Yahoo Finance ArcBest Corporation (NASDAQ:ARCB) Q1 2024 Earnings Call Transcript
ArcBest Corporation (NASDAQ:ARCB) Q1 2024 Earnings Call Transcript April 30, 2024
ArcBest Corporation beats earnings expectations. Reported EPS is $2.47, expectations were $1.54. ArcBest Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the ArcBest First Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mr. David Humphrey, Vice President of Investor Relations. Please go ahead.
David Humphrey: Thank you for joining us. Today, we'll provide an update on our business, walk through -- walk you through the details of our recent first quarter 2024 results and then answer some questions. Joining me for the prepared remarks are Judy McReynolds, Chairman, President and CEO of ArcBest; Matt Beasley, Chief Financial Officer; and Seth Runser our President of ABF Freight. In addition, Steven Leonard, Chief Commercial Officer and President of Asset Lot Logistics; Dennis Anderson, Chief Strategy Officer; and Christopher Atkins, Vice President, Yield Strategy and management are available to help answer questions. To help you better understand ArcBest in our results, some forward-looking statements could be made during this call.
Forward-looking statements, by their very nature, are subject to uncertainties and risks. For a more complete discussion of factors that could affect ArcBest's future results, please refer to the forward-looking statements section of our earnings press release and our most recent SEC public filings. To provide meaningful comparisons, certain information discussed in this call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. Reconciliations of the GAAP financial measures to the related non-GAAP measures discussed in this call are also provided in the additional information section of the presentation slides. As a reminder, there is a conference call slide deck that can be found on the ArcBest website, arcb.com and exhibit 99.3 of the 8-K that was filed earlier this morning.
Before I turn the call over to Judy, I want to let you all know that I will be retiring from ArcBest at the end of August. So the second quarter earnings conference call will be the last one I do. It's been a privilege being a part of this wonderful company for my entire career. I came here right out of college in 1983, and it was the best career decision I could have made. It's been an honor to have been part of the success story of growing from a $468 million LTL company into a multibillion-dollar integrated logistics company. But as the proud grandfather of 7, I'm looking forward to speaking -- to spending more time with my family. I look forward to watching and cheering for ArcBest as it continues to prosper in its second century of business.
With that, I will now turn it over to Judy.
Judy McReynolds: Good morning, everyone. I'd like to begin by expressing my heart felt gratitude to David for his enormous contributions to ArcBest. As he prepares for a well-deserved retirement, we celebrate his remarkable tenure of nearly 41 years with us, 26 of which he spent leading our Investor Relations team. Throughout my time as CEO and even before that, I've had the privilege of working closely with David. He has been an outstanding colleague and friend, and his dedication and leadership have been instrumental to our success I am excited to welcome Amy mendenhall as our new Head of Investor Relations. Amy has been with ArcBest for 26 years until recently served as Vice President, Controller for asset-light operations.
Earlier this year, Amy assumed the role of Treasurer and she has been working closely with David to ensure a seamless transition as she adds Investor Relations responsibilities. We believe the core of ArcBest success is our people, and our people rose to the occasion this quarter as we navigated continued market softness and weather events. Despite these challenges, we delivered solid first quarter results, including generating $1 billion in revenue and nearly $43 million in non-GAAP operating income. Our focus remains on efficiently running our business, delivering a high-quality service that our customers value and effectively managing costs. Here are some key highlights from the first quarter that show our continued focus on our 3-point strategy of accelerating growth, increasing efficiency and driving innovation, all while delivering a high-quality service that our customers value and effectively managing costs.
Demand for our services remains strong with a solid pipeline that has grown by 35% since the start of the year as our best continues to act as a trusted adviser to customers, helping them solve their logistics challenges. We have seen positive trends in our core asset-based business with daily shipments and tonnage, both increasing over last year. Our asset-light shipment volume has grown significantly with double-digit growth in the managed transportation solutions. This is a testament to our commitment to helping our customers optimize their supply chains. A large and long-time customer recently told us how much they value our hands-on approach to creating logistics strategies that enhance flexibility in their network, increasing efficiencies and reducing costs.
Despite severe weather conditions in January, we achieved the highest on-time performance and network efficiency since 2021, a testament to our laser focus on operational excellence. We continue to make strategic investments to accelerate growth and increase operational efficiency. For instance, the opening of a new facility in Olathe, Kansas, allowed us to relocate city operations from the Kansas City distribution center, leading to a significant increase in productivity across the facilities. We anticipate similar productivity gains with the upcoming Lithia Springs Georgia facility set to open in June, which will enable us to relocate our Atlanta area city operations from our Atlanta area distribution center. And we remain committed to innovation.
In March, we announced the next step in our Box Suite FOX smart autonomy, which includes forklifts and reach trucks that leverage automation and teleoperations, when needed. This transformational solution empowers customers to unlock supply chain efficiencies across their facilities. Before I pass the call to Matt, I'd like to address the noncash impairment charge related to our best equity investment in Fantom Auto, which resulted in a $22 million reduction in net income. For context, in January of 2022, ArcBest announced a $25 million investment in Fantom Auto as a part of a transformative initiative centered around remote-operated autonomous forklifts developed for use in ArcBest customer locations. Since our March launch of the Box Smart Autonomy solution, we've seen significant customer interest, and we currently have pilots underway with key customers.
These pilots are leveraging our own technology solutions for any required teleoperations, instead of the Phantom Auto solution we previously used. Box is just one example of our proud legacy of developing creative solutions and investing in strategic and transformative initiatives. We remain encouraged by our progress and are committed to staying involved in leading-edge innovations to help our customers solve real supply chain challenges. And with that, I'll turn it over to Matt to take you through the results in more detail.
Matt Beasley: Thank you, Judy, and good morning, everyone. Despite the market backdrop, I'm pleased to report that ArcBest delivered solid financial performance for first quarter 2024. Let me start with an overview of our consolidated results. During the first quarter, we generated $1 billion in revenue, down 6% versus last year. Our non-GAAP operating income from continuing operations was $43 million compared to $52 million last year. Adjusted earnings per share was $1.34, a decrease from $1.58 in the first quarter of 2023. Despite a 3% decrease in revenue per day and additional costs related to a new labor contract, our asset-based business achieved the same level of non-GAAP operating income as the first quarter of last year.
The $9 million decrease in consolidated non-GAAP operating income was primarily driven by our asset-light business, we saw impacts from January's weather in a softer truckload market. Now, let's talk about the 2 segments in more detail. Starting with the Asset-Light segment. First quarter revenue was $396 million, a daily decrease of approximately 9% year-over-year. While shipments per day increased 14%, revenue per shipment decreased 20% due to the softer market and growth in our managed business, which has a lower revenue per shipment. The non-GAAP operating loss of $4.7 million for the quarter was largely due to weather in January, which increased purchase transportation costs. However, I'm pleased with the improvements we saw throughout the quarter, with a small loss in February and a slight profit in March on a non-GAAP basis.
We have maintained our focus on reducing operating expenses and improved employee productivity over 27% on a year-over-year basis. Looking at preliminary results for April that were filed in the 8-K this morning, shipments per day are trending higher by 10%, while revenue per shipment is down 18% and revenue per day is down 7% compared to April of last year. While the April numbers are somewhat lower than March, I'm encouraged by the improvement in purchase transportation costs, which helps margins and overall operating results. With our improvements in operating costs and productivity, we are well positioned for the eventual recovery of the truckload brokerage market. Moving on to our asset-based business. First quarter revenue was $672 million, a per day decrease of 3%.
The segment's non-GAAP operating ratio was 92.0%, an improvement of 30 basis points versus the first quarter of last year and 430 basis points above the fourth quarter of 2023. The sequential performance was generally in line with the past performance we have seen in softer freight environments. As we move from a strong fourth quarter into our first quarter with more muted demand and higher union benefit and profit sharing costs, we optimize our freight mix, maintain pricing discipline, manage costs lower and improve productivity, which all contributed to our results for the quarter. First quarter tonnage per day decreased by 17% and daily shipments were 6% below prior year levels, primarily due to lower transactional volumes and lower tonnage levels more broadly for the industry.
However, our core LTL shipments and tonnage continued to grow, contributing to improved productivity and better financial results. Our year-over-year billed revenue per hundred rate increased over 15% in the first quarter, which was driven by higher prices in our transactional business and a mix shift towards our growing core business at a higher revenue per hundredweight. We secured an average increase of 5.3% on our customer contract renewals and deferred pricing agreements during the quarter demonstrated continued pricing discipline. Preliminary asset-based results for April show lower year-over-year tonnage in shipment levels and higher prices as we continue to manage our mix of business with more core and less transactional shipments, leading to a better productivity and profit outcome.
The average sequential change in the asset-based operating ratio from the first quarter to the second quarter over the last 4 years has been an improvement of approximately 200 to 300 basis points. We are proud of our first quarter performance and our solid financial position. As Judy said, we continue to pursue growth, efficiency and innovation while delivering superior service to our customers and value to our shareholders. Seth will now discuss how ABF continues to advance its proud tradition of excellence.
Seth Runser: Thanks, Matt. Our focus remains on the factors within our control that contribute to operational excellence, our people, productivity and capacity. Let's start with our people. We pride ourselves on our strong culture. Over the years, we have successfully navigated various freight environments in the spirit of determination, adaptability and excellence continues to thrive among our employees. We invest in our employees, ensuring they are well trained and fully understand our strategy. This empowers them to perform at their best, and we're proud to have been repeatedly recognized on Training Magazine's Apex Awards list for our commitment to our employee training and development. This year marks the 40th anniversary of our quality process, a 5-step problem elimination process that empowers our frontline employees to identify and resolve problems, enhancing our productivity and service.
We have a dedicated team of operations experts working closely with our frontline teams in key locations to refine processes and improve operational execution. These efforts have led to double-digit productivity gains at these key locations, expanding capacity and improving operating results. We plan to extend this initiative to more locations throughout the year. Our investments in technology is fueling productivity and yielding tangible benefits. We are developing tools that enhance network visibility and empower our frontline teams to make real-time, data-driven decisions. Here are a few examples of the tools we've recently deployed. City optimization, which leverages AI and machine learning to drive efficiencies continues to save us around $1 million each month.
We are currently piloting the next 2 phases of this project at multiple locations. Our new dock software enhances visibility into dock activity. Early results from locations where the software has been installed are promising. We developed in-house labor planning applications for our distribution centers and tools that predict hiring needs based on forecasted demand. These are being rolled out in additional locations. These new tools have enhanced freight visibility and resource management across our network, and we expect them to continue delivering benefits for the years to come. Regarding our network and our facility road map, we operate a mature nationwide network and have a robust process in place to identify where we need to increase capacity to meet customer demand.
Since the end of 2021, we've added roughly 500 doors, and we plan to add around 280 doors the rest of this year, including the 4 yellow facilities. Our technology tools and network design strategies are amplifying our capacity. As Judy said, in March, we opened our new facility in Olathe, Kansas, which has already led to a double-digit improvement in productivity at the nearby distribution center. This additional capacity will support future growth. We continue to invest in our fleet, which is one of the newest on the road. This has reduced repairs and lowered operating expenses and positioned us to respond with the reliable capacity our customers expect as market conditions improve. We have a robust pipeline of optimization projects on our road map, all aimed at delivering customer value and positioning us for growth, both in the short term and long term.
In closing, I would like to congratulate our team on some recent external recognitions including the LTL Carrier of the Year award from several companies like Coyote, TQL, American Group and in Express. We were also honored to receive the ATA's Prestigious Excellence in Security Award last week. A sincere thank you to our people for all you do. I will now turn it back to Judy for some closing remarks.
Judy McReynolds: Thank you, Seth. At ArcBest, we help keep the global supply chain moving. Our commitment to investing in our people, our solutions and our technology is unwavering, and it is this commitment that fuels our growth. Our customers appreciate the depth of knowledge and experience we bring to the table, helping them navigate their most complex challenges. It's so rewarding when I hear feedback from our customers on the challenges we've helped them solve. We are honored to receive external recognition, especially when it highlights performance in key areas. So I was pleased for ArcBest to be recognized by Newsweek and Statista as one of America's most responsible companies in 2024. ArcBest has a long history of good stewardship and taking intelligent risks on our path to growth. That concludes our prepared remarks, and now I'll turn it over to David Humphrey. Thank you.
David Humphrey: Okay. Denis, I think we're ready for some questions.
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