CEVA reports mixed Q1 earnings results

CEVA Logistics, a global third-party logistics (3PL) services provider, announced mixed earnings results for the first quarter.

Revenue was down 8.9 percent annually at $1.865 billion, and adjusted EBITDA saw a 7.3 percent increase to $43 million. Company officials said the revenue decline was due to weakness in airfreight and oceanfreight, which had a negative impact on the Freight Management segment for CEVA whose revenues dropped 11.5 percent, while the EBITDA gain was paced by a strong performance in CEVA’s Contract Logistics group.

Along with its earnings data, CEVA also said it completed a capital structure refinancing that extended all material maturities and increased liquidity by about $100 million.  And as previously reported, last year CEVA it completed a major agreement with its major note holders to recapitalize its balance sheet and raise new capital in the first half of 2013. CEVA said that these efforts will make for a stronger balance sheet for CEVA, which will enable the company to grow faster and better compete in the logistics and supply chain marketplace, as well as give CEVA the flexibility of making additional capex investments, which will allow it to better serve its customers as it grows globally and build and sell new supply chain products.

“CEVA continues to show strength in Contract Logistics driven by initiatives the company put in place to increase profitability,” said CEVA CEO Xavier Urbain in a statement.  “We have not, however, been immune to market conditions that have impacted Freight Management.  Despite that, I am pleased to report we had our strongest quarter in nearly two years for new business wins, showing particular strength in Freight Management as we exited the quarter.  While revenue from these wins won’t be reflected until subsequent quarters, it shows positive momentum in the business. During my first few months at CEVA, I have visited many of our operational bases and have been impressed by both the professionalism and commitment of our people.  It is clear that we have tremendous potential that can be focused on building the top line while we also continue to keep tight control on costs.”

CEVA CFO Rubin McDougal described the first quarter to LM as a solid performance, with an excellent output in Contract Logistics and where it thought it would be on the Freight Management side and good cash flow.

Addressing Contract Logistics, McDougal said that one of the main drivers for the group’s success was execution at the local levels, with a focus on execution or doing the day-to-day job right the first time.

“That has to do with performance indicators and action surrounding contract management and working on the basics,” he explained. “Another part is getting underperforming contracts to perform or we get out and do so in accordance with the contract and not leave anyone in the lurch. We deal with customers on a long-term basis and are very focused on making sure that both we and the customer work according to the contract.”

With ongoing challenges in the air and ocean markets for Freight Management, he said that CEVA looks at certain metrics impacting business trends.

One metric is China exports, which some sources indicated, McDougal noted, were down 18 percent in February and nearly 7 percent in March, making it a challenging market in some trade lanes and is subject to variation depending on a company’s specific footprint.

“We had a very challenging January and February, driven in part by the weather in our U.S-based ground business, as well as our air business with some of our customer’s production slowing down resulting in less demand for inbound product,” he said. “Our overall view of Freight Management for the quarter was one of good news on two fronts: one was the number of new customer wins we had which was up 30 percent and is good news for future Freight Management volume and March and into April showed good growth for airfreight volume. We think we may have outperformed the industry for April, but we were up 7 percent and don’t think the industry was up as much.”

The pairing of first quarter capital structure refinancing and a stronger balance sheet due to last year’s recapitalization essentially made it possible to pay off nearly all of its existing debt and replace it with new debt that has longer terms so that it will have very good maturity growth interest rates, which has been well-received by customers.