UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 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 or other ju ...

Core Insights - Covenant Logistics Group reported a record high revenue in Q2 2025, driven by the expansion of its dedicated fleet, strong new business awards in Managed Freight, a small acquisition, and the easing of weather and avian influenza impacts [4]. Financial Performance - Revenue rebounded to a new record high during the second quarter [4]. - Margins remain compressed in the Asset-Based Truckload segments due to inflationary costs, high claims expenses, a spike in fuel prices at quarter-end, and ongoing pressure on volume and yields in the Expedited and legacy Dedicated segments [4].

Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 7.8% or approximately $20 million to $276.5 million [4] - Consolidated adjusted operating income decreased by 19.6% to $15 million, primarily due to cost increases in the truckload segment [4] - Net indebtedness increased by $49 million to $268.7 million, resulting in an adjusted leverage ratio of approximately two times and a debt to capital ratio of 39.2% [4] - Average age of tractors increased slightly to 22 months compared to 21 months a year ago [4] - Return on average invested capital was 7% versus 8% in the prior year [5] Business Segment Performance Changes - The expedited segment had an adjusted operating ratio of 93.9, slightly better than the previous year, but below expectations [5] - Expedited's average fleet size decreased by 50 units or 5.5% to 860 tractors [6] - Dedicated segment's adjusted operating ratio improved sequentially but fell short of prior year expectations; freight revenue grew by $8.3 million or 10.2% [6] - Managed freight exceeded both revenue and profitability expectations, benefiting from nonrecurring business [7] - Warehouse segment revenue was flat year-over-year, but adjusted operating profit fell by approximately 45% due to facility-related cost increases [9] Market Data and Key Metrics Changes - The general freight market remains tepid, impacting margins more than desired [10] - The company anticipates a slowly improving general freight market in the second half of the year [11] - The air freight side of the business is showing signs of improvement, particularly related to AI and data center transportation [19] Company Strategy and Industry Competition - The company aims to grow its dedicated fleet, focusing on value-added services and reducing exposure to commoditized markets [7][72] - The strategy includes diversifying the managed freight segment and improving margins through rate increases and exiting less profitable business [6][9] - The company is experiencing increased competition in traditional dedicated markets, prompting a shift towards specialized services [71] Management's Comments on Operating Environment and Future Outlook - Management sees "green shoots" in the market, indicating potential improvements in capacity and pricing [14] - The outlook for the second half of the year includes additional start-ups in the dedicated segment and expectations for a modest peak season [11] - Management believes that improving economic conditions and lower interest rates could stimulate demand for freight services [61] Other Important Information - The company repurchased approximately 1.6 million shares for a total cost of $35.2 million, representing 5.7% of average diluted shares outstanding [3][4] - The company has $13.8 million remaining under its share repurchase authorization [4] - The management team is focused on disciplined capital allocation and improving operational leverage as market conditions improve [11] Q&A Session Summary Question: What are the expectations for the market and customer conversations around peak season? - Management sees some positive signs in the market, with customers expressing interest in capacity and pricing stability [14] Question: How is the LTL business developing? - The LTL side has been challenging, with most customers reporting pressure on volume [18] Question: What is the impact of the recent legislation on CapEx and truck purchases? - The legislation may help cash tax obligations, but the company plans to remain disciplined with its CapEx [21] Question: What drove the record revenues in Q2? - Record revenues were driven by growth in the dedicated fleet and managed freight, along with surge freight in the quarter [78] Question: What are the long-term margin expectations for expedited and dedicated segments? - Long-term expectations for expedited margins are in the range of 83 to 93, while dedicated margins aim to return to the low nineties [50][56]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Covenant Logistics Group achieved record quarterly freight revenue of **$276.5 million**, a **7.8%** increase, despite a decline in GAAP EPS to **$0.36** and adjusted EPS to **$0.45**, while actively repurchasing **$35.2 million** of common stock Consolidated Financial Summary - Q2 2025 vs Q2 2024 | ($'000s, except per share information) | 2025 | 2024 | | :--- | :--- | :--- | | **Total Revenue** | $302,854 | $287,497 | | **Freight Revenue** | $276,532 | $256,512 | | **Operating Income** | $11,563 | $15,577 | | **Adjusted Operating Income** | $15,019 | $18,670 | | **Net Income** | $9,840 | $12,194 | | **Adjusted Net Income** | $12,415 | $14,452 | | **Earnings per Diluted Share** | $0.36 | $0.44 | | **Adjusted Earnings per Diluted Share** | $0.45 | $0.52 | - Freight revenue reached an all-time quarterly high of **$276.5 million**, a year-over-year growth of **7.8%**, despite a competitive operating environment[4](index=4&type=chunk) - The company repurchased approximately **1.6 million shares** of common stock for **$35.2 million**, at an average price of **$22.69 per share**[4](index=4&type=chunk) - The **49%** equity method investment in Transport Enterprise Leasing ("TEL") contributed **$4.3 million** in pre-tax net income, or **$0.12 per share**, which is in line with the prior year's quarter[5](index=5&type=chunk) [Segment Performance Analysis](index=2&type=section&id=Segment%20Performance%20Analysis) The company's segments exhibited varied performance, with strong revenue growth in Dedicated Truckload (**10.2%**) and Managed Freight (**28.5%**), a decline in Expedited Truckload (**6.4%**), and flat revenue but reduced profitability in Warehousing due to increased costs and new business inefficiencies [Combined Truckload](index=2&type=section&id=Combined%20Truckload) The Combined Truckload segment's freight revenue grew **1.5%** to **$173.4 million**, driven by fleet expansion but offset by reduced utilization, while rising costs for salaries and maintenance deteriorated the adjusted operating ratio from **92.5%** to **94.5%** Combined Truckload Operating Statistics - Q2 2025 vs Q2 2024 | ($'000s, except statistical information) | 2025 | 2024 | | :--- | :--- | :--- | | **Freight Revenue** | $173,395 | $170,771 | | **Adj. Seg. Operating Income** | $9,590 | $12,788 | | **Adj. Seg. Operating Ratio** | 94.5% | 92.5% | | **Average Freight Revenue per Tractor per Week** | $5,543 | $5,726 | | **Weighted Average Tractors for Period** | 2,406 | 2,294 | - Salaries, wages, and related expenses increased by **7 cents per total mile** (approx. **6%**), driven by growth in the dedicated protein supply chain business which requires more skilled professionals[12](index=12&type=chunk) - Operations and maintenance expenses rose by **2 cents per total mile** (approx. **10%**) due to high-stress demands on equipment in niche service areas with short hauls[13](index=13&type=chunk) - The net impact of fuel expense and fuel surcharge revenue was unfavorable by **5 cents per total mile** compared to the prior year, as rapidly rising fuel prices at the end of the quarter were not fully recovered by surcharges[14](index=14&type=chunk) [Expedited Truckload](index=2&type=section&id=Expedited) The Expedited segment's freight revenue decreased **6.4%** to **$83.2 million**, primarily due to a **5.5%** reduction in the average tractor fleet and a **3.5%** drop in utilization, while its adjusted operating ratio remained stable at **93.9%** Expedited Truckload Operating Statistics - Q2 2025 vs Q2 2024 | ($'000s, except statistical information) | 2025 | 2024 | | :--- | :--- | :--- | | **Freight Revenue** | $83,229 | $88,918 | | **Adj. Seg. Operating Income** | $5,077 | $5,302 | | **Adj. Seg. Operating Ratio** | 93.9% | 94.0% | | **Weighted Average Tractors for Period** | 860 | 910 | - Freight revenue decreased by **$5.7 million**, or **6.4%**, year-over-year[9](index=9&type=chunk) - The decline was driven by a **5.5%** decrease in average total tractors and a **1.0%** decrease in average freight revenue per tractor per week[9](index=9&type=chunk) [Dedicated Truckload](index=2&type=section&id=Dedicated) The Dedicated segment's freight revenue increased **10.2%** to **$90.2 million**, driven by an **11.7%** increase in its tractor fleet, though profitability was challenged as the adjusted operating ratio worsened to **95.0%** Dedicated Truckload Operating Statistics - Q2 2025 vs Q2 2024 | ($'000s, except statistical information) | 2025 | 2024 | | :--- | :--- | :--- | | **Freight Revenue** | $90,166 | $81,853 | | **Adj. Seg. Operating Income** | $4,513 | $7,486 | | **Adj. Seg. Operating Ratio** | 95.0% | 90.9% | | **Weighted Average Tractors for Period** | 1,546 | 1,384 | - Freight revenue increased by **$8.3 million**, or **10.2%**, year-over-year[10](index=10&type=chunk) - Growth was primarily driven by an **11.7%** increase in the average total tractor count to **1,546 units**[10](index=10&type=chunk) [Managed Freight Segment](index=4&type=section&id=Managed%20Freight%20Segment) The Managed Freight segment achieved strong growth, with freight revenue increasing **28.5%** to **$77.6 million** and adjusted operating income improving **16.1%** to **$4.2 million**, driven by new business awards and effective overflow capacity management Managed Freight Operating Results - Q2 2025 vs Q2 2024 | ($'000s) | 2025 | 2024 | | :--- | :--- | :--- | | **Freight Revenue** | $77,550 | $60,366 | | **Adj. Seg. Operating Income** | $4,171 | $3,594 | | **Adj. Seg. Operating Ratio** | 94.6% | 94.0% | - Freight revenue increased **28.5%** and adjusted operating income improved **16.1%** compared to Q2 2024[17](index=17&type=chunk) - Growth is attributed to new business awarded during the year and the team's efforts to handle overflow capacity for the Expedited fleet[17](index=17&type=chunk) [Warehousing Segment](index=4&type=section&id=Warehousing%20Segment) The Warehousing segment's freight revenue was nearly flat, increasing **0.8%** to **$25.6 million**, but profitability significantly declined by **$1.0 million** due to higher facility costs and new business start-up inefficiencies, with expected margin improvements as issues are resolved Warehousing Operating Results - Q2 2025 vs Q2 2024 | ($'000s) | 2025 | 2024 | | :--- | :--- | :--- | | **Freight Revenue** | $25,587 | $25,375 | | **Adj. Seg. Operating Income** | $1,258 | $2,288 | | **Adj. Seg. Operating Ratio** | 95.1% | 91.0% | - Operating income and adjusted operating income both decreased by approximately **$1.0 million** compared to Q2 2024[19](index=19&type=chunk) - The decline in profitability was driven by facility-related cost increases and start-up costs for new business. Margins are expected to gradually improve[19](index=19&type=chunk) [Capitalization, Liquidity, and Capital Expenditures](index=6&type=section&id=Capitalization%2C%20Liquidity%20and%20Capital%20Expenditures) Net indebtedness increased by **$49.0 million** to **$268.7 million**, raising the net indebtedness to total capitalization ratio to **39.2%**, driven by acquisitions and stock repurchases, while the company maintains **$65.5 million** in borrowing capacity and plans **$50-60 million** in capital expenditures - Net indebtedness increased by **$49.0 million** to **$268.7 million** from December 31, 2024, primarily due to **$19.2 million** in acquisition-related payments and **$35.2 million** in stock repurchases[20](index=20&type=chunk)[21](index=21&type=chunk) - The net indebtedness to total capitalization ratio increased to **39.2%** at June 30, 2025, from **33.4%** at December 31, 2024[20](index=20&type=chunk) - As of June 30, 2025, the company had **$65.5 million** of available borrowing capacity under its ABL credit facility[21](index=21&type=chunk) - Net capital equipment expenditures for the remainder of the year are expected to be between **$50 million** and **$60 million**, higher than anticipated due to expected growth in the dedicated fleet[23](index=23&type=chunk) [Outlook](index=6&type=section&id=Outlook) Management anticipates a slow improvement in the general freight market as capacity exits and demand strengthens with reduced inventories, focusing on capturing new dedicated contracts, evaluating acquisitions, and gaining operating leverage amid resilient demand for specialized services - Management believes the general freight market is slowly improving, with capacity exiting the market through fleet downsizing and bankruptcies[24](index=24&type=chunk) - Demand is expected to improve as excess inventories are reduced, and policy changes take hold. Specialized freight within the Dedicated and Expedited segments is showing resilient demand[24](index=24&type=chunk) - The company's goals are to grow profitably, expand the dedicated fleet organically, evaluate acquisitions, and gain operating leverage as conditions improve[24](index=24&type=chunk) [Appendix: Detailed Financials and Reconciliations](index=10&type=section&id=Appendix) This appendix provides supplementary financial information, including detailed consolidated income statements, selected balance sheet data, and comprehensive reconciliations of GAAP to non-GAAP financial measures, offering a granular view of the company's financial performance and position [Consolidated Income Statement](index=10&type=section&id=Income%20Statement%20Data) This section details revenues, operating expenses, and net income for the three and six months ended June 30, 2025, showing total revenue of **$302.9 million** and net income of **$9.8 million** for Q2 2025 Consolidated Income Statement (Three Months Ended June 30) | ($'000s) | 2025 | 2024 | | :--- | :--- | :--- | | **Total revenue** | $302,854 | $287,497 | | **Total operating expenses** | $291,291 | $271,920 | | **Operating income** | $11,563 | $15,577 | | **Income from continuing operations** | $9,840 | $12,044 | | **Net income** | $9,840 | $12,194 | [Selected Balance Sheet Data](index=11&type=section&id=Selected%20Balance%20Sheet%20Data) This section presents key balance sheet items as of June 30, 2025, showing total assets at **$1.009 billion** and total indebtedness (net of cash) increasing to **$268.7 million** Selected Balance Sheet Data | ($'000s) | 6/30/2025 | 12/31/2024 | | :--- | :--- | :--- | | **Total assets** | $1,009,092 | $997,768 | | **Total stockholders' equity** | $416,874 | $438,340 | | **Total indebtedness, net of cash** | $268,694 | $219,620 | | **Net Indebtedness to Capitalization Ratio** | 39.2% | 33.4% | [Non-GAAP Reconciliations](index=11&type=section&id=Non-GAAP%20Reconciliation) This section details adjustments from GAAP to non-GAAP measures, showing Q2 2025 GAAP operating income of **$11.6 million** adjusted to **$15.0 million** and GAAP net income of **$9.8 million** adjusted to **$12.4 million** Reconciliation of GAAP Net Income to Adjusted Net Income (Q2 2025) | ($'000s) | Amount | | :--- | :--- | | **GAAP Presentation - Net income** | $9,840 | | Amortization of intangibles | $2,746 | | Contingent consideration liability adjustment | $710 | | Tax effected adjustments | ($881) | | **Non-GAAP Presentation - Adjusted net income** | $12,415 | Reconciliation of GAAP Diluted EPS to Adjusted EPS (Q2 2025) | | Amount | | :--- | :--- | | **GAAP Presentation - Diluted EPS** | $0.36 | | Tax effected adjustments | $0.09 | | **Non-GAAP Presentation - Adjusted EPS** | $0.45 |

Core Insights - Covenant Logistics Group reported second quarter earnings of $0.36 per diluted share, with a non-GAAP adjusted earnings of $0.45 per diluted share [2] - The company achieved a freight revenue growth of 7.8% year-over-year, reaching $276.5 million, marking an all-time high for any quarter [3] - The company repurchased approximately 1.6 million shares of common stock for $35.2 million as part of a $50 million stock repurchase program [3] Financial Performance - Total revenue for the second quarter was $302.9 million, a 5.3% increase from $287.5 million in the prior year [4] - Freight revenue, excluding fuel surcharge, was $276.5 million, up from $256.5 million, reflecting a 7.8% increase [4] - Operating income decreased to $11.6 million from $15.6 million year-over-year, while adjusted operating income was $15.0 million compared to $18.7 million [4] - Net income for the quarter was $9.8 million, down from $12.2 million in the previous year [4] Segment Performance - Truckload operations saw a slight revenue decrease of 0.9% to $199.6 million, primarily due to a $4.5 million drop in fuel surcharge revenue [6] - The Expedited segment's freight revenue decreased by 6.4% to $83.2 million, while the Dedicated segment's freight revenue increased by 10.2% to $90.2 million [7][27] - Managed Freight segment experienced a significant revenue increase of 28.5% to $77.6 million, driven by new business [12][13] - Warehousing segment's freight revenue increased by 0.8% to $25.6 million, but operating income decreased due to facility-related cost increases [16] Capitalization and Liquidity - As of June 30, 2025, total indebtedness increased by $49 million to approximately $268.7 million compared to December 31, 2024 [17] - The net indebtedness to total capitalization ratio rose to 39.2% from 33.4% [17][28] - The company had cash and cash equivalents of $0.1 million and $24.6 million in outstanding borrowings under its ABL credit facility [18] Outlook - The company anticipates gradual improvement in general freight market fundamentals, despite ongoing fluctuations in inventory levels and supply chain patterns [21] - There is optimism for demand improvement as excess inventories are reduced and tax and monetary policy changes take effect [21] - The company aims to grow profitably and generate meaningful returns for stockholders while expanding its dedicated fleet and exploring acquisition opportunities [21]

Core Viewpoint - Covenant Logistics Group, Inc. is set to release its second quarter earnings on July 23, 2025, followed by a live conference call on July 24, 2025, to discuss the results [1] Company Overview - Covenant Logistics Group, Inc. provides a range of transportation and logistics services across the United States, including asset-based expedited and dedicated truckload capacity, asset-light warehousing, transportation management, and freight brokerage [1] - The company also has an affiliated entity, Transport Enterprise Leasing, which offers revenue equipment sales and leasing services to the trucking industry [1] - Covenant's Class A common stock is listed on the New York Stock Exchange under the ticker symbol "CVLG" [1] Conference Call Details - The earnings release will occur after 4:00 p.m. Eastern time on July 23, 2025, with a conference call scheduled for 10:00 a.m. Eastern time on July 24, 2025 [1] - Participants can join the call by dialing 877-550-1505 (U.S./Canada) or 0800-524-4760 (International) [1] - An audio replay of the call will be available for one week post-call at 800-645-7964, access code 3895, and will also be accessible on the investor website under "Audio Archives" [1]

Covenant Logistics Conference Call Summary Company Overview - **Company Name**: Covenant Logistics - **Ticker**: CVLG - **Market Cap**: $600 million - **Location**: Chattanooga, Tennessee - **Industry**: Logistics service provider - **Transformation**: Underwent significant operational transformation over the past several years [1][2] Core Points and Arguments Operational Transformation - Covenant Logistics has diversified its operations, moving from a predominantly long-haul transportation model to a more integrated supply chain approach [3][4] - The company made a pivotal acquisition in 2018 of Landair, which expanded its capabilities into dedicated and warehousing services [5] - The strategic plan initiated in 2019 aimed to challenge existing operational norms and improve efficiency [6][7] Financial Performance - The company reduced its leverage from 3.7 times EBITDA to 0.2 times during the pandemic, showcasing effective management and strategic execution [7][9] - Covenant has been actively repurchasing shares, buying back approximately 25% of the public float over a twelve-month period [9][10] - The company generates $70 to $80 million in free cash flow annually after maintenance CapEx and dividends [11] Business Model Shift - Transitioned from a 100% asset-based model to approximately 65% asset-based and 35% asset-light, with a goal of reaching a 50/50 split in the next three to five years [11][12] - The company has improved operational efficiency, achieving higher returns with fewer trucks; currently making four times the revenue with 2,500 trucks compared to 4,000 previously [12][13] Market Position and Strategy - Covenant operates in four main segments: expedited, dedicated, managed freight, and warehousing, with a focus on high service standards and specialized operations [15][20] - The expedited segment includes high-margin services for time-sensitive deliveries, including a recent acquisition related to ammunition and explosives for the Department of Defense [16][20] - The dedicated segment primarily serves the poultry industry, which constitutes about 50% of its operations, emphasizing the need for specialized service [17][20] Industry Context - The logistics industry is currently experiencing a freight recession, with excess supply created during the pandemic leading to rate reductions [24] - Covenant's strategic focus on non-commoditized services has allowed it to perform better than peers during this downturn [24][25] - The company anticipates an upswing in the freight economy and is positioned to capitalize on operational leverage as conditions improve [34] Additional Important Insights - Covenant's management team has undergone significant changes, focusing on unlocking balance sheet value and improving operational efficiency [7][10] - The company has a strong emphasis on maintaining a culture of integrity and operational excellence, which is seen as a competitive advantage [15] - Covenant's equity method investment in Transport Enterprise Leasing contributes significantly to its earnings, representing 15% to 20% of earnings per share [22][23] - The company is actively seeking acquisitions that align with its strategic goals, focusing on businesses with strong margins and growth potential [29][46] Conclusion Covenant Logistics is positioned as a compelling investment opportunity due to its strategic transformation, diversified operations, and strong financial performance. The company is focused on maintaining operational excellence and capitalizing on market opportunities as the logistics industry navigates current challenges.

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, showing a year-over-year increase in net income despite a slight decrease in total revenue [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2025, shows a slight decrease in total assets driven by reduced cash, alongside a decrease in total liabilities and an increase in stockholders' equity Condensed Consolidated Balance Sheet Highlights (In thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $179,774 | $213,850 | | **Net Property and Equipment** | $521,913 | $524,809 | | **Total Assets** | **$979,969** | **$997,568** | | **Total Current Liabilities** | $164,303 | $181,277 | | **Total Liabilities** | $536,325 | $559,228 | | **Total Stockholders' Equity** | $443,644 | $438,340 | | **Total Liabilities and Stockholders' Equity** | **$979,969** | **$997,568** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, total revenue slightly decreased, yet operating income and net income significantly increased year-over-year, leading to higher diluted earnings per share Statements of Operations Summary (In thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenue** | $269,355 | $278,763 | | **Total Operating Expenses** | $261,728 | $274,428 | | **Operating Income** | $7,627 | $4,335 | | **Net Income** | $6,563 | $3,974 | | **Diluted EPS** | $0.24 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased, while investing activities used less cash, and financing activities shifted to a net cash outflow, resulting in a lower period-end cash balance Cash Flow Summary (In thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $24,830 | $21,701 | | **Net Cash from Investing Activities** | ($24,080) | ($43,481) | | **Net Cash from Financing Activities** | ($25,130) | $22,438 | | **Net Change in Cash** | ($24,380) | $658 | | **Cash at End of Period** | $11,239 | $2,952 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail significant accounting policies, segment performance, debt, lease obligations, and a subsequent $50 million stock repurchase authorization Segment Revenue and Operating Income (Q1 2025, In thousands) | Segment | Total Revenue | Segment Operating Income | | :--- | :--- | :--- | | Expedited | $94,693 | $5,591 | | Dedicated | $93,609 | $2,085 | | Managed Freight | $56,850 | $3,541 | | Warehousing | $24,203 | $1,842 | - The company has a **$110.0 million** revolving credit facility maturing in May 2027, with no borrowings outstanding and **$90.1 million** of available borrowing capacity as of March 31, 2025[60](index=60&type=chunk)[63](index=63&type=chunk) - The company owns a **49.0%** interest in Transport Enterprise Leasing, LLC ("TEL"), which contributed **$3.8 million** to pre-tax income in Q1 2025[78](index=78&type=chunk)[80](index=80&type=chunk) - Subsequent to the quarter end, on April 23, 2025, the Board approved a stock repurchase authorization of up to **$50.0 million** of Class A common stock[89](index=89&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 results, highlighting improved operating income despite revenue decline and external impacts, while outlining strategies for market improvement and potential acquisitions - First quarter earnings were **$0.24** per diluted share (**$0.32** non-GAAP adjusted), a decrease from Q1 2024, primarily due to subpar equipment utilization from inclement weather and avian influenza outbreaks[93](index=93&type=chunk) - The company's outlook indicates an incrementally improving freight market as capacity and demand become better balanced, with management focused on capturing new dedicated contracts and evaluating acquisition opportunities[94](index=94&type=chunk) Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $269.4M | $278.8M | | Freight Revenue | $243.2M | $247.7M | | Operating Income | $7.6M | $4.3M | | Net Income | $6.6M | $4.0M | | Diluted EPS | $0.24 | $0.14 | [Results of Consolidated Operations](index=31&type=section&id=Results%20of%20Consolidated%20Operations) Consolidated operations analysis shows a 3.4% revenue decrease in Q1 2025, primarily from lower fuel surcharges and segment declines, offset by reduced operating expenses, leading to improved operating income - Salaries, wages, and related expenses increased to **$105.0 million** (**43.2%** of freight revenue) from **$100.3 million** (**40.5%** of freight revenue) due to pay increases and growth in the Dedicated segment[111](index=111&type=chunk) - Revenue equipment rentals and purchased transportation costs decreased significantly to **$56.8 million** from **$66.8 million**, primarily due to a decline in the spot market affecting the Managed Freight segment[121](index=121&type=chunk) - General supplies and expenses decreased to **$13.6 million** from **$20.8 million**, mainly because the change in fair value of contingent consideration was only a **$0.7 million** increase in Q1 2025 versus an **$8.1 million** increase in Q1 2024[128](index=128&type=chunk) [Results of Segment Operations](index=37&type=section&id=Results%20of%20Segment%20Operations) Q1 2025 segment performance was mixed, with Expedited revenue and income declining, Dedicated revenue growing and loss narrowing, Managed Freight income increasing despite lower revenue, and Warehousing income decreasing Segment Operating Income (Loss) (In thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Expedited | $4,122 | $4,784 | | Dedicated | ($619) | ($4,697) | | Managed Freight | $3,085 | $2,269 | | Warehousing | $1,039 | $1,979 | - Dedicated segment revenue increased due to a **16.7%** increase in average tractors, and its operating loss improved significantly from (**$4.7 million**) to (**$0.6 million**)[141](index=141&type=chunk)[145](index=145&type=chunk) - Managed Freight operating income increased despite lower revenue, driven by reduced purchased transportation costs and improved cargo control procedures[146](index=146&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a solid liquidity position with **$15.5 million** working capital and **$90.1 million** available borrowing capacity, planning **$55.0 million** to **$65.0 million** in capital expenditures for the rest of 2025 - As of March 31, 2025, the company had working capital of **$15.5 million** and available borrowing capacity of **$90.1 million** under its Credit Facility[148](index=148&type=chunk)[151](index=151&type=chunk) - Net capital expenditures for Q1 2025 were **$23.9 million**, with the company expecting **$55.0 million** to **$65.0 million** for the rest of 2025[152](index=152&type=chunk) - The average tractor fleet age was **1.7 years** at March 31, 2025, providing flexibility in managing the fleet replacement cycle[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes to its market risks since the Form 10-K filing for the year ended December 31, 2024 - There have been no material changes to the company's market risks since the year-end 2024 Form 10-K filing[161](index=161&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[163](index=163&type=chunk) - No changes occurred during the first quarter of 2025 that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[166](index=166&type=chunk) [PART II OTHER INFORMATION](index=43&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings, including routine litigation, is incorporated by reference from Note 9 of the condensed consolidated financial statements - Details on legal proceedings are incorporated by reference from Note 9 of the financial statements[167](index=167&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the Form 10-K, indicating no material changes to the principal business risks and uncertainties - The company refers readers to the "Item 1A. Risk Factors" section of its Form 10-K for the year ended December 31, 2024 for a description of risks and uncertainties[169](index=169&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities in Q1 2025, while distributing **$1.9 million** to stockholders through cash dividends - No unregistered sales of securities occurred during the quarter ended March 31, 2025[170](index=170&type=chunk) - The company distributed a total of **$1.9 million** to stockholders via dividends in the first three months of 2025[170](index=170&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The exhibits filed with this report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[174](index=174&type=chunk)

Financial Data and Key Metrics Changes - Consolidated freight revenue declined by 1.8% or approximately $4.5 million to $243.2 million, primarily due to a decrease in the managed freight segment [8] - Consolidated adjusted operating income shrank by 26.6% to $10.9 million, attributed to adverse operating conditions that reduced equipment utilization [8] - Net embeddedness increased by $5.8 million to $225.4 million, yielding an adjusted leverage ratio of approximately 1.55 times and a debt-to-capital ratio of 33.7% [10] - Return on average invested capital was 7.6% compared to 8.3% in the prior year [11] Business Line Data and Key Metrics Changes - The expedited segment had an adjusted operating ratio of 94.2%, which fell short of expectations, with average fleet size decreasing by 48 units or 5.3% to 852 tractors [11][12] - Dedicated experienced average fleet growth of 212 units or approximately 16.7%, with freight revenue increasing by $9.5 million or 13.1% compared to the prior year [13] - Managed freight exceeded profitability expectations, focusing on profitable freight and reducing insurance-related claims [15] - The warehouse segment saw a 6% decrease in freight revenue and a 42% decrease in adjusted operating profit compared to the prior year, largely due to facility-related cost increases [15][16] Market Data and Key Metrics Changes - The overall freight market faced challenges, with lower miles impacted by weather and avian influenza, leading to higher layover costs and reduced fixed cost coverage [6][7] - The LTL market showed mixed results, with some national LTLs experiencing declines while regional players performed better [44] Company Strategy and Development Direction - The company is focused on improving margins through rate increases, exiting less profitable business, and adding more profitable business [13] - There is a strategic emphasis on growing the dedicated fleet in areas that provide value-added services [14] - The company aims to continue moving towards specialized dedicated services to enhance competitiveness [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about operational improvements in the second quarter, despite recognizing potential economic uncertainties that may delay recovery in the freight environment [17] - The company remains committed to disciplined capital allocation and improving operational leverage as conditions improve [18] Other Important Information - The average age of tractors slightly decreased to 20 months compared to 21 months a year ago [10] - The company anticipates a more normalized maintenance CapEx year in 2025, estimating total CapEx between $75 million to $80 million [58] Q&A Session Summary Question: Discussion on the dedicated side and competitive nature of non-poultry business - Management acknowledged the competitive environment in the non-specialized dedicated market and noted that margins are expected to improve with better weather and recovery from avian influenza [26][27] Question: Commentary on LTL market and AAT business trends - Management indicated mixed performance in the LTL market, with some stress observed, while the AAT business is performing well and looking good going into the second quarter [44][47] Question: Appetite for M&A in the current environment - Management stated that the appetite for M&A remains unchanged, with a focus on disciplined capital deployment and the potential for share repurchases [50][52] Question: Insights into the protein business and avian flu impact - Management explained the cyclical nature of avian flu and projected a return to full capacity by June, with improvements expected in results thereafter [68] Question: Details on tuck-in acquisition and revenue impacts in warehouse and managed transportation - Management provided insights into a recent tuck-in acquisition in the specialty dedicated fleet and expressed optimism for revenue growth in warehousing and managed freight moving forward [75][80]

Financial Data and Key Metrics Changes - Consolidated freight revenue declined by 1.8% or approximately $4.5 million to $243.2 million, primarily due to a $6 million decrease in managed freight revenue, although adjusted operating income improved by $800,000 [6][12] - Consolidated adjusted operating income shrank by 26.6% to $10.9 million, mainly due to adverse operating conditions that reduced equipment utilization [6][7] - Net indebtedness increased by $5.8 million to $225.4 million, resulting in an adjusted leverage ratio of approximately 1.55 times and a debt to capital ratio of 33.7% [7] Business Segment Performance - The expedited segment had an adjusted operating ratio of 94.2, with a fleet size reduction of 48 units or 5.3% to 852 average tractors [9] - The dedicated segment experienced a fleet growth of 212 units or approximately 16.7%, with freight revenue increasing by $9.5 million or 13.1%, although revenue per tractor fell by 3.1% due to adverse weather and avian influenza [10] - Managed freight exceeded profitability expectations, focusing on profitable freight and reducing insurance-related claims [11] - The warehouse segment saw a 6% decrease in freight revenue and a 42% decrease in adjusted operating profit, attributed to facility-related cost increases and startup inefficiencies [11] Market Data and Key Metrics Changes - The LTL market is experiencing mixed performance, with national LTLs facing more challenges than regional players, and some industrial sectors showing declines of 2-3% [30][43] - The AAT business performed well in Q1 and is expected to continue its positive trend into Q2 [32] Company Strategy and Industry Competition - The company is focusing on increasing its dedicated protein business while reducing assets in lower-return segments, aiming for higher revenue per mile and improved margins [4][6] - The competitive landscape in the non-poultry dedicated market is tough, with increased competition affecting margins, particularly in commoditized segments [18][20] - The company plans to continue moving towards specialized dedicated services to enhance profitability [20][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while Q1 results fell short of expectations, there was improvement late in the period, and April showed better operational conditions [12] - The company remains optimistic about its strategy of disciplined capital allocation and operational leverage improvement as conditions stabilize [13] - Economic uncertainties may delay recovery in the freight economy, but management is positive about the team's capabilities and strategic direction [12][13] Other Important Information - The minority investment in Tel contributed pretax net income of $3.8 million for the quarter, with Tel's revenue increasing by 25% due to fleet expansion [12] - The company anticipates a more normalized capital expenditure year, focusing on maintenance rather than aggressive growth [40][41] Q&A Session Summary Question: Discussion on dedicated business and competitive nature - Management noted that the non-poultry dedicated market is highly competitive, with pressure on margins, but expects improvements as weather conditions stabilize and avian influenza impacts lessen [18][19][20] Question: Insights on LTL market and AAT business - Management indicated mixed results in the LTL market, with some stress observed, while AAT is performing well and expanding equipment types [30][32] Question: Appetite for M&A in the current environment - Management confirmed that the appetite for M&A remains unchanged, with a focus on disciplined capital allocation and evaluating opportunities as they arise [34][35][37] Question: Impact of avian flu on the protein business - Management explained that avian flu has significantly impacted operations, but they expect to return to normal capacity levels by June [52][53] Question: Details on tuck-in acquisition and warehouse performance - Management discussed a recent tuck-in acquisition in the specialty dedicated fleet and indicated that warehouse revenue is steady, with expectations for improvement in Q2 [56][57][58]