Q2 2025 Universal Logistics Holdings Inc Earnings Call
Hello and welcome to Universal Logistics Holdings, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero a brief question. And answer session will follow the formal presentation. During the course of this call management may make forward-looking statements based on their best view of the business as seen today. Statements that are forward-looking related to Universal's business objectives or expectations and can be identified by the use of the words such as belief expect and anticipate and project such statements are subject to risk and uncertainties and actual results could differ materially from those expectations. As a reminder, this conference is being recorded.
Speaker Change: Officer Mr. Jude Paris Chief Financial Officer and Mr. Stephen Fitzpatrick, Vice President of Finance, and investor relations. Thank you, Mr. Phillips, you may begin.
Speaker Change: Good morning and thank you for joining Universal. Second quarter 2025 earnings call.
Speaker Change: The second quarter of 2025 remain to challenging environment across the transportation and Logistics industry.
We saw Freight Market slightly lower Automotive production and tough comps from a prior year, are all contributed to a muted, but better overall results sequentially.
Speaker Change: However, our performance was broadly in line with our expectations and we continue to take the necessary steps to manage costs.
Speaker Change: Enhance efficiencies.
Speaker Change: And position the business for long term growth.
Before diving into the numbers, I would like to recognize the efforts of our over 11,000 employees and contractors.
Their continued dedication and effort have consistently provided our customers with a seamless best-in-class service.
In a difficult environment.
Speaker Change: Let's review the results for the quarter.
Speaker Change: Universal reported second quarter 2025 operating revenues of 393.8 million with net, income of 8.3 million, or 32 cents per diluted share.
Speaker Change: Operating income for the quarter was, 19.9 Million representing a 5.1% operating margin.
Ibida came in at 56.24% of Revenue.
Speaker Change: While down from the prior year, these results reflect our continued ability to generate solid cash flows and maintain profitability in a persistently soft Freight Market.
Speaker Change: Now, let's look at performance by segment.
Speaker Change: Our contacts contract Logistics segment Remains the Cornerstone of our results.
Speaker Change: Revenues were 260.6 million down slightly from Q2 of last year.
Speaker Change: The integration of parsec continues to progress smoothly and contributed 55 million in Revenue during the quarter.
Speaker Change: As a reminder, the prior year include included, 44.6 million of Revenue related to our now completed development project in Stanton Tennessee.
Speaker Change: Contract Logistics operating income was 21.8 million with an 8.4% margin.
Speaker Change: While margins were lower year-over-year, due to the absence of a special development project and increased depreciation. And amortization on a recent parsek acquisition, The Core Business remains healthy.
Speaker Change: We continue to operate, 87 value, added programs including 20, rail terminals up from 68 programs a year ago.
Speaker Change: We are confident in the stability and long-term growth prospects of this segment especially as we integrate, our expanded footprint and pursue new contract opportunities.
Speaker Change: Turning to trucking.
Speaker Change: Revenues were 64.1 million down nearly 30% year-over-year.
Due to the 22.6% drop in load volumes and in 8.9% decrease in Revenue per load.
Speaker Change: excluding fuel s charges that said,
Speaker Change: I'm encouraged by the 5.2%, operating margin.
Speaker Change: up from 4.8% a year ago, and the 3.3 million in operating income
Our focus on Specialized Freight including our wind energy, business continues to support more resilient margins, even in the depressed Market.
Speaker Change: Sequential improvements from the first quarter seeing that we are on the right path.
Speaker Change: And we expect Improvement in the second half of the year.
Speaker Change: Our Intermodal segment remains Under Pressure, but we are seeing signs of progress.
Revenues were 608.9 million down 13.5% year-over-year.
Speaker Change: Decline nearly 13%, but pricing showed some stability with a slight Improvement in Revenue per load, excluding fuel.
Speaker Change: We narrowed up operating loss to 5.7 million from 10 points, 7 million in the first quarter and sequentially. Improved our operating ratio 108.2 from 1 1, 5. 1.
Speaker Change: Well, we are not where we want to be the quarter over. Quarter progress is encouraging.
Speaker Change: Our Focus remains on optimizing operations.
Existing un and and exiting a unprofitable business rationalizing. All costs
Speaker Change: To return to profitability.
Speaker Change: across all segments, we remain focused on cost discipline operational execution and expanding our sales pipeline,
Speaker Change: Our diverse service portfolio continues to provide balance and stability as we manage through cyclical pressures.
Speaker Change: As we continue to navigate a softer Freight Market, we are doubling down on strategic initiatives to strengthen our sales engine and drive long-term profitable growth.
We have a new executive leadership shaping, our enterprise-wide sales and Business Development initiatives.
Speaker Change: This role reflects our commitment to building, a more integrated and customer-driven sales organization that aligns with Universal's long-term strategic objectives.
Speaker Change: In addition.
We've expanded our sales organization with hiring of several senior sales directors across key regions and service lines.
Speaker Change: These hires bring deep experience, and strong, customer relationships in core Industries, including automotive, industrial and Retail.
Speaker Change: We also began rolling out a new customer, relationships management, solution to unify sales activity across the company and provide better visibility into our growing 1 billion dollar sales pipeline.
Speaker Change: These enhancements are already yielding improved coordination and accelerating the pace at which we are able to identify and presenting customer-centric Solutions.
We expect our enhanced commercial capabilities to play a critical role in our margin and growth targets over the coming quarters.
Speaker Change: To close.
While the macro environment remains challenging, I am confident in our team.
Our strategy and our ability to adapt and execute.
Speaker Change: We're taking the right steps to whether the near-term storm, while positioning Universal for sustained profitable growth over the long term.
Speaker Change: Thank you again to all our team members for your continued dedication.
And to our customers and shareholders for your ongoing trust and support.
Speaker Change: I will now turn the call over to you to provide additional details on the financials and our Outlook going forward. Jude, thanks Tam. Good morning everyone yesterday. Universal Logistics Holdings, reported Consolidated, net income of 8.3 million or 32 cents per share on total, operating revenues of 393.8 million in the second quarter of 2025.
Speaker Change: This compares to net income of 30.7, million or 1.17 per share on total operating revenues of 462.2 million during the same period last year.
Consolidated income from operations, was 19.9 Million for the quarter. Compared to 47.1 million, 1 year earlier.
Speaker Change: Ibida decreased 28.6 million to 56.2 million which compares to 84.8%.
Our operating margin and ibadan margin for the second quarter of 2025 are 5.1% and 14.3% of total operating revenues.
Speaker Change: these metrics compared to 10.2% and 18.4% respectively in the second quarter of 2024,
Speaker Change: looking at our segment performance for the second quarter of 2025 in our contract Logistics segment, which includes our value, add and dedicated Transportation businesses income from operations, decreased 31.1 million to 21.8 million on 260.6 million of total operating revenues. This compares to operating income of 52.9, million on 263.6 million of total operating Revenue in the second quarter of 2024,
For comparison purposes, and the second quarter of 2025 included, 55 million of Revenue attributable, to our recent acquisition of perac. While the second quarter of 2024 included, 44.6 million of Revenue, attributable to our specialty development program, which was completed in late 2024
Speaker Change: Operating margins for the quarter were 8.4% of total operating revenues compared to 20.1% 1 year earlier.
Speaker Change: Onto our internal segment.
Speaker Change: Operating revenues decreased 10.7 million to 68.9 million compared to 79.7 million and the same period last year and operating results, improved 3 million to an operating loss of 5.7 million. This compares to an operating loss of 8.6 million and the second quarter of 2024, operating ratios for the quarter were 1082 versus 1108 last year.
Speaker Change: And income from operations, increased 1 million, to 3.3 million.
Speaker Change: This compares to 4.4 million and the second quarter of 2024, operating margins for the quarter were 5.2 versus 4.8% last year.
Speaker Change: For comparison purposes, 1 additional item of note.
26.7 million of brokerage revenues are included in the second quarter last year from our now closed company managed brokerage operation in Nashville.
Speaker Change: On our balance sheet, we held cash and cash equivalents totaling 24.3 million and 9.9 million of marketable securities.
Speaker Change: Outstanding interest-bearing debt net.
Speaker Change: 3.1 million of debt, issuance costs totaled 795.5 million at the end of the period.
Excluding lease, liabilities related to ASC 842 are net, interest-bearing debt to reported trailing 12-month. EBA was 3.13 times.
Capital expenditures for the quarter were 84.3 million.
Speaker Change: For the third quarter of 2025, we are expecting Topline revenues between 390 and 410 million operating margins in the 5 to 7% range and Ava Dom margins between 14 to 16%.
Speaker Change: For the full year, we are expecting top-line revenues between 1.6 to 1.7 billion with operating. An IBA margins, similar to our range in our Q3 guidance.
For the full year, we are expecting Capital expenditures for equipment to be in the 100 to 125 million range, and real estate between 50 and 65 million.
Speaker Change: Interest expense is expected to come in between 48 and 51 million as well.
Speaker Change: Finally Wednesday, our board of directors, declared Universal's 10 and a half cent per share. Regular quarterly dividend. This quarter's dividend is payable to shareholders of record at the close of business on September 1st 2025 and is expected to be paid on October 1st 2025.
Speaker Change: With that Chloe, we're ready to take some questions.
Thank you, ladies and gentlemen. We will now conduct the question and answer session. If you would like to ask the question please press star. Then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2
Speaker Change: If you're using a speaker-phone, please leave the handset before pressing any keys.
Speaker Change: We'll pause for just a moment to compile the Q&A roster.
Speaker Change: Our first question comes from the line of Bruce Chan from State, failure line is open.
Hey, good morning gentlemen. This is Andrew Cox on for Bruce.
Speaker Change: Hey, Andrew.
Speaker Change: Hey guys, just wanted to uh get started off here with a bit of the the Tariff headwind and just discuss you know how impactful you guys thought it was to to queue across the business. And you know what, what of the kind of conversations you're having with customers about potential restocking into 3 q and through your, through your end. And I guess, you know, on that note talk a little bit about um what normal seasonality would look like in the business and you know, how you're expecting it to Trend relative to that. Thank you.
Speaker Change: Yeah, I I'll I'll start uh this is Tim Ian. Uh, I think the tariffs did have uh an impact on our inner modal Division and imports coming into the country. Um, the way I saw it is we saw a general fall off in some of our normal volumes somewhere in the middle to end of May, and, and that lasted generally through the month of June. And it, it appears that that fall off was uh, specifically highlighted about from discount retailers that that had a large presence of of Chinese sourcing.
Speaker Change: Well, on other, uh, customer fronts that there was some flexibility on on sourcing, uh, from overseas. So we saw some of those types of customers Audible and volumes remained somewhat consistent. But overall, it was a, uh, it was, it wasn't effect on the inner Moto division. Uh, the other divisions, uh, saw a lesser impact as it was related to tariffs. Although in the prepared remarks, as I'd mentioned, we saw a little bit of a fall off, uh, on Automotive production. It was, it was minimal, uh uh on a year-over-year basis. So I didn't see any serious challenge, the way. Uh, I read the the uh output from the Autos is that they did a good job. Um you know trying to to Source before they had to Source from and making those keys strategic War Room decisions.
Speaker Change: Now, as we level set, I don't know if there's really any clear firm direction that we're getting on on where we're going to go from a tariff basis. Uh, you know what you read as I do in the news?
Speaker Change: We will see some, uh, normal cyclical uplifts as we normally would in the third quarter. We believe that some of the intramodal volumes will be more cyclical in nature, but there's, there's definitely a pause and and how much lift that will be. I think that, uh, we will see, uh, you know, some pent up, um, ordering that wasn't done in the second quarter, especially when it comes to the, the discount retailers will probably hit Shores in this quarter. So we expect that to help our numbers uh, beyond that. Uh, I I really couldn't give you a good guidance, on, on what it looks like. Uh, exiting the year. Uh, from an import standpoint, just 1 more comment. This is Jude. I think also, when you look at the, you know, the isrs across, you know, retail wholesale and Manufacturing, they're all kind of flattish to down a little bit year-over-year. So, you know, although there's been, you know, a lot of the, the choppiness in the first half of the year due to tariffs, you would think that because of how the
Jude: Most inventory to sales ratios are shaking out, that would be a catalyst for uh a back half. But I think as uh, as Tim alluded to its kind of wait and see at this moment.
Speaker Change: Yeah, certainly. So it does seem that the retailers in particular are a bit lean right now, you know, sticking with that that Intermodal, um, part of the business, you know, discussing some of the profitability initiatives, you guys have ongoing, you know, can you refresh us here? And and walk us through the progress and, and timeline here, thus far, I mean, narrow is uh, the loss is now.
Speaker Change: Narrow this quarter but you know, is it is it realistic to expect this business to reach a turning point by the end of the year? And particularly, I mean uh um possibly get into uh back into the Black based on the the current business Trends or is this looking towards a 2026 event.
Speaker Change: Yeah, I mean, to start with the last part of your question. Our goal is to return to profitability, uh, in the third or fourth quarter. Um, you know, a good percentage of what we need to do is on the top end of the funnel. It does depend on the sales activity, it does depend on our price as we navigate, uh, any additional bids as well as going back to customers on on bids that have already closed to see if there's there's room for for some growth, we think we're well positioned from an asset standpoint, in the markets, where we need to grow, we think we're very well, positioned, and made the commitment and investments from a location standpoint on our properties as they serve the ports and rails around the United States. So, I think we're well set on that. Uh, as I'd mentioned in my prepared remarks, we've had a, a real, uh, strong focus on on the sales objectives. We have new sales leadership and we're heavily involved in cross-selling. Uh, the different customers between division.
Speaker Change: Visions specifically. Uh, as you mentioned on the Intermodal side, uh, we believe this will bring about new customer opportunities in conjunction with that, on the other side of the, of the map, the efficiencies, and how we support that growth, and where we look for that cost. Um, rationalization, uh, we're we're middle of the road, uh, halfway through our centralization process of customer service and and our operations. Uh, as we do that, we're rationalizing, headcount. Uh and also making sure as we do that, the focus is on the tail end, making sure that we're giving the customer the service, they expect uh and deserve and from a back office standpoint, we're taking a real sharp pencil. And looking at, you know what we've been awarded making sure that there's Revenue realization from the awards that uh we've been promised looking at any potential decline or customers and trying to work with them to figure out what we need to do uh to Garner more of their
Speaker Change: Uh, more of their Freight. And then, I think we're taking a, a very, uh, specific approach besides the, the bigger customers. We're also looking into the spot market and making sure that we're effective in capturing all the opportunities to fill in the cracks that we have with our bigger customers. So it's a full core press on on the, on the sales side, as well as continuing in in a parallel path to streamline, uh, making sure their operations is efficient and optimized as possible.
Speaker Change: Okay, that's helpful. Thank you. Um, moving on to I guess we could touch here we touched on it. Briefly uh in the opening response but just kind of on the other OEM and and Class 8 back drop, you know, it does seem like the visibility here gets worse every time that we uh, that we discussed, um, you know, future quarters, I guess, you know to us it it does seem like the OEM and Class 8 is uncertain and maybe declining respectively, I just kind of wanted to get your thoughts on that. And then, you know, next is is what levers do you guys have potentially to, to drive improvements to the business? If the Top Line kind of remains a challenge for you guys,
Speaker Change: Of our 2 of our customers. Within that space. I mean, 1 of them was down 30% year-over-year, the other was down. 70% year-over-year on volumes. So, yeah, there's not a lot of, uh, uh, of, uh, positive outlook for that space. I mean, the, the new orders in Q2 of 25 were were, uh, less than, uh, Q2 of 2020, which is the co period, right? So, you know, you you kind of look out in that space and you say, well, what's going on there? Well, there's import tariffs on, you know, stealing aluminum. You still have a really soft Trucking backdrop, which is really a disincentive for, uh, trucking companies to make the Investments now, maybe the new tax legislation and the 1, big beautiful bill will help spur. Some of that economic uh, economic activity within Class 8, but I think that will kind of shake out over the next couple of quarters. Then I think, finally, I mean, just from the global side is that, you know, the administration rolling, back, those knock standards on that 2027 inch. And it in
Speaker Change: Engine and those California emissions regulations. I think the industry overall uh prior to that executive order uh were really expecting, you know, a really solid pull forward ahead uh prior to 2027 but you know it's all going to be muted and kind of once again and wait and see mode as we go forward. So I think
the tariffs obviously, impacting that business, a soft Trucking environment, impacting that business, and then, of course, the the, uh, knock standards for 2027 engines, uh, impacting the pull forward,
Speaker Change: Yeah. And and to add to the the Class 8 and move Beyond into the Autos, uh, as we had mentioned, in the prepared remarks, it's still fairly consistent. Although the SAR has dropped, uh, recently, the customers that we deal with and the locations that production is happening at, we still have a pretty decent. Look at, uh, the second half of the year and I don't see any drastic drop at this particular time. It hasn't hurt us because of where we operate in Supply. Uh, and part of the supply chain, uh, that the Inc, there's some increased production in the United States, uh, as the as some of these, uh, adjustments to tariffs have happened. And I think those, uh, adjustments to the United States have helped us in in certain locations, uh, with uh, steady or increased production. So I, I still have an optimistic outlook for the second half of the year.
Okay, moving Parts there. Um, moving on to, to trucking just for, for a moment here. I mean, it, it does seem like a pretty good result for Trucking, but the the business, you know, continues to to shrink here. What needs to happen for this business to start growing. Again, you know, and and if the cycle turns is there negative leverage in this business. Now do you guys feel that? You'll you'll need to
Speaker Change: Resources here to meet demand. Uh, I know that you guys sell, you felt pretty good about, uh, the asset front on, um, an intermodal. But kind of wanted to ask about Trucking.
Speaker Change: Yeah, I'll I'll kick this 1 off. So yeah, I think there's a you know, a couple of phenomenon so we have kind of 2 aspects to that business. We have the Legacy agent-based business on 1 side which is really been the 1 that's been shrinking over the past couple of years, you know, related to some, uh, initiative that we've both done internally as well as the overall macro and environment, which is really not been indicative, uh, to trucking particularly in the van front, if you remember that business is about 70%, flatbed, uh, and, and then 50% of that, uh, volume is also specifically related to metals and steel. So, very heavily industrial focused on the Legacy side of the business and, you know, kind of being in that, uh, industrial recession that we've been over the past few years, has really been a, a major macro headwind, uh, in that space. Now, on the other side of of, that of our trucking business, we have the, um, wind franchise where
Speaker Change: We've been investing heavily. So we are we Haul blades, we Haul towers, and we Haul components. Um, that business was impacted negatively in the first half of the Year primarily because of tariffs, a lot of those components are imported, but I think the Cadence that, uh, we're seeing in the back half of the year should make up for the shortfall.
Speaker Change: Uh, in that business that we experienced in the first half and then of course, we have a pretty clear Runway. Now with the 1, big beautiful bill on, you know, what's going to happen for the next 5 years through 2030. So I think most of the uh, the headwinds and the wind side of the business are, are going to be manageable and start to improve in the coming quarters. I think on the other side of the business on the Legacy side, we really need some kind of catalyst in the general Freight Market to really turn that business uh, uh, to Growing again.
Speaker Change: Side. We really rationalize the group of Agents we had and how we wanted to to push forward as an organization. So we think we have a level footing on the makeup of the agent. We're actively uh recruiting new agents as you would imagine and we put some additional uh, sales power and oversight on that side of the business as Jude had mentioned on the specialized side, there's an extreme Focus. Not only on the Wind product, which we're we're, we're really bullish on. But we're also, uh, going to Branch out into other heavier Hall, type opportunities, that might support various, uh, various Industries. So we're, we're pretty bullish on the specialized and we'll continue to focus on building that product out.
Speaker Change: And and, and that's a follow up on the changes, uh, to the incentive structure and and um, and whatnot with the with the big, beautiful bill. I mean, should we expect this to be, you know, kind of a short term, or at least a, you know, over the next few years, the short term, um, tailwind and then potentially something that that hurts long term, you know, after the 5 year period, I mean, should we expect to see some increased demand for the product? Um, given the the incentives are rolling out
Speaker Change: No, I I think the way that we should imagine this is that as as we decipher the bill, that there is a period of time that those uh projects would need to get started. Alright, so I think it's it's roughly a 1 year period of time that they have to have the shape. The project will need to be started. They'll need to have some start.
Speaker Change: The procurement of the equipment that's going to be used on the project, but then they're going to have another 4 years, uh, to complete that project and it's a minimal uh, commitment in the first year of what they have to purchase. I, I guess they have to show, uh, good course, of moving forward. And then we believe, uh, that we'll have a steady, uh, feed, uh, now and that that should pick up towards the middle. Uh, to end of that. Uh, let's call it 5 year period. So we expect, you know, uh, 27 2829 to be, uh, pretty fruitful years based on the fact that those projects will be in full swing and uh, we'll be there to serve and deliver.
Okay, that makes a lot of sense. Uh, thank you guys so much for the time.
Speaker Change: Thank you.
Speaker Change: Again, if you would like to ask the question please, press start and the number 1 on your telephone keypad.
Speaker Change: There are no further questions at this time. Mr. Phillips, you, please continue.
Phillips: Thank you, Chloe, and thank you for joining Universal's. Second quarter earnings call.
We remain committed to navigating the current economic environment and providing our customers with blessing best-in-class service, while creating additional shareholder value. I'm convinced the actions. We have taken over the last couple of quarters have positioned us very well for future growth. I appreciate you dialing in. Thank you.
Phillips: For purchasing.
Phillips: you may now disconnect