A Wednesday note to investors from Stephens, a financial services company, estimates that Yellow may soon breach a key requirement on its cash reserves.
Based on a July 10 liquidity disclosure, Stephens estimated that Yellow was burning $4 million in cash each week in the second quarter of 2023. In that same filing, Yellow disclosed that it had roughly $100 million in cash as of the end of June.
Jack Atkins and Grant Smith, respectively a research analyst and associate both at Stephens covering the freight and logistics sectors, wrote in the note that Yellow’s cash flow has been severely limited as customers have diverted freight. However, Atkins and Smith wrote that it’s unlikely Yellow was able to “adjust its expense structure that rapidly,” so the trucking carrier still had some $70 million in cash expenses last week while revenue was some 35% below plan.
Stephens estimated that Yellow likely burned $20 million to $25 million in cash last week.
Given further freight diversions, Stephens estimates the company is now burning $9 million to $10 million per day, estimating that the company’s revenue per day is down 70% from Q2 levels, with expenses per day at about the same level, excluding noncash costs and deferred health and welfare payments.
This means that the company is likely nearing a key requirement set out by its lenders: Yellow cannot have less than $35 million in liquid cash reserves.
“Putting it all together, if Yellow had roughly $100 mil. in cash at the end of June, burned $4 mil.-$5 mil. a week during the first two weeks of July, burned an additional $20 mil.-$25 mil. last week and is now burning $9 mil.-$10 mil. per day, it is reasonable to believe that the Company could breach its $35 mil. liquidity requirement at any moment,” the Stephens note read.
Yellow did not immediately return a request for comment.
Analysts at other banks, including Deutsche Bank, are also predicting that Yellow’s demise is inevitable in notes to investors this week. A Stifel note from Monday noted that the only way Yellow could survive without declaring bankruptcy is with a “major equity injection.”
Meanwhile, employees at Yellow nationwide have told FreightWaves that their terminals and regions are halting pickups. Yellow told employees Tuesday afternoon that the company was limiting pickups, according to a memo shared with FreightWaves.
One clerical worker based in Tennessee told FreightWaves that her terminal manager said she did not need to come into the office on Wednesday, as drivers were simply picking up empty equipment around the city. She and her colleagues are certain that operations are winding down.
“For 18 years, that was my family,” she told FreightWaves Wednesday afternoon. “I saw them more than I saw my family. Yesterday I saw the guys start hugging and saying goodbye. It’s mad.”
Are you a Yellow employee with a story to share? Email rpremack@freightwaves.com.