enant Logistics (US:CVLG)2020-05-21 01:15Financial Data and Key Metrics Changes - Revenue from the Highway Services Truckload segment decreased by 1% to $77 million, primarily due to an 80 tractors average operating fleet reduction of 5.8%, partially offset by a 5.1% increase in average freight revenue per tractor [5] - The Dedicated Truckload segment's revenue decreased by 2.5% to $69.9 million, mainly due to a 3.1% reduction in average operating fleet [6] - Managed Freight segment's operating revenue decreased by 4% to $42.7 million, driven by a 10.4% decrease in freight brokerage operating revenue [7] - Factoring segment net fee revenue increased by 48.2% to $2.7 million, with operating income rising to $2.2 million from $1.5 million [7] - Total indebtedness net of cash increased by $32.2 million to $336.8 million by March 31, 2020, due to stock repurchases and increased funds in the factoring business [9] Business Line Data and Key Metrics Changes - Highway Services Truckload segment saw a 3.7% decrease in average freight revenue per total mile, while average miles per tractor increased by 9.1% [5] - Dedicated Truckload segment experienced a 1.6% decrease in average freight revenue per total mile, with average miles per tractor up by 2.2% [6] - Managed Freight's operating income was $1.6 million, with an operating ratio of 96.2% [7] - The average age of the tractor fleet decreased to 1.8 years from 2.3 years year-over-year [8] Market Data and Key Metrics Changes - The company expects a 12% to 14% reduction in operational tractor fleet size by the end of 2020 compared to the end of 2019 [8] - The company noted a significant increase in the percentage of team-driven tractors, contributing to improved utilization [5] Company Strategy and Development Direction - The company is focused on reducing total capital employed while prioritizing higher margin and less volatile core service offerings [11] - Strategic initiatives include cost control planning and a realignment of the executive structure to enhance operational efficiency [11] - The company aims to strengthen its position in the U.S. logistics industry and concentrate on sustainable higher margin sectors [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about initial positive results from strategic plan execution, despite expecting volatility in the coming months due to external factors [13] - The outlook for 2020 is no longer applicable, with management indicating readiness to support partner customers as business levels return to normal [14] - Management highlighted the importance of structural improvements and strategic initiatives in mitigating risks and enhancing profitability [14] Other Important Information - The company recognized a pre-tax loss of $700,000 from its equity investment in TEL, compared to a pre-tax income of $3 million in the same quarter of the previous year [8] - The company has suspended its 401(k) match for employees as a temporary cost-saving measure [24] Q&A Session Summary Question: What percentage of your automotive businesses is in your dedicated side? - Management indicated that approximately 10% to 12% of the total fleet is dedicated to automotive, which was significantly impacted by shutdowns due to COVID-19 [17] Question: How are automotive customers ramping up production? - Management expects a gradual ramp-up, with projections of reaching 100% production levels by mid-June [18] Question: How many of the costs should be considered permanent versus variable? - Management stated that many of the cost reductions are permanent, including the rationalization of fixed infrastructure and headcount reductions [25] Question: What is the expectation for the tractor count by year-end? - Management confirmed that the tractor count is expected to be down to approximately 2,600 by year-end [59] Question: How has fuel impacted margins recently? - Management noted that while lower fuel costs are beneficial, the corresponding decrease in fuel surcharges has balanced the effect on margins [61] Question: Will TEL continue to be a headwind? - Management expects TEL to remain a headwind in the third quarter but anticipates improvement in the fourth quarter compared to the previous year [64]