STB

Student Transportation Inc (STB)

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Exchange: NASDAQ
Industry: Transportation
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Student Transportation (STB)

Q2 2014 Earnings Call

February 13, 2014 11:00 am ET

Executives

Keith P. Engelbert - Chief Technology Officer and Director of Investor Relations

Denis J. Gallagher - Founder, Chairman, Chief Executive Officer, Chairman of Student Transportation of America Holdings Inc and Chief Executive Officer of Student Transportation of America Holdings Inc

Patrick J. Walker - Chief Financial Officer and Executive Vice President

Analysts

Greg Colman - National Bank Financial, Inc., Research Division

Brady Cox - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Student Transportation Inc. Fiscal 2014 Second Quarter Results Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I'll now introduce your host for today's conference, Keith Engelbert, Director of Investor Relations. You may begin.

Keith P. Engelbert

Thank you, Ashley. Good morning, everyone, and thank you for joining us to discuss our second quarter fiscal 2014 results, which ended December 31, 2013. Joining me today on the call are Denis Gallagher, Chief Executive Officer; and Pat Walker, Executive Vice President and Chief Financial Officer.

Yesterday, the earnings release, MD&A and financials were disseminated. The release, MD&A and financials are accessible on SEDAR, EDGAR and our website at ridestbus.com.

In addition to our standard disclaimer about forward-looking statements, please also note that all figures are in U.S. dollars, unless otherwise specified.

I will also remind you that this conference call is being webcast live.

With that, I'll turn the call over to Denis Gallagher.

Denis J. Gallagher

Thank you, Keith. Good morning, everyone, and thanks again for joining us. I'm pleased to report that our operating results for the first 6 months of fiscal year 2014 have improved over the same period last year despite the effects of the bone-chilling cold and severe ice storms that hit much of the North -- hit much of North America this past November and December.

As I've stated in previous calls, based on the net new business we secured for fiscal 2014, we entered in the year anticipating an approximate 11% to 12% increase in our annualized revenues. While the quarter was not as good as we anticipated, it is nothing we haven't seen before and/or something we have not recuperated from in the past. We know the uncertainty of the weather on a monthly or quarterly basis is something we cannot predict. However, our performance, by historical standards, has been pretty much consistent.

We're also off to a very good start for fiscal 2015 with a very busy bid season underway and some exciting opportunities that we've realized, thanks to the quality of our service and the strength of our reputation. Pat Walker, our CFO, will review our complete financial results for the second quarter and year-to-date positions of 2014 in detail in a few minutes, but first, let me give you the highlights and some perspective on how Old Man Winter impacted our second quarter results.

Let me summarize the results for the quarter. Revenue for the second quarter of fiscal 2014 increased 13.5% to $135.5 million from $119.4 million in the second quarter of fiscal '13. Adjusted EBITDA for the quarter was $30.9 million, up 8.7% over the $28.4 million recorded for the same period last year, which included some increased costs associated with the winter. Net income from the quarter was just under $3 million at $2.9 million on par with the $3 million we reported in the second quarter of fiscal '13.

Looking at the first 6 months of fiscal 2014, the year-to-date numbers are still tracking well through our internal expectations despite some tougher conditions. For the year-to-date, revenue is up 15.3% compared to the same period last year, while adjusted EBITDA is up 18.2% year-over-year. Our adjusted EBITDA margin was 14.1% compared to 13.8% for the first 6 months over last year.

Winter weather did hit a bit early again this year resulting in a number of school delays and closings in late November and December in places like Texas and the Midwest and also in Ontario, where we had severe ice and snow storms.

What's most notable about this year, however, is not the number of school days deferred, but the severity of the ice and cold, and below-freezing temperatures and the impact, quite frankly, that, that's had on our labor and maintenance expenses, as well as on our customers, our children that we transport. We will continue to make sure our fleet is safe, that our buses are cleaned off, started, warm and running properly before we pick up our first child on that bus.

In the case of this quarter, it meant added overtime and increased cost, but we will not jeopardize safety in anything we do. It costs more in weather like this -- in the weather like this we've had, but we see it as an investment in safety, and it's a cost we will bear because it's our culture and it's our reputation. As you know, in most areas, we operate or contracted for 180 days of school service, so we will make up for any school closings later in the year, but what we don't directly recover are the increased expenses that go along with maintaining our service during the severe cold.

So here we go again. In many places, winter has been like Groundhog Day, stubbornly cold day after day, requiring us to bring in our mechanics in on some days this year at 4 a.m., and drivers as early as 5 and 6 a.m. to clear away snow, warm up the buses so we're ready to roll when our school administrators make that important call for the day. On days like this, I'm sure all of you realize, as you do with your own cars, you just can't start it up and drive away. With weather like this, it can increase wages, fuel and maintenance expenses. It's not unusual for us. I've been in this business 38 years and we've learned to deal with it. Being prepared, though, is what we do. And quite frankly, it's just good business. It's the reason our customers trust us, renew and stay with us.

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