Yellow Corp. narrowed its net loss in the first quarter of 2022 from a year earlier and posted a small operating profit. Executives said their work to convert the company into a superregional carrier is moving closer to bearing real fruit.
Yellow, which is No. 7 on the 2022 FleetOwner 500: For-Hire list and recently moved its home office to Nashville from Kansas, produced operating income of $9.2 million on revenues of nearly $1.3 billion in the first three months of 2022, improvements from a loss of $27.6 million on sales of $1.2 billion in the prior-year period. The company’s comprehensive loss was $25.2 million, less than half the $59.7 million of early 2021, and its adjusted EBITDA improved to $52 million from $13.2 million.
Price hikes played a big role in those trends: Total revenue per hundredweight, including fuel surcharges, jumped 32% year-over-year (and nearly 31% for less-than-truckload shipments), which more than helped offset a 21% drop in tonnage that was due in part to the COVID-19 omicron wave and severe winter weather sidelining many Yellow workers early in the quarter.
See also: XPO puts up record numbers in Q1
Not discussed on the May 10 conference call was the release late last month of a report by the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis that detailed senior Trump administration officials' role in approving a $700 million loan to Yellow in June 2020 under the auspices of the federal government's CARES Act—despite the company not meeting a requirement that it be critical to national security.
The U.S House report also noted that Jamie Pierson, then Yellow's CFO, told a creditor the company's leaders would, "while we had our hand in the cookie jar," look to use some of the loan to catch up on capital spending, a move that also would contravene the CARES Act's stipulations.
A number of elected officials raised questions about the loan soon after it was made and congressional investigators have published several reports on the matter, including one about a year ago, when they noted that the funding came after Yellow had ramped up its lobbying spending in early 2020 on the heels of spending nothing on lobbying in 2019.
Work underway to integrate linehaul, PUD units
President and COO Darrel Harris said the Yellow team is preparing to take the next steps in its work to integrate its linehaul network with its pickup-and-delivery (PUD) units, a plan that will trim its terminal network from 316 to about 300. The company’s operations in the West, which include more than 80 terminals, will be the first to convert to a new system, which Harris told analysts and investors on a conference call will produce “near-immediate” savings from running fewer routes and terminals as well as other efficiencies.
“The reduction in linehaul schedules, that may take a little bit longer as the entire network gets impacted with the optimization component,” Harris said, adding that Yellow leaders will then tackle their Northeast and Midwest divisions later this year before finishing with the Southeast and central parts of the country. “But that is a huge component of this as well as we start to bring everything together.”
CEO Darren Hawkins told analysts that contracts Yellow signed in April average price increases of nearly 11%, which he said made him “comfortable” with seeing the company’s tonnage fall by about 15%. He added that Yellow’s large customers in the industrial, home improvement, and retail sectors remain confident about demand.
“We're bringing a much stronger value proposition to the market starting at the beginning of Q3,” Hawkins said of the One Yellow plan. “We will grow tonnage at this company but we will do it profitably.”
Shares of Yellow (Ticker: YELL) were up nearly 4% to $3.97 in late-morning trading. Year to date, they have lost two-thirds of their value, cutting the company’s market capitalization to about $200 million.
