ArcBest(ARCB) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter 2021 consolidated revenues grew 51.3% to $949 million compared to $627 million in the same period last year [10] - Net income for Q2 2021 was $2.27 per diluted share, up from $0.61 per share in Q2 2020 [10] - Adjusted earnings per diluted share increased 194% to $1.97 compared to $0.67 in the same period last year [10] - The company ended Q2 2021 with unrestricted cash and short-term investments of $423 million and total debt of $238 million, resulting in a cash net of debt of $185 million, an increase of $100 million since the beginning of the year [11][12] Business Line Data and Key Metrics Changes - Asset-Based revenue was $653 million, with an average daily increase of 42% compared to last year [17] - The Asset-Based operating ratio improved 440 basis points sequentially versus Q1 2021, with a 600 basis-point improvement when adjusting for a large property sale gain [17] - Asset-Light businesses saw a revenue increase of 67% versus last year's second quarter, with operating income rising to $16.3 million from $2.1 million last year [21] Market Data and Key Metrics Changes - The company experienced strong customer demand, resulting in shipment and tonnage growth, with daily total tonnage per day increasing 22.7% versus last year's second quarter [17] - Total billed revenue per hundredweight on Asset-Based shipments increased 15.4%, influenced by higher fuel surcharges [18] - Preliminary business trends for July indicated daily average tonnage and shipments were above the prior year month by percentages in the mid-single digits [18] Company Strategy and Development Direction - The company is focused on increasing hiring and recruiting efforts, optimizing the ABF network, and investing in technology to enhance customer experience [7][8] - Investments in facility upgrades and expansions are prioritized, with an expected capital expenditure range of $160 million to $170 million for the year [13][14] - The company aims to leverage its integrated logistics solutions to strengthen customer relationships and improve retention [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth opportunities due to strong customer demand and a positive pricing environment [5][6] - The company is adapting to supply chain disruptions and is focused on providing holistic solutions to customers [6][23] - Management highlighted the importance of agility and responsiveness to evolving customer needs as a key to long-term success [23][24] Other Important Information - The company is committed to enhancing its environmental, social, and governance (ESG) initiatives, including developing a diversity, equity, and inclusion strategy [24][25] - The company has a strong focus on employee well-being and community involvement, recognizing the importance of its workforce in driving success [25] Q&A Session Summary Question: Insights on the U-Pack business profitability compared to traditional core network business - Management noted that U-Pack has historically been a spot-quoted business and emphasized the strength in core LTL business, which is experiencing good demand [27][29] Question: Future capital expenditures and facility upgrades - Management indicated that the $50 million to $75 million in additional capital expenditures would primarily focus on the Asset-Based network for upgrades and expansions [32][34] Question: Sustainability of operating ratio levels - Management expressed confidence in maintaining strong operating ratios due to strategic direction and customer demand [36][38] Question: Capacity additions and long-term demand outlook - Management acknowledged potential secular changes in LTL demand and emphasized the importance of reliability in service [43][44] Question: Capital allocation strategy and share buyback flexibility - Management outlined a balanced approach to capital allocation, focusing on capital expenditures, dividends, and potential acquisitions [45][47] Question: Update on technology and efficiency initiatives - Management is optimistic about pilot projects in Kansas City and Indianapolis, with plans for broader rollout pending successful testing [48][49] Question: Customer demand and inventory management - Management highlighted strong customer conversations and the need for holistic logistics solutions amid supply chain disruptions [52][54] Question: Labor availability and hiring challenges - Management reported progress in hiring, with a focus on recruiting military veterans and addressing elevated levels of purchased transportation [56][58] Question: Tonnage trends and core LTL business performance - Management noted that while tonnage per shipment is trending down due to larger shipments, core LTL business is seeing strength in revenue and customer retention [60][64]