Heartland Express(HTLD) - 2024 Q1 - Quarterly Results

Executive Summary Heartland Express reported a Q1 2024 net loss from weak freight demand and cost inflation, focusing on cost reduction and debt repayment Q1 2024 Performance Overview Heartland Express reported a significant decline in Q1 2024 financial performance compared to Q1 2023, with operating revenue decreasing to $270.3 million and a net loss of $15.1 million, primarily due to weak freight demand, excess industry capacity, and cost inflation Q1 2024 Performance Overview | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Operating Revenue | $270.3M | $330.9M | -18.3% | | Net (Loss) Income | ($15.1M) | $12.6M | N/A | | Basic (Loss) Earnings per Share | ($0.19) | $0.16 | N/A | | Operating Ratio | 105.3% | 93.1% | +12.2 pp | CEO Commentary and Strategic Initiatives CEO Mike Gerdin attributed the weak results to challenging market conditions but highlighted internal efforts to improve operating effectiveness through cost reductions, purchasing scale, driver utilization, and on-time service. The company also focused on reducing unprofitable freight and debt, with a $36.7 million reduction in acquisition-related debt in Q1 2024 - Market Challenges: Weak freight demand, excess capacity, unfavorable weather, and ongoing operating cost inflation negatively impacted Q1 2024 results[1] - Strategic Focus: Internal efforts include cost reductions, purchasing scale, information systems projects for driver utilization improvements, and a continued focus on on-time service. The company also worked to reduce unprofitable freight and refused to lower freight rates to unsustainable levels[1] - Debt Reduction: Prioritized capital to reduce acquisition-related debt by an additional $36.7 million during the first quarter of 2024[1] Consolidated Financial Results Q1 2024 saw a substantial decline in operating revenue and a shift to net loss, reflecting challenging market conditions Income Statement Analysis The consolidated statements of income show a substantial year-over-year decline in revenue and a shift from net income to net loss for the three months ended March 31, 2024. Operating expenses increased relative to revenue, leading to an operating loss Consolidated Statements of Income (Three Months Ended March 31) | (In thousands, except per share amounts) | 2024 | 2023 | | :--------------------------------------- | :---------- | :---------- | | OPERATING REVENUE | $270,320 | $330,916 | | OPERATING EXPENSES: | | | | Salaries, wages, and benefits | $112,697 | $123,333 | | Rent and purchased transportation | 23,863 | 33,144 | | Fuel | 47,321 | 57,528 | | Operations and maintenance | 16,264 | 15,026 | | Operating taxes and licenses | 5,315 | 5,543 | | Insurance and claims | 14,584 | 11,002 | | Communications and utilities | 2,440 | 2,876 | | Depreciation and amortization | 46,504 | 48,469 | | Other operating expenses | 15,626 | 17,891 | | Loss (gain) on disposal of property and equipment | 89 | (6,786) | | Total Operating Expenses | 284,703 | 308,026 | | Operating (loss) income | (14,383) | 22,890 | | Interest income | 366 | 484 | | Interest expense | (5,302) | (6,075) | | (Loss) Income before income taxes | (19,319) | 17,299 | | Federal and state income taxes | (4,211) | 4,687 | | Net (loss) income | $(15,108) | $12,612 | | (Loss) Earnings per Share | | | | Basic | $(0.19) | $0.16 | | Diluted | $(0.19) | $0.16 | | Weighted Average Shares Outstanding Basic| 79,044 | 78,987 | | Weighted Average Shares Outstanding Diluted| 79,122 | 79,022 | | Dividends Declared per Share | $0.02 | $0.02 | Key Performance Indicators Key financial metrics for Q1 2024 reflect the challenging market, with significant drops in operating revenue and a shift from net income to net loss, alongside a notable increase in the operating ratio Key Financial Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------------- | :---------- | :---------- | :----------- | | Operating Revenue | $270.3M | $330.9M | -18.3% | | Fuel Surcharge Revenue | $36.2M | $49.6M | -27.0% | | Operating (Loss) Income | ($14.4M) | $22.9M | N/A | | Net (Loss) Income | ($15.1M) | $12.6M | N/A | | Basic (Loss) Earnings per Share | ($0.19) | $0.16 | N/A | | Operating Ratio | 105.3% | 93.1% | +12.2 pp | | Non-GAAP Adjusted Operating Ratio | 105.6% | 91.4% | +14.2 pp | | Net Loss as % of Operating Revenues | 5.6% | 3.8% (Net Income) | N/A | Financial Position and Capital Management Heartland Express maintained a solid Q1 2024 financial position, reducing debt and managing capital expenditures Balance Sheet Highlights As of March 31, 2024, Heartland Express maintained a solid financial position with total assets of $1.45 billion and stockholders' equity of $848.8 million. The company successfully reduced its debt and financing lease obligations Condensed Consolidated Balance Sheets (March 31, 2024 vs December 31, 2023) | (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $23,823 | $28,123 | | Total current assets | 160,142 | 169,272 | | Property and equipment, net | 841,451 | 885,351 | | Goodwill | 322,597 | 322,597 | | Total Assets | $1,452,485 | $1,509,646 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 127,468 | 123,476 | | Long-term debt and finance lease liabilities less current portion | 254,616 | 290,696 | | Total long-term liabilities | 476,227 | 520,910 | | Stockholders' Equity | 848,790 | 865,260 | | Total Liabilities and Stockholders' Equity | $1,452,485 | $1,509,646 | - Debt and financing lease obligations decreased to $263.6 million as of March 31, 2024, down from initial borrowings for the CFI and Smith acquisitions[4] - The Company had $88.0 million in available borrowing capacity on its unsecured line of credit as of March 31, 2024, and remained in compliance with financial covenants[4] Cash Flow and Debt Reduction Net cash flows from operations for the first three months of 2024 were $31.0 million, primarily used for significant debt and financing lease repayments. The company has repaid a substantial portion of acquisition-related debt since 2022 and intends to prioritize further debt reductions throughout 2024 - Net cash flows from operations for Q1 2024 were $31.0 million, representing 11.5% of operating revenue[5] - Primary use of cash in Q1 2024 was $36.7 million for repayments of debt and financing leases[1][5] - Since the 2022 acquisitions, the Company has repaid a total of $232.2 million of acquisition-related debt, and plans to continue prioritizing capital towards further debt reductions in 2024[5] Capital Expenditures and Fleet Information The average age of the company's consolidated tractor and trailer fleets increased slightly year-over-year. For calendar year 2024, net capital expenditures are projected to be approximately $15 to $20 million, with no significant gains expected from equipment disposition Fleet Age (as of March 31) | Fleet Type | 2024 | 2023 | | :--------- | :------ | :------ | | Tractor | 2.4 years | 2.1 years | | Trailer | 6.7 years | 6.2 years | - Expected net capital expenditures for calendar year 2024 are approximately $15 to $20 million, with no significant gains anticipated from equipment disposition[6] Shareholder Value The company maintained regular Q1 2024 dividend payments, demonstrating shareholder commitment, but did not repurchase shares Dividends Heartland Express continued its commitment to stockholders by declaring a regular cash dividend of $0.02 per share during the first quarter of 2024, maintaining its long history of consecutive quarterly payments - A regular dividend of $0.02 per share was declared during Q1 2024 and paid on April 5, 2024[7][14] - The Company has paid cumulative cash dividends of $550.5 million, including four special dividends, over the past eighty-three consecutive quarters since 2003[7] Share Repurchase Program Heartland Express did not repurchase any shares of common stock in Q1 2024 or throughout 2023, despite having authorization to repurchase an additional 6.6 million shares - No shares of common stock were repurchased in the first three months of 2024 or throughout all of 2023[7] - The Company has the ability to repurchase an additional 6.6 million shares under the current authorization[7] Other Information Heartland Express received multiple industry awards in Q1 2024 and provided non-GAAP financial reconciliations for operational insights Operational Achievements During the first quarter of 2024, Heartland Express's operating brands continued to deliver award-winning service, safety, and integrity, earning several industry recognitions - Awards received include: Home Depot Truckload Carrier of the Year (Medium Fleet), Home Depot Truckload Carrier of the Year (Small Fleet), NFI US East Carrier of the Year, TCA Fleet Safety Award 2023 - 2nd Place (Division VI, 100+ Million Miles), Missouri Trucking Association - Safety Award (Over the Road, 15+ Million Miles), and Newsweek's 2024 Most Trustworthy Companies[8][9] Non-GAAP Financial Measures Reconciliation The report includes a reconciliation of GAAP to non-GAAP financial measures, such as operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio. Management believes these non-GAAP measures provide a more consistent basis for comparing operational results by excluding the volatility of fuel prices GAAP to Non-GAAP Reconciliation (Three Months Ended March 31) | (Unaudited, in thousands) | 2024 | 2023 | | :---------------------------------------- | :---------- | :---------- | | Operating revenue | $270,320 | $330,916 | | Less: Fuel surcharge revenue | 36,212 | 49,647 | | Operating revenue, excluding fuel surcharge revenue | 234,108 | 281,269 | | Operating expenses | 284,703 | 308,026 | | Less: Fuel surcharge revenue | 36,212 | 49,647 | | Less: Amortization of intangibles | 1,254 | 1,291 | | Adjusted operating expenses | 247,237 | 257,088 | | Operating (loss) income | (14,383) | 22,890 | | Adjusted operating (loss) income | $(13,129) | $24,181 | | Operating ratio | 105.3 % | 93.1 % | | Adjusted operating ratio | 105.6 % | 91.4 % | - Non-GAAP measures (operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio) are used to supplement GAAP results, providing a more consistent basis for comparing operations by excluding fuel price volatility[8][17] Forward-Looking Statements This section provides a standard disclaimer for forward-looking statements, highlighting inherent risks and uncertainties Forward-Looking Statements Disclaimer This section contains a standard disclaimer regarding forward-looking statements, cautioning that such statements are based on management's current beliefs and involve certain risks and uncertainties, which may cause actual events to differ materially from those projected. The Company assumes no obligation to update these statements - Statements regarding freight supply and demand, future cost inflation, market conditions, operational improvements, goals, capital deployment, capital expenditures, equipment dispositions, operating ratio, stock repurchases, dividends, and debt repayment are considered forward-looking statements[11] - Actual events may differ materially from forward-looking statements due to numerous factors, including those specified in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[11] - The Company assumes no obligation to update any forward-looking statements[11] Contact Information Investor relations contact details are provided for inquiries, listing key executive personnel Investor Relations Contact This section provides contact details for investor inquiries, listing the Chief Executive Officer and Chief Financial Officer - Contact persons for Heartland Express, Inc. are Mike Gerdin (Chief Executive Officer) and Chris Strain (Chief Financial Officer) at (319-645-7060)[12]