• Revenue: $491.9 million in Q1 2024, up from $437.4 million in Q1 2023.

• Net Income: $52.5 million in Q1 2024, increased from $24.9 million in Q1 2023.

• Earnings Per Share (EPS): $1.99 in Q1 2024, up from $0.95 in Q1 2023.

• Operating Margin: 15.3% in Q1 2024, improved from 8.7% in Q1 2023.

• EBITDA: $96.9 million in Q1 2024, up from $56.7 million in Q1 2023.

• Contract Logistics Segment Revenue: $313.5 million in Q1 2024, a 48.4% increase year-over-year.

• Trucking Segment Revenue: Decreased 12.6% to $69.7 million in Q1 2024.

• Intermodal Segment Revenue: Decreased 30.9% to $76.7 million in Q1 2024.

• Brokerage Segment Revenue: Decreased 8.7% to $31 million in Q1 2024.

• Capital Expenditures: $68.6 million in Q1 2024, with an annual projection of $315 million to $330 million.

• Dividend: Declared quarterly dividend of $0.105 per share, payable on July 1, 2024.

• Warning! GuruFocus has detected 2 Warning Sign with ULH.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Hey, gentlemen, good morning and wow, congrats. Clearly the market is liking the results here this morning. I just want to clarify a couple things on the contract logistics program that you talked about namely whether this entire program is expected either by next year or if you're just talking about the ramp up. I'm assuming that this is just kind of a one-off thing. Is that correct? A: (Tim Phillips - President, CEO, Director) Yeah, correct Bruce. It's a one -- This project will be substantially complete this year. It's a one-year phenomenon with the possibility of additional business in the future, but the economics of this particular business that we described is a 2024 phenomenon.

Q: Got it, okay. So clearly, a very beneficial contract here, which is not to undersell the progress in the rest of the contract logistics business, but maybe towards that end, can you just help us to kind of parse out what portion of the big margin uplift here is coming from mix from this program? And then what's kind of leverage on existing contracts? And ultimately, what sustainable margin run rate should look like for this business once you kind of sunset that program? A: (Tim Phillips - President, CEO, Director) Yeah. So we're not going to get into the specific customer economics on this one, Bruce. But what we can just basically reiterate is, we had $95 million of the business of this contract was in Q1. We think there's going to be around somewhere between $54 million and $75 million of additional revenue in Q2, then $44 million in Q3 and $35 million in Q4. I would just say that after this particular business, this particular development contract is over, at the end of this year, the business will continue to operate at its run rate that we've seen over the past six or seven quarters, a little better than 15%.

Q: Got it. And then just one final question here. Is there any reason to believe that you'd be able to attract similar opportunities like this one or should we be thinking about this as really just a kind of one-time windfall? A: (Tim Phillips - President, CEO, Director) Well, the one thing Bruce, is that we have a great balance sheet. We are slightly levered. So we have been able to -- Since the founders of this company started this contract with the logistics business in the mid-80s, we've been able to grow a business from one location in Flint, Michigan, to 71 programs across four countries. So I would just say that Universal is the go to for any type of solution that a customer wants, and we are going to continue to be open for any type of opportunities that are presented to the team.

Q: Okay. Yeah, I appreciate that color. And then maybe just to follow up on some of your comments, Tim on SAAR, just maybe looking to get a little bit more color there, but if I'm not mistaken, we're still below kind of pre-pandemic levels here. I think there are some probably good pent-up demand for consumer fleet refreshment. Any color that you can give there, as far as what your customers are saying and what they're expecting for the ramp up? A: (Tim Phillips - President, CEO, Director) Yeah. What I can say is that the facilities that we are servicing in our contract logistics portfolio are very high-demand type units, and there really hasn't been any talk of any fall off aside from the overall SAAR in those facilities. In fact, we've gained a couple additional programs, which you saw in that ramp up to 71, that we think there's a good chance throughout the rest of this year we could see on the programs we service as a whole, overall increase in units.

Q: Great, super helpful. And then just pivoting over to the intermodal side here, and I understand the headwind on yield from the accessorial comp, but I guess just on the volume decline here, little surprised, maybe not at your result, but just overall in the industry to see the pressure on the drayage business given the strength that we've seen in import volumes and what we've heard anecdotally about transloading activity. So maybe just a little insight from your side about what's happening with the demand side on the intermodal drayage business? A: (Tim Phillips - President, CEO, Director) Yeah, I think that if you look around the country, different regions have different pockets of flow and volume. We have not seen that pick-up. Kind of like I mentioned in the remarks, a lot of our retail customers on the coastal cities, especially on the West Coast, we've seen steady volumes, but not that type of increase that you might read in the news. And some of those increases on the West Coast that were recently published, we have not seen those double-digit margins make it into the inland environment where we service in major cities.

Q: Okay, perfect. And then maybe just one more from my side, and I'll turn things over. Just looking for an update on the Southern California operation. I know that had been a focus for turnaround, so if you could give us some detail on how that process is going, it'd be great. A: (Jude Beres - CFO, Treasurer) Yes. Bruce, this is Jude. Yeah, overall, the business operated on an adjusted basis at slightly break even in March. We did, throughout the quarter, perform better as a lot of the optimization efforts that Tim has been talking about over the past couple of quarters have come to fruition. So although not obviously the result that we're looking for, the business is operating markedly better than it was at the trough of the cycle in the middle quarters of last year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.