U.S. Markets closed

Edited Transcript of RRTS earnings conference call or presentation 7-May-19 2:00pm GMT

Q1 2019 Roadrunner Transportation Systems Inc Earnings Call

CUDAHY Jun 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Roadrunner Transportation Systems Inc earnings conference call or presentation Tuesday, May 7, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Chelsea Mitchell

Roadrunner Transportation Systems, Inc. - Senior Manager of Corporate Communications

* Curtis W. Stoelting

Roadrunner Transportation Systems, Inc. - CEO & Director

* Michael L. Gettle

Roadrunner Transportation Systems, Inc. - President, COO, Secretary & Director

* Terence R. Rogers

Roadrunner Transportation Systems, Inc. - Executive VP & CFO

================================================================================

Conference Call Participants

================================================================================

* Bruce Chan

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to the Roadrunner Transportation System 2019 First Quarter Financial Results Conference Call. (Operator Instructions) And as a reminder, this conference is being recorded.

I would now like to hand the call over to Mr. Curt Stoelting. You may begin.

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [2]

--------------------------------------------------------------------------------

Thanks, Amanda. Good morning and welcome to today's conference call. Joining me are Mike Gettle, our President and Chief Operating Officer; and Terry Rogers, our Executive Vice President and Chief Financial Officer. Also joining us is Chelsea Mitchell, our Senior Manager of Corporate Communications.

To begin, I'd like to turn the call over to Chelsea.

--------------------------------------------------------------------------------

Chelsea Mitchell, Roadrunner Transportation Systems, Inc. - Senior Manager of Corporate Communications [3]

--------------------------------------------------------------------------------

Before we begin, I would like to remind everyone that a number of statements made today will be forward-looking statements that relate to future events or performance. These statements reflect our current expectations, and we do not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in these or other statements will not be realized. Please be cautioned that these statements involve risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include the risk factors set forth in our SEC filings.

Our commentary today will include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in our press release, which we have posted to our website at rrts.com. Additionally, the slides accompanying today's presentation can be accessed in the Events and Presentations tab in the Investor Relations section of our website at rrts.com.

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [4]

--------------------------------------------------------------------------------

Thanks, Chelsea. Before we go further, I'd like to personally thank our management team, our team members, our pilots, drivers, independent contractors, customers, vendors, lenders and business partners for their ongoing trust and support.

On the call today, we'll cover the following topics. I'll provide some opening comments. Terry Rogers will provide a summary of our consolidated results for the 2019 first quarter. Mike Gettle will cover Q1 business trends for each of our segments. And I'll give an update on business improvements and outlook, and then we'll wrap up with a Q&A session.

Moving to our opening comments. Our revenue declined in Q1 primarily due to ground expedite market conditions and planned LTL service area reductions. Ground expedite at Active On-Demand was down $60 million year-to-year from peak demand in Q1 of 2018. LTL revenue was down $10.3 million year-to-year. Despite lower revenue, restructuring efforts in our LTL segment drove improved adjusted EBITDA of $2.6 million year-to-year. Truckload & Express Services and Ascent Global Logistics segments experienced marginally lower adjusted EBITDA due to difficult comparisons. Additionally, in Q1, we invested in additional sales talent in our Ascent International freight forwarding business unit.

Capital structure improvements completed during Q1, which Terry will cover, include the rights offering and the refinancing of our bank facilities. These improvements enable us now to increase our investment in all 3 segments. We also announced recently that we're adding 2 new Board member nominees with significant industry experience. And lastly, our long-term outlook is unchanged. Improvement plans are in place for the -- for all businesses, including underperforming businesses.

As we stated in the past, we did not expect a linear turnaround process. There's always some ups and downs along the way. And although some of our businesses can experience volatility between quarters primarily due to market conditions, our overarching focus is to invest in all segments and achieve better-than-average industry margins and sustainable bottom line results. We are encouraged by our longer-term progress that our teams are making and feel especially good about the improved balance sheet, which will provide us with enhanced financial flexibility as we move forward.

I'll now turn the call over to Terry.

--------------------------------------------------------------------------------

Terence R. Rogers, Roadrunner Transportation Systems, Inc. - Executive VP & CFO [5]

--------------------------------------------------------------------------------

Thank you, Curt, and good morning. Before I review our performance for the first quarter of 2019, I want to point out a number of transactions that are reflected in this quarter's results. First, the $450 million rights offering on February 26. Second, the $200 million ABL facility and $51.1 million term loan that closed on February 28. And lastly, the 1-for-25 reverse stock split on April 4.

Additionally, the company adopted the new lease accounting standard, or ASC 842, as of January 1, 2019, and you will see the impact of that reflected on our balance sheet. We adopted ASC 842 prospectively, so prior period financial statements have not been restated for adoption of this standard. As of March 21, 2019 -- March 31, 2019, excuse me, we have an operating lease right-of-use asset of $122.7 million and operating lease liability of $127.6 million, of which $36.8 million is reflected as a current liability.

Turning to Slide 7, which summarizes our first quarter financial performance. Mike will provide more details on the segments in a few minutes, so I will cover the results at a higher level. First quarter 2019 revenues of $507.1 million declined 11% from revenue of $570 million in Q1 2018 with year-over-year revenue declines in all 3 segments. Truckload & Express Services, or TES, revenues declined primarily due to market moderation in ground expedite compared to peak demand in Q1 2018. Less-than-truckload, or LTL, volumes were down primarily due to planned service area reductions. And Ascent Global Logistics or Ascent revenues were down due to lower volume in our Domestic Freight Management.

The first quarter 2019 operating loss was $20.8 million compared to a loss of $13.4 million in Q1 2018. This was due to decreased operating results in our TES and Ascent segments partially offset by improved LTL performance year-over-year.

The first quarter of 2019 also includes depreciation and amortization expense of $15.5 million, which is $6.5 million higher year-over-year. This reflects our increased use of finance lease obligations or capital leases versus operating leases to secure rolling stock for our operating companies. With a finance lease the asset has recorded as property, plant and equipment and depreciated. Additionally, we recorded a software impairment charge of $0.8 million for internal use software that was no longer needed after we integrated the operations of our Domestic Freight Management companies.

Lastly, other operating expenses were $2.2 million lower year-over-year due primarily to a decrease in legal expenses related to the securities litigation and regulatory investigations and an increase in rental income from equipment list to ICs, partially offset by higher professional fees. The net loss in the first quarter of 2019 was $27 million compared to a loss of $23.6 million in the first quarter of 2018.

In addition to the items I already discussed, the bigger impact year-over-year was a reduction in interest expense to $3.9 million versus $9.5 million in Q1 2018 as the interest on the preferred stock was weighed in the first quarter of 2019 through the redemption date. We also incurred a $2.3 million loss on debt restructuring as part of the capital structure changes in the first quarter of 2019.

The effective tax rate was relatively low compared to the statutory rate for both the first quarter of 2019 and 2018. However, the primary driver was different for each period. The income tax benefit for Q1 2019 was offset by increases in the valuation allowance for deferred tax assets. In 2018, the largest driver was the non-deductible interest expense associated with the company's preferred stock. For the balance of 2019, we expect the tax benefit will be largely offset by increases to the valuation allowance for deferred tax assets. Please see the income taxes footnote in the 10-Q for more detail.

The diluted loss per share was $1.78 versus $15.37 per share in the first quarter of 2018. The calculation is based on the weighted average number of shares outstanding during the period. It is important to note that as a result of the 1-for-25 reverse tax split on April 4, references to number of shares and per common share data have been retroactively adjusted to account for the effect of the reverse tax split for all periods. The per share calculation for the first quarter of 2019 reflected the substantial increase in the share count following the completion of the $450 million rights offering on February 26. The per share calculation for Q2 will be based on the shares issued in the rights offering being outstanding for the entire quarter. Lastly, first quarter adjusted EBITDA decreased by $2.4 million year-over-year.

I'd ask you to next turn to Slide 8, which reconciles the net loss to adjusted EBITDA for the first quarter of 2019 and 2018 for the reporting segments and the company. For the segments, TES and Ascent both posted lower numbers than in 2018 while the adjusted EBITDA loss of LTL improved. Turning first to our TES results. First quarter adjusted EBITDA declined by $3.2 million due to lower ground expedite revenue compared to the very strong first quarter of 2018. We also had aircraft maintenance and availability issues that reduced the capture rate for our owned aircraft. On a positive note, we continue to see improved performance in our restructured temperature-controlled offering.

The LTL segment recorded a $5.2 million loss in adjusted EBITDA. However, this was an improvement over the loss of $7.8 million in the first quarter of 2018. Revenues declined year-over-year as we continue to focus on planned reductions in selected service areas, but the losses have narrowed. The Ascent segment had a slight dropoff in adjusted EBITDA from the prior year due to declining volume for Domestic Freight Management. Most of the reconciling Ms for the adjusted EBITDA calculation have already been discussed.

Turning last to Slide 9. This reflects the significant transactions that closed in the first quarter of 2019 that transformed the capital structure and improved our operating liquidity, including the preferred stock, which was mandatorily redeemable and thus recorded as debt. The company had $622.7 million of debt and preferred stock at the end of 2018. The preferred stock was also our highest-yielding obligation. The $450 million rights offering and the new bank facility and bank term loan closed during the final week of February. The proceeds from these transactions allowed us to fully redeem the preferred stock, pay off our prior ABL and term loan and improve liquidity for operating purposes.

During the quarter, our finance lease liability increased by $23 million as we continue to upgrade our fleet with financing primarily provided by the captive finance companies of OEM manufacturers. We plan to continue to upgrade our fleet, which will increase our finance lease liability for the remainder of 2019. We expect this will positively impact fleet rent expense and repairs and maintenance. The net result of all these actions is a $389 million reduction in our total debt and preferred stock since the beginning of the year.

Now let me turn the call over to Mike Gettle, our President and Chief Operating Officer, who will discuss the trends in our business.

--------------------------------------------------------------------------------

Michael L. Gettle, Roadrunner Transportation Systems, Inc. - President, COO, Secretary & Director [6]

--------------------------------------------------------------------------------

Thanks, Terry. Good morning, everyone. I'm pleased to be able to share some additional commentary regarding the operations in each of our segments.

Starting with Truckload & Express Services on Chart 11. Our revenue in this segment in Q1 was $275 million and declined by 15.7% over 2018 Q1, and our adjusted EBITDA was $7.5 million and declined by approximately 30% over Q1 of 2018. Our Truckload & Express strategy is centered around integrations that improve our scale and rightsize our capacity to address both scheduled and unscheduled freight needs.

Looking at Active On-Demand, the market for air expedite was reasonably strong in Q1, and we saw an increase in revenue of nearly 13%. However, the availability of our own aircraft was limited due to the location of freight and maintenance of our fleet, including particularly the upgrade of avionics, which is required to be complete under FAA rules by January 1, 2020. Given the strong Q4 performance of our fleet, we elected to perform some of these maintenance in Q1, and it took several weeks longer than we anticipated. This contributed to more of our revenues being brokered under lower margins than freight moving on our aircraft. This reduced capture rate was the primary contributor to the decline in EBITDA in the Truckload & Express Services segment.

Our ground expedite revenue declined by approximately $60 million or 44% primarily as we had tougher comparables in Q1, the peak periods of ground expedite demand in 2018. While this drove the revenue performance of the segment, it had a more modest impact on EBITDA.

Our over-the-road capabilities include scheduled and expedited dry van, temperature-controlled and flatbed fleets. Our revenues in this area were down by 6.2%, which was largely the result of fleet reductions associated with our temperature-controlled integration in Q2 of 2018. While temperature control is producing less revenue, it is producing improving profitability and we are pleased with the trends in this area of the business and with our flatbed business.

Our dry van fleet is underperforming with modest declines in revenue and unacceptable EBITDA performance. We have 3 dry van businesses that have both complementary and overlapping lanes and customers. We believe that closer integration provides excellent opportunities to improve the quality of our fleet, optimize our lanes and customers and streamline our operations in back office in ways similar to what we achieved with temperature control. We've begun this integration by aligning our team under 1 management structure who is now actively developing our integration plan. We expect the integration effort to extend throughout 2019. It's likely to drive some nonrecurring charges, which we will share with you as they become available.

Our Q1 intermodal revenue declined 1.7% in the face of weaker market conditions and increased impacts from weather. This reduced our load counts but we offset some of that impact by improved revenue per load.

Turning to LTL on Chart 12. Our revenue in Q1 was $103 million and decreased by 9.1% over 2018 in Q1. Our Q1 adjusted EBITDA was a loss of $5.2 million and was approximately $2.6 million or 33% lower than a year ago and was $3.1 million or 37% lower than Q4 of 2018. Our LTL strategy is to focus on our core competency as a metro-to-metro LTL provider with expansive long-haul, regional and next-day offerings. This includes 3 main elements: using sales discipline to drive volume into strategic lanes and leveraging our regional capabilities within Expedited Freight Systems, EFS; using pricing intelligence and networks enhancements to improve yield and market share in strategic lanes; and driving shipment reliability and visibility through investments in technology, centralization of our teams and process harmonization across the network.

Our Q1 revenue decline of 9.1% was driven by a reduction in shipments per day of 13.7%, which reflects our continued focus on reducing our pickup and delivery footprint, reducing unprofitable freight, improving our freight profile and building density in strategic lanes. While shipment counts declined, this focus produced improved Q1 revenue per shipment and yield with revenue per shipment excluding fuel increasing by 6.9% and yield excluding fuel increasing by 3.2% as compared with 1 year ago. And the 3.6% increase in weight per shipment is also a reflection of our improving freight profile.

The most significant efforts to improve our freight and lane profiles began in late Q1 of 2018. As a result, we're beginning to lap the periods where those benefits began. We expect this to cause our metrics to moderate, including lower rates of decline in shipments and lower rate of increase in revenue per shipment in yield. We are expecting to see improved overall revenue trends as we progress, and we did see improving revenue trends in each month as we move through the first quarter.

From a cost perspective, our focus on yield, reducing service areas and improving our freight profile is improving our pickup and delivery costs. And our linehaul costs have improved due to network planning and efficiency as well as lower purchased transportation costs versus Q1 of 2018.

Turning to Ascent Global Logistics on Chart 13. Our revenue in Q1 was $132 million and decreased by 2.4%. Our adjusted EBITDA was $7.1 million and was 10.7% lower than 2018 Q1. Our strategy in Ascent is based on improved integration, which enables easier access to more of our brokerage capabilities by more of our customers. As part of this integration, we're making investments to consolidate our IT capabilities onto 1 domestic transportation management system.

Revenue was down by 12.2% in our domestic freight management business as a result of lower brokerage load counts and from the planned reduction in the fleet used to back up our brokerage in certain tight lanes. These revenue declines were partially offset by improved brokerage spreads and by reduced operating costs. However, the Ascent segment EBITDA reduction was primarily driven by our domestic freight management offering.

International freight forwarding continued its strong growth with revenue increasing 24.6% in Q1 from expanded volumes at current and new customers. Our retail consolidation revenue grew by 6.6% primarily from new and existing customer volumes.

That concludes our comments on our operating segments, and I'll turn the presentation back over to Curt.

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [7]

--------------------------------------------------------------------------------

Thanks, Terry, and thanks, Mike. Next, I'll provide an update on business improvement plans and outlook on Slide 15. We are tracking our business improvements in 5 phases. We are currently in the second phase of our business improvement, simplification and integration. And as Mike indicated, we still got some work to do in our LTL and dry van businesses, but we're making good progress. We believe that the capital structure improvements that Terry outlined will represent a key inflection point in the business improvement process and allow us to move more quickly to the next phases.

On Slide 16, we summarize the detailed improvement plans that are in place for each of our business segments. As you can see, we have simplification and integration initiatives for all performing, restructured and underperforming business units.

On Slide 17, we summarize our key -- other key initiatives. Beginning in the third quarter of 2018, we started to upgrade our fleet equipment. These fleet upgrades will continue throughout 2019. And as the year continues, we expect to see a benefit -- a growing benefit in our safety, fuel efficiency. We expect to see reduced maintenance and short-term lease costs and an improvement in our service levels and productivity. We haven't received the full benefits yet, but that will build throughout the year. Newer equipment also improves the work experience and retention of our drivers.

Investments in IT across all 3 segments are focused on integration and customer-facing technologies. In IT, finance and across the company, we're working to improve our internal controls. We also continue to strengthen our corporate functions so that we can support the current business and future growth. Lastly, we are sharpening our focus on key financial goals such as return on invested capital. And our management team long-term incentives are now aligned with TSR based on the rights offering price.

Finishing on Slide 18. Our longer-term outlook remains unchanged. We've already discussed the recent capital structure improvements and expectations around segment margins. In-process improvements and structural changes are expected to increase our resiliency and success throughout the natural industry cycles.

That concludes our remarks. We now like to turn it back to Amanda, and we'll go to the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Bruce Chan of Stifel.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [2]

--------------------------------------------------------------------------------

Curt, I just want to start off here with your last slide about the longer-term outlook being unchanged. And I recognize, obviously, that the path forward is going to be a bit of a rocky one, but you'd initially laid out a 2020 EBITDA guidepost of about $100 million. And I just want to know, given your experience this quarter with both your performance improvements and what's going on with the market, is that guidepost still intact? Are you feeling a little bit more confident or less confident in that number?

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [3]

--------------------------------------------------------------------------------

Well, Bruce, I knew you would remember that number. And I'll tell you that that's still our goal for 2020. We are making good progress. The numbers don't reflect I think all the improvements that we're seeing in the underlying businesses. And obviously, we don't control the market. So there's a lot happening. There's still a lot to do. But we're -- we feel like we've got the plans in place and that we will see progress throughout the rest of the 2019.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [4]

--------------------------------------------------------------------------------

Okay. And I guess taking this maybe down through the segments. I was a little bit surprised to see the hit in AOD, and I know that had to do with some aircraft upgrades and avionics upgrades. Where are we in that process? Is that complete? Do we expect any overhang into the second quarter? And I don't know if you're able to quantify what the actual dollar impact on the EBITDA was of those longer-than-expected avionics upgrades.

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [5]

--------------------------------------------------------------------------------

Yes. Let's -- I'll let Mike get into the details on the avionics. But what I'll remind you, Bruce, as you know, AOD is an excellent business, one of our top-performing businesses. But there is a natural to that business month-to-month and quarter-to-quarter volatility that is just -- because it's an episodic type of business, it's going to happen. Now if you look at it over a longer, say, 12-month -- rolling 12 months, it's a pretty stable business that can be volatile as you know month-to-month and quarter-to-quarter. So we don't get too concerned or overly concerned about month-to-month and quarter-to-quarter comparisons. We'd like to look at a little longer time frame as we evaluate the performance of that business.

--------------------------------------------------------------------------------

Michael L. Gettle, Roadrunner Transportation Systems, Inc. - President, COO, Secretary & Director [6]

--------------------------------------------------------------------------------

And I think, Bruce, as it relates to the maintenance specifically, the FAA has rules requiring upgrades for avionics by January 1, 2020. We've been performing these upgrades on our fleet, the 12 aircraft, since the beginning of 2017. And we began to work on 2 more aircraft in Q1 and had some follow-up work on other aircraft during the quarter. At the end of Q1, our teams estimate that we've competed about 75% of the avionics upgrade effort, and we don't expect any issues complying with the FAA requirements or any specific overhang in any 1 quarter, although each aircraft is a bit different in terms of what you may chase -- face as you get into that upgrade.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [7]

--------------------------------------------------------------------------------

Okay. I guess the reason why I'm asking for the specificity and the details because -- and I know we've talked about this before, but AOD had a really great year last year, certainly due to really the acute tightness in, frankly, global supply chains. And I think maybe there's been some concern that you wouldn't be able to or won't be able to replicate that same experience going forward. And you've sort of assured us that this is a business that is constantly going to see demand from supply chain disruptions. And I would've thought that the weather that we saw in Q1, for example, would've contributed to that. So I'm just trying to get an idea of what the performance of that division would have been like ex some of those episodic onetime costs?

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [8]

--------------------------------------------------------------------------------

I think if you look, Bruce, at our performance, the segment is down about $3 million. And we've shared with you that that's the primary driver of that segment performance. I think the other thing, we did have, as you point out, a really kind of peak year or peak quarter in 2018 Q1, both in the air and on the ground. Yet as we sit here in a looser market in Q1, our air expedite revenue was up 13%. So there were other events at the border and strikes and weather events that created demand. Unfortunately, we weren't able to get all that demand on our aircraft as we have done historically. But I don't think we have any diminished capability.

I think the business is as strong as it's ever been. Usually, Q1 is a little bit weaker. And so we decided to go a little heavier on scheduling some of that avionics upgrade. And so we were -- had planes on the ground when the market was good. I think the other thing is, we ask around the industry about our competitors and their stage of completion on these avionics upgrades because of, I think, all the capacity in the industry is needing to go through this. As near as we can tell, people aren't always clear with us, we're at or ahead of the industry in terms of our progress in getting this done.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [9]

--------------------------------------------------------------------------------

Okay. That's very helpful. And just switching gears a little bit to the LTL segment. I guess it seems like you're seeing a little bit of deceleration in LTL yield. And certainly, we've heard that there's a little bit of increasing pricing competition there. But I guess the concern is that you're reducing shipment counts to drive better mix and drive better yield. Obviously, we're still fighting up against a little bit of a service issue. But as we start to lap some of the comparisons, are we going to see some of these yield improvement metrics grind to a halt? Maybe you can talk a bit about the progress that you're continuing to see on that metric?

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [10]

--------------------------------------------------------------------------------

Yes. I guess, Bruce, the issue is we're going to have twofold impacts. One, we're going to be lapping the period when the shipment count's already declined. And two, we're going to be lapping the periods where we were very aggressive on yield. And so I think both ends of that are going to moderate. We expect that the net revenue growth, the overall revenue growth of that business, is going to improve as we work through that cycle. So the shipment count impact, which has outweighed, frankly, the yield impact in the last 3 or 4 quarters, we think that will both moderate. And the revenue growth numbers will improve. And that's what we saw as we moved through the first quarter. In each month, we had an improving, let's say, revenue decline.

--------------------------------------------------------------------------------

Terence R. Rogers, Roadrunner Transportation Systems, Inc. - Executive VP & CFO [11]

--------------------------------------------------------------------------------

Yes. And Bruce, as we've said many times, what we need as we go forward here with LTL is we need more revenue. We -- but we need the revenue in the right lanes, our tier 1 and tier 2 lanes, and we need the right freight mix. But revenue growth is key as we go throughout the rest of this year in terms of turning that business to breakeven and then to profitability.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [12]

--------------------------------------------------------------------------------

Okay. So given your revenue -- oh, go ahead.

--------------------------------------------------------------------------------

Terence R. Rogers, Roadrunner Transportation Systems, Inc. - Executive VP & CFO [13]

--------------------------------------------------------------------------------

Just one last point. And then, I don't know if we've formally announced it or not, but I would expect it will -- we'll follow the industry in terms of the annual rate increases that others have already announced.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [14]

--------------------------------------------------------------------------------

Okay. Great. So given your revenue expectations for the rest of the year, when do you expect to be breakeven in the LTL business? And has that expectation moved forward, moved back, or is it roughly the same as what it was before?

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [15]

--------------------------------------------------------------------------------

Bruce, that hasn't changed. The answer to that question is exactly what we said at the last quarter, which was we expect to be exiting this year at breakeven turning to profitability.

--------------------------------------------------------------------------------

Terence R. Rogers, Roadrunner Transportation Systems, Inc. - Executive VP & CFO [16]

--------------------------------------------------------------------------------

And hopefully sooner, but that's what we're still planning on, Bruce.

--------------------------------------------------------------------------------

Bruce Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [17]

--------------------------------------------------------------------------------

Okay. Great. And then just one final time line update here for you. As far as the dry van turnaround, how is that progressing? And again, what's sort of the rollout schedule for that?

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [18]

--------------------------------------------------------------------------------

Bruce, we're at the front end of that. We've just taken the first key step, which was aligning the entire team into 1 management structure. And we now have them working on our integration plans. That work is going to extend throughout the balance of this year. I think we'll be pretty steady on this throughout the year. This is a bigger business than our temperature control. And so I think it's going to take a little bit longer, but we think we can achieve the same outcomes.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

(Operator Instructions)

--------------------------------------------------------------------------------

Curtis W. Stoelting, Roadrunner Transportation Systems, Inc. - CEO & Director [20]

--------------------------------------------------------------------------------

Okay. Amanda, I think we're sufficient for today. I appreciate your help, and I want to thank everybody for their time on the call. And we look forward to speaking to you all in the future. Have a great day.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.