Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-42192 COVENANT LOGISTICS GROUP, INC. (Exact name of registrant as specified in its charter) Nevada 88-0320154 (State / other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 400 Birmingham Hwy. Chattanooga, TN 3741 ...

Core Insights - The trucking industry is facing significant regulatory constraints that may limit capacity growth and affect market dynamics in the coming years [5][6][8] - A shift in the supply-demand balance is anticipated, with many carriers struggling to utilize existing equipment effectively while also facing a potential shortage of drivers [4][8][22] Industry Overview - The trucking industry is currently experiencing a tightening of capacity due to regulatory changes, which have impacted small operators and deterred new entrants [5][10] - Approximately 7,000 out of 17,000 driver schools in the U.S. have been cited for noncompliance, which could lead to closures and further limit driver supply [3][6] Capacity and Fleet Management - Carriers have been reducing fleet sizes as part of cost-cutting measures, with many opting for dedicated contracts to ensure better utilization of their assets [7][11] - Public carriers are focusing on long-term contracts and dedicated operations, with significant investments in these areas expected to continue [12][17] Financial Projections - Werner Enterprises anticipates mid-single-digit contractual rate increases for one-way operations and low- to mid-single-digit increases for dedicated services in 2026 [20][25] - The company is also projecting a potential improvement in operating margins for dedicated operations during the next upcycle, with current margins in the high-single digits [19] Market Dynamics - The current tender rejection index indicates a tightened truckload market, suggesting that shippers may face challenges in securing capacity moving forward [9][22] - There is a possibility of a modest demand inflection due to low inventory levels and favorable economic indicators, although the overall market remains cautious [23][24]

分组1 - J.B. Hunt reported an 11% year-over-year increase in adjusted operating income despite a 2% dip in revenue, benefiting from a $100-million cost reduction program that improved operating margin by 80 basis points [1] - The release of a white paper by Algorhythm Holdings, claiming significant savings through AI tools in freight brokerage, led to a selloff in 3PL stocks and affected asset-based carriers [3][6] - Knight-Swift Transportation's fourth-quarter adjusted earnings fell short of expectations, with operating margins eroding across all business units except intermodal, although first-quarter guidance aligned with consensus [9][10] 分组2 - Carriers experienced decent peak-season demand, but improving fundamentals were noted late in the quarter, indicating a prolonged downturn [5] - Schneider National's fourth-quarter results and 2026 outlook were below expectations, with a net loss reported and a conservative adjusted EPS guide [15][17] - Covenant Logistics Group reported a modest miss in the fourth quarter, citing heightened regulatory enforcement and a government shutdown as challenges, but noted improved revenue trends in early January [18][20] 分组3 - Marten Transport saw a 9% year-over-year revenue decline but a 70% sequential improvement in adjusted operating income, attributed to aggressive cost controls [13][14] - Werner Enterprises reported a net loss before adjustments but announced a restructuring of its one-way unit to improve fleet utilization and profitability, following the acquisition of dedicated carrier FirstFleet [24][25]

Core Insights - Covenant Logistics Group's freight market is evolving towards equilibrium, with management suggesting that the industry might already be at this point [3][6] - The company reported a 7.8% increase in Q4 revenue to $270.6 million, but faced a 39.4% decline in consolidated adjusted operating income due to margin compression across various business lines [5][12] - Management is optimistic about improving freight fundamentals and plans to optimize fleet size and reduce capital expenditures, with a projected capex of $40–$50 million for 2026 [4][7] Revenue and Financial Performance - Q4 revenue rose 7.8% year-over-year, amounting to $270.6 million, while consolidated adjusted operating income fell to $10.9 million due to margin compression [5][12] - Net debt increased to $296.6 million, resulting in an adjusted leverage ratio of approximately 2.3x [5][13] - The average tractor age increased to 24 months from 20 months a year earlier, reflecting changes in fleet composition [14] Market Activity and Pricing - The average rate increase in January was around 3.5%, with bid activity up 33% compared to Q4, indicating strong demand from shippers [1][2][6] - Management noted a "sharp increase in bid activity" as shippers seek to secure contractual capacity [2] Operational Strategies - Covenant is focusing on fleet optimization and has acquired Star Logistics Solutions to enhance asset-light growth, which is expected to be accretive to earnings in H1 2026 [9][10][11] - The company plans to reduce fleet size and concentrate on higher-yield freight, particularly in the Expedited segment, while also growing its Dedicated segment [16][17] Segment Performance - The Expedited segment reported an adjusted operating ratio of 97.2%, which did not meet expectations, partly due to the U.S. government shutdown [16] - The Dedicated segment achieved an adjusted operating ratio of 92.2%, marking its best quarter of the year, with growth in high-service niches [16] - Managed Freight saw significant revenue improvement due to the Star acquisition, but margins were pressured by rising costs [16]

Core Insights - Covenant Logistics Group reported a net loss in the fourth quarter but expressed confidence in improving freight fundamentals, anticipating stronger performance in the second half of 2026 [1] - The company noted that spot rates increased significantly in the fourth quarter, with revenue trends improving across all business units in early January [2] Financial Performance - Adjusted fourth-quarter results met expectations despite challenges such as a prolonged U.S. government shutdown, high insurance claims, capacity costs, and startup expenses in warehousing [1] - The company has secured low- to mid-single-digit contractual rate increases for its expedited fleet starting in the first quarter, with further increases anticipated in the second quarter [3] Industry Trends - The freight market is evolving towards equilibrium between shippers and carriers, with indications that the market may already be at equilibrium [2] - Industry-wide driver and truck capacity may continue to decline due to regulatory pressures, cost inflation, and insurance risks, potentially tightening capacity as 2026 progresses [4] Strategic Initiatives - Covenant is intentionally shrinking and reshaping its asset-based fleet to enhance returns, expecting to operate a smaller fleet by the end of 2026, with planned net capital expenditures of $40 million to $50 million [5] - The company aims to grow higher-service, specialized dedicated operations while moving away from commoditized freight, achieving an adjusted operating ratio of 92.2 in the dedicated segment during the fourth quarter [6] Growth Prospects - The dedicated segment showed consistent improvement throughout the year, with a fleet growth of approximately 6.3% as the company continues to win new business and focus on high-service niches [7]

Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 7.8% or approximately $19.5 million to $270.6 million [6] - Consolidated adjusted operating income shrank by 39.4% to $10.9 million due to margin compression in several segments [7] - Net indebtedness increased by $76.9 million to $296.6 million, yielding an adjusted leverage ratio of approximately 2.3 times and a debt-to-capital ratio of 42.3% [7] - Average age of tractors increased to 24 months from 20 months year-over-year [8] - Adjusted return on average invested capital was 5.6% compared to 8.1% in the prior year [8] Business Segment Data and Key Metrics Changes - The expedited segment reported an adjusted operating ratio of 97.2%, which did not meet expectations due to external challenges including a U.S. government shutdown [8] - Dedicated segment achieved a 92.2 adjusted operating ratio, the best for any quarter during the year, with a fleet growth of 90 average tractors or approximately 6.3% [9] - Managed freight saw significant revenue improvement due to the Star Logistics Solutions acquisition, but margins were compressed due to rising costs [10] - Warehousing segment experienced a 4.6% increase in freight revenue but a decline in adjusted operating income due to startup costs and operational inefficiencies [11] Market Data and Key Metrics Changes - The freight market is evolving towards equilibrium, with spot rates rising meaningfully and increased bid activity from shippers [3] - Bids in January were up 33% compared to the fourth quarter, indicating heightened interest from shippers [23] - Concerns about capacity and increased cargo theft have influenced shippers' demand for high-value programs [24] Company Strategy and Development Direction - The company aims to reduce balance sheet leverage and improve return on capital through fleet optimization and targeted rate increases [5] - Focus on growing high-service niches within the dedicated segment while reducing exposure to commoditized freight [9] - The acquisition of Star Logistics Solutions is expected to be accretive to earnings in the first half of 2026, diversifying the business mix [6] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about improving freight fundamentals and the ability to capture operating leverage in 2026 [12] - The first quarter is expected to be impacted by seasonality and extreme weather, but improvements are anticipated later in the year [12] - Management highlighted the importance of rate increases to improve margins and expressed optimism about ongoing conversations with customers [16][54] Other Important Information - The company has deferred some trades and moved a group of assets to held-for-sale status to improve operations and balance sheet [4] - The strategic focus for 2026 includes integrating the Star acquisition and preparing for new business opportunities [34] Q&A Session Summary Question: What are the expectations for price increases in the expedited segment? - Management indicated that the average price increase is around 3.5% for the first three weeks of January, with optimism about ongoing conversations with customers [15][16] Question: How is the warehousing segment performing? - Revenue is up, but profit is down due to startup costs; management expects improvement in the coming quarters [25][30] Question: What is the outlook for managed freight revenue? - Revenue is expected to be flat to up on a sequential basis, with growth anticipated in the third and fourth quarters [64] Question: How will the company respond to potential demand recovery in 2026? - The strategy will focus on reclaiming profits lost over the past four years and ensuring rates are acceptable before increasing capacity [95][96] Question: What percentage of the customer book renews in each quarter? - Approximately 40% of customers renew in the second quarter, with 60% expected to take multiple rate increases [99][100]

Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 7.8% or approximately $19.5 million to $270.6 million [7] - Consolidated adjusted operating income shrank by 39.4% to $10.9 million due to margin compression in several segments [8] - Net indebtedness increased by $76.9 million to $296.6 million, yielding an adjusted leverage ratio of approximately 2.3 times and a debt-to-capital ratio of 42.3% [8] - Average age of tractors increased to 24 months from 20 months year-over-year [9] - Adjusted return on average invested capital was 5.6% compared to 8.1% in the prior year [9] Business Line Data and Key Metrics Changes - The expedited segment reported an adjusted operating ratio of 97.2%, which did not meet expectations due to external challenges including a U.S. government shutdown [9][10] - The dedicated segment achieved a 92.2 adjusted operating ratio, the best for any quarter during the year, with a fleet growth of 90 average tractors or approximately 6.3% [10] - Managed freight saw significant revenue improvement due to the Star Logistics Solutions acquisition, but margins were compressed due to rising costs [11] - The warehousing segment experienced a 4.6% increase in freight revenue but a decline in adjusted operating income due to startup costs and operational inefficiencies [12] Market Data and Key Metrics Changes - The freight market is evolving towards equilibrium, with spot rates rising meaningfully and increased bid activity from shippers [3] - Bids in January were up 33% compared to the fourth quarter, indicating heightened interest from shippers [25] - Concerns about capacity and cargo theft have increased, influencing shippers' demand for high-value programs [26] Company Strategy and Development Direction - The company aims to reduce balance sheet leverage and improve return on capital through fleet optimization and targeted rate increases [5][10] - A small acquisition of a truckload brokerage company, Star Logistics Solutions, is expected to be accretive to earnings in the first half of 2026 [7] - The focus will be on growing high-service niches within the dedicated segment while reducing exposure to commoditized freight [11] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about improving freight fundamentals and the ability to capture operating leverage in 2026 [14] - The first quarter is expected to be impacted by seasonality and extreme weather, but improvements are anticipated later in the year [14] - Management highlighted the importance of executing their strategy effectively in 2026, focusing on integration and capital allocation [37] Other Important Information - The company has deferred some trades and moved a group of assets to held-for-sale status due to declining used equipment values [4] - The acquisition of Star Logistics Solutions is aimed at diversifying the business mix and enhancing profitability [7] Q&A Session Summary Question: Price increases in the expedited segment - Management indicated that the average price increase is around 3.5% for the first three weeks of January, with positive momentum in conversations with customers [17][18] Question: Expectations for warehousing revenue and bookings - Management expects improvement in warehousing revenue in Q1 compared to Q4, with a commitment to driving organic growth [30][31] Question: Impact of government shutdown on expedited segment - Management confirmed that the government shutdown significantly impacted the expedited segment's performance [49] Question: Future margin expectations for expedited and dedicated segments - Management aims for expedited margins in the 80s and dedicated margins in the high 80s to 90s over the long term [73] Question: Flexibility in responding to improved demand - Management plans to reclaim profits lost over the past four years and focus on rate increases rather than adding excessive capacity [94]

Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 7.8% or approximately $19.5 million to $270.6 million [6] - Consolidated adjusted operating income decreased by 39.4% to $10.9 million due to margin compression in several segments [7] - Net indebtedness increased by $76.9 million to $296.6 million, resulting in an adjusted leverage ratio of approximately 2.3 times and a debt-to-capital ratio of 42.3% [8] - Average age of tractors increased to 24 months from 20 months year-over-year [9] - Adjusted return on average invested capital was 5.6%, down from 8.1% in the prior year [9] Business Line Data and Key Metrics Changes - The expedited segment reported an adjusted operating ratio of 97.2%, which did not meet expectations due to external challenges including a U.S. government shutdown [9] - Dedicated segment achieved a 92.2 adjusted operating ratio, the best for any quarter during the year, with a fleet growth of 90 average tractors or approximately 6.3% [10] - Managed freight saw significant revenue improvement due to the Star Logistics Solutions acquisition, but margins were compressed due to rising costs [11] - Warehousing segment experienced a 4.6% increase in freight revenue, but adjusted operating income declined due to startup costs and operational inefficiencies [12] Market Data and Key Metrics Changes - The freight market is evolving towards equilibrium, with spot rates rising meaningfully and increased bid activity from shippers [3] - Bids in January were up 33% compared to the fourth quarter, indicating heightened interest from shippers [24] - Concerns about capacity and cargo theft have increased among shippers, influencing their bidding strategies [26] Company Strategy and Development Direction - The company aims to reduce balance sheet leverage and improve return on capital through fleet optimization and targeted rate increases [5] - Focus will be on growing high-service niches within the dedicated segment while reducing exposure to commoditized freight [10] - The acquisition of Star Logistics Solutions is expected to be accretive to earnings in the first half of 2026, diversifying the business mix [6] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about improving freight fundamentals and expects to capture operating leverage in 2026 [13] - The first quarter of 2026 may be impacted by seasonality and extreme weather, but improvements are anticipated later in the year [13] - Management believes that the trucking industry is beginning to recover, with increased bids and new business at higher rates [77] Other Important Information - The company has deferred some trades and moved a group of assets to held-for-sale status to improve operations and balance sheet [4] - The company plans to integrate the Star acquisition and focus on capital allocation efficiency in 2026 [35] Q&A Session Summary Question: What are the expectations for price increases in the expedited segment? - Management indicated that the average price increase is around 3.5% for the first three weeks of January, with positive conversations with customers [16][17] Question: How is the warehousing segment performing? - Management expects improvements in the warehousing segment, with Q1 anticipated to be better than Q4 due to the onboarding of new customers [31] Question: What is the outlook for managed freight revenue? - Managed freight revenue is expected to be flat to up sequentially, with incremental growth anticipated in the third and fourth quarters [62] Question: How will the company respond to potential demand recovery in 2026? - The company plans to reclaim profits lost over the past four years and focus on rate increases rather than adding excessive capacity [96] Question: What percentage of the customer book renews in each quarter? - Approximately 40% of customers renew in the second quarter, with 60% expected to take multiple rate increases [99][100]

Core Insights - Covenant Logistics Group reported a fourth-quarter net loss due to impairment charges and increased insurance costs, despite core operating performance aligning with management expectations [1][2] - Adjusted earnings per share were $0.31, down from $0.49 in Q4 2024, while total revenue increased by 6.5% year-over-year to $295.37 million [1][2] Financial Performance - The company missed analysts' revenue estimates of $299.2 million and earnings per share expectations of $0.33 for the quarter [2] - Truckload revenue decreased slightly to $188.9 million, a 0.8% decline year-over-year, with declines in the expedited business offsetting growth in the dedicated segment [3] - Dedicated freight revenue rose by 12.6%, supported by an expanded specialized agriculture fleet, while expedited freight revenue fell by 12.2% due to lower utilization and pricing pressure [3] Segment Performance - Managed Freight segment revenue grew nearly 29% following the acquisition of a truckload brokerage now operating as Star Logistics Solutions, although profitability was pressured by elevated capacity costs during peak season [4] Strategic Outlook - The company plans to exit unprofitable business segments, modestly reduce its overall truckload fleet, and focus on higher-return freight while improving free cash flow and reducing leverage in 2026 [5] Impairment and Costs - The fourth quarter included approximately $19.4 million in non-cash impairment charges related to goodwill and tractors pulled from service, alongside $11.6 million in claims costs primarily from an auto liability claim settlement [6]

Financial Performance - Covenant Logistics Group reported a loss of $0.73 per diluted share for Q4 2025, with adjusted income of $0.31 per diluted share excluding impairment charges [3]. - Total revenue for Q4 2025 was $295.4 million, a 6.5% increase from $277.3 million in Q4 2024 [7]. - Freight revenue, excluding fuel surcharge, was $270.6 million, up from $251.1 million in the same quarter last year [7]. - The operating loss for Q4 2025 was $24.2 million, compared to an operating income of $8.6 million in Q4 2024 [7]. - The company reported a net loss of $18,257,000 in Q4 2025, compared to a net income of $6,720,000 in Q4 2024 [31]. - Total revenue for the three months ended December 31, 2025, was $188,943,000, an increase from $190,418,000 in the same period of 2024 [40]. - The adjusted net income for the year ended December 31, 2025, was $41,252,000, down from $54,977,000 in 2024, reflecting a decrease of approximately 25% [37]. - The diluted loss per share (EPS) for Q4 2025 was $(4), compared to an EPS of $0.24 in Q4 2024 [37]. Revenue Segments - Managed Freight segment revenue increased by 28.8% year-over-year to $80.2 million, driven by the integration of newly acquired assets [14]. - The Dedicated segment saw a 12.6% increase in freight revenue to $102.3 million, supported by a 6.3% increase in average total tractors [10]. - For the quarter, Warehousing's freight revenue increased by $1.1 million to $25.5 million, while segment operating income declined by $1.4 million to $1.4 million compared to Q4 2024 [17]. - Total revenue for the combined segments reached $776.474 million, with a breakdown of $373.294 million for GAAP and $403.180 million for non-GAAP [42]. Operating Efficiency - The average freight revenue per tractor per week in the truckload segment decreased by 7.8% to $5,327 due to lower utilization and revenue per total mile [9]. - Operating expenses on a non-GAAP adjusted basis increased by approximately 6% year-over-year, reflecting inflationary pressures and changes in business mix [11]. - The segment operating income for the combined truckload and freight segments was $10,705,000 for Q4 2025, compared to $19,121,000 in Q4 2024, indicating a decline of approximately 44% [40]. - The adjusted segment operating ratio improved to 94.4% in Q4 2025 from 95.2% in Q4 2024, showing enhanced operational efficiency [40]. - The company aims to improve operational efficiency, targeting a reduction in the operating ratio to below 94% in the next fiscal year [42]. Debt and Capital Expenditures - Total indebtedness increased by $76.7 million to approximately $296.3 million as of December 31, 2025, with net indebtedness to total capitalization rising to 42.3% from 33.4% year-over-year [18]. - The increase in net indebtedness was primarily due to $46.3 million in acquisition-related payments and $36.2 million in stock repurchases [19]. - The company anticipates net capital equipment expenditures of $40 million to $50 million in 2026, a significant reduction compared to 2025 [22]. - The leverage ratio increased to 2.89 in 2025 from 1.65 in 2024, indicating higher indebtedness relative to earnings [33]. Strategic Initiatives - The company acquired a truckload brokerage business with approximately $130 million in revenue, enhancing its logistics platform and customer base [6]. - The company plans to exit unprofitable business relationships and focus on high-value freight to improve free cash flow and balance sheet leverage in 2026 [5]. - The company aims to operate more efficiently and refine capital allocation while looking for new opportunities in 2026 [24]. - The company plans to focus on market expansion and new product development in the upcoming fiscal year [42]. Impairments and Adjustments - The fourth quarter included approximately $19.4 million in non-cash impairment charges related to goodwill and tractors pulled from service [22]. - Total adjustments for the fourth quarter amounted to $35.1 million, including $10.7 million for impairment of goodwill and $11.6 million for large claims settlement [23]. - The company incurred total adjustments before taxes amounting to $35,061,000 for Q4 2025, compared to $9,130,000 in Q4 2024 [37]. - The amortization of intangibles for the year ended December 31, 2025, was $10,770,000, up from $9,488,000 in 2024, indicating increased intangible asset amortization [37]. Operational Metrics - The average age of tractors increased to 24 months, with expectations for it to range from 24 to 26 months going forward [21]. - Average miles per tractor per period decreased to 28,795 in Q4 2025, down 6.9% from 26,812 in Q4 2024 [32]. - Average freight revenue per loaded mile decreased to $2.91 in Q4 2025, down 8.2% from $3.15 in Q4 2024 [32]. - Employee separation costs amounted to $1.302 million, indicating restructuring efforts within the company [42]. - The company incurred transaction costs of $149, which may relate to strategic acquisitions or partnerships [42]. - The abandonment of long-lived software resulted in a cost of $1.884 million, reflecting ongoing adjustments in technology investments [42].