Roadrunner Sees Another Rough Quarter, "Narrows Strategic Focus"

Roadrunner Transportation Systems, Inc. RRTS reported another big loss in the second quarter of 2019 that was far worse than the consensus estimate, which called for break-even results.

The asset-light logistics service provider reported a 14 percent decline in total revenue year-over-year to $481 million. The decline was largely due to lower expedited logistics revenue (air and ground) and lower volumes in all of the company's truckload offerings. RRTS' operating loss of $138 million included $108 million of impairment charges. Excluding the charges, the adjusted loss of almost $30 million was close to three times the loss incurred in the second quarter of 2018.

RRTS reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) more than $13 million lower in the period at a $7 million loss.

"Challenging market conditions resulted in revenue and adjusted EBITDA declines in the second quarter, primarily driven by low demand in air and ground expedited logistics at Active On-Demand. As we have stated in the past, Active On-Demand is a well-positioned logistics business that can exhibit short-term volatility. Historically, these variations moderate over longer periods and do not impact our ability to capture improved revenue and profits as expedite demand improves," said Roadrunner's Chief Executive Officer Curt Stoelting.

Active On-Demand offers premium mission-critical air and ground transportation solutions.

Revenue declines were seen across all of the company's segments, but the less-than-truckload (LTL) division may have been the lone bright spot as revenue was just slightly lower year-over-year. Excluding backhaul and fuel surcharges, revenue increased more than 3 percent in the division. Management noted that freight mix and yield on that freight continued to improve in the quarter. However, these improvements were offset by an increase in equipment repair as the company continues to address its previously deferred maintenance of equipment.

Regarding progress in the LTL division, Stoelting said, "Our ongoing efforts to eliminate unprofitable freight and increase density in key lanes continues to produce improvements in our key operating metrics."

So far in 2019, RRTS has invested more than $50 million to upgrade its fleet throughout all of its segments. "Because of the timing of the equipment delivery schedules and transition costs, we have not yet seen the full benefits from these investments," said Stoelting.

The company continues to navigate its corporate restructuring following a re-capitalization that lowered its debt load in February 2019, a 1-for-25 reverse stock split in order to comply with New York Stock Exchange listing requirements in April 2019 and the amicable departure of its Chief Financial Officer in June 2019.

"Despite a challenging second quarter, we remain committed to our longer term business plans to improve operating results, followed by growth and optimization opportunities. Challenging market conditions can cloud progress in making structural improvements, so it's important to note that we are encouraged by our teams' efforts in all segments," said Stoelting.

The company also made reference to "narrowing" its focus to the logistics and asset-light LTL segments as a means of improving return on invested capital and the company's valuation. Further clarity on this statement will likely come on its earnings call with analysts and media at 10:00 a.m. EDT on August 7, 2019.

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