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Roadrunner Transportation Systems Inc (RRTS 3.15%)
Q2Â 2019 Earnings Call
Aug 7, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings, and welcome to the Roadrunner Transportation Systems 2019 Second Quarter Financial Results Conference Call.
[Operator Instructions]
At this time, I will turn the call over to CEO, Curt Stoelting. Please go ahead, sir.
Curtis W. Stoelting -- Chief Executive Officer
Thank you. 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 is Chelsea Mitchell, our Director of Marketing and Corporate Communication. To begin, Chelsea will cover our safe harbor statement.
Chelsea Mitchell -- Director of Marketing and Corporate Communications
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. 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 -- Chief Executive Officer
Thanks, Chelsea. Before we cover today's materials, I'd like to start by personally thanking our management team, team members, pilots, drivers, independent contractors, customers, vendors, lenders and other business partners for their ongoing trust and support. Today on the call, 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 second quarter and first half. Mike Gettle will cover Q2 business trends in each of our 4 segments, and I'll provide an update on business improvements and strategic focus, and then we'll wrap up with a Q&A session. Moving on to our opening comments, our revenue and adjusted EBITDA declined in the second quarter of 2019, primarily due to low demand in air and ground expedited logistics at Active On-Demand as market conditions deteriorated from the prior year and from Q1 of this year.
Active On-Demand revenue was down $63.6 million -- sorry, $63.3 million in the second quarter versus prior year, with declines across all service offerings, including our air fleet, our air brokerage and our ground expedite. This resulted in a decline in adjusted EBITDA of $10.3 million. So we have seen volatility in this segment in the past, and these variations do not impact Active's ability to capture improved revenue and profit as expedite demand improves in the future. Ascent Global Logistics earned lower revenue and marginally lower adjusted EBITDA in the second quarter due to declines in truckload volumes and rate mix, which were offset by revenue improvements in our international freight forwarding and retail consolidation service offerings. Ascent International had double-digit top and bottom line growth in the second quarter.
Our asset-light LTL business continues to improve freight quality and operating metrics, despite a slight decline in second quarter revenue and adjusted EBITDA. It's important to note that our second quarter LTL revenue, excluding backhaul and fuel surcharge revenue, increased by 4.3% -- I'm sorry, 3.4% versus the prior year. We continue to invest and improve our LTL offering. Truckload segment adjusted EBITDA declined due to lower revenue and higher cost at certain operating units. The improvement in Temperature Controlled and Flatbed was offset by declines in Dry Van, which had higher costs and interval services, which experienced reduced volumes in Q2 compared to the prior year due to soft market conditions. Moving forward, we are narrowing our strategic focus to our logistics and asset-light LTL segments.
More on that topic later in the presentation. Despite lower operating performance in Q2, we continue to have available liquidity from our asset-based lending facility. As we stated in prior calls, we do not expect and are not achieving a linear turnaround process, although some of our businesses can experience short-term volatility, primarily due to market conditions, our overarching focus to achieve better-than-average industry margins and sustainable returns on invested capital in our core segments. We are encouraged by our team's progress across all segments.
I'll turn the call over to Terry Rogers, our EVP and CFO.
Terence R. Rogers -- Executive Vice President and Chief Financial Officer
Thank you, Curt, and good morning. I will review our performance for the second quarter and the first half of 2019. Mike will be providing details on the operating trends of each of our segments in a few minutes, so I will cover the results at a consolidated level. Before I start, I want to point out that we have changed our segment reporting by expanding from 3 segments to 4. The segments are: Ascent Global Logistics; Active On-Demand; Less-than-Truckload or LTL; and Truckload or TL. The change established a separate segment for Active On-Demand, which was previously grouped with the Truckload segment operations.
slide seven summarizes our first quarter financial performance -- I'm sorry, our second quarter financial performance. Challenging market conditions resulted in second quarter 2019 revenues of $480.7 million, a decline of 13.9% from revenues of $558 million in the second quarter of 2018. Year-over-year revenue declined in all 4 segments, but the largest contributor was the low demand in air and ground expedite for the Active On-Demand segment. The second quarter 2019 operating loss was $137.8 million compared to a loss of $11.4 million in the second quarter of 2018. The second quarter of 2019 was materially impacted by [Technical Issues] of noncash impairment charges. First, in connection with the previously mentioned change in segments, the company completed an impairment analysis as of April 1, 2019, for the Truckload & express segment or TES. The TES operations had not met forecasted results and it was determined that carrying [Technical Issues] exceeded the fair value required an impairment -- goodwill impairment charge of $96.9 million.
This represented the write-off of all the goodwill of the TES segment. Thus, the new Active On-Demand and the remaining Truckload segment have no goodwill balances as of the end the second quarter of 2019. Additionally, we recorded an asset impairment charge of $13 million related to internal use software that was abandoned in favor of alternative customized [Technical Issues] . Also, declining in operating performance in one of the Truckload business resulted in the determination that other intangibles of $1.9 million related to that business were impaired. And lastly, impairment charges of $0.5 million were recorded for assets held for sale in our Truckload segment. Excluding the impairment impact, operating results decreased in 3 of the 4 segments compared to the second quarter of 2018.
This includes a decrease in operating results at Active On-Demand of over $10 million compared to the second quarter of 2018. The net loss in the second quarter of 2019 was $141.9 million compared to a loss of $42 million in the second quarter of 2018. In addition to the items previously discussed, there was a significant reduction in year-over-year interest expense to $4.6 million in the second quarter of 2019 versus $34.2 million in Q2 2018. This is largely the result of substantially lower debt in the second quarter of 2019 following the redemption of the preferred stock, which was classified as debt under GAAP in the first quarter of 2019. Effective tax rates are relatively low compared to the statutory rate for both the second quarter of 2019 and 2018. However, the primary driver of that was different for each period.
The income tax benefit for Q2 2019 was offset by corresponding increase in the valuation allowance for deferred tax assets. Along with second quarter of 2018, the largest driver was the nontax-deductible interest expense associated with the company's preferred stock. For the balance of 2019, we expect any tax benefit to be offset by increases in the valuation allowance for deferred tax assets. Please see the income tax footnote in the 10-Q for more detail. The diluted loss per share in the second quarter of 2019 was $3.77 versus $27.24 per share in the second quarter of 2018. The calculation is based on the weighted average number of shares outstanding during the period. It is important to remember that -- it is important to note that as a result of the 1-for-25 reverse stock split on April 5, 2019, references to the number of shares and common share data for all reported [Technical Issues] retroactively adjusted to account for the effect of the reverse stock split.
The per share calculation for the second quarter of 2019 reflects the issuance of 36 million shares of common stock in the rights offering completed in February 2019. Second quarter adjusted EBITDA decreased by $13.3 million year-over-year, we'll touch on that more in a bit. On slide eight, turning briefly to the slide, you can see the revenue comparison for the second quarter of 2019 versus the second quarter of 2018. LTL's revenue decreased slightly, although it was essentially flat. There were decreases in other segments, with the largest decline in the Active On-Demand segment. Turning to slide nine, which reconciles the net loss to adjusted EBITDA for the second quarter of 2019 and 2018 for each of the 4 reporting segments in the company. For the segments, only Ascent posted adjusted EBITDA in the second quarter of 2019, and Q2 year-over-year adjusted EBITDA was down in all 4 segments.
The largest contributor was the performance at Active On-Demand with a $10.3 million reduction in adjusted EBITDA versus the second quarter of 2018 represents over 78% of the year-over-year decline. Mike will cover the drivers by segments shortly. Turning to slide 11 and the first half results. Revenues decreased to $987.8 million from $1.128 billion in the first half of 2018. Like the second quarter, the year-over-year decline was driven by low demand in the air and ground expedite for the Active On-Demand segment. The Active On-Demand revenue decline of $115.3 million represent over 80% of the total year-over-year decline from the first half of 2019. The net operating loss of $158.8 million -- $158.6 million, excuse me, in first half of 2019 compared to the $24.8 million operating loss in the first half of 2018 was impacted by $109 million of impairments in the first half. I discussed the second quarter 2019 impairments of $108.3 million previously.
Additionally, the first quarter of 2019 also had a $0.8 million impairment for abandoned internal use software, bringing the first half of 2019 total to $109.1 million. Excluding the impairment charges, the higher operating loss in the first half of [Technical Issues] was again driven by larger year-over-year declines at Active On-Demand as well as declining performance in Truckload and Ascent, partially offset by improvement in the results at LTL. The net loss of $168.8 million versus [Technical Issues] 2019 was higher than a loss of $65.6 million from the first half of 2019, largely due to the operating performance and impairment charges already discussed. Additionally, the first half time of 2019 included a debt restructuring charge of $2.3 million. Interest expense in the first half of 2019 was $35.3 million lower than the first half of 2018 due to the redemption of the high-class preferred stock in February 2019.
And also that interest on that preferred stock in January and February of '19 was waived upon completion of the rights offerings. The effective income tax rate was low in both first half of 2019 and 2018 for the same reasons I cited for the second quarter tax rates. Similarly, as I discussed for the quarter, the 1-for-25 reversal stock split on April 5, 2019, has been retroactively adjusted to account for all reported periods. The higher weighted average number of shares on the first half of 2019 resulted in a lower first half loss per share of $6.39 versus $42.62 per share for the first half of 2018. The 36 million shares issued during the rights offering in February 2019 is reflected in the calculation. Adjusted EBITDA for the first half of 2019 decreased to a loss of $5.8 million versus $9.9 million of adjusted EBITDA income in the first half of 2018. Turning to slide 12. The first half revenues declined for all 4 segments year-over-year. And again, Mike will touch on some of this in his section.
So moving on to slide 13, which is my final operating slide, adjusted EBITDA -- which compares to adjusted EBITDA for the first half of 2019 versus the first half of 2018. The decline in year-over-year performance at Active On-Demand stands out along with moderate declines in Ascent and Truckload businesses. On a positive note, the actions at LTL showed improved adjusted EBITDA over the first half of 2018. Finally, slide 14 reflects the substantial reduction in total debt in 2019. The $450 million rights offerings in the new bank ABL and term loan closed during the week of February 2019. The proceeds from these transactions allowed us to fully redeem the preferred stock, which was our highest yielding obligation as well as payoff our prior ABL facility and improved liquidity for operating purposes.
Our finance lease liability increased by $42.9 million year-to-date as we continue to upgrade our fleet with financing primarily provided by the captive finance companies of OEM manufacturers. We expect this investment will positively impact fleet rent expense and repairs and maintenance moving forward. The net result is $350 million reduction on 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 -- President and Chief Operating Officer
Thanks, Terry. Good morning, everyone. I'm pleased to be able to share some additional commentary regarding our operations in each of our segments, starting with the Ascent Global Logistics on Chart 16. Our Ascent revenue in Q2 was $130 million and decreased by 10%, and our adjusted EBITDA was $7.5 million, which was 11.6% lower than 2018 Q2. 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 proprietary enterprise brokerage platform for both our Ascent and Active On-Demand segments. Revenue was down 18.8% in our domestic freight management business because of lower brokerage load counts and rates and from the planned reductions in the fleet used to back up our brokerage in certain tight lanes.
These revenue declines were partially offset by improved brokerage margins and by reduced operating costs. However, the Ascent segment EBITDA reduction was primarily driven by domestic freight management. International freight forwarding continued its strong growth with revenue increasing 10.9% in Q2 from expanded volumes at current and new customers as a result of sales force, investment and continuing high levels of customer service. Our retail consolidation revenue grew 2.4%, primarily from new and existing customer volumes because of continuing improvements in our on-time in for performance. Turning to Active On-Demand on Chart 17, our revenue in Q2 was $101.5 million, and decreased by 38% from 2018 Q2. Our Q2 adjusted EBITDA was a loss of $0.5 million and was approximately 10.3% lower than the profit year ago. Our strategy at Active On-Demand is to provide premium, mission-critical air and ground expedite services while working to drive operational improvements and further execution of world-class client solutions, including the ability to quickly mode shift and to leverage IT scale with other Ascent Global Logistics brokerage systems.
The market demand in Q2 for expedited air declined significantly, resulting in lower trip volumes and rates in our air fleet and brokerage. This resulted in 50% less revenue than a year ago and was the primary driver of the reduced segment adjusted EBITDA in Q2. And together with the lower fleet availability and capture rate in Q1 was the primary driver of first half adjusted EBITDA performance. Ground revenue declined by 31% in Q2 from lower margin demand, which continues to decline from peak levels in 2018. While this contributed strongly to the revenue performance in the segment, it had a more modest impact on adjusted EBITDA. Active On-Demand short-term volatility historically moderates over longer periods. Our business capabilities remain intact to capture revenue and adjusted EBITDA as demand improves.
Turning to LTL on Chart 18, our revenue in Q2 was $117 million and declined 0.1% from the prior year. Our Q2 adjusted EBITDA was a loss of $3.4 million, which was approximately 18% higher than a year ago and was $1.8 million or 35% lower than our loss in Q1. Our LTL strategy is to focus on our core competency as a metro to metro LTL provider, with expansive long-haul, regional, next-day offerings. This includes 3 main elements: using sales discipline to drive volume into strategic lanes and leveraging our regional capabilities within EFS; using pricing intelligence and network enhancements to improve yield and market share in strategic lanes; and driving shipment reliability and visibility through investments in technology; centralization of our work teams and process harmonization across the network. Excluding backhaul and fuel surcharge revenue, our revenue grew by 3.4%, which was driven by an increase in revenue per shipment, excluding fuel of 4.4%, offset by a decline in shipments per day of 1%.
The percentage decline in shipments per day improved from recent quarters as we are now lapping periods after late Q1 of 2018, when our most significant efforts began, reducing our pickup and delivery footprint, reducing unprofitable freight, improving our freight profile and building density in strategic lanes. The Q2 increase in revenue per hundred weight, excluding fuel of 3.8% and in weight per shipment of 0.6% reflect our ongoing focus on improving our freight profile. From a cost perspective, our focus on yield, reducing service areas and improving our freight profile is improving our pickup and delivery costs. The increase in operating costs in the quarter was predominantly driven by an increase in equipment repair maintenance costs as well as personnel-related costs as we have reduced deferred maintenance and built a stronger foundation for future growth.
Our Truckload revenue in Q2 was $141.5 million and declined by 2.9% over 2018 Q2. Our adjusted EBITDA was a loss of $1.1 million and declined by approximately $1.4 million from a modest profit in 2018 Q2. Our Truckload strategy is centered around integrations and improve our scale and rightsize our capacity to address both scheduled and unscheduled freight needs. Our over-the-road capabilities include Dry Van, Temperature Controlled and Flatbed fleets, which comprise 68%, 20% and 12%, respectively, of year-to-date 2019 revenue.
Dry Van revenue increased in Q2, but that was outpaced by increases in cost. Our Temperature Controlled revenue in Q2 declined primarily from a fleet size from prior period, but resulted in improved profitability in Q2 and year-to-date 2019. Our Q2 intermodal revenue declined by 7.6%, driven by decline in load counts from markets softness, partially offset by improved rates per load, which together resulted in lower profitability.
That concludes our comments on our operating segments, and I'll turn the presentation back over to Curt.
Curtis W. Stoelting -- Chief Executive Officer
Thanks, Terry and Mike. Next, I'll provide an update on our business improvement plans and our strategic focus. On slide 21, we are tracking our business improvements in 5 key phases. We are currently in the second phase of business improvement simplification integration. Having completed the capital structure improvements in Q1, we are now sharpening our strategic focus. On slide 22, we summarize the key initiatives we are in place in each of our segments. It's important to remember that we continue to invest in the integration of Ascent, which we expect will benefit future top and bottom line results. We also recently launched development of a proprietary enterprise brokerage platform called PEAK platform, which will support our logistics operations in Ascent and Active On-Demand and streamline our logistics go-to-market capabilities.
Concluding on slide 23, we want to summarize our key financial focus areas. Based on our increased focus on our logistics and asset-light LTL segments, we are undertaking a strategic assessment of our Truckload assets. Through June 30, we invested over $50 million to upgrade -- update our fleets across all 4 segments. Because of the timing of the equipment delivery schedules and transition costs, we have not yet seen the full benefits from these investments. Expected benefits include improved safety and fuel efficiency, reduced repair and maintenance on operating lease costs and improved service levels and productivity. Over time, we expect to reduce the amount of required fleet investments. By narrowing our strategic focus, we expect to more quickly improve cash flow and debt reduction, remediate internal control efficiencies and move operating margins and return on invested capital closer to or better than industry norms.
That concludes our remarks, and we'll now turn the over to Tia for the Q&A session.
Operator -- Chief Executive Officer
[Operator Instructions] The first question will come from Bruce Chan with Stifel.
Bruce Chan -- Analyst
Yes thank you operator. Good morning. Terry, I guess this is probably going to be your last earnings call, so I just want to give a quick thanks for all your help and all your work over the past few years. And maybe that's -- a good transition into question about how the search for replacement is going? I know that it's a fairly recent announcement, but any progress to speak of there?
Curtis W. Stoelting -- Chief Executive Officer
Bruce, this is Curt, thanks for being on the call today. Yes, we are in the search process, it's still early on, but we're encouraged with the quality of the candidates that we're getting exposure to. And when we make a decision, we'll let you know which direction we're going in the future.
Bruce Chan -- Analyst
Okay. Great. And then just switching gears a little bit, Curt and Mike, you talked about some elevated cost during the quarter, and I was just hoping to get a little bit more color, the personnel costs were up in many of the segments, which I think kind of seems a little strange give the topline declines, but can you talk about what's driving that increase there?
Michael L. Gettle -- President and Chief Operating Officer
Bruce, I think in terms of personnel costs, they are up across most of the segments, probably the one you may find more interesting is in LTL. We've increased our maintenance team, our safety team, we're putting in place foundation for future growth. We also had in LTL as a result of increased maintenance team catching up on some of our deferred maintenance, and so our maintenance costs were up across the quarter, our logistics businesses, our talent-driven businesses. And so we're being proactive, I think, in investing in talent in those businesses.
Bruce Chan -- Analyst
Okay. That's helpful. And in terms of headcount overall, where do stand now versus year-ago levels?
Curtis W. Stoelting -- Chief Executive Officer
I think we're pretty close overall, Bruce. I think what you're seeing in the numbers is probably just normal wage inflation. There's obviously driver inflation this year versus last year, many of the driver pay increases took effect throughout in '18, we'll get the full effect in '19.
Bruce Chan -- Analyst
Got it. That's helpful. And then on OpEx side, Mike, I know you talked about the equipment piece, which was very helpful, is there anything else that's going on in other parts of the business? Is there anything in there related to claims expense maybe?
Michael L. Gettle -- President and Chief Operating Officer
I don't have at hand our claims expense data, doesn't stand out for me. I think the primary issue is around our maintenance cost and the timing of getting benefit from the fleet investments and to reduce our maintenance costs going forward, which we think will be an opportunity.
Okay. All right. And then on the Active On-Demand side, obviously, really tough environment for that business and there are other companies out there, they reported similar results. But digging in on what that trajectory might be, I know, Curt, you said it ebbs and flows, but it seems like a lot of the weakness might be related to this automotive and industrial softness that we've been seeing. And I'm wondering what needs to happen in order for these volumes in this environment to inflect. Do we just have to wait for automotive and industrial end markets to improve, or is there something else that you guys can do to help smooth these results out?
Curtis W. Stoelting -- Chief Executive Officer
Yes. That's an interesting question. The Active On-Demand business is really driven more by supply chain disruptions than I think global economics or industry trend. Obviously, industry trends have an impact, but the bigger impact is really supply chain disruptions. And last year was a record year because we had a very tight truckload freight market. And we had a number of different events. Year before, we had, especially in the third and fourth quarter, we had impacts of hurricanes and those things are hard to predict, but they do tend to happen even though they're not predictable and we don't see them coming. And what encourages us is that Active, if you look at their history, they go through these ebbs and soft peaks and valleys in cycles, but the business remains very well positioned to earn increased revenue and profit as demand in expedite either on the air or the ground improves. So it's hard to predict. We've said that all along. But it's a very well-positioned business and things -- stuff seems to always happen but moderated over a longer period of time.
Bruce Chan -- Analyst
Sure. Well, there's certainly no shortage of stuff happening now. And I guess you saw pretty strong demand in Active On-Demand last quarter, I imagine some of that may have been related to some of the inventory prestocking and then maybe you experienced some of the air pocket after May. We've recently had an announcement that we might be getting another round of tariffs. So I thought I'd ask if you seen any indication of that in your Active On-Demand business or in any other parts of the business where maybe there is some restocking going on to shore up inventory that might have gotten depleted over last few months?
Curtis W. Stoelting -- Chief Executive Officer
Yes. I think it's really hard to say. There's certainly been impacts from the tariffs, but because they affect different companies in very different ways and their supply chains in very different ways, it's really hard to make a generalized statement. We're encouraged that our international freight forwarding business within Ascent has done tremendously well throughout the first half of the year, both top and bottom line, whereas I think many of the larger players in that market have had some disruptions because of tariffs and other changes in supply chains. I think we've been able to overcome that because we've put out new customers and we've increased our business with existing customers. So it's very hard, I think, to take something like tariffs, which are very complex and affect different companies in different ways and know exactly how it impacts the different parts of Roadrunner.
Bruce Chan -- Analyst
Okay. So I guess no real signs of any inventory build at this point?
Michael L. Gettle -- President and Chief Operating Officer
I think that's fair to say.
Curtis W. Stoelting -- Chief Executive Officer
Yes. And I don't know tariffs are going to have a big impact on Active On-Demand because most of those -- most of the supply chain that they support are running more of adjusting time model and probably are not going to build extra inventory. And again, it's more based on supply chain disruptions is what's going to drive more expedite demand.
Bruce Chan -- Analyst
Okay. All right. Then, looking at the truckload segments, interesting to hear about the strategic assessment, are you actively shopping that in the market now or you're still considering shopping that in the market?
Curtis W. Stoelting -- Chief Executive Officer
Well, we're in different phases with different parts of the business. Overall, we're still in assessment phase. We haven't made any decisions. But we are considering all viable alternatives.
Michael L. Gettle -- President and Chief Operating Officer
Okay. And what drove that decision to divest now or to potentially divest now? Was it just that the turnaround wasn't going the way that you wanted to or that you needed to put more focus on other parts of the business? It just seems like now when maybe we've seen some softening in some of the transactions multiples now, I'm wondering what kind of spark that decision.
Curtis W. Stoelting -- Chief Executive Officer
Well, I think we've already said that we were going to look at our longer-term portfolio. Our goal was to recapitalize the business, which we were able to complete that in the first quarter. We had some delays around that because of the government shutdown early in the year. But -- and that really got us to a point where we had the time and the energy to put into this kind of the strategic assessment of the entire portfolio. And so our timing may be a little off, but I think this is all part of the plan that we laid out a few years ago.
Bruce Chan -- Analyst
Okay. That's fair. Are you guys still going to be pursuing the turnaround in a Dry Van while you're making you're strategic assessment?
Curtis W. Stoelting -- Chief Executive Officer
Absolutely. I think the team there is working hard, we've completed more of the integration. There's still more work to do to turn that business around. But we're 150% working to improve that business.
Bruce Chan -- Analyst
Okay. Then on the LTL side, I think all told, fairly encouraging result there, especially given what's going on in the market, are you guys still on target for breakeven EBITDA this year?
Michael L. Gettle -- President and Chief Operating Officer
Bruce, that is the goal that we're working to. I think as you kind of you alluded to in your comment there, the overall market for LTL is softening, and that's clearly a headwind, the depth and kind of persistence of that is that going to have an impact on our ability to achieve that. So I think it's maybe a little more in question that it was three and six months ago, but still what we're working to try to achieve.
Curtis W. Stoelting -- Chief Executive Officer
And I'd say, overall, we continue to make good structural improvements on the things that we can control. But ultimately, we do need -- we need higher levels of revenue in the network, obviously in the right lanes with the right freight. And that's what the team's working on every day.
Bruce Chan -- Analyst
Okay. Just because I've always been curious, can you provide any color on the margin differential between EFS and the legacy LTL business? Is there anything appreciable there? Do they run roughly the same in terms of OR?
Curtis W. Stoelting -- Chief Executive Officer
I'm sorry, that was the difference between the Roadrunner Freight offering and EFS offering?
Bruce Chan -- Analyst
Yes.
Curtis W. Stoelting -- Chief Executive Officer
That's something that we don't obviously publish, and I don't have that right in front of me. I think they probably are different because they're different operating models, with EFS really focusing on more of a regional expedited offering, whereas as you know, the Roadrunner freight model is long-haul metro to metro and priced a little differently. So I would guess if you dug into that a little deeper, you would find some differences. But the vast majority of our LTL business is tied around Roadrunner Freight.
Bruce Chan -- Analyst
Okay. And EFS is pretty much running smoothly and doesn't need a whole lot of time and investments or are both segments undergoing the turnaround divestment?
Curtis W. Stoelting -- Chief Executive Officer
Yes. That has been a stable business for us. There's always some puts and takes on the customer side that affect both the top and the bottom line results. But we're on the upswing there, and we've tied the 2 management teams closer together, and I think that's also providing some good synergies and some things they can work together on even though they're operating in different business models.
Bruce Chan -- Analyst
Okay. And then just because I have to ask and kind of follow up on Mike's point about LTL margins, you guys have laid out that $100 million benchmark for 2020 EBITDA. And I just want to get your take on how achievable that is now given what's been going on in the larger macro environment? Does that still -- something that's possible? Is that likely moved out a little bit further and what's your view there?
Curtis W. Stoelting -- Chief Executive Officer
Well, Bruce, as we've said in the release at this point in time, we don't -- we're aren't in a position to give longer -- short or long-term guidance. We certainly believe we can get to that number. I think at this point, I would say it's likely going to take longer than we'd hoped, but it's still a longer-term goal that we have but guidance.
Bruce Chan -- Analyst
Appreciate that. Thanks for sticking with us.
Operator -- Analyst
The next question is from Boris Senderzon with Hilbar Capital. Please go ahead.
Boris Sanderson -- Analyst
Good morning gentlemen. I have a couple, if I may. First question on the strategic review. I wanted to ask you why engaging it now as opposed to a year ago when you had Barclays looking at the entire company and arguably the Truckload business was in a better shape.
Curtis W. Stoelting -- Chief Executive Officer
Yes. Boris, that's a good question, and I probably should have pointed that out in my earlier response to Bruce Chan's question. But yes, when Barclays did look at the strategic alternatives for the company, we did look at different scenarios, selling off segments or parts of the business. And it was pretty clear from the analysis they did and the recommendations that they gave that, that wouldn't have solved the capital problem, there wouldn't been enough cash generated to redeem the preferred stock at that point in time. And so obviously we went in a different direction.
Boris Sanderson -- Analyst
Okay. And could you also comment on the standby financing from Elliott?
Curtis W. Stoelting -- Chief Executive Officer
Well, that agreement -- last year, my recollection is '16 and '17 -- I'm sorry, in '17 and '18, we had a standby agreement from Elliott. I can tell you now is, Elliott as a large majority owner in the business continues to be a good partner with the management team in terms of aligning with the strategy and providing the capital that we need to continue the recovery effort.
Boris Sanderson -- Analyst
Okay. And one final question on the software development impairment. Is this the legacy software that you're basically deprecating or is something you've been working recently on and decided to go in different direction?
Michael L. Gettle -- President and Chief Operating Officer
Yes. That's a great question. Backdrop to this is, we've identified some pretty significant overlaps in the functionality requirements and customer needs in domestic freight brokerage and in our expedited air and ground business. And we made the decision to create a single platform to support those capabilities and halted separate efforts that were under way in those businesses. Then the second thing that we've done is, you have seen we have some very good operating and financial trends in our LTL business. And this has been partially accomplished by us making a very targeted IT investment to improve the business. And our previous plan was to change out our entire transportation management system and move to a package solution. Based on the progress we have made with some of those more targeted efforts, we now believe that continuing the custom development and modernization of our current TMS is a better path. And so those are really the two drivers.
Curtis W. Stoelting -- Chief Executive Officer
Yes. And I agree totally with Mike. I think in both cases we believe we'll have better technology, which is very important for the long-term viability of the businesses as well as we'll be spending less in the future by taking the impairments now. And -- plus I think by building the more customized proprietary software, we do differentiate ourselves in the marketplace. So I think when we weighed all the puts and takes, that's how we concluded on that.
Boris Sanderson -- Analyst
Thank you so much.
Operator -- Analyst
Thank you. At this time, I would like to turn the conference back over to Curt Stoelting for any closing comments.
Curtis W. Stoelting -- Chief Executive Officer
Okay. Well, thank you for your time today. We look forward to better results in the future and speaking to you on future calls. Thank you.
Operator -- Chief Executive Officer
[Operator Closing Remarks]
Questions and Answers:
Duration: 43 minutes
Call participants:
Curtis W. Stoelting -- Chief Executive Officer
Chelsea Mitchell -- Director of Marketing and Corporate Communications
Terence R. Rogers -- Executive Vice President and Chief Financial Officer
Michael L. Gettle -- President and Chief Operating Officer
Bruce Chan -- Stifel, Nicolaus & Company -- Analyst
Boris Sanderson -- Hill Bar Capital -- Analyst
