Yellow Corp (YELL) 2020 Q2 法說會逐字稿

Good afternoon, and welcome to YRC Worldwide's Second Quarter 2020 Earnings Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Eric Birge, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to YRC Worldwide Second Quarter 2020 Earnings Conference Call. Joining us on the call today are Darren Hawkins, Chief Executive Officer; Jamie Pierson, Chief Financial Officer; and T.J. O'Connor, Chief Operating Officer, who will be available for our Q&A.

During the call, we will make some forward-looking statements within the meaning of federal securities laws. These forward-looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and number of risks, and therefore, actual results may differ materially. The format of this call does not allow us to fully discuss all these risk factors. For a full discussion of the risk factors that could cause the results to differ, please refer to this afternoon's earnings release and our most recent SEC filings, including our Forms 10-K and 10-Q. These items are available on our website at yrcw.com.

Additionally, please see today's release for a reconciliation of net income to adjusted EBITDA. In conjunction with today's earnings release, we issued a presentation which may be referenced during the call. This presentation was filed in an 8-K along with our earnings release and is available on our website.

I'll now turn the call over to Darren.

Good afternoon, everyone, and thanks for joining our second quarter 2020 earnings conference call. I want to thank our 30,000 American families that make up the population of YRCW companies for approaching their essential work with safety and diligence to take great care of our customers as every business we interact with and serve has had unprecedented challenges during this roller coaster pandemic. On behalf of our YRCW families and over 200,000 customers, we would like to start by thanking Congress and the administration for passing the CARES Act, which has provided liquidity to pandemic-stricken companies like ours and tens of thousands of businesses that comprise our customer base. The CARES Act empowered the administration to provide critical support to companies that are the last line of America's supply chain.

After the quarter ended, we announced that we had closed on a $700 million loan with the U.S. Department of Treasury under the CARES Act. The first piece was the $300 million in tranche A, which the majority of was directed at deferred health, welfare and pension payments and added to our July liquidity, which we will report at the end of Q3. The second piece of this loan was the $400 million in tranche B. Tranche B is specifically targeted at reinvesting into rolling stock and gives us the opportunity to refresh our fleet with the latest and greatest that the OEMs have to offer today: better fuel efficiency, lower maintenance and the latest in safety technology, and let's not forget, better experience for our employees and service for our customers. Make no mistake, this volume of equipment and upgrade coming into our network will allow us to shift into high gear.

Moving forward, YRCW and our 5 powerful brands have over 3 years before any major debt maturity to complete our enterprise transformation, to focus on running the business and taking great care of our customers. It has been a long time since this company has had this much runway in front of us, and we intend to capitalize on every single day.

As I shared with you on the first quarter earnings call, we continue our transformation work toward a single enterprise. The collective power of technology migration to a single enterprise platform, increased network density to optimize line-haul mileage and a comprehensive plan for terminal asset utilization will result in a North American LTL industry leader designed to grow for the long term. This new day at YRCW allows us to accelerate our transformation as we look to optimize and blend the very best service offerings by and among our 5 brands so that the customer will have a variety of choices all under one company.

On a current note, we see the pricing environment is stable. And in the month of July, YRCW companies averaged plus or minus 3% on contract negotiations.

I will now turn the call over to Jamie who will share additional details about the quarter and plans we have in place for the future. After which, I will provide closing comments.

Thank you, Darren, and good afternoon, everyone. As usual, I will tick through the results in fairly short order, and we'll end with a little more color and my thoughts [through TC].

For the second quarter of 2020, YRC Worldwide reported revenue of $1.02 billion, down from $1.27 billion in 2019; and reported an operating loss of $4.6 million, which included a $6 million net gain on property disposals, compared to an operating income of $14.3 million in 2Q '19, which included a $6.2 million net gain on property disposals. As for adjusted EBITDA, we reported $37.9 million in the second quarter of this year, down from the $67.3 million in 2Q '19. Over the last 12 months, LTM adjusted EBITDA was $183.1 million, down from the $259.1 million for the comparable period in 2019.

For the second quarter of this year, our consolidated LTL tonnage per day was down 14.8% compared to last year's comparable period. The decrease in tonnage was led by a 16% decrease in LTL shipments per day, which was offset by a 1.4% increase in weight per shipment.

As for pricing, year-over-year LTL revenue per hundredweight, including fuel surcharge, was down 5.7%; and LTL revenue per hundredweight, excluding fuel surcharge, was down 2.6%. However, as I have shared last quarter, given the increase in weight per shipment, a better indicator for us right now is revenue per shipment ex fuel. And to that end, year-over-year change in LTL revenue per shipment, excluding fuel surcharge, was only down 1.2%.

On the tonnage side, trends for the quarter showed improvement each month during the second quarter, with April LTL tonnage being down 22.6%; May was down 14.5%; and June was down 8.6%; and preliminarily, July was down about 4%.

As for investment back into the business during the quarter, we only spent $11.7 million on capital expenditures. If you will remember because I know that you do, CapEx is one of the spend items that we curtailed during the quarter to preserve and build liquidity. The good news is we intend to fully utilize all $400 million of the tranche B loan to start refreshing the fleet and clipping the associated coupon that should come with brand-new tractors and trailers.

On the balance sheet and capital structure side of the equation, Darren touched on the size and uses of the tranches in his opening remarks. But for a little more detail, I will tell you that the $300 million tranche A loan that is and will be utilized for working capital, deferred health, welfare and pension obligations as well as other deferred payments yields an interest rate of LIBOR plus 350 basis points with a floor of 1%. Of which, 150 basis points of the 350 is to be paid in cash and the remaining 200 is to be paid in kind or additional accrual of debt. And before you ask, to date, we have drawn $245 million on this tranche. The $400 million tranche B loan that we used for the acquisition of tractors and trailers simply yields an interest rate of LIBOR plus 350 basis points with a floor of 1%. Both of these tranches are nonamortizing and mature on September 20, 2024, or just over 4 years from now.

In addition to securing the CARES Act funding, we also amended our existing term loan whereby we extended the LTM adjusted EBITDA covenant holiday until December 2021, at which time the new minimum LTM adjusted EBITDA covenant will just be $100 million. The covenant steps up to $150 million in 1Q '22 and is not back up to the original agreed upon $200 million until the second quarter of 2022. Long story short, we do not have a minimum LTM adjusted EBITDA covenant for the next 5 quarters, and it's not back up to the original $200 million until the middle of 2022. However, the minimum required liquidity did increase as a result of the term loan amendment. It increased to $125 million until we reach $200 million in LTM adjusted EBITDA, at which time the minimum liquidity covenant goes away.

Finally, and I think it's important to highlight, we amended our ABL facility to extend its current maturity from June of next year all the way out to January of 2024, giving us an incremental 2.5 years of additional runway on this facility.

All 3 of these financing actions provide us with an opportunity and runway to focus on the operations of the business, execution of our enterprise transformation to oneco, taking great care of our customers and also has the added benefit of allowing us to significantly refresh our fleet.

Turning to cash and ABL availability. Our total liquidity increased to just over $300 million, $303 million to be exact. Compare that to the $80 million at the end of 2019 and $118 million at the end of the first quarter, and I think you would agree that our liquidity-preserving measures enacted in March of this year worked fairly well. As a result, the going concern mentioned in the first quarter 10-Q has been alleviated.

Now as always, I leave you with a few parting thoughts: One, even before closing the CARES Act loan, we had built our liquidity to end the quarter at just a little over $300 million, which is the highest level in well over a decade. Two, the $700 million CARES Act loan further strengthens our short-term liquidity position, lifts the shroud of the deferred health, welfare and pension payments and allows us to accelerate the capital investment into our fleet. Three, please do not lose sight of what we accomplished on the term loan and ABL amendments. These amendments give us additional latitude and runway to focus on the business and the transformation thereof. Four, volumes have stabilized and have certainly recovered from April's low point. They have continued to improve in May, June and preliminarily into the month of July. In the same vein, pricing on a revenue per shipment basis, ex fuel, has remained fairly stable as the economy slowly but surely opens back up. Obviously, no one knows where the economy and the industry is heading in the next 3, 6, 9, even 12 months. But I can tell you with 100% certainty that the capacity crunch is real as we're having difficulty recruiting drivers to keep up with the increase in volumes.

In closing, all I would say is that I agree with Darren, it is a new day at YRC Worldwide. Contrary to many pondered thoughts or theories, we did it again and are thankful to all of those involved. Now it is time to execute.

I will turn the call back over to Darren for some additional closing comments.

Thank you, Jamie. I want to close the call by acknowledging all of our employees, customers and partners who reached out to me as we successfully closed the CARE Act loan with Treasury on July 7. Hearing from our employees was rewarding as they shared with me their renewed commitment to our company and our customers as we move forward. Hearing from so many of our customers filled me with gratitude for their belief in and partnership with YRCW and our 30,000 freight professionals who serve them. We are indeed grateful for the opportunity provided to us, and we will honor that trust placed in YRCW, with a commitment to serve America's essential domestic supply chain through this pandemic and beyond.

And now we would be glad to take any questions that you may have. Operator?

(Operator Instructions) Our first question is from Jack Atkins with Stephens.

Well, before we get started, I just want to say congratulations here on everything you guys were able to accomplish in the quarter. I know there were just a lot of distractions, you guys had your hands full and you really performed very well, all things considered. So congratulations on getting all this done.

Thank you, Jack. We're very proud of our team.

You should be. You should be. So I guess, let me just, first off, ask a question to make sure everyone is on the same page about the U.S. Treasury funding. You've drawn down, I think you said $245 million of the $300 million of tranche A. Tranche B, have you drawn any of that? What's sort of the time line for when you expect to draw down there? Would you expect to fully utilize all $400 million this year?

Yes. Jack, it's Jamie. From my perspective, we have not -- let me back up and tell you that definitively, we've not done anything on Term B -- or tranche B yet. In terms of our expectations, since we just closed literally less than 30 days ago, it's going to take us probably the better part of 4, maybe up to 6 quarters to put all $400 million to work. You know as well as I do, once you put the order in place, they gin it up and by the time that they roll it off, the factory floor would pay for it. That's going to be easily 60 to 90 days from now. So it will be a while before we take our first delivery. But once we do, we expect to roll with a certain amount of pace and intentionality to get as much in as quickly as we possibly can.

Okay. Got you. But I know there's been some speculation in the financial press about it. There's really -- I mean that tranche B is fully signed, sealed. There's no way that the federal government can go back on that, correct?

Well, if you're talking about committee oversight piece, if that's what you're talking about, Jack, I mean, that's exactly what the committee was formed to do. It's not to rubber stamp what the Treasury did. It's to oversee what the Treasury did. From our perspective, we are marching with the exact same pace that we did 30 days ago, and we don't see any reason why we wouldn't get that fully funded between now and when we need to exhaust all $400 million of it.

Okay. That's great. And then, Jamie, I think as you sort of think about how you want to utilize that $400 million, you've got a fairly weak used equipment market right now. You mentioned it sort of may take some time to get new equipment from OEMs. What are your thoughts around maybe going into the used equipment market, buying some of this more lightly used, newer model equipment? Any thoughts around that? Would that be a potential outlook for some of the funding?

Yes. Jack, we're not leaving any stone unturned. I know that lightly used in an LTL environment is somewhat of an oxymoron. But we're going to stretch the dollars as far as we possibly can. We have identified some pockets of used equipment that we could think that would fit our specs. The challenge being is we want the latest and greatest safety equipment that comes with an OEM spec unit. And what we found is that some of the used market does not come with that. Even stuff that is 1, 2, even 3 years of age doesn't come with the anti-collision avoidance technology that we like. It has the same maintenance profile, it has the same fuel efficiency, but we are going to be very judicious and very intentional about the units that we buy. We are not looking to cut corners when it comes to safety, and we will be availing ourselves of every dollar that we can.

Okay. That's great to hear. And I guess -- and I know this is probably a little bit more of a difficult question to answer. But when you think about that $400 million and -- how far will that go to close some of the sort of the capital hole that you've been needing to fill now for a number of years? You guys have sort of been behind the eight ball, so to speak, in terms of catching up on your capital investment. How much of that gap -- that funding gap over the years will that $400 million close for you?

Well, I'd tell you what, yes, this is a once-in-a-lifetime opportunity. Never in a million years that I think coming back and being here 7 months that we'd have $400 million which to invest back into the backbone of this business. As for the gap, you know as well as we do, this is going to be a multiyear journey. This is what I would consider an adrenaline shot to the heart that will get us pointed in the right direction in fairly short order.

No problem, Jack. I was just going to add that this equipment comes without the leasing headwind that we've seen in the past. It gives us an opportunity not only to take advantage of the fuel miles per gallon and other pieces, but the uptime is a big part of that as well. And without the leasing headwind, the return on interjecting a new tractor into our network is significant. And as you know, there's very low execution risk because you're replacing an older unit with a brand-new unit that comes with the benefit of that. So it's a very nice return with this opportunity.

Okay. Makes sense. Let me ask one more question, I'll turn it over to anyone else in queue. But what's been the customer response over the course of the last several weeks now that this news around the U.S. Treasury funding has been finalized? Do you feel like customers are coming back or maybe even committing more freight to you now that you have these liquidity issues resolved? Any sort of thoughts around that? Because I mean I would think that if there were some customer concerns, those have got to be alleviated at this point.

Jack, taking great care of the customer has always been our focus, and you're familiar with my career as that's been a focus of my entire career. I can say this as being part of the YRCW team for a long period of time through many different assignments, our customers are why we're here. They have supported us through difficult negotiations with a variety of different challenges over the years. And our customers have always supported us because they recognize the value of our 30,000 freight professionals across the North American supply chain. So you put all that together, we saw good, strong support from our customers during unprecedented times when they were experiencing hardships as well. Certainly, some of those that had to make decisions about the company based on noise that was in the marketplace or an attempt to protect their overall supply chain, I would hope we would have the opportunity to revisit that with them. But over time, our people make the difference. And when I sum it up, I think our over 200,000 customers continually choose to share market share with YRCW companies because of the value we bring to the marketplace and also the diversity that we bring across all the geographies that we serve with our multispeed carriers.

The next question is from Scott Group with Wolfe Research.

So Jamie, I wasn't really clear, the answer on the congressional oversight. Are we in a place where there's really nothing that they can do, and this is your money? Or is there still some potential restrictions based on whatever they may say or not in terms of the ability to tap that $400 million? I just wasn't clear with the answer. Sorry.

Scott, this is Darren. We went in to the loan agreement with the United States Treasury on July 7. Congress certainly empowered the Treasury to administer the CARES Act. We watched the process closely, submitted our application, went through a very thorough diligence process with Treasury. Any comments beyond that as far as normal government oversight or other pieces, that's a necessary part of the process. But at this time, we haven't been contacted by any groups or agencies. So really all we can comment on is what we've been involved in, and that was a very thorough diligence process with Treasury, where we were able to present the facts of our business for them to make a disciplined decision.

Okay. And going forward, as you guys progress towards, I guess, a oneco, where do you think -- any plans in terms of further terminal consolidation? Anything in terms of head count? And then are there any restrictions as part of the treasury loans either on rationalizing terminals or reducing head count?

Scott, I'll open with that and then allow Jamie and T.J. We started the year with 351 facilities. We are currently at 335. As I have said publicly earlier on, I believe we will land at around 325 by the end of 2020. Naturally, much has changed since I said that. But overall, from a demand standpoint, even though we may pull down facilities, we won't give up any geographic coverage that we provide right now. It will be because we have multiple facilities in one service area. So that will continue on as planned. But we will always protect capacity for our customers in each of the markets we serve. Jamie, anything additional?

The only thing I would add, Scott, this is T.J., the demand is there with recalled employees from layoff during the pandemic and we're hiring at many locations. So the outlook is very good from an employment standpoint, and the demand is certainly strong.

Okay. And then just last question. Maybe, Jamie, any thoughts on operating ratio? Do we -- do you -- are we -- do we get back to profitability in the third quarter? And then any thoughts longer term on where you'd like to see the operating ratio go as you sort of get through this oneco process?

Well, I tell you what, from a CFO's perspective, this is probably the most difficult time in any of our careers to forecast what's going to happen with the virus, the economy, the impact on our industry and then certainly the impact on our company. So I won't give any guidance as to if and when what the OR will be. I will share with you that pumping $400 million into the steel and the backbone of this business, getting tractors and trailers that come with full powertrain warranties relative to what we are currently running today, as Darren said, will be an immediate positive impact to the bottom line. And it's not just maintenance, it's not just the increased fuel efficiency, it's not just the improvement in the safety performance. You guys are very well aware of the atomic products that have been issued as of late. But it's also the improvement in morale of our employees, getting into a brand-new unit versus getting into one that has been "lightly used," which is again an oxymoron in the space. But it's also less downtime and an improvement on our customer service.

So this is a once-in-a-lifetime opportunity that we are going to avail ourselves on an immediate basis. And we will run as fast and as diligent as we can to invest those funds.

Okay. Makes sense. And I apologize, one more just really quick one for you, Jamie. Any of the health and welfare, whatever other costs you didn't actually pay in the second quarter, did you still accrue those costs? Are they showing up in the operating ratio?

Yes, we did.

(Operator Instructions) The next question is from Jeff Kauffman with Loop Capital Markets.

Well, congratulations, guys. I know it was a rough go. So I want to come back to Scott's question on OR and CapEx, so I'll start with CapEx. $400 million, have you thought about how -- well, of course, you thought about it. But how are you thinking to split that between tractors, trailers? How many tractors can we buy at that level? And what percentage of the fleet are we thinking about replacing at this point?

Yes. So Jeff, it's Jamie. I'll field that one and let Darren and T.J. fill in. So the answer is it depends. It depends on 2 things primarily: One, the depth and the breadth of the used market. We talked about when we're trying to address Jack's questions on the used units, so that's the first thing. If we can find a deeper market that fits our specs, we'll be able to get more. If not, then we'll go after the OEMs and buy brand-new units.

It also depends on the taxes. If they're going to -- in some semblance, do away with the tax aspect of those new units, I think you could save upwards of $12,000 plus or minus. So that obviously will go a long way when you take it across $400 million.

Now in terms of the composition of tractors and trailers, what we're trying to do, Jeff, is actually go after the oldest unit and, I'd call it, the tail of both fleets. The tail of the tractor fleet and the tail of the trailer fleet. And we're going after those oldest units that have the highest maintenance cost per mile. So we're going to go after that in a fairly equal-weighted basis. We could put all the money on tractors if we wanted to, but that would not do anything to change the age and the complexion of our trailer fleet. We're going to go at it on an equal basis. And the amount that we go after will depend on the depth of the used market and what happens with the taxes.

That's a great answer. Let me come back to you a different way. Approximately, what is your maintenance cost per mile on the existing fleet? I got a pretty good idea what it runs on new equipment. But I'm just kind of trying to figure out how much we might be able to bring down maintenance cost.

Well, I won't give it to you on a per mile basis. I'll tell you, when you buy a brand-new unit, it rolls off the line, our maintenance expense for a 1-year unit is somewhere in the $1,000 to $2,000 range. Obviously, a full powertrain warranty. And you might ask why $1,000 to $2,000, well you've got few -- I mean you've got brakes, you've got antifreeze, you've got oil. You got everything that goes with the daily maintenance of that unit. And then you go out to 5, 6, 7, 8, 9, 10 years, you get in into a number that is probably closer to $11,000, $12,000. So we can easily clip a 10,000, maybe a little bit more coupon per tractor on maintenance expense alone and does nothing to take into consideration what we can get on miles per gallon and fuel efficiency. And the big unknown, and I'm going to apologize in advance, Jeff, the big unknown is what it does for us on a safety basis because we don't know the cost of an accident that does not occur.

No. That's great. Let me just ask a question to Darren and T.J., and then I'll move on here. Darren, when we were talking about a year or so ago and you just negotiated the new labor plan, back to Scott's question on OR, you were thinking in the long term, hopefully, we get down to a 95 and take it from there. And you had a series of steps that you were going to be implementing and things you were going to do. As we sit today, how has that changed? And kind of what are the big levers separate from the capital spending that we can do to get the OR to where you want it to be? And even though maybe COVID's pushed things out and the recession's pushed things out, is your belief that in the long run, this is a company that's capable of 95 still?

Well, certainly, with the changes we saw from the invisible enemy this year, any type of guidance went out the window for the majority of publicly traded companies. What I will say is we've got a labor contract that runs through 2024, the CARES Act loan runs through 2024, the ABL and the term loan go through 2024. So there's a runway there that's real and tangible.

Part of -- when I was talking last year about the trajectory of our company, a big part of that was the equipment plan as it always is in a heavy asset-based company with 60,000 pieces of equipment. That equipment plan is crucial. It's certainly been assisted by this process that we've gone through, but also that's what protects the overall investment that a variety of constituents have made in this company. So the equipment plan is solid. It will return a good return on investment. We know that. And that's why I said there's very low execution risk.

Outside of that, the network optimization plan, certainly, we had to pause for 6 to 8 weeks at the beginning of the pandemic and as we sat down as a team and determined how we were going to address something that America had never seen before, the world had never seen before, to this magnitude in this modern of a time. So as we made those lists and determined what to do, network optimization stayed at the top of the list just because it allows us to pivot depending on where the economy goes, how deep the valley would become or how quickly we would recover from it that we could adjust to all those pieces because of the flexibility we have with these 4 asset-based brands and our 1 nonasset-based brand. So all those things are still intact.

The plan for HNRY Logistics, naturally, this event has created demand in the residential area where HNRY plays very well. It's also allowed us to streamline parts of our line-haul operation. You put all that together, and I think the company has a solid opportunity over this runway of time between now and 2024 to be a very solid member of the national supply chain.

The next question is a follow-up from Jack Atkins with Stephens.

And I just had a couple of follow-up questions here. But I guess kind of going back to, Jamie, your comments around what this new equipment can do for you from a cost perspective and you think about that on top of the enterprise transformation initiatives that you guys are working on now for a little while. When you think about benchmarking your cost per shipment relative to your publicly traded peers, excluding salaries and wages, do you feel like that these efforts, this ability to refresh the fleet, combined with the efforts that you're doing to rationalize your broader network, does that close the majority of the gap in terms of your cost per shipment? Is there just a -- that's what we're trying to understand. Any way to help us think about that?

Yes. I would say it does 2 things for us, and I'll answer your question very directly, Jack, is will it start to close the gap, will it ever completely close the gap? No. You know it won't. Everyone on this call knows that it won't. We are one of the largest United -- carriers in the United States, and we're proud to have those fine folks as our partners as we work through this journey.

What it does do for us is 2 things. One, all the things I already talked about on the maintenance, fuel efficiency and the safety. The one thing that Darren touched on a little bit earlier, don't lose sight of the fact that's also going to help us with the leasing headwind that we actually experienced today. My estimation, Jack, is relative to our peers, and they don't always publicly disclose it, so it's hard, I'm shooting in the dark a little bit, is that we're probably facing a 300 basis point margin headwind on the leasing expense alone relative to the person in the left side of the aisle and the right side of the aisle. So you can do the math on saving $11,000 per unit, multiply that -- times how many units you think that we'll be able to get through this $400 million on a tractor basis. And then do our best to minimize the leasing headwind going forward, that will give you some semblance of the gap that we can close.

And Jack, as a reminder on our contractual side with the labor contract going through 2024 and that we've got new job classifications as part of the labor contract is something we haven't talked about in a while because many other things have gotten in the way of just the normal operating discussion. But we've got the flexibility now around purchase transportation, also the flexibility around job classification that helps align us with what our customers need us to do on a daily basis.

Okay. Great. Great. And then, Jamie, just kind of going back to the OR discussion for a moment. And I know you don't want to give guidance. I'm not going to ask you to give guidance. But can you help us think through maybe some of the puts and takes of some costs that maybe weren't in the second quarter? And I know a lot of transportation companies maybe saw some unexpected expense, tailwinds from fuel, from health care, from a whole host of different items. Were there some costs that maybe weren't in the second quarter that maybe come back into the third quarter? Just trying to get a feel for if we can all make our assumptions around revenue trends sequentially. Anything that would be different on the cost side when we think about incremental or decremental sequentially?

Jack, not a lot. And I think Scott asked a good question in terms of deferrals that we had experienced. Did we expense those? The answer is yes. The cost that would come back in the third relative to the second would just be some of the folks that we had furloughed when we start making our liquidity, preserving levers and pulling those levers. So it's things around the fringes. I don't think it's anything that would be down the level of materiality that you would be looking for.

Right. But that would all flow with shipment and tonnage, so that would all make sense. Okay. I was just looking for any unusual items.

So last question. Maybe for T.J., if you could just sort of talk about potential purchase transportation inflation given what we're seeing in the truckload market. Any sort of thoughts around that line maybe creeping up on you a little bit faster than expected just given where we're seeing truckload rates move in the market?

Jack, I would say that the majority of our purchase transportation dollars move under contract that we have locked in prior to the pandemic and the current circumstance. The transactional stuff, I expect to go up, and it has slightly. But the vast majority of our purchase trans, which I remind you is up to 29% under the new contract, is under contract.

This concludes our earnings call. I would like to turn the conference back over to Darren Hawkins for any closing remarks.

Thank you, operator. Thanks again to everyone for joining us today. Please contact Eric with any additional questions that you may have. This concludes our call. And operator, I'm turning it back to you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.