Yellow Corp (YELL) 2020 Q1 法說會逐字稿

Good afternoon, and welcome to YRC Worldwide's First Quarter 2020 Earnings Call. (Operator Instructions) Please note that 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's First Quarter 2020 Earnings Conference Call. Joining us on the call today are Darren Hawkins, Chief Executive Officer; and Jamie Pierson, Chief Financial Officer.

During the call, we may 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 a number of risks. And therefore, actual results may differ materially.

The format of this call does not allow us to fully discuss all of these risks. 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 also available on our website at yrcw.com.

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

Because of the tremendous amount of uncertainty surrounding COVID-19 and the rapidly changing environment we are navigating, we will not be taking questions on today's call.

We appreciate your understanding.

And now I'll turn the call over to Darren.

Good afternoon, everyone, and thanks for joining our first quarter 2020 earnings conference call. Before getting into the business side of the call, I'd like to start with a big thank you to all of YRC Worldwide's employees, who have answered the call every day since we first heard of this invisible enemy to keep this nation's supply chain and economy moving.

I don't know of a more patriotic industry than trucking, and that spirit has stood strong in Americas transportation networks. As a result of the service and value that we bring to our customer supply chains, we have grown into the nation's second largest LTL carrier and the nation's fifth largest trucking company. Our 30,000 employees perform a vital role in ensuring that the domestic supply chain is the safest, securest and most advanced in the world. Through our work with over 200,000 customers, including being a leading transportation provider for the Departments of Defense, Energy, Homeland Security and Customs and Border Patrol, we have developed a deep understanding of and expertise and the importance of a secure and reliable supply chain. During this crisis, our employees are delivering the vital supplies that our first responders and other essential workers need, when they need it and where they need it, including mill kits, protective gear and equipment.

As the nation gets back to business, all of our employees will continue to be there to help put America on the road to recovery.

The Department of Transportation under Secretary Chao's leadership along with the FMCSA have also gone above and beyond to support the nation's truckers during this crisis.

Specific to YRCW, the year started out ahead of expectations, and our results reflect that our transformation strategy was really gaining traction and continues to do so. Even with the sharp contraction starting in mid-March, we finished the quarter with higher operating income, LTM EBITDA, liquidity and a lower operating ratio than the end of 2019.

The operational optimization in our terminal footprint, line haul networks and technology created efficiency for our company through greater terminal density and a reduction of line haul expands while protecting service to our customers.

As soon as we started seeing the fundamentals of the business start to change, we established a COVID-19 task force with the primary objective of protecting our employees while also focusing on continuing to serve our customers, especially those frontline customers who are vital suppliers to first responders and other essential employees and then finally, preserving liquidity to weather the storm.

These liquidity actions included the elimination of incentive compensation for officers, no merit increases, further cessation of 401(k) match, furloughs, layoffs and reductions to our discretionary CapEx among other controllable levers.

One of the more significant actions we completed was the amendment of our term loan. The amendment accomplishes 2 fundamentals stabilizing and corrective actions. One, it provides covenant flexibility every quarter this year through and including the end of the year; and two, it preserves liquidity through picking almost all of the cash interest payment that would have otherwise been due.

And contrary to historical sequential liquidity trends when liquidity usually decreases in the first quarter relative to the fourth, we actually built liquidity. While there were many distractions in the quarter, our employees answered America's call, delivered the goods, continued to drive strategy and improved operations on a year-over-year basis.

As I've been sharing for the last few quarters, our vision and strategy is to operate as one company with one network and 5 very proud brands that provide exceptional service to all of our customers. I want to assure you that while we have been significantly challenged by this crisis, we will continue the operational optimization initiatives to drive asset utilization and equipment as well as properties which we ended Q1 at 343 terminals.

Combined with network mile reduction through density aggregation, this should lead us to be a more profitable company on the other side.

I will come back at the end with some closing comments but would now like to hand this over to Jamie, who will share some more details on the quarter and plans we have in place for the future. Jamie, take it away.

Thank you, Darren, and good afternoon, everyone. As usual, I will run through the results and with a little more color, not only on the quarter itself, but other more topical nonnumerical, nonfinancial items as well. For the first quarter of this year, YRC Worldwide reported revenue of $1.15 billion, down from $1.18 billion in 2019, and operating income of $28 million which included a $39.3 million net gain on property disposals compared to an operating loss of $31.7 million, which included a $1.6 million net loss on property disposals in 1Q '19. As for adjusted EBITDA, we reported a $4 million increase from $30.1 million in 1Q '19 million to $34.1 million this quarter. Obviously, a better quarter this year over last year is going to lead to higher LTM results as well.

To that end, we just printed an adjusted LTM EBITDA of $214.6 million for the first quarter of 2020, up from the $210.6 million at the end of the year.

Before jumping into the stats, I wanted to remind everyone that, as we mentioned last quarter, we're going to start going to a single segment reporting structure, which, if you really think about it, means one company. Our consolidation to one was driven by an important change that actually started last year, and that change was to bring our independent operating companies together as one. One company, one network and one management team all rowing in the same direction. The creation of one is the foundation of our future where we will leverage the power of our national and regional networks to provide faster and more reliable service to our customers.

So without further ado, here we go with one segment/company reporting. For the first quarter of this year, our consolidated LTL tonnage per day was down 3% compared to last year's comparable period. The decrease in tonnage was led by a 6.7% decrease in LTL shipments per day, offset by a 3.9% increase in weight per shipment. On the pricing side, year-over-year LTL revenue per hundredweight, including fuel surcharge, was down 4.2% and LTL per hundredweight, excluding fuel surcharge, was down 4%. However, given the fairly sizable increase in weight per shipment, a more domain pricing marker in this quarter is probably revenue per shipment. The year-over-year change in LTL revenue per shipment, including fuel surcharge, was down only 40 bps. Excluding fuel surcharge, it was essentially flat.

And since we are not going to do Q&A this quarter, I thought I would go ahead and share some of our monthly changes in LTL volume, and I'm even going to share with you our preliminary results from April as well.

Compared to last year, January was down 5.3%. February was down 2.4%, March was down 11.3%. And preliminarily, April was down 23.9%. It is very important to note the weekly trends within both March and April as the shelter-at-home orders were issued across the nation.

Equally is important is that based on our most recent 3 to 4 weeks actual experience, volumes appear to have stabilized and with the state lifting those orders, we are hopeful that we will begin to see some positive sequential moves in the coming weeks, if not months.

As for investment back into the business, during the quarter, we only spent $12.4 million on capital expenditures as CapEx is one of the discretionary spend items that we curtailed during the quarter. Additionally, we entered into new leases for revenue equipment with a capital value equivalent of $700,000 for a total of $13.1 million or 1.1% of operating revenue.

Turning to cash and ABL availability. Historically speaking, liquidity typically decreases in the first quarter of most years as working capital gets squeezed as the usual quarter end seasonal surge consumes cash as we provide services that have a longer payment cycle than does our pay to our employees and our vendors who help us supply those services. It also just happens to be one of the slower seasonal quarters of the year. However, this year, given the liquidity preservation actions that Darren referenced in his opening remarks, I am pleased to say that during this quarter, our total liquidity actually increased. It increased almost $40 million from $80.4 million at the end of the year to $118 million at the end of the first quarter. The increase in liquidity was aided by the $25.2 million we retained from property sales, but still positive during the toughest quarter of the year.

For information relating to our liquidity and covenant compliance over the next 12 months and the challenges we face, I direct you to our 10-Q, including the discussion on liquidity, risks and uncertainties and the risk factors included therein.

I will not repeat what Darren already covered but will add that we are actively and simultaneously balancing the safety of our employees, the service to our customers and our liquidity, and I trust it goes without saying that liquidity and the preservation thereof continues to consume a fair amount of our time at the moment.

The good news is, just as everyone in the industry has their hands full with a lot of competing priorities at this time, we have more experience managing through tough times than anyone else in the space.

As I mentioned earlier, while we've seen volume declines moderate and stabilize in the last 3 to 4 weeks. And while no one knows just how deep or long the economic impact of this global pandemic will last, we will continue to put our employees first. We will continue providing the same level of service and the value we have for the past 90 years, and we will continue to preserve liquidity the best that we can.

Now as always, I will leave you with a couple of parting thoughts. One, as we entered 2020, we are ahead of our plans and ahead of last year's performance. Two, as far as the waived adjusted EBITDA covenant, by posting approximately $215 million in the LTM period, we would have handily beat the minimum required $200 million. And not only would we have beat it, equally, if not more importantly, we would have actually built liquidity in the quarter. Now everyone knows, I want more over less, but tipping the scales above $100 million again is certainly heading in the right direction. Three, the degradation in volumes appear to have stabilized as we moved into the last couple of weeks of April and the first week of May, down approximately 20% plus or minus. Four, we did what we said we were going to do and continuing our enterprise transformational efforts and are using this lull in activity to accelerate that transformation. It is also important to note what we are not doing. We are not slowing our investment in technology. We remain committed to using technology to drive change and performance.

And finally, I'm not certain what shape this recovery will take capital U, lower u, B or an L or something in between, but I'm certain that we are a vital link in the nation's supply chain and stand ready to do our part in its recovery.

In closing, I simply want to say thanks for standing by us during these most difficult times.

I'll now turn the call back over to Darren for some closing comments.

Thank you, Jamie. No doubt, every company, every individual for that matter has had to make significant changes to operate in our new world. YRCW is no stranger to adversity. And although this is more than any of us ever imagined at the beginning, we will see it through.

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 the call back to you.

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