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UL

UNIVERSAL LOGISTICS HOLDINGS, INC. (ULH)·Q3 2024 Earnings Summary

Executive Summary

  • ULH delivered resilient Q3 results in a depressed freight market: revenue $426.8M (+1.3% y/y), operating margin 10.0% (vs 8.7% y/y), and EPS $1.01 (+14.7% y/y). Non‑GAAP EBITDA rose to $72.9M (17.1% margin). One‑time brokerage shutdown losses of ~$8.6M reduced EPS by ~$0.24; adjusted EPS would have been $1.25.
  • Segment mix drove performance: Contract Logistics strength (rev +17.8% y/y; 18.6% margin) offset Intermodal losses (OR ~101.5%) and softer Trucking revenue, though Trucking margin improved on heavy‑haul wind.
  • Management introduced Q4 and inaugural FY25 guidance: Q4 revenue $450–$475M and 9–11% operating margin; FY25 revenue $1.8–$1.9B and 10–12% operating margin, with capex $140–$160M and interest expense $45–$50M.
  • Strategic actions/catalysts: closure of loss‑making company‑managed brokerage, acquisition of Parsec (TTM rev ~$230M; +$30M annual EBITDA expected), acquisition of East Texas Heavy Haul (+$3M EBITDA), and a new Tacoma intermodal terminal to bolster network density.

What Went Well and What Went Wrong

  • What Went Well
    • Contract Logistics outperformed: revenue +17.8% y/y to $245.2M; operating margin 18.6% (vs 16.9% y/y). “Contract Logistics has been the cornerstone of our success… the acquisition [Parsec] will allow us to enter new industries… and provide cross‑selling opportunities.”
    • Margin resilience and cost control: consolidated operating margin 10.0% (vs 8.7% y/y); EBITDA margin 17.1% (vs 13.5% y/y).
    • Trucking margin expansion on heavy‑haul: revenue per load ex‑fuel +9.3% y/y; operating margin 8.2% (vs 6.8% y/y), supported by wind projects.
  • What Went Wrong
    • Intermodal remained loss‑making despite sequential OR improvement (~101.5% in Q3 vs 110.6% in Q2): volume −13.2% y/y; fuel surcharge and accessorials down.
    • Brokerage underperformance forced closure; Q3 incurred pretax losses of ~$8.6M including ~$2.8M impairment, depressing op margin by ~200 bps and EPS by ~$0.24.
    • Sequential step‑down from Q2 on cadence and charges: revenue fell to $426.8M (from $462.2M) and EPS to $1.01 (from $1.17).

Financial Results

Overall performance vs prior periods and y/y

MetricQ1 2024Q2 2024Q3 2024
Revenue ($M)491.9 462.2 426.8
Operating Income ($M)75.1 47.1 42.6
Operating Margin (%)15.3% 10.2% 10.0%
EPS (Diluted, $)1.99 1.17 1.01
EBITDA ($M, non‑GAAP)96.9 84.8 72.9
EBITDA Margin (%)19.7% 18.4% 17.1%

Q3 year-over-year comparison

MetricQ3 2023Q3 2024
Revenue ($M)421.3 426.8
Operating Income ($M)36.8 42.6
Operating Margin (%)8.7% 10.0%
EPS (Diluted, $)0.88 1.01
EBITDA ($M, non‑GAAP)56.7 72.9
EBITDA Margin (%)13.5% 17.1%

Non‑GAAP/adjusted context (Q3 2024)

  • Brokerage shutdown losses (~$8.6M pretax; ~$0.24/share) reduced EPS; adjusted EPS would be $1.25.

Segment breakdown

SegmentRevenue Q1 2024 ($M)Op Inc Q1 2024 ($M)Revenue Q2 2024 ($M)Op Inc Q2 2024 ($M)Revenue Q3 2024 ($M)Op Inc Q3 2024 ($M)
Contract Logistics313.5 81.5 263.6 52.9 245.2 45.6
Intermodal76.7 (8.0) 78.1 (8.3) 77.6 (1.1)
Trucking69.7 3.7 91.4 4.4 87.0 7.1
Company‑Managed Brokerage31.0 (2.5) 28.1 (2.2) ——
Other1.0 0.5 1.0 0.4 17.0 (9.0)

Key operating KPIs

KPIQ1 2024Q2 2024Q3 2024
Intermodal loads105,037 108,326 103,970
Intermodal avg rev/load ex‑fuel ($)566 555 557
Intermodal avg tractors1,758 1,656 1,596
Trucking loads41,691 40,620 36,909
Trucking avg rev/load ex‑fuel ($)1,508 2,115 2,222
Trucking avg tractors830 815 755

Balance sheet/cash deployment highlights (end of period)

  • Cash & equivalents: $11.8M (Q3); Marketable securities: $11.7M; Net debt ~$557.5M; Q3 capex $65.1M.
  • Dividend declared: $0.105 per share, payable Jan 2, 2025 (record Dec 2, 2024).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2024N/A450 – 475Introduced
Operating Margin (%)Q4 2024N/A9% – 11%Introduced
Specialty development project revenue ($M)Q4 2024N/A~50Introduced; rolls off post‑2024
Revenue ($B)FY 2025N/A1.8 – 1.9Introduced
Operating Margin (%)FY 2025N/A10% – 12%Introduced
Capex ($M)FY 2025N/A140 – 160 (ex strategic real estate)Introduced
Interest Expense ($M)FY 2025N/A45 – 50Introduced
Dividend ($/sh)Quarterly0.1050.105Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
Contract Logistics strengthQ1: Newly awarded program; key differentiator; 26% margin. Q2: 10th straight quarter of double‑digit margins; robust pipeline. 11th quarter OR<90% and 6th below 85%; Parsec lifts CL annual run‑rate >$1.1B; continued outperformance expected. Strengthening/scale up
Intermodal performanceQ1: Margin pressure; loss; focus on returning to profitability. Q2: Loss deepened; cost controls emphasized. Loss narrowed; OR improved to ~101.5%; volumes −13.2% y/y; signs of bottoming sequentially. Gradual improvement from trough
Trucking heavy‑haul windQ1: Stable but down volumes; margin modest. Q2: Heavy‑haul buoyed results. Q3: Margin 8.2%; strong demand; E. Texas Heavy Haul acquisition to support.
Portfolio reshapingQ1/Q2: Brokerage under pressure; non‑core. Q3: Brokerage shutdown complete; acquisitions (Parsec; E. Texas Heavy Haul) immediately accretive. De‑risking + accretive M&A
Macro/freight cycleQ1/Q2: Prolonged freight recession; focus on costs. Q3: “Most prolonged freight recession” seen; auto SAAR 15.8M supports CL outlook. Macro headwind persists
Network/ESG initiatives—Q3: New Tacoma intermodal terminal; EV drayage deployment in SoCal. Build‑out/ESG progress

Management Commentary

  • “Universal’s diverse service offerings continue to set us apart… achieve exceptional results even during this extended downturn.” — CEO Tim Phillips.
  • “Contract Logistics… the cornerstone of our success… the acquisition of Parsec… will allow us to enter new industries… and provide cross‑selling opportunities.” — Tim Phillips.
  • “Intermodal… continues to perform below our expectations… we saw a sequential improvement… narrowed our losses to just over $1.1 million.” — Tim Phillips.
  • “We shut down [the company‑managed brokerage]… took our medicine… about $13M of losses this year replaced with about $33M of additional EBITDA with the 2 acquisitions.” — CFO Jude Beres.
  • “We anticipate [Parsec] to add approximately $230M of top line and nearly $30M of additional EBITDA annually to our contract logistics segment.” — CFO Jude Beres.

Q&A Highlights

  • Parsec synergies/margins: Management expects double‑digit EBITDA margins consistent with CL programs and meaningful cross‑selling with drayage; immediate accretion and strong cultural fit.
  • Brokerage closure modeling: Stand‑alone Nashville brokerage closed; overflow brokerage in agent network continues; ~$8.9M one‑time expenses taken; forward impact eliminated.
  • FY25 margin expansion: Driven by mix shift away from brokerage toward acquired businesses operating around ~10% margin vs brokerage at ~105% OR.
  • Event exposure: No FEMA/emergency response exposure in heavy‑haul wind; minimal hurricane impact on normal van flows.
  • Portfolio focus: Comfortable with current portfolio; key remaining headwind is Intermodal turnaround.

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was not retrievable at the time of analysis due to a data access limitation; as such, we cannot provide vs‑consensus comparisons for this quarter. If needed, we can refresh once access is restored and update the “vs estimates” tables. [Values intended from S&P Global but unavailable]
  • Company guidance implies Q4 revenue of $450–$475M and 9–11% operating margin; FY25 revenue of $1.8–$1.9B and 10–12% operating margin, which may require upward revisions to Intermodal profitability assumptions and CL run‑rate post‑Parsec, while modeling the roll‑off of the 2024 specialty development project.

Key Takeaways for Investors

  • Mix/quality improving: Exiting loss‑making brokerage and adding Parsec/East Texas Heavy Haul should structurally lift margins and reduce earnings volatility into 2025.
  • Contract Logistics is the engine: Sustained double‑digit margins, >$1.1B run‑rate post‑Parsec, and a $700M+ sales pipeline provide multi‑quarter visibility.
  • Intermodal likely at/near trough: Sequential OR improvement and network investments (Tacoma terminal) set the stage for operating leverage when capacity rationalizes.
  • Heavy‑haul wind underpins Trucking: Provides counter‑cyclical strength and margin support while broader truckload remains soft.
  • 4Q setup: Guidance implies sequential revenue step‑up aided by final ~$50M from the specialty project; monitor execution and any residual restructuring drag.
  • 2025 framework: Revenue $1.8–$1.9B and 10–12% operating margin with moderated capex ($140–$160M) and higher interest ($45–$50M) — watch integration of Parsec and intermodal recovery cadence.
  • Capital returns intact: Quarterly dividend maintained at $0.105/sh amid elevated investment cycle.

Appendix: Additional Context

  • Dividend declaration details: $0.105 per share; record Dec 2, 2024; payable Jan 2, 2025.
  • Liquidity/Leverage snapshot: Cash $11.8M; marketable securities $11.7M; net interest‑bearing debt ~$557.5M; TTM net debt/EBITDA ~1.8x (ex‑lease).
  • Network/ESG: New Tacoma intermodal terminal operational; EV drayage deployment in SoCal advancing sustainability objectives.