Good day, everyone, and welcome to the Patriot Transportation Holding, Inc. earnings call for the third quarter. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rob Sandlin, CEO and President of Patriot Transportation Holding, Inc. Sir, the floor is yours. Good afternoon, and thank you all for being on the call today and for your interest in Patriot Transportation. I am Rob Sandlin, CEO of Patriot Transportation, and with me today are Matt McNulty, our Chief Financial Officer and Chief Operating Officer, and John Klopfenstein, our Chief Accounting Officer. Before we get into our results, let me caution you that any statements made during this call that relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated by such forward-looking statements. Additional information regarding these and other risk factors and uncertainties may be found in the company's filings with the Securities and Exchange Commission. For the third quarter results. Today, the company reported net income of $1,187,000 or $0.33 per share for the quarter ended June 30, 2023, compared to $771,000, or $0.22 per share in the same quarter last year. Operating revenues for the quarter were $24,253,000, up $752,000 from the third quarter last year due to rate increases, increased miles, and an improved business mix. Miles this quarter increased 379,000 over last year's same quarter, mainly due to improving driver count. Operating revenue per mile was down $0.16 or 3.6% versus last year's same quarter due to lower fuel surcharges on lower diesel prices, which was reflected in the $1,242,000 less fuel costs. Compensation and benefits increased $1,490,000, mainly due to increased driver count and compensation package, including an increase in driver training pay of $126,000 versus the same quarter last year, and an increase in owner-operators. Gains on sale of equipment was $432,000, compared to a $163,000 gain in last year's quarter. The operating profit this quarter was $1,499,000, compared to $913,000 in last year's third quarter. Now on to the nine months results. The company reported net income of $2,147,000 or $0.60 per share, compared to $6,720,000 in the same period last year, which included $6,281,000 from gains on real estate, net of income taxes. Operating revenue for the period was $70,568,000, an increase of $5,568,000 due to rate increases, increased miles, and an improved business mix. Operating revenue per mile was up $0.29 or 7.2%, the miles for the period increased 177,000 versus last year's same period. Compensation and benefits increased $4,692,000 due to the increases in driver compensation, including a $422,000 increase in driver training pay versus last year's period and increases in owner-operators. Fuel expense decreased $802,000 for the period due to declining fuel prices. Insurance and losses decreased $1,022,000 due to lower health and risk claims, and depreciation expense was $313,000 lower versus the same period last year. Gains on sale of equipment was $773,000, compared to $642,000 in the same period last year. SG&A increased during the period $787,000, due mainly to bonus accrual and increased travel. Operating profit was $2,703,000, compared to $8,815,000 for last year's first nine months. Prior year gain on real estate was $8,330,000 due to the sale of our Tampa terminal. Operating ratio for the nine months was 96.2. Now for the summary and outlook. Over the first nine months of fiscal 2023, we added 42 drivers, which allowed us to add business with new and existing customers and increase our miles. While summer petroleum and cement volumes have been softer than expected, we are confident that our current partnerships will allow continued growth into the future with our efforts to expand our customer base. We will continue to focus our growth with new and existing customers in all segments of our business that will allow us to improve our return on investment. We had $7.4 million of cash at the end of the third quarter, with no outstanding debt. We will have added 73 new tractors during our year. 44 will replace company-owned tractors and 29 are replacing leased tractors with company-owned tractors. We believe replacing the 29 leased tractors with company units will provide a better financial result and is a good use of our cash. We continue to focus on our driver hiring and retention. While the driver hiring market is still challenging, our driver count increased during the year, which allowed us to add miles throughout the period. The training costs increased, but we believe the increased driver count positions us well as we complete the final year, this fiscal year in September, and look to continue to improve our results during fiscal year 2024. During the previous year, due to previous driver pay increases, turnover results have been lower among our drivers with 1 year or more of seniority. We still see a higher than acceptable turnover in our first-year driver. The continued trend of general freight spot rates declining has allowed us to add more owner-operators in several markets, and we will continue to monitor and balance with company drivers. In some of our markets, we have reached our driver goal and have cut back on hiring and associated recruiting and training. We will closely monitor each location for needed adjustments to our plan on a weekly basis. In closing, our safety goals for, are on target for the year, with the exception of product mixes, and we will continue our efforts to keep preventable incidents and related expenses in check, while also staying focused on quality customer service. I am proud of our team's safety and customer service performance thus far in fiscal 2023, and look to finish the year strong. Thank you again for your interest in our company, and we will be happy to answer any questions. Certainly. Everyone at this time, we'll be conducting a question-and-answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Please hold while we poll for questions. Your first question is coming from Steve Rudd from Blackwell. Your line is live. Hi, guys. Thanks for the update and a fairly solid quarter. I do have. Normally, I focus a bit on the trees. I just want to look at the forest for a moment. Can you give me a sense of what the overall competitive landscape is for your industry? Let me just give a little background as to where I, where I want to head, or maybe you take me in a different direction. We had to scale back years ago because of decreased demand, then we increased, you know, and so to increase driver count and business seems to be picking up. What do you see a year or 2 years out as to the level of competitors? Do you have folks who are still exiting the industry and therefore it gives you an advantage as to being one of the only last standing? I mean, give us just a broad view of that. Okay, let me... I'll, I'll go back to where you started. I don't, I don't know that our downsizing was because there was less business opportunity. Our downsizing was really driven more by some of the markets that we were in and our inability to hire drivers and make profit in those markets. One was where we, we downsized a large customer just because it wasn't, it wasn't working out, the relationship wasn't working out where we could make the return that we wanted. That was really the, the, the main... Those couple of things were the main drive for our downsizing. Obviously, during COVID, there was, there was less business and there was some downsizing while that took place, but I think a lot of that business has returned as we've come out of the pandemic. I think it's really hard for us to speak to what's going to happen in the marketplace with competitors, because I really don't. You know, we're one of the few, if not the only public company in this, in this space, certainly, totally in this space. It's hard for us to know what their, what their balance sheets and their profits look like. I have to think that our balance sheet is an advantage to us right now, with no debt and not having to bear the brunt of increased capital cost, because tractors and trailers have increased in price, along with paying, what? 6.5%, 7%+ interest compared to, what, a couple percent a year or two ago. I think that probably bodes well for us. I think the marketplace from a competitive standpoint, there's still a driver shortage out there. It's better, but it's not perfect, there's a lot of added cost as it relates to the acquisition of that driver, there's a lot of cost pressure for us to be able to keep prices up in the marketplace. From that standpoint, plus, you're dealing with, you're dealing, you're still dealing with inflation and a CPI, less food and energy, that was, what, 4.8% last month. Typically, that, that bodes well as far as the pricing in a market. If I left something out on there, just go ahead and ask me back anything I didn't cover. Okay, sure. I, I think you covered some of what I'm looking for, I don't think you left it out. I think it's just my framing of the questions. One of the things that's of interest is the... and it's 85%, I think, still of your business is the transportation of petroleum. You know, one might, depending on how you view the world, but one might think: Oh, gosh, electric vehicles are coming, demand for petroleum is going to decrease. I think that's probably correct. However, are we in a position where in, even in light of a decrease of that potential demand, there are just not other folks to carry the remaining petroleum that must be carried? That's, that's what I'm headed for. ... I think, yes, I mean, I think what you're saying is that there's always gonna be petroleum needed, and so a decline in demand could potentially not hurt us because there's other folks falling out of the market that we can pick up their share. That's, yes, but that's so hard to predict. I mean, we feel like we're well positioned to be here for the long term, by far, you know, by just, you know, listening to other competitors and the way they run their business. You know, there's typically a lot of debt involved, especially in smaller trucking companies. We haven't seen any kind of run or rash of closures of our competitors. We've seen people moving out of markets like we had done in certain places. What we really haven't seen, and there's no way for anybody to know, is we haven't seen a significant decline in you know, in gasoline, due to electric vehicles yet. So we have no way to know when and if that's really gonna come to fruition. You know, the only thing I would add to that, Steve, is certainly we know that electric vehicles are there. How, how quickly that's gonna have... You know, as the population continues to grow, we're, we're in the Southeastern United States, and people are moving to Florida, Tennessee, Georgia, the Carolinas. We think market-wise, we're in a pretty good spot, and I don't know that we're gonna see near-term demand declines for that reason. Certainly, at some point in the future, we're all gonna have to deal with that in some, some form or fashion. That's also why we're spending a lot of our time trying to diversify our product, offering into dry bulk materials, water, and some chemicals. We will continue to do that, so maybe that petroleum percentage isn't quite as high going forward. Okay. That makes a lot of sense, and I've certainly noticed that over the last few years. The next part of the question is getting to your earlier comments. You mentioned that some petroleum and cement revenues were lower than expected. What, what happened? I mean, any explanation for it? Well, I think- Yeah. Yeah, we've seen a couple things. Number one, in June, we had, we had just horrible rains throughout our marketplace. We had two weeks of just torrential downpours and raining every day, and so that has an impact on your cement business because they're not, they're not producing concrete for these jobs that are going on out there. It also impacts your petroleum business because people aren't traveling as much. So we saw that in June, which was kind of unusual. The cement business, with housing starts down, has just not been as robust as we would-- had, had projected early on. We're certainly not hitting the miles in revenue, hauling those products that we did at this time last year, and so it's just been a little soft. it's nothing that's, it looks to me like it's just a big ongoing deal. I would just tell you that the summer's just been softer than we had, than we had hoped, customer by customer, really, and across the whole network. Okay. All right. We're busy. Our driver's getting... I'm sorry, go ahead. We're busy, right? We're good and busy right now, so that's great. Oh, I know. I, I mean, the revenue numbers and the, and, and the, and the net number is pretty good. Right. It was less than I thought it would be, but it was pretty good. Let me ask on the, you know, I'll get to my favorite question. Driver count, I want to just start with, was the 126,000 an incremental number in training costs, or that's was a gross number? I think that you identified the training pay. That was. Mm-hmm. He was giving you the incremental increase from the same period last year that we spent that much more this third quarter than we did in the last third quarter. Okay. We ended the last year's quarter, you mean. We, we ended the last quarter with... Well, not the last quarter, but I think at the time of our conference call on May 9th, with a driver count of 387. Where are we now? I think you had identified a goal of 400, and I, I wonder if that goal has moved at all. Yeah, we, we, we haven't quite made it to 400, but we're, we're, we're at 390. We've got some markets where we've kind of pulled back on our hiring because we've, we've kind of reached a point where we've saturated the market with the, with the amount of business that we have there, and we'll continue to monitor those. We still see some opportunity to move that number up to 400, and that's what, that's what we're trying to do. Okay. Fair enough. I'll ask the last question for now, and if I have another one, I'll pop back into the queue if there is one. In terms of your pricing, Rob, the paradigm that we've come up with is that, you know, as demand increases and as you mentioned, this inflation number going forward, we can both... Well, two elements of pricing, of course, but we can charge a bit more. Are we still seeing that we have that pricing power, and, you know, are we able to put and I think some was already put into your for the end of summer, but I'm wondering how the pricing looks going forward. Yeah, it's, we, we really have not met with a lot of resistance, especially if we stay in that, if you use CPI, less, less food and energy, as long as you're- Yeah ... staying in that realm and price range, then I, I think, pricing is pretty stable. I think we're able to push the pricing along because we, you know, we did a good bit of that over the last 18 months to 2 years, depending on the timing. On new business, we're, we're, we're having to see where the market is, and we, we've been pretty successful adding new business this year at what I would say are favorable freight rates. Okay. All right. All right, well, terrific, and as always, thanks, thanks for the hard work. As something else pops up, I'll press star one. Appreciate the question. Thank you. Thank you. Your next question is coming from Stephen Dennis. Your line is live. Hi, guys. Hey, Steve. I'm the one, I'm the one in Syrac- in, Sarasota, and I went to visit your truck-. Oh, yeah. that was delivering. I had a great time. You guys are really serious. You have a supervisor, a safety supervisor, who's fantastic. Your truck driver was very dedicated. I was pretty impressed, and I got a feel for a little feel for the company. Now, I truly know what Florida Rock is. Okay. I was thinking about this. I was thinking about this. Here I am, a shareholder, and I really wasn't really up to what Florida Rock, so I watched them deliver the, the diesel and the gas. My question to you is: How are you gonna get your story out? I think that's a good question. It's something we've talked about. We really, up until recently, this year, we didn't think we had a great story to go out there and tell. We were trying to fix things, as we've told you and, and others. We had right-sized the company. We were coming out of COVID. That's something that we're talking about now. How are we gonna get out and go to, whether it's an investor conference or whether we go do a roadshow? That's something that we're, we're trying to determine the best timing to go do something like that. Certainly, I think our, our numbers are moving in a lot better direction to be able to do that, without giving you anything specific. We don't have, yeah, we don't have anything specific yet, Steve, but it's, it'll be on the radar as we get through this fiscal year. That's great. Have a good story. Again, thank you. It was really, It's like a 45-minute delivery schedule. Yeah. It was very interesting. Good. I like doing this kind of stuff. Well, thanks for doing it. I'd like to know, I'd like to know something more about the companies I invest in. Cool. Yeah. Well, good. Thanks for doing that. Appreciate you. Thanks again. Thanks again. Thank you. Your next question is coming from Christian Olesen from Olesen Value Fund. Your line is live. Hello, Christian. Thanks for taking the question. Hey there. Sorry, I had to jump on the call late, so apologies if someone already asked this before, but I think you've previously mentioned that many of your mom-and-pop competitors have been very aggressive and somewhat irrational in the rates they offer to customers. Have you seen any change in that? You know, I don't, I don't know that I've seen any real change in their behavior at times. I mean, obviously, we've raised our driver pay up a lot. We've raised our pricing up. Their costs are up, our costs are up, so they've had to raise their prices, or they'd be losing money every day. They got a little bit different cost structure, and they don't have, they don't have the same return on investment criteria maybe that we do. The other thing that's maybe changed is the customer base a little bit. When you go through a situation where drivers are in short demand and getting your, getting your products hauled is, becomes a premium, some of those customers have chosen to partner with people that they know they're gonna be there with them for the long run and have the wherewithal to stomach a pandemic or stomach a driver shortage and also continue to provide them with quality service. I don't know if it's so much what our competitors' mindset is. It's maybe what some of our customers' mindset is and maybe a combination of those two things. Okay. You mentioned that they have a little bit different cost structure, those smaller competitors. How so? Well, what, what I mean by that is that usually, those are family-run operations, and they've got two or three family members in there running the business. Frankly, you know, cash flow becomes king for them, really. Depending on what your size is, obviously, if you get up to a 100 truck operation or 200 truck operation, that's a different story. If you're a small, 15 truck, 20 truck operation, and you're trying to sell, the same customer that we are, you can probably be a little lower priced than we can because all you're, you're trying to... That's a little different model than what we are. We're trying to provide a return on investment, we're trying to invest for the future, and sometimes they're not really doing that. Or maybe they'd love to be doing that, but they just can't. It's, it's really all over the board from that perspective. Okay. Sometimes they may just be trying to make a little bit of money in the short run. Yeah. Right. Yep. How about your larger competitors? Any change in their behavior? No, I think the market's pretty stable right now, and, you know, obviously, it's, it's trucking and transportation. As you've seen in the dry van business, I'm sure those of you that follow it, their, their, their business is a lot more cyclical than ours from a pricing standpoint. Those spot rates that you keep hearing about in that segment of the trucking industry are, are depressed right now, and they were probably the highest they've ever been during the driver shortage and during the pandemic. I heard stories of container freight going from Savannah to North Georgia, quadrupling in price. Well, we didn't see any of that kind of stuff in our business, but we also don't see what they've seen now, they've seen their prices come back down, probably close to where they were pre-pandemic on the spot rates. It's just a little more predictable from that standpoint. I think what I'm seeing out there is a fairly responsible marketplace. Yeah. Have you seen any financial distress or, or increasing desire to sell in the industry, tank truck industry in particular? No, not really. And again, it's really hard for us to see what's going on with their financials, 'cause we're, we're really about the only public guy out there. Generally, you don't know that one of these, one of these companies is in trouble until, until they're really in trouble. Somebody buys them. Somebody buys them, or they try to sell, and they've waited too long. It's just hard to know what. I have to believe these interest rates are, are causing pain points for some folks that, you know, are, are needing to buy equipment and having to finance their equipment, along with inflation. You know, trailer prices-- petroleum trailer prices are up probably $30,000 over pre-pandemic numbers. 30%. That's a, that's a big number. Yeah. Do you have ongoing dialogues with some of these operators? I, I think it that, you know, the, the reason you have so much net cash on the balance sheet is because you're hoping to be able to make some acquisitions at some point. Are you in, do you, do you try generally to be in dialogue with other operators? Are you aware of any M&A that's taken place in, in the tank truck industry in the last year or so? I know of a couple of them. Most of them, most of the M&A activity I've seen have been in the chemical segment, in small regional carriers. There's not been very much in our market, in our area. Certainly, we're in dialogue. I mean, we're, we're members of National Tank Truck, and I'm actively involved on the board there, and all of our competitors and people in the industry, especially the larger ones, are a part of that, and even some of the smaller regional folks. We're not shying away from acquisition opportunity. We just. We have, and we've looked at a couple things, but we just haven't seen anything that was the right fit for the right amount of money at this point. Yeah. Do you, or does the board, plan to continue to have this much cash on the balance sheet for the foreseeable future? If you don't see any M&A opportunities over the next months or year or so, do you think that it's something the board would consider returning some of it to shareholders, or, do you think- I would have to- Be more patient? I would have to ask the board that. I, I haven't had any discussions about that, so we would just have to, we'd just have to go back to the board on that one. I, I wouldn't anticipate that. I mean, we, we wanna run our business and, and, and just keep doing what we're doing, and hopefully, there's an opportunity down the road for us. You know, we've, we've distributed a lot of our cash already, I think, over the last two to three years. Anyway, I, I can't really answer what the board wants to do with that. Yeah. Got it. All right. Thank you very much. Uh-huh. Thank you. Thank you. Your next question is coming from Jason Ursaner. Your line is live. Good afternoon. Jason, how are you? Hi, Jason. How are you? Good. Good to hear some other voices on the call here, too. Just kind of- Yeah ... putting some things together. I mean, you mentioned spending 2 years, with the driver shortages, the pay increases. You've had, you know, a lot of issues you had to work through with the pandemic and everything, and you had the question about getting your story out there. Just like overall, I mean, do you feel like you've kind of turned the page on some of that stuff where, you know, given maybe, I think you called the market a little more predictable, but given some predictability, you know, are, are you in a position now where you kinda have consistent profitability kinda throughout the year and, and kind of a new, you know, again, just kinda turning the page on that story of the last 2 years that you guys kinda successfully navigated? I think you and I talked two years ago. We were kinda going through what's the plan, what's, you know, how, how will we know? In short, to answer your question, yes. I think we've kind of we feel like we've turned the corner. The things that we talked about back then were, you know, instead of driver count going down, it's going up. You know, rate per mile is continuing to go up. Our miles are starting to go in a positive direction versus the negative. Those, those were the key targets we were looking to turn around, and all of those have happened, in this, you know, kind of the second, third quarter of this year. We do kind of see a stable market at this point, unless there's something that we don't know about right now, rears its ugly head. Yeah, this is Rob. I, I, I would say, you know, we've been talking about what our game plan was for, even, even right before COVID started, as we were downsizing, on a big piece of business that we had. We did all that, and then obviously, we got-- like everybody, got to deal with the pandemic. I think coming out of that, the game plan that we've put together seems to be working. We've, we've, we've partnered with some really good customers out there who we appreciate a lot. That also understand that we've got to make a return on our investment. Frankly, kind of, this kind of goes back to the EV question we had earlier. The number of convenience stores and truck stops that are being built, it-- there's a lot of them. We're, we're growing our business with some of our partners that are adding those stores and have pretty aggressive plans to grow them even more. We feel like as we continue to add driver capacity, that we're not really in any position to have to, have to search wide and far for business. We feel like the partnerships we have are strong. Sure, it's a market-by-market question, and is it the right, right driver capacity for the, for the business that's coming on at that time? We feel like we've kind of gotten to where we've done what we, what we wanted to do, and now what we'd like to do is just slowly grow the business. If an opportunity comes along to use our cash to, to take in a strategic acquisition, then we'll certainly do that as well. Okay, great. I appreciate the company. That was it. Thank you. Thank you. Thanks for the question. Thank you. Once again, everyone, if you have any questions or comments, please press Star, then 1 on your phone. Your next question is coming from Bruce Oliphant from Oppenheimer. Your line is live. Thank you. Guys, congratulations on another great quarter! Thanks, Bruce. Bruce, hope you're doing well. Thank you. The question I wanted to ask you, is that, through three quarters now, you know, we have $0.60 a share in earnings. I was wondering, I got a little mixed up on the call because I think you said something like, you began the quarter, sort of, on a weak note, and then you said that it's picking up. I just wanted to if you can just elaborate on what you see? Yeah. Going into the fourth quarter. I don't, I don't want to overcomplicate that. I think it was really what we saw during June was just was mostly weather related. I think Florida this year has been a little softer on petroleum business, and it, it could just be as simple as, it's been really, really hot, and so maybe it's just an unusually slow summer. We're not sitting around with nothing to do. We're just, there's times we're not running at 100%. On the cement side, that, that business has been slower than we had hoped, and we were really kind of hoping for some growth opportunity throughout this year. We've kind of changed our marketing focus in the last four or five months on that side of our business. We're getting, we're getting out there and talking to more people in more areas, more terminals, more markets, to try to grow that business because we have some trailer capacity that we can grow that into. I wouldn't, I wouldn't take that comment as though it's a something that we see as a long-term thing, because we're, you know, the last week or ten days, we've been pretty darn busy, so I wouldn't read too much into that. Okay. The other thing is that, as far as the seasonality of your earnings go- Mm-hmm. right? Would you say that the first, that the fourth quarter is more like the first and second quarter? Say that again. The first quarter more like the what? The fourth quarter. Yeah. In other, in other words, would you say that your fourth quarter earnings is more like your first and second quarter, as far as seasonality goes? From a seasonality standpoint, on miles and revenue, our fourth quarter is typically closer to our third quarter, but our business will fall off some in September, so it may not be quite as strong. Kind of the same thing on your second quarter, where January, February aren't great, but then March really goes, goes high level for us on a volume standpoint. I'd say they're, you know, it's fairly similar, but, but you'll have 1 month in there, that's a little, little softer compared to the summer, but what would be the third quarter. You're saying that your fourth quarter, your third quarter is traditionally your best quarter, followed by your fourth? Yes. Yes. All right. The reason why I'm saying this is because on a trailing 12 basis, your earnings per share right now is at $0.73. Okay. Mm-hmm. In other words, it's, we can make a forecast there rather, rather easily that the company will finish the year better than 76-- $0.73 in earnings. Yeah. We're going to let you do the forecasting. We don't normally do that, but we'll provide you as much information as we can. All right. There are more factors to profit than just revenue and miles. Your costs matter, too. Those are not necessarily always completely the same, because we might have gains on sales of equipment, we might have insurance, actuarial gains to book, or losses. losses. Your, and your book value right now is what? About $11 a share? No, it's $9.70. Yeah, I saw that earlier today. I think, John, I wrote it down when you said- $9.58. $9.58. Okay. All right, guys, thank you very much, and keep up the good work. All right. Thank you. Thank you. There are no further questions in the queue. Okay. Great. Thank you. We appreciate your, your interest in Patriot Transportation and look forward to talking with you next quarter. Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.