Officer.
Speaker 3: During this call, we may make some forward-looking statements within the meaning of Federal Securities model.
Speaker 3: These forward-looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and a number of risks.
Speaker 3: and therefore, actual results may differ materially.
Speaker 3: The format of this call does not allow us to fully discuss all of these risk factors.
Speaker 3: for a full discussion of the risk factors that could cause the results to differ.
Speaker 3: Please refer to this after-immunities, financial release, and a most recent PCC fileings, including our form 10K and 10Q.
Speaker 3: These items are also available on our website at myyellow.com.
Speaker 3: Additionally, please see today's release for a reconciliation of net loss to adjusted even stop.
Speaker 3: Conjecture what today's around your lease, we issued a presentation which may be referenced on the call.
Speaker 3: The presentation was filed in an AK along with your age release. It's available on our website. I will now turn the call over to Darren.
Speaker 4: Thanks, Tony, and good afternoon, everyone. Thank you for joining our call. The Q1 results were in line with our expectations when considering the slowdown in the economy combined with the one yellow network transformation that we were undergoing.
Speaker 4: The number of daily shipments was consistent throughout the quarter without the typical early spring acceleration and demand that we are accustomed to seeing in March.
Speaker 4: In the near term, the man continues to be relatively flat due in part to ongoing stalking.
Speaker 4: Turning the pricing, and Q1, we improved year-over-year despite following strong growth a year ago.
Speaker 4: We have been consistent with our strategy to improve yield on the freight moving through Yellow's network. And this is the 10th consecutive quarter where LTL revenue per 100 weight, excluding fuel, has increased on a year-over-year basis.
Speaker 4: Looking ahead, we plan to stick to our strategy and their goal is to maintain the pricing gains made in recent years, which will be balanced with managing through the stagnant demand environment and fuel price headwind.
Speaker 4: For the month of April , yellow average between a 1% and 2% increase on contract negotiations.
Speaker 4: In Q1, our results were also impacted by elevated calls associated with the network transformation, including remaining expenses following the successful implementation of Phase 1, last September , and planning and preparation for Phase 2.
Speaker 4: Phase one included approximately 20% of our network in the Western United States.
Speaker 4: The real-end and optimized thermal coverage positioned us closer to the customers.
Speaker 4: which has enabled us to enhance our service.
Speaker 4: Following the implementation of Phase 1, our customers have seen improvement across the broad range of areas that positively impact the customer experience, including an improvement in the percentage of shipments going out for delivery before 9 a.m., a reduction in mispickups and improvement in the percentage of shipments departing origin by 10 p.m.
Speaker 4: Our goal is to exceed customers expectations with a red carpet experience and the improvements that we are seeing in phase one. Our examples of why moving to a super regional carrier is in the best interest of our customers, employees and shareholders.
Speaker 4: Phase 2 consists of legacy wire, seafray, hollum, and new pen terminals in the Midwest, Northeast, and Southings.
Speaker 4: and covers approximately 70% of the net water.
Speaker 4: We plan to communicate externally when an implementation date is determined.
Speaker 4: It's imperative that we complete our one yellow strategy, which will strengthen the company, protect 22,000 union jobs, and ensure that our customers are well cared for and receive the range of services that today's market demands.
Speaker 4: Phase one of the success, and as we look ahead, we plan the work with the IBT to determine the best path forward to implement Phase 2 and then turn our focus on refinancing the capital structure.
Speaker 4: Turning the purchase transportation expense would continue to show improvement, primarily due to targeted efforts to reduce the use of over-the-road purchase transportation and to reduce equipment lease expense.
Speaker 4: In Q1, purchase transportation expense was down to 13.1% of revenue, which is a 160 basis point improvement compared to your year ago and a 360 basis point improvement compared to two years ago.
Speaker 4: We recently announced the addition of David Weber to our Board of Directors.
Speaker 4: Mr. Weber is a law professor at Boston University and is a nationally recognized expert in pensions as well as shareholder activism and litigation.
Speaker 4: He was selected by the International Brotherhood of Teamsters to join the Board of Directors for Suent to its rights as the holder of Yellow Series A, Goatting Preferred Stop.
Speaker 4: I am very pleased to welcome Mr. Weber to the Ellos Board of Directors and the company will benefit tremendously from his insight.
Speaker 4: Thank you again for joining us today and I will now turn the call over to Dan who will share additional details about the quarter
Speaker 5: Thank you, Darren, and good afternoon, everyone. For the first quarter, 2023, offering revenue was 1.16 billion compared to 1.26 billion in 2022.
Speaker 5: An operating loss was $9.3 million compared to operating income of $9.2 million in the prior year.
Speaker 5: including a 5.5 million net gain on property disposal.
Speaker 5: Justed EVEDOF for the first quarter of 2023, 34.3 million compared to 52 million in 2022. Adjusted EVEDOF for the last 12 months, with 325.4 million compared to 341.4 million a year ago.
Speaker 5: The 8.1% decrease in year-over-year operating revenue in the first quarter was primarily attributable to lower volume and reduction in fuel surcharge revenue.
Speaker 5: Including fuel surcharge, first quarter LTL revenue per 100 weight was up 4.4% and LTL revenue per shipment was up 6% compared to a year ago. Excluding fuel surcharge, LTL revenue per 100 weight was up 2.8%
Speaker 5: and LTO revenue per shipment was up 4.4%. LTO tonnets per day in the first quarter was down 12%, driven by a 13.3% decrease in LTO shipment per day, partially offset by a 1.5% increase in LTO weight per shipment.
Speaker 5: The Quential LTL-10 is per day trends compared to the prior year whereas follows.
Speaker 5: January down 17.2%, February up 1.3%, and March down 16.9%.
Speaker 5: On a preliminary basis, April LTL tonnage per workday was down approximately 16% compared to last year. On a sequential basis, from March to April , our LTL tonnage per day was up approximately 0.9%, which is slightly higher than our average historical trend of up 0.2%.
Speaker 5: Capital expenditures for the first quarter were 29.6 million compared to 36.4 million a year ago.
Speaker 5: Total liquidity at the end of the first quarter was 167.5 million compared to 276.9 million at the end of the first quarter of 2022. As a reminder, in early January , we paid the remaining $66 million due on the CDA note and matured at the end of 2022 consistent with the terms of the agreement.
Speaker 5: Total debt at the end of the first quarter of 2023 was 1.51 billion compared to 1.61 billion at the end of the first quarter of 2022.
Speaker 5: Turning for hourly wages and mileage rates for our union employees.
Speaker 5: For 2023, our National Master Freight Agreement includes contractual wage increases of 40 cents per hour and one cent per mile on both April 1 and October 1.
Speaker 5: In addition, the contract also includes the cost of living allowance clause which provides for an additional increase in effective April 1st each year based on the year-over-year change and the Consumer Price Index published in January .
Speaker 5: Based on the issues measurement, our union employees qualify for a cost of living adjustment of 37 cents per hour and 0.925 cents per mile.
Speaker 5: resulting in a total April 1st wage increase of 77 cents per hour and 1.925 cents per mile.
Speaker 5: which is a wage increase of approximately 3%. For full year 2023, we expect our total union wage and benefits to increase between 4% and 5%.
Speaker 5: Since the inception of the current National Master Freight Agreement that became effective in 2019, through April 1st of 2023, we are extremely pleased that we have been able to increase the wages for our union employees by nearly $5 per hour and more than 20%.
Speaker 4: I will now turn the call back over to Ziren for some closing comments. Thank you, Dan. The financial results on the path to completing one of the largest network changes ever implemented by unionized LTO carrier are not linear. And we expect to change is that we're making today.
Speaker 4: will benefit customers, employees, and shareholders for many years to come.
Speaker 4: Throughout One Yellow, our goal has been to meet customers' needs, modernize our network, position Yellow for long-term success, and strengthen jobs.
Speaker 4: Thanks for your time this afternoon. We would now be happy to answer any questions.
Speaker 2: that you might have. Ladies and gentlemen, we'll now begin the question and answer session.
Speaker 3: The first question today comes from Jack Atkins from Stevens. Please go ahead with your question. Okay, great. Daring Dan, thank you for the time. I really appreciate it. So I guess if we could sort of dive into the one yellow initiative, you know, I don't think I'm letting the cat out of the bag.
Speaker 3: This is definitely dragging on longer than you would have anticipated in terms of trying to get, you know, phase two and phase three done.
Speaker 3: longer than you would have anticipated in terms of trying to get phase two and phase three done.
Speaker 3: Can you update us on maybe a timeline for when you would expect to maybe start to be able to execute on Phase 2? And what do you think that's sort of the major sticking points are here?
Speaker 4: Good afternoon, Jack. This is Darren and a great question to start with. Now, as I mentioned in the script, we continue to work with our union to determine the best path forward the implement phase to, and then we'll certainly turn our focus on refinancing the capital structure.
Speaker 4: The proven success of Phase 1 really sets the table for Phase 2. Phase 2 is much larger. It involves more local unions. It involves more employees. It involves more terminals. Certainly for the success that we've seen in Phase 1 to continue with Phase 2, we need to bring all of our employees along with us, make sure they understand what the changes are, how it affects them, their business.
Speaker 4: in the West, we've increased the productivity on our P&D side and also just by rationalizing those physical locations, we reduced the debt considerably from this time last year. So, you know, the benefits lead to us operating as one company, one network under one brand.
Speaker 4: that puts a value proposition out there for our large and loyal customer base that they'll reward us with tonnage and job expansion.
Speaker 4: The unions about creating jobs and creating membership will work hand in hand. And at the end of the day, I'm confident in this process, because both sides are determined to get a deal done that works for everyone involved. Now the path to that.
Speaker 4: Still is going to be determined, but the urgency around it and the interest in it, the communication lines are open and we'll communicate that implementation day publicly once it's determined. So that's what we're at on those front checks.
Speaker 3: Okay, I understand that you're limited in terms of sort of what you could say there But I appreciate the color and then in terms of the capital structure You know Do you feel like you have to get one yellow done before you can before you can You know really go sheet the capital structure and the death that comes to next year or is that
Speaker 4: that jump in as well. So we're picking up and delivering freight today just like we do every day. We're not as efficient as we can be without one yellow. And the marketplace, they pick winners and losers every day, bottom line. We have to provide a value proposition that's equal.
Speaker 4: to our national competitors in the LTL market and one yellow is certainly the way to do that. So it's imperative that we complete our one yellow strategy. It strengthens the company, it protects jobs, it ensures that our customers are well cared for and that the range of services is matched the marketplace.
Speaker 4: bottom line. We're in a very strong position from the collateral that we have in place and I'll tee that up with Dan speaking to the capital structure.
Speaker 5: Good afternoon, Jack. Just a reminder, first off, we extended an upside ABL facility in the fourth quarter of last year, and then in January , as I mentioned, we paid off the remaining $66 million due on the CDA notes.
Speaker 5: We have to earn our focus towards the term loan and the U.S. Treasury loans, which mature respectively in June and in September of 2024. Now that said, with those maturities still being more than a year away, at this point in time, we continue to stay actively engaged in understanding what the best options will be to deal with those term loans.
Speaker 5: And just to be in the best position possible to address them once we have clarity around the implementation date of phase two.
Speaker 3: Okay, okay. Understood. Let me kind of move on to something else if I could. You know, you talked about April trends being, if I hurt your right, Dan, maybe mistaken, but a little bit better than normal seasonality. Can you maybe talk about April ?
Speaker 3: First half of the month, second half of the month, did you see an acceleration trend? That's encouraging that we're kind of performing a lot of seasonality. In terms of April , it's been said that the first half, second half, pretty consistent throughout the month. You know, broader.
Speaker 5: speaking from a tennis perspective, you know, your over-year health care tennis per day, as I mentioned, Q1 was not fall percent. That was slightly better than we expected. When I look at each month of the quarter,
Speaker 5: January and February were a little bit better than expected, but March was lower than expected, of course, as a result of not seeing the traditional seasonal list that Darren mentioned. On a sequential basis from Q4 to Q1.
Speaker 5: LCL finished per day was up 1.2%. So December to January was better than expected. January to February was right in line with what we expected. And then again February to March was weaker than expected.
Speaker 5: Historically, we see about a 5% increase from February to March, but this year we were only up about 1.5% of 1%.
Speaker 5: And then if I think about LTL 10th is per day for the second quarter, historically we'd see about a 6% increase from Q1 to Q2.
Speaker 5: From month to month throughout the second quarter, we do expect to see the normal sequential changes, but with March being weaker than expected and that being the jumping off point for Q2, I would expect that the second quarter in total would be below that historical 6% sequential increase. Okay, and so I guess they're just kind of carrying that through.
Speaker 3: And this is the last one for me and I'll jump back in queue. I don't want to hog all the questions. But you know, I guess how are you thinking about how that translates into operating ratio relative to normal seasonality? If revenue is below trend, tonnage below trend, I would imagine that's probably going to mean OR is going to be below trend, but can you walk us through your thoughts there? So.
Speaker 5: Yeah, so operating ratio for Q1 with a 100.8 and that was pretty much in line like there instead was what we expected.
Speaker 5: And that did not include any significant one-time item, so I would consider that a good japping off point to use when thinking about the second quarter. Normally it's sequentially going from Q1 to Q2. We see improvement of 300 to 400 basis points in operating ratio.
Speaker 5: I would expect some level of improvement from Q1 to Q2 this year, but taking into consideration that we didn't see the seasonal lift in tonnage during March and April , combined with the union wage increases that took effect on April 1st.
Speaker 5: and the fact that contractual renewals have moderated.
Speaker 5: To your point, I would expect the level of improvements to be less than that historical trend.
Speaker 3: You would see you would expect some improvement but less than the historical trend. That's correct. Okay. Well guys, I'll hand it over to the next person in queue but thank you for taking my questions.
Speaker 3: improvement but less than the historical trend. That's correct. Okay. Well guys, I'll hand it over to the next person in Q, but thank you for taking my questions. Thank you, Jack.
Speaker 2: And our next question comes from Scott Group from Wolf Research. Please go ahead with your question.
Speaker 6: Hey guys, this is Erin on Per Scott. Thanks for taking our questions. I just wanted to start out, so just looking at one queue, you know, noticing tonnage, you know, increased sequentially, but yields were down sequentially. Like how, I know that you're folks on yields, but how are you kind of balancing this tonnage versus yield?
Speaker 6: situation this week environment and then just take you back and up jack to you and mention that you will see some improvement in OR from one Q to two Q. Is that to make sense also some revenue improvement as well, like how should we think about rev per 100 weight to congratulate from one Q to two Q.
Speaker 5: Yeah, good afternoon Aaron, this is Dan. Let me start and then I'll talk to Dan for some further comments. You know, Dan mentioned his opening comments in Q1. We saw you over your improvement yield and we do expect to maintain the gains we've made over the past couple of years.
Speaker 5: That said, the year over year percent is comparisons, and it's a quite so gains in pricing and moderating, just as we expected they would, especially in a weaker freight environment. That's evidenced by the recent contractual renewals, which...
Speaker 5: On a year-to-date basis, they're averaging between 2 and 3% compared to more than 10% a year ago. Those contractual renewals reflect the execution of the overall pricing strategy to get paid appropriately for the work we perform.
Speaker 5: as well as on a very selective basis making strategic moves to either protect or to add a profitable business to the network.
And this is Darren, I would just add, with the current limitation and the union agreement on the over-the-road portion of purchase transportation, we'll certainly be leaning into pricing to protect our network, and that'll be the plan of tech service in Q2, as long as that limitation is placed.
Thank you. And then just to liken us to another one, like how I know that we talked about sequential margin improvement. How should we think about like EBITDA trends, 1.2 to 2.2? I know that you had sort of limited one time, like, games on sales is quarter. I'm just curious, like, where that trend is as well. I don't know.
Yeah, I just say from an even out perspective, it's going to follow the same trajectory as what the operating ratio.
you know, changes would be. I think that's a good proxy for thinking about the justity of the Dow. Okay, okay. And then I guess like all in, you know, with these like trends in mind sequentially, like should we expect, you know, profitability at the operating line next quarter or this quarter, apologies.
I'm sorry, miss that was that last part here.
Just given all what you laid out, just a sequential trend, and where you expect to land versus seasonality, can we expect that you'll be profitable in an operating basis in QQ? Yeah, let me just touch on revenue for a little bit.
including the impact of the tonnage decline with the essentially flat or down 1 to 2%.
Sequentially from Q1 to Q2, fuel prices are expected to decline by about another 7% whereas last year they went up by almost 30%. But for the second quarter, we expect fuel search aren't revenue to be moderately lower than in the first quarter, and significantly lower on a year-over-year basis from a total minimal revenue perspective though.
even despite a moderate sequential decline in...
and fuel search tried to revenue. And even if we don't see the normal historical sequential increase in tonnage of 6%, I would expect total revenue could still be slightly higher in Q2 than it was in Q1. Q1.
Got it. Okay. Thank you. Thanks for answering the questions.
Thank you, Aaron. Our next question comes from Jeff Kaufman from Vertical Research Partners. Please go ahead with your question.
Thank you very much. Hey everybody. Good afternoon. I think all the smart questions have been asked at this point. So let me try and come up with something a little less smart here.
You did mention that there was a drag on your operating results from the final implementation of P1 and the planning stage for Phase 2. Could you elaborate on what you think either the OR would have been or how much of a drag you think you bore in the current quarter and then with Phase 2 being three times the size of Phase 2.
phase two perspective, we're certainly carrying a lot of additional headcount from a planning and execution stage and training stage. All that's still in place and will remain in place per all the benefits that I talked about that one yellow brains wants.
It's implemented across the network. So that's an investment with a lot of people that aren't associated with a daily movement afraid that we're utilizing to be in place to ensure the success of that. The lessons learned from Phase 1, big time benefit for Phase 2. That's exactly why we did it that way. A smaller part of it.
cost in Phase 1 was utilizing traveling employees in certain portions of the country where we didn't have enough drivers, dock workers, etc., which is not completely associated with Phase 1, but somewhat associated with parts of the country where hiring can be a challenge.
and we had to supplement that with some traveling employees until we were hired up in those areas. Dan, include anything that a might have missed. Yeah, I was just saying additional...
you know costs over and above operational support and training that Darren mentioned would be you have some costs associated with Repositioning of equipment. I think about the financial impact of Q1. I think it's hard to exactly buy for K-Pose cost or our best Desmond is somewhere between four and six million dollars for the quarter
Okay, thank you. And just one follow-up if I can. You mentioned liquidity of 167 million cash about 154 to M-254. Is there a minimum cash balance that you would like to be at or above as we work through this environment and as we work through the integration?
Jeff, I say there's not necessarily a specific number, but more obviously, of course, it's better than less.
Yeah, more is always good, right? I just didn't know if there was a floor where your mind is okay, we just don't want to go beneath this. If we have to tweak cat-backs or something like that, we do it. But I guess your point is you're not worried about that. I say just from a broader liquidity perspective, you know.
down 75 million from the end of the year, but that also included the $66 million payment.
We made in January related to the CDA notes. So excluding that, liquidity came down by about $9 million for the quarter, and we had positive operating cash flow in Q1 for the first time in more than five years. That's a direct result of our continuous efforts and focus on the balance sheet and our working capital. From a free cash flow perspective, we continue exercising prudence in our capital planning efforts, which is a good thing.
Allow us to remain flexible around capex levels in all areas of business, especially in the near-term. Yeah, and I would just say this is there, and I would just add that we'll continue matching the size of our workforce to the volume and the network and to the needs of our customers, but also tightly managing purchase transportation, not just the over-the-road portion, but the entire piece.
as well. All right. Thanks so much and congratulations in a tough quarter. Thank you very much. Thank you, Jeff. In our next question comes from Bruce Chan from Steeple. Please go ahead with your question. Thank you.
Thanks operator and good afternoon everyone. Just a few quick follow-ups for me here. I know right now in the industry there's a lot going on, a lot of shares you have happening are potentially happening right now. As you think about the change of operations and the network integration, have you seen any customer? No.
If so, is there a pattern of you towards maybe winning some of that business back or given some of the network changes maybe do you even have to?
This is Darren, great question. One of the benefits that yellow was with all the brands that we've owned over a large number of years is the large and whole customer base that we got because of that. When you look at the public reported numbers of total customers,
in the LTL area for each individual company. Yellow typically is at the top of that list because of all those relationships that have been built over a long period of time. That's not just about having the relationship with a customer. It's what share of their span that that customer is giving to you. Certainly, one yellow is our pathway.
to take some of the frustration out of a customer service experience that our customer see. Where they can do business with one website, one pro number, one account executive, one driver from our company visiting their location on a daily basis, those type things. So we do believe there's a tremendous growth opportunity.
on the other side of one yellow. Well, we're getting there. I like the responsiveness and the loyalty of the customers that we have. They've continued to give us a large number of shipments on a daily basis. And we will continue to protect that through this down cycle in the economy until we see destocking.
improve somewhat and once we get to the bottom of that I believe the majority of customers out there are certainly wise to the fact that there will be a capacity challenge again because of what all carriers have had to do during this downturn and also not being determinative on how long the downturn's going to last. Okay great that's really helpful and then maybe just one
Okay, great. Thanks for that color. And ladies and gentlemen, this concludes our earnings call. I'd like to turn the comments call back over to the company for any closing remarks. Thank you, Operator. And thanks again to everyone for joining us today. Please contact Tony with any additional questions that you may have. This concludes our call and operator. Later, I'm turning the call back to you.
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There will be a question and answer session.
Please note this event is being recorded. At this time I'd like to turn the conference call over to Tony Carino, Senior Vice President of Treasury and Investor Relations. Sir, please go ahead.
Thank you, operator, and good afternoon, everyone. Welcome to Yale Corporation's first quarter of 2023 earnings conference call.
Joining us on the call today are Darren Hawkins, Chief Executive Officer, and Dan Olivier, Chief Financial Officer. During this call, we may make some forward-looking statements within the meaning of Federal Securities Law.
These forward-looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and a number of risks.
These forward looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and a number of risks. Therefore, actual results may differ materially.
The format of this call does not allow us to fully discuss all these risk factors. For a full discussion of the risk factors that could cause the results to differ, please refer to this afternoon's earnings release and most recent SEC filings, including our forms 10-K and 10-Q. These items are also available on our website at myyellow.com.
Additionally, please see today's release for a reconciliation of net loss to adjusted EBITDA. In conjunction with today's earnings release, we issued a presentation which may be referenced during the call. The presentation was filed in an AK along with the earnings release. It's available on our website. I will now turn the call over to Darren.
Thanks, Tony, and good afternoon, everyone. Thank you for joining our call.
The Q1 results were in line with our expectations when considering the slowdown in the economy, combined with the one-yellow network transformation that we were undergoing. The number of daily shipments was consistent throughout the quarter without the typical early spring acceleration.
demand that we are accustomed to see in March. In the near term, demand continues to be relatively flat due in part to ongoing stock.
we are accustomed to see in March. In the near term, demand continues to be relatively flat due in part to ongoing stockings.
Q1, we improved year-over-year despite following strong growth a year ago. We have been consistent with our strategy to improve yield on the freight moving through Yellow's network, and this is the 10th consecutive quarter where LTL revenue per 100 weight.
excluding fuel has increased on a year over year basis. Looking ahead, we plan to stick to our strategy and their goal was to maintain the price and the gains made in recent years, which will be balanced with managing through the stagnant demand environment and fuel price headwinds. For the month of April , yellow average between a 1 and 2% increase on contract negotiations.
In Q1, our results were also impacted by elevated costs associated with the network transformation, including remaining expenses following the successful implementation of Phase 1 last September and planning in preparation for Phase 2. Phase 1 included approximately 20% of our network in the western United States. The realigned and optimized terminal coverage positioned us closer to the customer.
which has enabled us to enhance our service. Following the implementation of Phase 1, our customers have seen improvement across a broad range of areas that hautatively impact the customer experience, including an improvement in percentage of shipments going out for delivery before 9.8. A reduction in mispickups.
and improvement in the percentage of shipments departing origins by 10 p.m. Our goal is to exceed customer's expectations with a red carpet experience and the improvements that we are seeing in phase one, our examples of why moving to a super regional carrier is in the best interest of our customers, employees, and shareholders.
Phase 2 consists of legacy YRC freight, Holland, and Nupenn terminals in the Midwest, Northeast, and Southeast, and covers approximately 70% of the network. We plan to communicate externally when an implementation date is determined.
It's imperative that we complete our One Yellow strategy, which will strengthen the company, protect 22,000 union jobs, and ensure that our customers are well cared for and receive the range of services that today's market demands.
Phase one is a success and as we look ahead we plan the work with the IBT to determine the best path forward to implement phase two and then turn our focus on refinancing the capital structure.
Turning the purchase transportation expense would continue to show improvement, primarily due to targeted efforts to reduce the use of over-the-road purchase transportation and to reduce equipment lease expense. In Q1, purchase transportation expense was down to 13.1 percent.
of revenue, which is a 160 basis point improvement compared to a year ago, and a 360 basis point improvement compared to two years ago. We recently announced the addition of David Weber to our board of directors. Mr. Weber is a law professor at Boston University and is a nationally recognized expert in pensions, as well as shareholder activism and litigation.
He was selected by the International Brotherhood of Teamsters to join the Board of Directors pursuant to its rights as the holder of yellow Series A voting preferred stop.
I am very pleased to welcome Mr. Weber to Yellow's Board of Directors and the company will benefit tremendously from his insight. Thank you again for joining us today and I will now turn the call over to Dan who will share additional details about the quarter.
Thank you, Darren, and good afternoon, everyone. For the first quarter, 2023, operating revenue was 1.16 billion compared to 1.26 billion in 2022.
An operating loss was $9.3 million compared to operating income of $9.2 million in the prior year.
including a $5.5 million net gain on property disposal. Adjusting EBITDA for the first quarter of 2023, $34.3 million compared to $52 million in 2022.
The Justin Heavidot for the last 12 months was 325.4 million compared to 341.4 million a year ago.
The 8.1% decrease in year-over-year operating revenue in the first quarter was primarily attributable to lower volume and reduction in fuel surcharge revenue. Including fuel surcharge, first quarter LCL revenue per 100 weight was up 4.4%, and LCL revenue per shipment was up 6% compared to a year ago.
Excluding fuel surcharge, LTO revenue per 100 weight was up 2.8%, and LTO revenue per shipment was up 4.4%. LTO tonnets per day in the first quarter was down 12%, driven by a 13.3% decrease in LTO shipment per day, partially offset by a 1.5% increase in LTO weight per shipment.
Sequential LTL tennis per day trends compared to the prior year were as follows.
January down 17.2%, February up 1.3%, and March down 16.9%. On a preliminary basis, April LTL 10 is per workday with down approximately 16% compared to last year. On a sequential basis for March to April , our LTL 10 is per day with up approximately 8.8%.
million compared to $276.9 million at the end of the first quarter 2022.
As a reminder, in early January we paid the remaining $66 million due on the CDA notes that matured at the end of 2022 consistent with the terms of the agreement.
Total debt at the end of the first quarter of 2023 was 1.51 billion compared to 1.61 billion at the end of the first quarter 2022.
Turning to hourly wages and mileage rates for our union employees. For 2023, our National Master Freight Agreement includes contractual wage increases of 40 cents per hour and one cent per mile on both April 1st and October 1st. In addition, the contract also includes a cost of living allowance clause which provides for an additional $50,000 to the union's budget. In addition, we also include a cost of living allowance for $20,000 to the union's budget. In addition, the contract also includes a cost of living allowance for $20,000 to the union's budget.
resulting in a total April 1st wage increase of $0.77 per hour and $0.1.925 per mile.
which is a wage increase of approximately 3%. For full year 2023, we expect our total union wage and benefits to increase between 4 and 5%.
Since the inception of the current National Master Freight Agreement that became effective in 2019 through April 1, 2023, we are extremely pleased that we have been able to increase the wages for our union employees by nearly $5 per hour and more than 20%. I will now turn the call back over to Darren for some closing comments.
Thank you, Dan. The financial results on the path to completing one of the largest network changes ever implemented by a unionized LTL carrier are not linear, and we expect the changes that we're making today will benefit customers.
employees, and shareholders for many years to come. Throughout One Yellow, our goal has been to meet customers' needs, modernize our network, position Yellow for long-term success, and strengthen jobs. Thanks for your time this afternoon. We would now be happy to answer any questions.
for many years to come. Throughout one yellow, our goal has been to meet customers needs, modernize our network, position yellow for long-term success, and strengthen jobs. Thanks for your time this afternoon. We would now be happy to answer any questions that you may have.
Ladies and gentlemen, we'll now begin the question and answer session. The first question today comes from Jack Atkins from Stevens. Please go ahead with your question. Okay, great. Darren, Dan, thank you for the time. Really appreciate it. So I guess if we could sort of…
dive into the One Yellow initiative. You know, I don't think I'm letting the cat out of the bag. This is definitely dragging on longer than you would have anticipated in terms of trying to get phase two and phase three done.
You know, can you update us on maybe a timeline for when you would expect to maybe start to be able to execute on Phase 2? And what do you think that's sort of the major sticking points are here?
Good afternoon, Jack. This is Darren and a great question to start with. Now, as I mentioned in the script, we continue to work with our union to determine the best path forward to implement phase two, and then we'll certainly turn our focus on refinancing the capital structure. The proven success of phase one really sets the table.
what the changes are, how it affects them, their bids, all of those items. We know what it does for the customer. One yellow is a growth strategy. We've seen the increase in the property and rolling stock asset utilization in the West. We can expand service offerings. We're creating density and reducing miles.
on a daily basis in the West. We've increased the productivity on our P&D side and also just by rationalizing those physical locations we reduced the debt considerably from this time last year. So, you know, the benefits lead to us operating as one company, one network under one brand.
And at the end of the day, I'm confident in this process because both sides are determined to get a deal done that works for everyone involved. Now, the path to that still is going to be determined, but the urgency around it and the interest in it, the communication lines are open.
and we'll communicate that implementation date publicly once it's determined. So that's where we're at on those fronts, Jack. Okay, and I understand that you're limited in terms of sort of what you could say there, but I appreciate the color. And then in terms of the capital structure, you know...
Do you feel like you have to get one yellow done before you can really go sheet the capital structure and the death that comes to you next year or is that something that?
You know, is that something that can you know, what if this thing just keeps dragging out? I guess they're not all just asking point blank away. What point do you need to pivot to the capital structure? Yeah, so I'll start with that and then let them jump in as well. So we're picking up and delivering freight today just like we do every day. We're not as efficient as we can be without...
strategy. It strengthens the company, it protects jobs, it ensures that our customers are well-cared for and that the range of services match the marketplace. Bottom line, we're in a very strong position from the collateral that we have in place, and I'll tee that up with Dan speaking to the capital structure. Yeah, good afternoon, Jack. Just a reminder, first off, we extended the last session of the webinar.
and understanding what the best options will be to deal with those term loans, and just to be in the best position possible to address them once we have clarity around the implementation date of Phase 2. Okay, okay.
I'm not sure if that's understood. Understood Let me kind of move on to something else. If I could, you know, you talked about April . Trends being if I heard you right, then maybe mistaken, but a little bit better than normal seasonality. Can you maybe talk about April ? First half of the month versus second half of the month. Did you see? Did you
That's encouraging that we're kind of performing in line with seasonality. In terms of April , it's been steady, first half, second half, pretty consistent throughout the month. You know, broader speaking from a tonnage perspective, year over year, healthy alternatives per day, as I mentioned in Q1, was down 12%. That was slightly better than we expected. When I look at each month of the quarter, we're down 12%.
January and February were a little bit better than expected, but March was lower than expected, of course, as a result of not seeing the traditional seasonal list that Darren mentioned. On a sequential basis, from Q4 to Q1, LTL per day was up 1.2%. So December to January was better than expected. January to February was right in line with what we expected. And then again, February to March was weaker than expected. Historically, we see about a 5% increase from February to March, but this year,
We were only up about one half of 1%. And then as I think about LTL tonnage per day for the second quarter, historically we see about a 6% increase from Q1 to Q2. From month to month throughout the second quarter, we do expect to see the normal sequential changes, but with March being weaker than expected and that being the jumping off point for Q2, I would expect that the second quarter in total would be below that historical 6% sequential increase. Okay. And so I guess Dan just kind of carrying that through.
And this is the last one for me and I'll jump back and cue. I don't want to hog all the questions. But you know, I guess how are you thinking about how that translates into operating ratio relative to normal seasonality? If revenue is below trend, tonnage below trend, I would imagine that's probably going to mean OR is going to be below trend, but can you walk us through your thoughts there?
Yeah, so operating ratio for Q1 was 100.8 and that was pretty much in line, like Darren said, with what we expected. And that did not include any significant one-time items, so I would consider that a good jumping off point to use when thinking about the second quarter. Normally sequentially going from Q1 to Q2, we see improvement of 300 to 400 basis points in operating ratio. I would expect some level of improvement from Q1 to Q2 this year, but...
taking into consideration that we didn't see the seasonal lift in tonnage during March and April , combined with the union wage increases that took effect on April 1st, and the fact that contractual renewals have moderated.
To your point, I would expect the level of improvement to be less than that historical trend. So you would expect some improvement but less than the historical trend? That's correct. Okay. Well, guys, I'll hand it over to the next person in queue, but thanks for taking my questions. Thank you, Jack. And our next question comes from Scott Group from Wolf –
your focus on yields, but how are you kind of balancing this tonnage versus yield situation this week environment? And then just piggybacking off Jack, you had mentioned that you will see some improvement in OR from 1Q to 2Q. Can we expect also some like revenue improvement as well? Like how should we think about?
to maintain the gains we've made over the past couple of years. You know, that said, the year over year percentage comparisons, and it's a quite so gains in pricing and moderated, just as we expected they would, especially in a weaker freight environment. And that's evidenced by the recent contractual renewals, which...
to you too, as long as that limitations have placed. That is, thank you. And then just to thank that's another one. Like, how I know that we talked about sequential margin improvement. How should we think about like EBITDA trends, the one Q to Q? I know that you had sort of limited one time.
for like games on sales with quarter. I'm just curious like where that trend is as well. Well,
Yeah, I would just say from an E-thaw perspective, it's gonna follow the same trajectory as what the operating ratio changes would be. I think that's a good proxy for thinking about adjusted E-thaw.
Okay, okay. And then I guess like all in, you know, with these like trends in mind, like, should we expect, you know, profitability at the operating line next quarter or this quarter? Apologies. Okay. So it's always great to keep a record high. Thank you.
Okay, okay. And then I guess like all in, you know, with these like trends in mind sequentially, like should we expect, you know, profitability at the operating line next quarter or this quarter? Apologies. I'm sorry I missed that. What was that last part?
Just given all like what you've laid out just the sequential trends and where you expect to land just versus seasonality like can we expect that you'll be profitable and like you know an operating basis in 2Q? Yeah let me just touch on revenue for a little bit since that was part of your first question.
drag, you think you bore in the current quarter and then with phase two being three times a size of phase one, but maybe we're a little bit smarter having gone through it. What kind of drag might we see on operating results as you work through this? Yep, good afternoon, Jeff. This is Darren. I'll start with that and let them.
once it's implemented across the network. So that's an investment with a lot of people that aren't associated with the daily movement of freight that we're utilizing to be in place to ensure the success of that. The lessons learned from Phase 1, big-time benefit for Phase 2. That's exactly why we did it that way.
part of the cost in phase one was utilizing traveling employees in certain portions of the country where we didn't have enough drivers, dock workers, etc. which is not completely associated with phase one, but somewhat associated with parts of the country where hiring can be a challenge.
and we had to supplement that with some traveling employees until we were hired up in those areas. I can't include anything that I might have missed.
Jeff, I'd say there's not necessarily a specific number, but more obviously is better than less. Yeah, more is always good, right? I just didn't know if there was a floor where your mind is, okay, we just don't want to go beneath this. If we have to tweak CapEx or something like that, we do it. But I guess your point is you're not worried about that. Well, I'd say just from a broader liquidity perspective, liquidity free cash flow, they're at the top of our priority list every single day. I am pleased that throughout the first quarter we were able to maintain the solid liquidity position. As I mentioned in my opening comments, you called out that...
liquidity at the end of Q1 was $167 million. That's down $75 million from the end of the year, but that also included the $66 million payment we made in January related to the CDA notes. So excluding that, liquidity came down by about $9 million for the quarter, and we had positive operating cash flow in Q1 for the first time in more than five years. That's a direct result of our continuous efforts and focus on the balance sheet and our working capital.
From a free cash flow perspective, we continue exercising prudence in our capital planning efforts which allows us to remain flexible around CapEx levels in all areas of the business, especially in the near term. Yeah, and I would just, this is Darren, I would just add that we'll continue matching the size of our workforce to the volume and the network.
and to the needs of our customers, but also tightly managing purchase transportation, not just the over the road portion, but the entire piece as well. Alright, thanks so much and congratulations in a tough quarter. Thank you very much.
to the needs of our customers, but also tightly managing purchase transportation, not just the over the road portion, but the entire piece as well. All right, thanks so much, and congratulations in a tough quarter. Thank you very much. Thank you, Jeff.
And our next question comes from Bruce Chan from Stiefel. Please go ahead with your question. Hey, thanks, operator, and good afternoon, everyone. Just a few quick follow-ups for me here. I know right now in the industry there's a lot going on, a lot of share shifts happening or potentially happening right now. As you think about the change of operations and the network integration, have you seen any customer attrition? And if so…
Is there a path or a view towards maybe winning some of that business back or given some of the network changes, do you even have to? Bruce, this is Darren. Great question. One of the benefits at Yellow with all the brands that we've owned over a large number of years is the large and loyal customer base that we've got because of that. When you look at the public reported numbers of total customers in the LTL area for each individual company, Yellow typically is at the top of that list because of all those relationships.
It's been built over a long period of time. That's not just about having the relationship with a customer, it's what, share of their span that that customer is giving to you. Certainly, one yellow is our pathway to take some of the frustration out of a customer service experience that our customers see. Where they can do business with one website, one pro number, one account executive, one driver from our company visiting their location on a daily basis, those type things. So we do believe there's a tremendous growth opportunity.
there are certainly wise to the fact that there will be a capacity challenge again because of what all carriers have had to do during this downturn and also not being determinative on how long the downturn is going to last.
Okay, great. That's really helpful. Then maybe just one last question here. I know you all got an injection of some new equipment a few years ago. As you think about the integration and network consolidation process, is there an opportunity to bring the Fleet Age down further as you sort of...
rationalize terminals and footprint and equipment pools? Well, it's one of the most exciting things about 1Yellow is the asset utilization piece. Not only do we go away from four separate line haul networks where we can have one line haul network that creates density and reduces miles across the whole thing.
But bottom line, when we're pulling back on CAPTAX during a downturn and once things do improve that we could be in a position to actually create our own capacity, not through buying, leasing, or building anything additional from a tractor trailer or terminal property standpoint.
that we would create that additional capacity just by eliminating the redundancy, and that especially applies to tractors. Okay, great. Thanks for that, caller. And, ladies and gentlemen, this concludes our earnings call. I'd like to turn the conference call back over to the company for any closing remarks.
Thank you, operator, and thanks again to everyone for joining us today. Please contact Tony with any additional questions that you may have. This concludes our call, and operator, I'm turning the call back to you. The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your line.