Patriot Transportation Holding Inc. Q2 2023 Earnings Call
Yeah.
Good day, everyone and welcome to the Patriot Transportation Holding's, Inc, earning call for second quarter.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is not my pleasure to turn the floor over to your host Rob Sandlin, CEO and president of Patriot Transportation Holding's, Sir the floor is yours.
Good afternoon, and thank you all for being on the call today and for your interest in Patriot transportation.
I am Rob Sandlin CEO of Patriot transportation and with me today are Matt Mcnulty, our Chief Financial Officer, and Chief operating Officer, and John Klopfenstein, Our Chief Accounting Officer before we get into our results. Let me caution you that any statements made during this call that relate to the future are by their nature subject to risks and uncertainties.
That could cause actual results and events to differ materially from those indicated by such forward looking statements.
Additional information regarding these and other risk factors and uncertainties may be found in the company's filings with the Securities and Exchange Commission.
Now for our second quarter results.
Today, the company reported a net income of $475000 or <unk> 13 per share for the quarter ended March 31, 2023 compared to a net loss of $490000 in the same quarter last year.
Operating revenues for the quarter were $23 million $465000 up $2.537 million from the second quarter last year due to rate increases higher fuel surcharges increased miles and an improved business mix.
Myles this quarter increased 97000 miles over last year's quarter, mainly due to an improving driver count operating.
Operating revenues per mile was up 40, <unk> or 10, 2% versus last year's quarter.
Compensation and benefits increased $2.081 million, mainly due to increased driver compensation to the increased driver compensation package, including an increase in driver training pay of $211000 versus the same quarter last year and an increase in owner operators.
Depreciation expense was down $107000 in the quarter and gains on sale of equipment was $275000 compared to $119000 gain in last year's quarter.
The operating profit this quarter was $584000 compared to an operating loss of $639000 in last year's second quarter.
Now for the six month results. The company reported net income of $960000 27 per share compared to $5.949 million in the same period last year, which included $6 million $281000 from gains on real estate net of income taxes.
Operating revenue for the period were $46 $46.315 million, an increase of $4.816 million due to rate increases higher fuel surcharges and an improved business mix.
Operating revenue per mile was up 53% or 13, 8% miles.
Myles for the period were down 202000 miles versus last year's period, mainly due to closing of our Nashville terminal last year.
Compensation and benefits increased $3 million $202000 due to the increases in driver compensation, including a $296000 increase in driver training pay versus last year's period and increases in owner operators.
Fuel expense increased $440000 for the period insurance and losses decreased $756000 due to lower health and risk claims and depreciation expense was $310000 lower versus the same period.
Gains on equipment.
Sales was $341000 compared to $479000 in the same period last year.
SG&A increased during the period $406000 due mainly to bonus accrual increased travel and higher 401K match.
Operating profit was $1 million $204000 compared to 7 million 900 in $2000 for last years six months.
Higher year gain on real estate was $8.330 million due to the sale of our Tampa terminal and land.
Now for the summary and outlook.
In the first half of our fiscal 2020 through 2023, we added business with new and existing customers on the back of a higher driver count and increased miles quarter over quarter over prior year quarter for the first time in several years.
We also have new business opportunities boats going forward into the third quarter and will continue to focus our growth with new and existing customers that meet our stated goal of adding business that will improve our return on investment.
We had $6.941 million of cash at the end of the first quarter.
At the end of this period with no outstanding debt.
We had 73, new tractors during our year 44 of the trackers or place our existing company fleet and 29 will replace leased tractors with company owned tractors, we believe replacing the 29 leased tractors with company units will provide a better financial result, and is a good use of cash.
Cash.
We continue to focus on our driver hiring and retention while the driver hiring market is still very challenging our driver count increased during the second quarter, which allowed us to add miles throughout the period.
This comes at a cost as shown earlier with $296000 of added driver training cost compared to the prior year.
Wherever they added driver the added capacity is encouraging for our plans to grow miles and revenue due to the previous driver pay increases turnover results have been lower among our drivers with a year or more of seniority.
New driver acquisition, while improved continues to result in high turnover, but with better results than this time last year.
The trend of general freight spot rates declining has allowed us to add Moreover operators in several markets and we will continue to monitor and balance with company drivers and.
In closing our safety goals are on target for the year with the exception of product mixes and we will continue our efforts to keep preventable incidents and related expenses in check while also staying focused on quality customer service. We believe we are positioned well to take advantage of the seasonal volume increases along with committed new biz.
<unk> that I mentioned earlier. Thank you again for your interest in our company and we will be happy to entertain any questions.
Certainly at this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
We do ask that while posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone.
Please hold while we poll for questions.
Your first question is coming from Martin Lorenzen Your line is live.
Okay.
Hey, good evening long time listener first time caller here from Europe . Thank you for taking my questions. The serve thank you.
Can you remind investors of allergy or a P. P. M E item on the balance sheet and particularly.
How much of that is related to terminals are how many 10 minutes left and how do you think about that asset base.
To break out how much of that is related to the terminals would take take a little bit of time.
But but as far as how many terminals. We have left we've got 17 terminals terminal locations currently.
And I think thats down from.
One one you know if you.
It went all the way back to 256 years ago, when we first at our terminal pleasure in Birmingham.
Okay and.
Would you say is are the economic benefit of a few owning that infrastructure.
Well I mean, a lot of it is that we don't experience any real expense for them and I believe own those properties. Most of those properties going back you know 50 years lets you says it as an example.
Part of it has been depreciated and so theres not a lot of there's not a lot of cost to us and owning those facilities other than the maintenance versus if we were to go out and lease properties today it would be extremely expensive.
Yeah that makes sense, yeah certainty and.
If you compare the existing months are the the last 17 ones. So the one that's being sold that was sold to Amazon.
Would you say are the economic value is comparable or just no it's very broad.
Yeah, no that that property was extremely unique as far as the rest of our properties go the rest of our properties are.
That was there was a lot of excess land and it was a it was in a place in Tampa that it has extremely high property values.
Place known as South Tampa, So we don't have anything like that left everything else in our network is relatively smaller properties and industrial type areas.
I mean, they've got value because obviously, even industrial properties are limited in most cities, but there there's nothing like that left in our network.
Okay. Thank you for clarification and then last thing just.
A little bit more longer term.
How do you think about smaller acquisitions I can only imagine that there's some distress and smaller mom and pop shops, given the current what what's less environment and.
The cost inflation.
Sure I think this is Rob good question and we are continuously being.
Acquisition opportunities and we've.
We've looked at a number of them. We've we've taken a shot at one or two small ones and and we will continue to do that.
But we hours will be a focus on.
An acquisition Thats, a good strategic acquisition or a bolt on that makes good that's going to provide something accretive to the shareholders in some return on investment.
So a couple of them we've looked at probably went for higher prices than we would have been willing to pay and so we just have to kind of walk away from those but it's something that that's part of what we do.
On a monthly basis.
Add onto that mostly what we'd be looking at and therefore, there is to try and get some diversification have an acquisition. So.
But that's not the only thing but that would be a primary.
<unk>.
Item, we'd be trying to do through acquisition.
Alright, that's suddenly searching thank you gentlemen, thank you for great alright. Thank you. Thanks for the question.
Thank you. Your next question is coming from Christian Olson from Olson value Fund your line is live.
Hey, Christian.
Hi, there how are you.
Good.
So I wanted to see if you can give us an update on.
Where you're at at this point in your conversations with.
Tomorrow is about pricing.
Are there any relationships left where you think you really need to meaningfully improve the pricing in order for that relationship to really make sense for you. What would you say that you are really back to just normal ongoing price increases at this point.
Think we're I think we're somewhat back to normal.
Some of that will depend on what opportunities present themselves and how future negotiations go but I think we've done I think the way I generally answer that is I think we've done most of the heavy lifting.
With regard to partnering with the right with the right companies and that continues to pay off and that's where a lot of our growth is coming from.
But those but understanding that.
Those are typical and typically at least annual increases.
And so they'll start to roll again roll roll around again.
Some of them in the summer and into fall and then we'll get back through the early part of the year again.
Okay. That's helpful.
How would you characterize the competition out there in general.
What I would tell you that.
Theres not a lot of excess capacity in the marketplace. There feels like there is slightly more than there was say a year ago.
But not to the extent to wear a surge in.
Even a small surge in demand or any kind of disruption.
It creates a real problem all up we just had flooding in south Florida, and it took that market a couple of weeks to get caught back up and so I wouldn't tell you that theres a lot of excess demand out there and I think the same things that we're talking to you about.
As maybe a little bit of easily easing and the ability to get some drivers hired and owner operators has happened but.
Nothing on just a large scale. So I think everybody is probably mostly in the same position.
Yeah, and I also meant in terms of the pricing the rates.
He said you know how would you characterize the competition are there well.
Well I can't I don't I can't it's hard for me to speak for what the competition is doing on pricing, except that I will tell you. We've told you guys.
As we've gone along and we raise driver pay and we've we've raised our drive freight rates significantly over that same period of time and.
I think if the competition wasn't doing the same thing.
We would have lost.
Business by now we really haven't seen that happen if anything.
So we've added business and our partnerships have improved so that should be a little bit of an indication of what's going on in the market.
Okay, great. Thank you very much Oh I'm sorry.
Thank you. Your next question is coming from Stephen Dennis Your line is live.
Hi, I'm a shareholder.
Hey, how are you. Thank you well I don't know if it is fair.
With Florida, Florida.
Like saying I'll prod, where when I go to see all trucks.
In action.
Well, that's the places to go to the port of Tampa.
To watch our trucks coming in and out of there and then if you wanted to see them in action I would just follow them to out of there too late to a station or that for you as a shareholder if you'd like to go watch a driver.
Can't really watch them load you can you can pull into the port facility and see what the the port facilities look like but if you want to call me I would be glad to arrange for you to go watch one of our drivers unload with one of our management or likelihood.
I can do that can I see something in Sarasota or I have to go to Tampa we've.
We've got we've got Sarasota Clearwater, St. Pete stuff. So we can find something close to you.
Okay Gonna do that.
Reach out to Matt or me.
One and we can help you we can help arrange that.
I think very good.
I like doing that I'd like to make sure we're there.
I think it would be good it'd be it'd be educational for sure you can reach out okay.
I'm going to call, Matt Yeah, Okay that sounds good.
Thank you. Thank you.
Thank you. Your next question is coming from Steve Rudd from Blackwell Your line is live.
Hey, guys, sorry, I missed the last conference call.
No interest in seeing the truck load and unload, but it sounds like that's a fun day.
I'm curious on our driver count is it now at 380 I know you mentioned in the press release.
Out of 30.
Is that bring us to $3 80, approximately as of yet.
John you, where we're at 387 as of today.
Oh, Craig revenue, producing drivers and and we've got more drivers in training.
No kidding, so maybe three.
A net increase of 37 drivers approximately versus year end is that about right.
But what was the last part of the question Devin sure like when I look at the incremental 37 or so drivers.
Did they come on.
Since January one since March.
31, I mean, they're ended most of those come on but I would say, yes John's right. I mean, that's that's from October one forward.
Bulk of those folks really started to increase in January January February that is really most of that is the bulk of that is since January and a lot of that happened in February and March and this month and this month going forward into April .
Well no no it isn't.
Getting very impressive now of those.
It tells US most of that number is not in our revenue number for this.
The quarter and it sounds like you've got more coming on what bringing about the more it's just is it training programs or I know, it's a combination but right in the idea of like how many yeah. Yeah I think it's too it's a few things one certainly the draw.
River pay increases that we've done have helped us with our retention levels and those drivers that have been here for a while the newer drivers pay is up and so I think thats helped.
We are we are we changed a few things in our recruiting.
Process and conversations.
To drive to get drivers in the door, a little quicker because some of the things that we were asking them. We felt like were just waste of waste of time, because we can find those things out later and so we've really kind of gone through the whole process.
Top to bottom and we think all of those things are helping and I think from the owner operator standpoint.
And we're certainly we certainly increase them as well I do think that the freight market out there, albeit in the port cities, it's tougher, but the freight market and the fact that the general freight prices not our freight prices are down some of those owner operators have had to move on to something else.
As you May know all of those used trucks they were buying over the last couple of years, where very high priced and so they've got to have good freight to be able to pay for those things.
So when we bring on owner operators compared to employees.
In the past I've used as a operating.
In terms of incremental revenue per driver.
Sorry profit per driver of used as a ballpark about $50000 or netted out about one seven per share.
Owner, operator situation are we at a lower <unk>.
Margin, because I've never quite understood.
I think from our perspective, whatever the number is.
We feel like the incremental benefit to the owner operators similar to the company driver to us through us.
To you guys right. So how many more drivers I know, it's a tough question, but you guys clearly have hit the right formula markets hitting right and.
These guys who bought the <unk>.
They've got it they've got to get work.
But they are expensive.
Nicole.
So what do we think our Cao does it continue to go up I mean, these are staggering numbers quite frankly.
Our plan would be to continue the incremental growth of the drivers I mean, we're we for lack of a better way of saying that we've created a internal target of 400 drivers now when we get to 395, we will create a new target and determine what that is and where that is some of the markets will top out.
Some of the smaller markets, where we will only be looking for drivers to fill.
Phil a spot if somebody leaves and because because we're not going to be able to grow a lot in some of those markets, but theres other markets, where we can still grow and there's other segments, where we could still grow within some of those small terminals that are predominantly petroleum and we start talking about dry bulk business in <unk>.
Some of it in chemical and some of the other things that were that were working towards so I think we'll continue to see incremental driver growth as long as we're able to get to hire them and keep our turnover moving the same direction and then we will just we will change our plan as we go but I would tell you. We've continued to try to grow the driver force.
Okay.
Now I just want to talk about the price increases.
We should be able to.
Put forward some additional pricing in the summertime and fall as these.
Contracts rollout are there with you and I think there's a few things that roll in the summer most of the heaviest part of the lifting.
In numbers of customers is in the fall and then we've got some others that roll on some larger accounts into the early part of the calendar year and so I would say your biggest impact is going to be towards.
Fall to early part of 'twenty four.
First couple months of 'twenty four.
Okay.
Beyond what we've already got hopefully here.
Alright understood.
I guess the next question I have is let's talk a little bit about our I don't know if I can call it new business, but.
Dry bulk in the other product that we're picking up.
But what percent of our company now is hauling that stuff versus.
What we deliver to the gasification. So so I think in the queue, we'd say that petroleum's, 85% of our business and I don't want to I want to be sure. We said this correctly, we have added new business.
In the petroleum side as well so our plan is to continue growing all of those segments, where it makes sense for us to do that.
But our our plan as we've talked about before is to continue to try to diversify with the dry bulk and chemical but if we but if we continue to be able to grow petroleum at.
Prices that make sense for us and we can hire the drivers will continue to do that as well.
Okay.
Alright.
For the first you guys have consistently and I think I'm in for two years or three years ago I don't remember I can look back, but we've consistently run this business extremely well.
And right now it feels like we're hitting it on all cylinders and we're hitting it on driver count we're hitting it on pricing.
And and also top line growth from customers He said.
That a fair statement.
We feel good.
About the direction and the metrics that you rattled off that we're continuing to see the things that care about it that move the needle the most are improving.
Yeah, I think did I answer to take.
So I'd, rather I'm sorry.
Right.
Yes.
Should I offer to take everyone to Disneyland.
Only knowing too we.
We don't like California.
Do [laughter] when.
We can find out what Ricky and many are really up to get to.
At the bottom of that what do you think it's important right.
Listen I want to thank you guys as they always do but really this is awesome news so.
Many many thanks and I'm sure we'll be talking as we proceed.
I appreciate it.
Thank you. Your next question is coming from John Koller from Oppenheimer close your line is live.
Yes, hi, good afternoon gentlemen.
John how are you.
Alright. Thanks.
Congratulations.
Iterate that I think you guys are doing a great job my questions relate more to our capex based on the figures.
Pulling out here it looks like.
Barring equipment sales you might have to borrow a little bit of money towards the end of the year is is that.
Am I reading that right.
Our forecast would have us end the fiscal year.
Similar position to where we are now cash wise.
Okay. Okay.
I guess I was thinking that the capex is going to be.
Okay, maybe I misread the press release.
The second question then relates to as you hire.
Get your driver counts up I think you have enough trailers and tankers.
Do you have enough, obviously, you'll need a little more tractors, but do you think your Capex budget, then going forward will be similar to this well do you think it will be different John .
John I think the thing you got to pull out going forward is the 29 leased tractors that were replacing this year one on tractors on a replacement cycle will get back to a more normal 10 trucks a quarter and just in round numbers. Once you get that but this one year, we had to replace those 29 leased tractors and we just.
We felt like in our analysis that doing that with cash and doing it with company trucks was the right answer.
On a go forward basis, we have we have the trailers that we need to grow on the petroleum side of the business. We have some growth ability on the dry bulk side of the business. If we saw a big chemical opportunity, we would have to probably go out and buy some equipment.
Right now the focus is not really to do that.
And so I think we're in pretty good shape on the trailer side, what we have historically done is if we need as these replacement tractors come in and we need.
Capacity truck capacity, we will pull.
2345, 10 of those trucks that are coming in and continue to run the older trucks and then we would order trucks for to buy later to fill that driver number. So we're not going to do a speculative purchase of what I would call expansion tractor capacity as well.
As we have trucks coming in on a regular basis and the one thing okay.
Got to keep in mind in our business in particular as we try to you. If we don't do it everywhere slip seat all of our petroleum trucks. So there is always there's always some capacity in a slip seat side, where you've got a single shifted a single shifted tractor you're hiring into his ship partner and Thats our focus right now as we've added to this.
Driver count is to continue to push that utilization up on that on the trucks that we have.
Okay do you have a lot more room in the utilization side or do you have certain amount of downtime you need for repairs and maintenance kind of stuff I wouldn't say, we have a lot, but we've got I think we've got enough to get us to the 400 driver Mark or so and then depending on depending on the type of business.
An example of the dry bulk business is typically one driver one truck and so if you're growing that business you might mean more trucks than if we were growing a piece of business in our terminal.
There we could go from one to five or three drivers per truck to one and a half.
It just depends on what we're adding but theres some room there.
Okay. That's great alright. Thank you very much yes. Thank you. Thank you.
Thank you. Your next question is coming from John Deja. Your line is live.
Hello, everyone Illusionary, Jeff.
Just following up on the diversification question.
Youre talking about diversified diversifying product right not geography in terms of potential right.
Yes, there'll be specific what we would like to do is to have one of our term existing terminals that already has management and dispatch and maybe it's predominantly a petroleum terminal and then diversify that into water like we have in a couple of our terminals drybulk.
If we can if we got 25 drivers in the market and we can add five drivers about.
Dry bulk to that particular terminal then we're able to utilize that same facility. The same dispatch staff and management staff and so really the only thing we're adding is as drivers and the capacity haul loads.
Okay that makes sense and in terms of the miles driven.
What's the goal for the full year would you guess.
'twenty, one 'twenty 2 million miles.
Yes, roughly yes, okay 21.
Last year.
'twenty two is probably what I would have in my head is our target.
'twenty two.
Several years ago, the miles driven or 43 44 million.
So I know you you know.
Walked away from some customers you've.
Close on terminals.
What would be a reasonable target.
For miles driven to normalize that.
As we can right right kind of right, where we are.
I think thats a hard one for us to answer because we're just coming out of a market where it was next to impossible to drive to add driver capacity and so we're kind of feeling our way through what are we able to do on a grassroots basis.
I've said it forever. It's one driver one truck at a time and then if we can shift the truck that is two JAK two drivers one truck at a time and so we.
We wanted to get a little better feel for this driver hiring market in retention hopefully it continues in the direction that its going now and then it would be our goal to continue to add Myles I would probably not want to speculate right now on what our target is because we really haven't had those internal conversations.
Okay, but in your markets our people back to driving at levels pre pandemic or are people working from home or I mean, obviously, they probably are but whats that dynamic like at this point coming out of the pandemic.
I think we and we're getting ready to go into the summer busy season, we didn't see.
Frankly, we didn't see the the surge the typical surge of business in the central and South Florida market that you would see in during the spring time and I don't know if thats, partly because the Europeans are traveling.
Just don't know exactly what that was but.
I'm out on the roads every week and it feels like the Traffics back and if you go through Atlanta.
Then take you long to figure out that the Traffics back Tampa has the same way so we're anticipating a pretty busy summer season.
Okay, probably the best way to people working at home and spend more time driving them.
Yes, just at different times of the day.
In particular, we've got a customer who's got stores in Jacksonville.
Over the last two years, they've consistently been five 8% below what they were pre COVID-19 or whatever that drives that people working from home would be my guess, but.
But in other places they are at the same levels that they were before like in Atlanta, right Youre, not really seeing and Thats, a little bit high because I would think you'd have more people working from home in a place like Atlanta, but to John's point I still think there are driving around so okay alright.
Alright, good that's encouraging thanks, Thank you very much answers yet.
Okay.
Thank you once again, everyone. If you have any questions or comments. Please press Star then one on your phone. Your next question is coming from Bruce Oliphant from Oppenheimer. Your line is live.
Congratulations guys on an excellent quarter. Thank you Bruce.
One of the questions I wanted to ask you can you go over this is like some seasonality.
These are earning.
And like what would you won't be considered how strong this quarter.
Specific typically John Matt Correct me, if I say this wrong, but typically the quarter that we're in from a from a.
Business level.
And the seasonality of business would be our third quarter and then it starts to tail off a little bit towards the end of the fourth quarter as schools have started going back in a little bit earlier, So say late August and September arent quite as robust as they used to be.
But.
So when you look at this summer month, we would expect to see.
Obviously revenues should should indicate earnings right. So I would think that the summer should be really strong because thats. Historically your best March is typically a really good month, but as I said a few minutes ago. We just didn't see the Florida season take off as much as it normally has in the past.
Hopefully that answers. Your question was we still had a strong March was a little lighter than we would've thought but yeah March kind of begins to season and it starts in South Florida, and then as the summer comes on it moves up more to the north and.
Our Tennessee, and Georgia markets really really start kicking into the summer.
For the third quarter should be our strongest.
How would you like that and anticipate lets say the fourth quarter and ranked in the Covid ranking the quarters. She can.
Yeah, I'd say, it's probably similar to the spring quarter and business levels.
Maybe a little stronger in the very beginning kind of the opposite the January February January February is a little slow March was really good.
July August are usually pretty good and it starts to tail off at the end of August and September tails off. So I'd say those are probably pretty similar with the fall being the least of before.
From that perspective.
And also you made a comment about the commitment of new business in the third quarter.
And I was just curious to know your take.
Get them familiar arity with your customers.
Is there any way you can discuss possible new business.
For existing customers that you have.
Yeah, I would hesitate to name customers for us where a lot of reasons.
But I I would here's how I would think I would answer that question. We are focused on our customer base that we have been growing with and talking about partnering doing a true partnership with and as they grow their business typically what happens is new opportunities present themselves.
Whether that's a new station a new truck stop.
Somebody decides that they want to move a little bit of their capacity and offer that to us.
A month out or two months out.
And so that's when we say that we've got commitments on business. It would be those sort of commitments and in most cases I would say in all of those cases right now it is folks that were already in partnership with.
Another question I wanted to ask you is that.
When I look at your stocks.
And it's quite unbelievable.
I really believe the stock is significantly undervalued.
Today's current prices, you're probably looking at a market cap of about $30 million.
Which means that the.
In the first half alone first six months, but we're not even selling.
Let's go under one times revenue for half the year.
And we have no debt.
So my question really isn't I realize we're a microcap stock my question is.
What does the company plan to do audit and Investor Relations front.
To get out.
Great story.
Good question, Bruce and I think we had.
With the period of time that we've gone through and with our earnings not doing so well, we had kind of stepped away from that and we've had some recent discussions about getting back out there and talking with potential investors and investors about the story that we have going in so.
Let me get back with you on that really where we are.
We're aware that thats, probably something we need to do.
We haven't up until recently.
Felt like that was in our best interest, but now as we start to do a little better I think maybe we've got something we can talk to people about.
Thank you very much and I founded Zillow accrual.
Quite an kilometers and I wish you good luck and again excellent quarter.
Thank you thanks for your interest.
Thank you that concludes our Q&A session I will now hand, the conference back to our host for closing remarks. Please go ahead.
Thank you all we appreciate your interest in Patriot transportation, and we look forward to talking with you next quarter have a great day.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.