Q3 2023 Patriot Transportation Holding Inc Earnings Call
[music] sleeping on the floor finished.
Pick up there or are you good day, everyone and welcome to the Patriot Transportation Holding's, Inc earnings call for the third 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 now my pleasure to turn the floor over to your host Rob Sandlin, CEO and President Patriot Transportation Holding's, Inc. 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.
It may be found in the company's filings with the Securities and Exchange Commission.
For the third quarter results today, the company reported net income of $1.187 million or <unk> 33 per share for the quarter ended June 32023, compared to $771000 or 22 cents per share in the same quarter last year.
Operating revenues for the quarter for $24.253 million up $752000 from the third quarter last year due.
Due to rate increases increased miles and an improved business mix.
It was this quarter increased 379000 over last year same quarter.
Mainly due to improving driver count.
Operating revenue per mile was down 16 cents or three 6% versus last year's same quarter due to lower fuel surcharges on lower diesel prices, which was reflected in the $1.242 million less fuel costs.
Compensation and benefits increased $1 million and $490000, mainly due to increased driver count and compensation package, including an increase in the driver pay of dark driver training pay of $126000 versus the same quarter last year and an increase in owner operators.
The old sale of equipment was $432000 compared to $163000 gain in last year's quarter.
And the operating profit this quarter was $1.499 million compared to $913000 in last year's third quarter.
Now on to the nine months result.
The company reported net income of $2 million $147000 or <unk> 60 per share compared to 6 million and $720000 in the same period last year, which included $6.281 million from gains on real estate net of income taxes operating revenue for the period was $70 million five.
<unk> hundred $68000, an increase of $5.568 million due to rate increases increased miles and an improved business mix.
Operating revenue per mile was up 29 sets or seven 2% and the miles for the period increased 177000 versus last year's same period.
Compensation and benefits increased $4 million $692000 due to the increases in driver compensation, including a $422000 increase in driver training pay versus last year's period and increases in owner operators.
Fuel expense decreased $802000 for the period due to declining fuel prices insurance and losses, the insurance and losses decreased 20.
$22000 due to lower health and risk claims and depreciation expense was $313000 lower versus the same period last year.
Gains on sale of equipment was $773000 compared to $642000 in the same period last year.
G&A increased during the period $787000 due mainly to bonus accrual and increased travel.
Operating profit was $2.703 million compared to 8.815 million for last year's first nine months.
Higher year gain on real estate was $8.330 million due to the sale of our Tampa terminal.
Operating ratio for the nine months was $96 two.
Now for the summary and outlook.
The first nine months of fiscal 2023, we added 42 drivers, which allowed us to add business with new and existing customers and increase our miles while some are petroleum and cement volumes have been softer than expected. We are confident that our current partnerships will allow continued growth into the future with our efforts to expand our.
Or base.
We will continue to focus our growth with new and existing customers in all segments of our business that will allow us to improve our return on investment.
We have said, we had $7.400 million of cash at the end of the third quarter with no outstanding debt.
We will add we will have added 73, new tractors during our year 44 will replace company owned tractors and 29 are replacing leased tractors with company owned tractors, we believe replacing the 29 leased tractors World Cup with company units will provide a better financial result, and is a good <unk>.
Use of our cash.
We continue to focus on our driver hiring and retention.
While driver hiring the driver hiring market is still challenging our driver count increased during the year, which allowed us to add miles throughout the period.
The training cost increase, but we believe the increased driver count positions us well as we complete the final year this fiscal year in September .
To continue to improve our results during fiscal year 2024.
During the previous year due to two two previous driver pay increases turnover results had been lower among our drivers with one year or more of seniority. However, we still see a higher than acceptable turnover in our first year driver there.
The continued trend of general freight spot rates declining has allowed us to add more owner operators in several markets and we will continue to monitor and balance with company drivers.
And some of our markets. We have reached our driver goal and have cut back on hiring and associated recruiting and training.
However, we will closely monitor each location for needed adjustments to our plan on a weekly basis.
In closing our safety goals for our 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.
I'm proud of our team's safety and customer service performance, thus far in fiscal 2023 and look to finish the year strong. Thank you again for your interest in our company and we will be happy to answer any questions.
Certainly everyone. 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 them about putting 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 Steve Rudd from Blackwell Your line is live.
Hi, guys. Thanks for the update and a and a fairly solid quarter.
And you have normally I focus a bit on the trees I just wanted to look at the forest for a moment can you give me a sense of what the overall competitive landscape is for your industry and let me just give a little background as to where where one ahead or maybe you can take them in a different direction.
Had to scale back years ago, because of a decrease demand then we increased our you know tried to increase driver count.
And our business seems to be picking up but why don't you see a year or two years out as to the level of competitors do you do you have folks who are.
Still exiting the industry and therefore it gives you a an advantage it is to being one of the only.
Last standing I mean give us just a broad view of that.
Okay. So let me I'll go back to where you started I don't I don't know that our downsizing was because there.
There was less business opportunity are downsizing was really driven more by some of the markets that we're in and our inability to hire drivers and make profit in those markets and then one was where we we downsized a large customer.
Just because it wasn't it wasn't working out the relationship wasn't working out where we can make the return that we wanted and so that was really the main those couple of things where the main drive for our downsizing.
Obviously during Covid. There was there was less business and there was some downsizing while that took place, but I think a lot of that business has returned as we've come out of the pandemic I.
I think it's really hard for us to speak to what's going to happen in the marketplace with competitors because I really don't you know we're one of the few.
If not the only public company in this in this space certainly totally in this space and so it's hard for us to know what their what their balance sheets and their profits look like I have to think that our balance sheet is an advantage to us right now.
With no debt and not having to bear the brunt of it.
Increased capital cost because tractors and trailers have increased in price along with paying what 657 plus percent of interest compared to what a couple of percent.
Year or two ago, so I think that probably bodes well for us.
Thank the marketplace from a competitive standpoint.
Standpoint.
There is still a driver shortage out there, it's better but it's not perfect.
So there's a lot of added cost as it relates to the acquisition of that driver and so there's a lot of cost pressure.
For us to be able to keep prices up in the marketplace. So from that standpoint.
Plus youre dealing with your data that youre still dealing with inflation.
And the CPI less food and energy that was what four 8% last month, so typically that that bodes well as far as the pricing in our markets.
And if I left something out on there.
Go ahead and ask me back anything I didn't go Okay sure I think he covered.
Some of what I'm looking for and I don't think he left it out it just my framing of the questions. So one of the things that's of interest is each and it's 85% I think still have your businesses the transportation of petroleum.
And one night.
Depending on how you view the world, but one might think Oh gosh are electric vehicles are coming demand for petroleum is going to decrease and I think that's probably correct. However.
Are we in a position where even in light of a.
A decrease of that potential demand.
They're just not other folks to carry the remaining petroleum that must be carried that's that's what I'm headed for.
I think yes, I mean.
What you're saying is that there's always going to be petroleum needed and so a decline in demand.
Could potentially not hurt us because there's other folks falling out or out of the market that we can pick up their share.
That's yes, that's so hard to predict but we feel like we're well positioned to be here for the long term.
By far, but I've, just listening to other competitors and in the way they run their business you know, there's typically a lot of that involved especially in smaller trucking companies.
We haven't seen any kind of run a rash of closures of of our competitors. We've seen people moving out of markets like we had done in certain places Oh, well, we really havent seen and there's no way for anybody to know is we haven't seen a significant.
Decline in diesel and gasoline.
Due to electric vehicles, yet and so we have no way to know when and if that is really going to come to fruition. You know the only thing I would add to that Steve is that certainly we know that electric vehicles are there how how quickly that's going to have.
As the population continues to grow where were in the south eastern United States and people are moving to Florida, Tennessee.
Georgia the Carolinas so.
So we think market wise, we're in a pretty good spot and I don't know that we're going to see near term demand declines for that reason.
Certainly at some point in the future.
All going to have to deal with that and some some form or fashion, but that's also why we're spending a lot of our trial time trying to diversify our product offering into dry bulk materials water and some chemicals and so we'll we will continue to do that so maybe that petroleum percentage.
Isn't quite as high going forward.
Okay and that makes a lot of and I've certainly noticed that over the last few years.
Next part of the question is getting to your earlier comments. You said you had mentioned that some controlling them and cement revenues were lower than expected what what happened I mean any elevation four yeah. Yeah. We've seen a couple of things number one in June we had we had just horrible range throughout.
Our marketplace, we had two weeks with just.
Torrential downpours and rain in every day and so that has an impact on your cement business because theyre not theyre not producing concrete for these jobs that are going on out there. It also impacts your petroleum business because people aren't traveling as much. So we saw that in June which was kind of unusual.
The cement business with housing starts down has just not been as robust as we had projected.
Early on and so we're certainly not hitting the miles and revenue holding those products that we did at this time last year and so it's just been a little soft.
It's nothing that's it looks to me like it is just a big ongoing deal I would just tell you that the summer is just been softer than we had than we had hoped customer by customer really across the whole network.
Okay Alright.
I'm sorry go ahead busy right, we're good and busy right now so that's great Oh, I know I mean, the revenue numbers in the other end and then the net number is pretty good it was what it was.
Less than I thought it would be but it was pretty good let me ask on the you know get to my favorite question driver count, but wanted to just start with what is the 126000 and incremental number in training costs or that's a gross number.
And I think that was it.
There's training pay.
He was giving you the incremental increase from the same period last year that we spent that much more of this third quarter than we did in the last quarter.
And we ended the last.
Last year's quarter, you mean, the we ended the dry Alaska.
A quarter with well that the last quarter, but I think at the time the conference call on May 9th where the driver count of 387.
And where are we now and I think you had identified a goal of 400 and I Wonder if that goal has moved at all.
Yeah, we haven't quite made it into 400, but where we were $3 90, and and we've got some markets, where we've kind of pulled back on our hiring because we've kind of reached a point, where we're we've saturated the market with our with the amount of business that we have there and we will continue to monitor those but we still see some opportunity to move.
That number up.
To 400, and that's what that's what we're trying to do.
Okay fair enough and I'll ask the last question for now and if I have another one and I'll hop back into the queue. If there is one.
So in terms of your pricing our Rab.
The paradigm that we've come up with is that you know as demand increases in the pension. This inflation number going forward, we can both well two elements the pricing of course, but we can charge a bit Ah.
Bit more Oh are we still seeing that we have that pricing power.
And are we able to put in I think it was already put into your for the end of the summer, but I'm wondering how the pricing looks going forward.
Yeah, It's we really have not met with a lot of resistance, especially if we stay in that.
Just in that if you use CPI list less food and energy as long as you're staying in that range.
And price range than I thought.
Pricing is pretty.
Stable I think we're able to push the pricing along because we did a good bit of that over the last 18 months to two years, depending on the timing and so.
And then on new business, where we're having to see where the market is and we've been pretty successful, adding new business. This year and what I would say our favorable freight rates.
Okay, Alright, alright, well terrific and there's always things thanks to the hard work and something else Pops up all press star one.
Appreciate the questions. Thank you.
Thank you. Your next question is coming from Stephen Dennis Your line is live.
Hi, guys.
The one I'm the one in Zurich, and Sarasota, and I went to visit your truck who was deliberately.
I had a great time, you guys are really serious you havent supervise safety supervisor was fantastic.
Driver was very dedicated I'm pretty I'm pretty impressed and I got a feel for a little feel for the company now I truly know what Florida rocket.
Okay.
We're thinking about it I was thinking about this parameter shareholder and it really wasn't really afterwards floor in Iraq.
We watch them deliver the diesel and the gas and my question is how are you going to get your story out.
Well and I think that's a good question, it's something we've talked about we really up until recently.
This year, we were we weren't didn't think we had a great story to go out there until we were trying to fix things as we've told you and others. We had right sized the company we were coming out of Covid and so that's something that we're talking about now how are we going to get out and go to whether it's an investor conference or whether we go.
<unk> do a road show.
And so that's something that we're trying to determine the best timing to go do something like that and certainly I think our numbers are moving in a lot better direction to be able to do that.
Without giving anything specific we don't have anything specific yet.
Steve.
It'll be on the radar as we close and get through this fiscal year.
Okay, well again. Thank you. It was really it was an insurance. It was 45, it's like a 45 minute delivery schedule here and it was really interesting I like doing this kind of stuff.
Thanks for doing something more about the company as an investment.
Well good thanks for doing that appreciate your it's actually yeah. Thanks again.
Yes.
Thank you. Your next question is coming from Christian Olson from Olson value Fund your line is live.
Hello, Krish and I think the question.
Hey, there alright.
Had to jump on the call late so Paul.
The group's if someone already asked this before but I think you had previously mentioned that many of your mom and pop.
And very aggressive in kind of like an X.
I saw in the rates they offer to customers.
Have you seen any change in that.
Yeah.
We.
You know I don't I don't know that I've seen any real change in their behavior at times I mean, obviously, we've raised our driver pay up a lot. We've raised our pricing up there are costs are up our costs are up so they've had to raise their prices are they would be they would be losing money.
Every day, so they got a little bit different cost structure and they don't have.
They don't have the same return on investment criteria, maybe that we do but the other thing this maybe changed as the customer base a little bit when you go through a situation where drivers are in short demand and getting your getting your products hold is becomes a premium some of those customers have chosen.
And to partner with people that they know they're going to be there with them for the long run and have the wherewithal to stomach the pandemic.
Our or stomach a driver shortage and also continue to provide them with quality surface. So I don't know if it's so much what our competitors mindset is as maybe what some of our customers' mindset is and maybe a combination of those two things.
Okay.
You mentioned they have a little bit different cost structure are those smaller competitors also.
Well.
What I mean by that is that they usually those are family run operations and they've got two or three family members and they're running the business in and frankly, you know cash flow becomes king for them really.
So depending on what your size is obviously, if you get up to 100 truck operation or 200 truck operation. That's a different story, but if you're a small 15 truck 20 truck operation and you're trying to sell.
The same customer that we are you can probably be a little lower priced than we can because all you're you're you're not you're trying to that's a little different model than what we are we're trying to provide a return on investment and we're trying to invest for the future and sometimes they're not really doing that or maybe they'd love to be doing that but they just can't so it's.
Really all over the board from that perspective.
Okay. So that there sometimes they may just be trying to make a little bit of money in the short run.
Right and.
Yeah.
And how about your larger competitor has any change in their behavior.
No I think the market's pretty stable right now and you know its obviously its trucking and transportation and as you've seen in the dry van business I'm sure. Those of you that follow it there they're their businesses a lot more cyclical than ours from a pricing standpoint, there those spot rates that you keep hearing about in that segment of the trucking industry.
We are are depressed right now and they were probably the highest they've ever been during the driver shortage and during the pandemic and I heard stories of container freight going from Savannah to North, Georgia Quadrupling in price well, we didn't see any of that kind of stuff in our business, but we also don't see.
What they've seen now as they've seen their prices come back down probably close to where they were pre pandemic on the spot rates. So.
It's just a little more predictable from that standpoint, and so I think what.
What I'm seeing out there is a fairly responsible marketplace.
Yeah.
Have you seen any financial distress or or increasing to fire sell them the Indus.
Great.
Tanked trucks industry hopefully flow.
No not really and again, it's really hard for us to see what's going on with their financials, because we're really the only public guy out there.
So generally you don't know that one of these one of these companies is in trouble until until they are really in trouble somebody buys them and somebody buys them or they try to sell and they've waited too long. It is just hard to know what.
But I have to believe these interest rates are causing.
Pain points for some folks that.
Our or needing to buy equipment, and having to finance our equipment along with inflation.
Trailer prices petroleum trade, our prices were up probably $30000 over pre pandemic numbers.
Yes.
That's a that's a big number.
Yeah.
Yeah and.
You have.
Ongoing dialogues with some.
Some of these operators are I think that you know the.
Do you have so much net cash on the balance sheet. It because you are hoping to be able to make some acquisitions at some point.
Are you in dialogue do tried generally to be in dialogue with although operators.
And and are you aware of any M&A, that's taken place in the tank drug industry.
And last year or so.
I know of a couple of them most of them or most of the M&A activity I've seen have been in the chemical segment segment and small regional carriers.
There has not been very much in our market in our area.
Certainly.
We're in dialogue I mean, we're members of National tank truck and I'm actively involved on the board there and in all of our competitors and people in the industry, especially the larger ones are are a part of that and even some of the smaller regional folks. So we we're not shying away from.
Acquisition opportunity, we just we have and we've looked at a couple of things, but we just haven't seen anything that was the right fit for the right amount of money at this point.
Yeah and.
Wow.
Board.
Plans to continue.
How much cash on the balance sheet.
So that's available for sure.
Well.
Well I mean, if you don't see any M&A opportunities over the next.
So we ourselves.
Thank goodness.
The board will consider returning some of our vessels shareholder Oracle.
I would have to see what else I would have to ask the board that we I haven't had any discussions about that so we would just have to we just have to go back to the board on that one but.
I wouldn't anticipate that I mean, we want to run our business and.
And just keep doing what we're doing and hopefully there is an opportunity down the road for us.
We've distributed a lot of our cash.
Already I think.
Over the last two to three years.
And you're right I can't really answer what the board wants to do with it.
Got it alright, thank you very much thank you.
Thank you. Your next question is coming from Jason Our Center your line is live.
Good afternoon, how are you Jason how are you good good to hear some other voices on the call here too just kind of adding some things together I mean, you mentioned spending a couple of years. The what's the driver shortages. The pay increases you've had you know a lot of issues you have to work through with the pandemic and everything and you had the question about.
Getting your story out there just like overall I mean do you feel like you've kind of turned the page on some of that software.
You know given maybe.
He called the market, a little more predictable, but given some predictability.
Are you in a position now where are you going to have.
Consistent profitability kind of throughout the year and kind of a new.
Yeah, again, just kind of turning the page on that story over the last couple of years that you guys kind of think definitely navigated.
So I think you and I talked a couple of years ago, we were kind of going through whats. The plan with you know how will we know and and so in short answer to your question. Yes, I think we've kind of we feel like we've turned the corner.
Things that we talked about back then where you know instead of driver count going down it's going up.
Our rate per mile is continuing to go up more miles are starting to go in a positive direction versus the Mega. So those were the key targets. We were looking to turn around and all of those have happened in this kind of a second third quarter of this year.
And we do just kind of see a stable market at this point unless something that we don't know about right now rears its ugly head.
Yeah. This is rob, but I would say.
And we've been talking about what our game plan was four.
Even even right before Covid started as we were downsizing.
A big piece of business that we had and we did all of that and then obviously, we got everybody's got to deal with the pandemic, but I think coming out of that the game plan that we've put together seems to be working and.
We've we've partnered with some really good customers out there who we appreciate a lot.
That also understand that we've got to make a return on our investment in and frankly kind of this kind of goes back to the EV question. We had earlier the number of convenience stores and truck stops that are being built.
Yeah.
There's a lot of them and.
We're growing our business with some of our partners that are adding those stores and have pretty aggressive plans to grow them, even more and so we feel like as we continue to add driver capacity that we're not really in any position to have to have to search widened four for business, we feel like the.
Partnerships, we have are strong.
Sure. It's a market by market question and is it the right.
Driver capacity for the for the business Thats coming on at that time, but we feel like we've kind of gotten to where we've done what we wanted to do and now what we'd like to do is just slowly grow the business and if an opportunity comes along to use our cash to taking on a strategic acquisition and we will certainly do that as well.
Okay great.
Okay.
Thanks.
Thanks for the question.
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.
Thank you guys. Congratulations on another great quarter. Thanks, Paresh, Bruce Hope you're doing well. Thank you. The question I wanted to ask you.
Is that are.
We're three quarters now you only have 60 cents a share in earnings I, just wonder I got a little mixed up on the call. Because I think you said something like you began the quarter sort of on a week ago, and then you said that it's picking up.
Just wanted to if you can just elaborate.
On what you see yes.
I don't want to over complicate that I think it was really what we saw during June was just what was mostly weather related and I think Florida. This year has been a little softer own petroleum business and it could just be as simple as it's been really really hot and so maybe it's just an unusual.
Really slow summer and it's not we're not sitting around with nothing to do we're just there's times, where not run it at 100% and then on the cement side that that business has been slower than we had hoped and we were really kind of opened for some growth opportunity throughout this year and we've kind of changed our marketing focus in the last four or five.
On that side of our business and so we're getting we're getting out there and talking to more people in more areas more terminals more markets.
Try to try to grow that business, because we have some trailer capacity that we can grow that into so I wouldn't I.
I wouldn't take that comment as though it's a something.
Something that we see as a long term thing because we are.
So did the last week or 10 days, we've been pretty darn busy so.
I wouldn't read too much into that okay. The other thing is that the.
As far as the seasonality of your earnings go right would you say that.
<unk>.
First that the fourth quarter is more like the first and second quarter.
And then again with the first quarter more like the what the fourth quarter.
Would you say that your fourth quarter earnings.
Is it more like your first and second quarter.
Seasonality goes.
So from a seasonality standpoint on miles and revenue our fourth quarter is typically closer to our third quarter, but our business will fall off some in September . So it may not be quite as strong kind of the same thing on your second quarter, where January February arent, great but.
In March really goes goes high level for us on a volume standpoint, so I'd say there it.
It's fairly similar but you should you'll have one month in there.
There's a little little softer compared to the summer, but what would be the third quarter.
So you're saying in your fourth third quarter traditionally your best quarter, followed by a fourth yes, yes, alright. So this is what I'm, saying is just because on a trailing 12 basis.
Earnings per share right now is at 73 cents.
Okay.
So it's.
So in other words as.
We can make a forecast there, but I would rather easily.
The company will finish the year.
Better than 70, 670%, but earnings yeah, obviously.
We're gonna, let you were going to let you do the forecasting where.
We don't normally do that but who will provide you as much information as we can alright.
Or factors to process than just revenue and miles you're cost matter too and those are not necessarily always completely the same because we might have some gains on sales of equipment, we might have insurance actuarial gains to book for lots more losses.
And your and your book value right now is what about $11 a share.
Yeah, It's nine 970, so that earlier today, so I think John .
I wrote it down when used 958 958.
Okay.
Alright, guys. Thank you very much and keep up the good work alright. Thank you.
Thank you there are no further questions in the queue.
Okay.
Great. Thank you. We appreciate your interest in Patriot transportation and look forward to talking with you next quarter.
Yeah.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.