Proficient Auto Logistics (PAL), the newly minted publicly traded auto carrier, signaled several weeks ago in a press release and SEC filing that its market had weakened and its third-quarter earnings were likely to be disappointing.
The numbers that came out Friday offered no surprises: Virtually every key financial measure was down, and comments by PAL (NASDAQ: PAL) management on an analyst call suggested there were few signs that the business of hauling autos from OEMs to dealers was getting better anytime soon.
CEO Rick O’Dell reviewed the quarterly performance by noting that shipment volumes in July rose 2.1% compared to the corresponding month in 2023.
But revenue that month was down 11%, he added. “This disparity between unit volume and revenue comparisons continued for the duration of the third quarter and the full quarter,” O’Dell said. Ultimately, the volume decline was 0.4% for the quarter.
While O’Dell said October volumes had picked up slightly and PAL thought “the market has bounced off the bottom,” he added that the trend has not carried through.
“In early November, we have seen a little bit of pullback on our daily run rates from where we were in the mid- to late October time frame, which is why we remain cautious,” O’Dell said. “We do expect some acceleration here as we move toward year-end.”
Key financial metrics reflected the weak market. Total operating revenue was down 12.5%, to $91.5 million compared to the third quarter of 2023. PAL posted an operating loss of $2.2 million, compared to an operating profit of $8.2 million a year ago. The company’s adjusted operating ratio was 98.8% compared to 92.2% a year ago.
“The macro auto industry environment exhibited weakness in the third quarter,” O’Dell said. He cited “seasonal plant shutdowns” as kicking off the downturn, but that was followed by “an only modest acceleration.”
Shipments down, revenue down even more
Specifically, unit volume in the third quarter was 499,311, comprising 167,772 deliveries by company vehicles and 331,539 deliveries by subhaulers. That marked a decline of 0.4% from a year earlier from the individual companies that a year ago had not yet been folded into PAL, which went public in mid-May.
The small decline in shipments was not the only problem at PAL, O’Dell said. Revenue on each shipment is hurting the company’s profitability as well.
For deliveries made by company-owned vehicles, third-quarter revenue per delivery rose, to $194.18 from $192.21.
But for subhaulers, it was a different story. On top of the drop in deliveries, the price per unit fell hard, to $155.89 from $189.10.
That resulted in a shift of revenue. Last year, 34% of third-quarter revenue came from company vehicles; the figure was 39% this year. That resulted in a drop of subhauler revenues to 61% from 66%.
Spot business wasn’t there
Subhaulers are heavily dependent on spot business, which has been weak, O’Dell said. “There was both a significant reduction in the spot market of opportunities made available to the market as well as much less spot pricing power, due to significant available capacity to address limited demand,” he said on the conference call.
PAL went public at $15 a share in mid-May and briefly crossed $20 in mid-August. But after PAL issued the statement that its third-quarter numbers were going to be disappointing given the state of the market, the sell-off began. The stock price dropped from about $13.75 to as low as $8.85 before rebounding alongside several other transportation stocks.
At approximately 11:25 a.m. Friday, PAL stock was up 4.34% to $9.62 a share.
The quarter also featured the acquisition of Auto Transport Group. It joins the original five companies that were brought together by the legacy Proficient business to form the larger public company.
In its prepared statement announcing the earnings, PAL said it expects to have all its operating subsidiaries on a uniform TMS by the end of the year. It will have consistent accounting and financial systems by the end of January, it said.
No need for a premium service
One area where PAL took a hit was in its dedicated business. Revenue of $16.2 million in the third quarter of 2023 was described by President and COO Amy Rice as “the highest level in the last seven quarters.” By comparison, the dedicated operations had revenue of $4.7 million in the third quarter of 2024.
On the call with analysts, Rice said dedicated services at PAL “play their greatest utility when there’s a need to get new vehicles to dealerships urgently, and therefore there’s a willingness to pay that premium on pricing to do so.”
But with dealers holding what she called “inflated” inventories, “that demand component has lessened considerably.”
Rice added that she thought the bottom had been reached in the dedicated business, but she wasn’t confident of an immediate upturn. “I would expect less volatility there as we go forward,” she said. “If there’s increased demand, you could see some upside there, but I certainly wouldn’t count on it now.”
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