Universal Posts Higher Revenue, Lower Profit in Q3
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Universal Logistics Holdings posted higher revenue, but earnings declined during the third quarter, the carrier reported Oct. 28.
The Warren, Mich.-based asset-light transportation and logistics company posted net income of $10.3 million, or 38 cents per diluted share, for the three months ending Oct. 2. That compared with $13.6 million, 50 cents, during the same time the previous year. The total operating revenue rose 22.1%, to $445.6 million from $365 million.
“We continue to collaborate with our valued customers to customize supply chain solutions that allow them to optimize, to execute their business strategies in a very challenging environment,” Universal CEO Tim Phillips said during a call with investors Oct. 29. “We worked tremendously hard to navigate a tight labor market and staff our new business wins.”
Phillips
Phillips added that despite the gains a lot of work remains to shape each service line to meet operating goals. He noted that attracting and retaining employees will remain a priority. The operating results also included a total of $12.9 million in litigation charges and launch losses on a recent program award that adversely impacted operating margins.
“Earnings included 36 cents per share of litigation-related charges and operational losses incurred at a recent contract logistics launch here in Detroit,” Phillips said. “Third-quarter operating revenues reflect Universal’s highest quarterly revenue ever. However, we fell well short on our earnings expectations.”
Phillips also highlighted that headwinds such as the ongoing chip shortage and supply chain disruptions hampered automotive production. Those conditions coupled with the larger-than-anticipated launch losses resulted in contract logistics operations underperforming. Still, Phillips sees plenty of opportunity despite the near-term challenges.
Wall Street investment analysts had been looking for 52 cents per share and quarterly revenue of $384.30 million, according to Zacks Consensus Estimate.
The contract logistics segment reported Q3 revenue increased 22.9%, to $156.9 million from $127.7 million for the same period last year. Operating income decreased 48.3%, to $6 million from $11.6 million. Dedicated transportation load volumes were down 14.7% as automotive and truck customers experienced production challenges during the period. An unfavorable operating environment led to compressed margins during the quarter.
“In our contract logistics service line, we experienced headwinds highlighted by production downtime due to shift and part shortages at several of our key value-added operations,” Phillips said. “We continue to remain bullish on autos and Class 8 truck demand in 2022, but there is no end in sight to the current headwinds the industry is facing.”
Phillips added that those headwinds are exacerbated by operating challenges. The contract logistics group saw $7.1 million of losses associated with operations for the quarter. The company also experienced wage inflation while staffing those operations.
“Our contract logistics pipeline remains healthy, and we continue to review and position for intelligent growth,” Phillips said. “We continue to see many opportunities in our dedicated transportation space, which has allowed us to optimize our assets, but further growth in the new markets is predicated on the delivery of new equipment, which has remained a challenge.”
The intermodal segment saw revenue increase 28%, to $121 million from $94.5 million in the 2020 period. Operating income decreased 78.1%, to $1.9 million from $8.8 million. The average operating revenue per load in the segment increased 20.9%, but load volumes decreased 12.8% on a year-over-year basis. Intermodal segment results included litigation-related charges totaling $5.8 million in the third quarter.
“For Intermodal, we’ve experienced operational friction due to congestion, equipment availability and stagnant driver numbers,” Phillips said. “Segment result had additional drag on earnings due to recent litigation charges incurred in the third quarter.”
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Revenue in the trucking segment increased 29.2%, to $107.2 million from $82.9 during the 2020 period. Operating income increased 43%, to $6.8 million from $4.8 million. Segment results included brokerage services revenues of $43 million. Trucking segment load volumes increased 12.4%, and the average operating revenue per load increased an additional 13.6% during the quarter.
“In our truckload segment, revenue growth was strong due to increased volumes and strong pricing,” Phillips said. “We experience both top- and bottom-line growth, highlighted by rate increases and better utilization.”
Revenue in the company-managed brokerage segment decreased 0.6%, to $59.2 million from $59.6 million. Operating income climbed $1.8 million from a loss of $3.2 million one year earlier. The segment saw average operating revenue per load rise 18.9%, but load volumes dropped 17.4% year-over-year.
Universal Logistics Holdings ranks No. 29 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 38 on the TT Top 50 list of the largest logistics companies.
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