Roadrunner Transportation Systems Inc :RRTS-US: Earnings Analysis: Q3, 2017 By the Numbers : April 2, 2018

Roadrunner Transportation Systems Inc reports financial results for the quarter ended September 29, 2017.

Highlights

  • Summary numbers: Revenues of USD 521.43 million, Net Earnings of USD -19.94 million.
  • Gross margins widened from 29.79% to 31.19% compared to the same period last year, operating (EBITDA) margins now 4.37% from -65.92%.
  • Change in operating cash flow of -309.06% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -68.90% to 1.01%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-29 2017-06-29 2017-03-30 2016-12-30 2016-09-29
Relevant Numbers (Quarterly)
Revenues (mil) 521.43 530.58 478.92 551.23 532.01
Revenue Growth (%YOY) -1.99 9.76 2.65 12.74 7.09
Earnings (mil) -19.94 -38.86 -319.62 -2.74 0.9
Earnings Growth (%YOY) -2315.89 -1202.81 -18845.92 -125.91 -90.84
Net Margin (%) -3.82 -7.32 -66.74 -0.5 0.17
EPS -0.52 -1.01 -8.34 -0.07 0.02
Return on Equity (%) -20.68 -39.79 -170.28 -1.26 0.23
Return on Assets (%) -8.83 -16.86 -139.47 -1.15 0.32

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, RRTS-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if RRTS-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -1.72% and earnings by 48.68% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 29.79% to 31.19%, while operating margins improved from -65.92% to 4.37% over this period. For comparison, gross margins were 31.88% and EBITDA margins 0.72% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

RRTS-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 27.34, compared to last year’s level of -46.53 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

RRTS-US’s year-on-year change in operating cash flow of -309.06% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -67.82% to 2.16% and pretax margins widened from -68.90% to 1.01%.

EBIT Margin History
PreTax Margin History

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Company Profile

Roadrunner Transportation Systems, Inc. (RRTS) is an asset-light transportation and logistics service provider. The Company offers a suite of global supply chain solutions, including truckload logistics (TL), customized and expedited less-than-truckload (LTL), intermodal solutions (transporting a shipment by over one mode, primarily through rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage and transportation management solutions. The Company operates through three segments: Truckload Logistics, Less-than-Truckload and Global Solutions. The Company utilizes a third-party network of transportation providers, consisting of independent contractors (ICs) and purchased power providers, to serve a diverse customer base. It primarily focuses on small to mid-size shippers.

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