[Company Announcement & Executive Summary](index=1&type=section&id=Company%20Announcement%20%26%20Executive%20Summary) Covenant Logistics Group announced Q3 2025 results and a conference call, with the CEO commenting on mixed segment performance and strategic initiatives [Announcement Details](index=1&type=section&id=Announcement%20Details) Covenant Logistics Group announced Q3 2025 financial and operating results, with a conference call scheduled for October 23, 2025 - Covenant Logistics Group, Inc. (NYSE: CVLG) announced financial and operating results for the third quarter ended September 30, 2025[2](index=2&type=chunk) - A conference call to discuss the quarter is scheduled for 10:00 A.M. Eastern Time on Thursday, October 23, 2025[2](index=2&type=chunk) [Chairman & CEO Commentary](index=1&type=section&id=Chairman%20%26%20CEO%20Commentary) CEO David R. Parker reported Q3 2025 diluted EPS of $0.35 ($0.44 adjusted), noting flat asset-light performance, lower Truckload results, and reduced TEL earnings - Third quarter results were **$0.35 per diluted share**, or **$0.44 per diluted share on a non-GAAP adjusted basis**[3](index=3&type=chunk) - Asset-light business units showed essentially **flat year-over-year performance**, while Truckload business units had lower performance due to higher costs and under-utilized equipment[3](index=3&type=chunk) - The company continues to invest in and grow dedicated fleet services with new start-up contracts, while evaluating other Truckload business contracts for improvement or exit[4](index=4&type=chunk) - The 49% equity method investment with Transport Enterprise Leasing (TEL) contributed pre-tax net income of **$3.6 million ($0.10 per share)** in Q3 2025, down from **$4.0 million ($0.11 per share)** in Q3 2024, primarily due to accelerated customer bankruptcies[5](index=5&type=chunk) - Acknowledged the unexpected passing of Lew Thompson, founder of Lew Thompson and Son Trucking Company, which was acquired in April 2023[6](index=6&type=chunk) [Third Quarter Financial Performance](index=1&type=section&id=Third%20Quarter%20Financial%20Performance) Covenant Logistics Group reported increased total revenue for Q3 2025 but significant declines in operating income, net income, and EPS on both GAAP and adjusted bases [Consolidated Financial Highlights](index=1&type=section&id=Consolidated%20Financial%20Highlights) Covenant Logistics Group reported a 3.1% increase in total revenue for Q3 2025 but significant declines in operating income, net income, and EPS Q3 2025 vs Q3 2024 Consolidated Financial Performance | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Total Revenue | 296,889 | 287,885 | 3.1% | | Freight Revenue, Excludes Fuel Surcharge | 268,840 | 258,599 | 4.0% | | Operating Income | 7,926 | 16,235 | -51.2% | | Adjusted Operating Income (1) | 14,977 | 19,327 | -22.5% | | Operating Ratio | 97.3% | 94.4% | +290 basis points | | Adjusted Operating Ratio (1) | 94.4% | 92.5% | +190 basis points | | Net Income | 9,093 | 13,033 | -30.2% | | Adjusted Net Income (1) | 11,517 | 15,224 | -24.3% | | Earnings per Diluted Share | 0.35 | 0.47 | -25.6% | | Adjusted Earnings per Diluted Share (1) | 0.44 | 0.54 | -18.5% | [Non-GAAP Adjustments](index=3&type=section&id=Non-GAAP%20Adjustments) Q3 adjusted financial results included a net gain of $0.1 million from a litigation settlement, offset by employee separation, lease abandonment, and software abandonment expenses - The third quarter included approximately **$0.1 million in net items** excluded from adjusted financial results[8](index=8&type=chunk) - A **$3.8 million gain** from discontinued operations related to a litigation settlement was recorded[8](index=8&type=chunk)[9](index=9&type=chunk) - Offsetting expenses totaled **$3.7 million**, including **$1.4 million** for employee separation, **$0.4 million** for lease abandonment and customer exit costs, and **$1.9 million** for abandonment of long-lived software[8](index=8&type=chunk)[9](index=9&type=chunk) [Segment Operating Results](index=3&type=section&id=Segment%20Operating%20Results) The Combined Truckload segment saw slight revenue growth but significant operating income decline, while Managed Freight grew and Warehousing remained stable with future growth anticipated [Truckload Operations](index=3&type=section&id=Truckload%20Operations) The Combined Truckload segment experienced slight revenue growth but a significant decline in operating income and worsened operating ratio due to rising costs [Combined Truckload Revenue & Operations](index=3&type=section&id=Combined%20Truckload%20Revenue%20%26%20Operations) Combined Truckload revenue increased slightly, but operating income declined significantly due to lower utilization and higher costs - Total revenue in truckload operations increased **0.3% to $199.7 million**, with freight revenue growing **1.0%** due to a **4.6% increase** in the average tractor fleet, partially offset by lower equipment utilization[13](index=13&type=chunk) Combined Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Total Revenue | 199,652 | 199,029 | 0.3% | | Freight Revenue, excludes Fuel Surcharge | 171,765 | 170,039 | 1.0% | | Segment Operating Income (1) | 9,178 | 23,066 | -60.2% | | Adj. Seg. Operating Income (2) | 9,977 | 14,464 | -31.0% | | Segment Operating Ratio (1) | 95.4% | 88.4% | +700 basis points | | Adj. Seg. Operating Ratio (2) | 94.2% | 91.5% | +270 basis points | | Average Freight Revenue per Tractor per Week | 5,445 | 5,637 | -3.4% | | Average Miles per Tractor per Period | 28,306 | 30,733 | -7.9% | | Weighted Average Tractors for Period | 2,400 | 2,295 | 4.6% | [Expedited Truckload Revenue & Operations](index=3&type=section&id=Expedited%20Truckload%20Revenue%20%26%20Operations) Expedited freight revenue decreased by 8.2% due to fewer tractors and lower utilization, leading to a significant drop in operating income - Freight revenue in the Expedited segment decreased **$7.2 million (8.2%)**, primarily due to a **3.4% reduction** in average total tractors and a **5.0% decrease** in average freight revenue per tractor per week from lower utilization[14](index=14&type=chunk) Expedited Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Freight Revenue, excludes Fuel Surcharge | 80,184 | 87,363 | -8.2% | | Segment Operating Income (1) | 5,079 | 12,272 | -58.6% | | Adj. Seg. Operating Income (2) | 5,140 | 7,000 | -26.5% | | Average Freight Revenue per Tractor per Week | 7,082 | 7,452 | -5.0% | | Weighted Average Tractors for Period | 861 | 892 | -3.4% | [Dedicated Truckload Revenue & Operations](index=3&type=section&id=Dedicated%20Truckload%20Revenue%20%26%20Operations) Dedicated freight revenue increased by 10.8% due to more tractors and higher revenue per tractor, despite a utilization decrease - Freight revenue in the Dedicated segment increased **$8.9 million (10.8%)**, driven by a **9.7% increase** in average total tractors and a **1.0% increase** in average freight revenue per tractor per week, despite a **5.7% decrease** in utilization[15](index=15&type=chunk) Dedicated Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Freight Revenue, excludes Fuel Surcharge | 91,581 | 82,676 | 10.8% | | Segment Operating Income (1) | 4,099 | 10,794 | -62.0% | | Adj. Seg. Operating Income (2) | 4,837 | 7,464 | -35.2% | | Average Freight Revenue per Tractor per Week | 4,529 | 4,484 | 1.0% | | Weighted Average Tractors for Period | 1,539 | 1,403 | 9.7% | [Combined Truckload Operating Expenses](index=5&type=section&id=Combined%20Truckload%20Operating%20Expenses) Rising operating costs, particularly in salaries, wages, insurance, and equipment, negatively impacted Truckload segment operating margins - Rising operating costs in the Truckload segment negatively impacted operating margins compared to the prior year, primarily due to salaries, wages, insurance, and both variable and fixed expenses for equipment operation[15](index=15&type=chunk) - Salaries, wages, and related expenses increased approximately **4% per total mile** year-over-year, driven by growth in the dedicated protein supply chain business and employee separation costs[16](index=16&type=chunk) - Insurance and claims expense for the current quarter was **4 cents per mile**, or **24% higher** than the prior year on a per total mile basis, due to large claims, and is anticipated to remain elevated in Q4[17](index=17&type=chunk) - Equipment related expenses (Operations and maintenance, Depreciation and amortization) increased approximately **8 cents per total mile (15%)** compared to the prior year, mainly due to unproductive equipment and higher recruiting/onboarding costs[18](index=18&type=chunk) [Managed Freight Segment](index=5&type=section&id=Managed%20Freight%20Segment) The Managed Freight segment experienced a 14.0% increase in freight revenue, with operating income improving by 0.4% and adjusted operating income by 11.7% in Q3 2025 Managed Freight Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Freight Revenue | 72,220 | 63,385 | 14.0% | | Segment Operating Income (1) | 2,960 | 2,946 | 0.4% | | Adj. Seg. Operating Income (2) | 3,035 | 2,716 | 11.7% | - The growth in this segment is attributable to new business awarded in the year by a large customer that will no longer continue in the fourth quarter[20](index=20&type=chunk) [Warehousing Segment](index=5&type=section&id=Warehousing%20Segment) The Warehousing segment's Q3 2025 results were comparable to the prior year, with slight reductions in revenue and operating income, but Q4 growth is anticipated from a new facility Warehousing Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ in thousands) | Q3 2024 ($ in thousands) | Change ($ in thousands) | | :-------------------------------- | :-------------- | :-------------- | :--------- | | Freight Revenue | 24,802 | 25,175 | -373 | | Segment Operating Income (1) | 2,498 | 2,751 | -253 | | Adj. Seg. Operating Income (2) | 1,963 | 2,147 | -184 | - Anticipating growth in the Warehousing segment in Q4 from a large new facility start-up with an existing customer scheduled to begin in November 2025[21](index=21&type=chunk) [Capitalization, Liquidity and Capital Expenditures](index=7&type=section&id=Capitalization%2C%20Liquidity%20and%20Capital%20Expenditures) Net indebtedness increased by $48.7 million to $268.3 million, raising the net indebtedness to total capitalization ratio to 38.8%, with Q4 capital expenditures projected [Capitalization, Liquidity and Capital Expenditures Overview](index=7&type=section&id=Capitalization%2C%20Liquidity%20and%20Capital%20Expenditures%20Overview) Net indebtedness increased to $268.3 million, raising the capitalization ratio to 38.8%, driven by acquisitions and stock repurchases, with Q4 capital expenditures projected - Total indebtedness, net of cash ('net indebtedness'), increased by **$48.7 million to approximately $268.3 million** at September 30, 2025, compared to December 31, 2024[22](index=22&type=chunk) - Net indebtedness to total capitalization increased to **38.8%** at September 30, 2025, from **33.4%** at December 31, 2024[22](index=22&type=chunk) - The increase in net indebtedness was primarily due to acquisition-related payments of **$19.2 million** and repurchasing approximately **$36.2 million** of common stock[23](index=23&type=chunk) - At September 30, 2025, cash and cash equivalents totaled **$2.7 million**, with **$90.1 million** in available borrowing capacity under the ABL credit facility[23](index=23&type=chunk) - Expectations for net capital equipment expenditures in the fourth quarter are **$15 million to $20 million**[25](index=25&type=chunk) [Outlook](index=7&type=section&id=Outlook) The company anticipates lower Q4 Adjusted EPS due to various negative factors but remains optimistic for intermediate to long-term market improvement and earnings growth [Short-Term Outlook](index=7&type=section&id=Short-Term%20Outlook) Q4 Adjusted EPS is expected to be sequentially lower than Q3 due to reduced TEL profits, government shutdown impact, increased claims, and loss of a Managed Freight customer - Adjusted EPS for the fourth quarter is expected to be **sequentially lower than the third quarter**[25](index=25&type=chunk) - Reasons for lower Q4 Adjusted EPS include expected lower profits from the minority investment in TEL due to credit losses, impact of the U.S. government shutdown on Department of Defense business, expected increase in claims accruals, and loss of a large Managed Freight customer[25](index=25&type=chunk) - These negative factors are expected to more than outweigh a modest peak season boost to Expedited and Managed Freight[25](index=25&type=chunk) [Intermediate to Long-Term Outlook](index=7&type=section&id=Intermediate%20to%20Long-Term%20Outlook) The company is optimistic for the intermediate to long term, expecting improving market conditions, accelerating capacity exits, and internal growth in dedicated and warehouse businesses - The company is **optimistic about the intermediate to long term**, expecting improving market conditions[26](index=26&type=chunk) - Capacity exits in the freight environment appear to be accelerating, and there are potential demand drivers from unwinding excess inventories, tax/monetary policies, and trade policy clarification[26](index=26&type=chunk) - Internal plans include growing certain dedicated and warehouse businesses and holding or downsizing other Truckload capacity until returns improve[26](index=26&type=chunk) - Expected outcome is operating leverage and higher earnings and return on capital over time, though individual quarters may be volatile[27](index=27&type=chunk) [Additional Information](index=7&type=section&id=Additional%20Information) This section provides conference call details, a company overview, explanations of non-GAAP measures, forward-looking statements, and contact information [Conference Call Information](index=7&type=section&id=Conference%20Call%20Information) Details for accessing the live conference call on October 23, 2025, and information for accessing the audio replay and additional financial data online - A live conference call will be held on **October 23, 2025, at 10:00 a.m. Eastern time**[27](index=27&type=chunk) - Access the call by dialing **877-550-1505 (U.S./Canada)** or **0800-524-4760 (International)**[27](index=27&type=chunk) - An audio replay will be available for one week at **800-645-7964, access code 3895**[27](index=27&type=chunk) [Company Overview](index=7&type=section&id=Company%20Overview) Covenant Logistics Group provides diverse transportation and logistics services across the U.S., including asset-based and asset-light solutions, and has an affiliation with Transport Enterprise Leasing - Covenant Logistics Group offers a portfolio of transportation and logistics services throughout the United States[27](index=27&type=chunk) - Primary services include asset-based expedited and dedicated truckload capacity, and asset-light warehousing, transportation management, and freight brokerage[27](index=27&type=chunk) - Transport Enterprise Leasing (TEL) is an affiliated company providing revenue equipment sales and leasing services[27](index=27&type=chunk) [Non-GAAP Measures Explanation](index=7&type=section&id=Non-GAAP%20Measures%20Explanation) The company uses non-GAAP measures like adjusted operating income and EPS to provide supplemental profitability information, excluding non-recurring items, but notes their limitations - Non-GAAP measures (e.g., adjusted operating income, adjusted net income, adjusted EPS) are used as key measures of profitability[27](index=27&type=chunk) - These measures provide supplemental information for investors and analysts, and management uses them to remove items that may not be an indicator of performance from period-to-period[27](index=27&type=chunk) - Non-GAAP measures are not substitutes for GAAP measures and have limitations, including potential comparability issues with other companies[28](index=28&type=chunk) [Forward-Looking Statements](index=9&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially from expectations, with no obligation to update - The press release contains forward-looking statements, which are based on current beliefs and expectations and are subject to risks and uncertainties[29](index=29&type=chunk) - Factors that could cause actual results to differ materially include economic, credit, business, and regulatory factors, competition, driver compensation, fuel price fluctuations, dependence on third-party providers, IT system failures, and various operational and market risks[29](index=29&type=chunk) - The company disclaims any obligation to update or revise any forward-looking statements to reflect actual results or changes in factors affecting the information[30](index=30&type=chunk) [Contact Information](index=10&type=section&id=Contact%20Information) Contact details are provided for M. Paul Bunn (President), Tripp Grant (Chief Financial Officer), and Brooke McKenzie (Executive Administrative Assistant) for further information - Contact information for M. Paul Bunn (President), Tripp Grant (Chief Financial Officer), and Brooke McKenzie (Executive Administrative Assistant) is provided[31](index=31&type=chunk) [Key Financial and Operating Statistics (Tables)](index=11&type=section&id=Key%20Financial%20and%20Operating%20Statistics%20%28Tables%29) This section presents key financial and operating statistics in tables, including income statement data, segment freight revenues, and truckload operating statistics [Income Statement Data](index=11&type=section&id=Income%20Statement%20Data) Detailed income statement data for Q3 and YTD September 30, 2025, shows increased total revenue but declines in operating income, net income, and diluted EPS Income Statement Data (Q3 & YTD Sep 30, 2025 vs 2024) | ($ in thousands, except per share data) | Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | % Change | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | % Change | | :---------------------------------- | :------------------------------------ | :------------------------------------ | :------- | :----------------------------------- | :----------------------------------- | :------- | | Freight revenue | $ 268,840 | $ 258,599 | 4.0% | $ 788,591 | $ 762,796 | 3.4% | | Fuel surcharge revenue | 28,049 | 29,286 | (4.2%) | 80,507 | 91,349 | (11.9%) | | Total revenue | $ 296,889 | $ 287,885 | 3.1% | $ 869,098 | $ 854,145 | 1.8% | | Total operating expenses | 288,963 | 271,650 | 6.4% | 841,982 | 817,998 | 2.9% | | Operating income | 7,926 | 16,235 | (51.2%) | 27,116 | 36,147 | (25.0%) | | Net income | $ 9,093 | $ 13,033 | (30.2%) | $ 25,496 | $ 29,202 | (12.7%) | | Diluted earnings per share | $ 0.35 | $ 0.47 | (25.5%) | $ 0.94 | $ 1.06 | (11.4%) | [Segment Freight Revenues & Truckload Operating Statistics](index=11&type=section&id=Segment%20Freight%20Revenues%20%26%20Truckload%20Operating%20Statistics) This section details segment freight revenues and truckload operating statistics, showing mixed performance across segments and declining utilization Segment Freight Revenues (Q3 & YTD Sep 30, 2025 vs 2024) | ($ in thousands) | Q3 2025 | Q3 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :-------------------------- | :------ | :------ | :------- | :------- | :------- | :------- | | Expedited - Truckload | $ 80,184 | $ 87,363 | (8.2%) | $ 243,662 | $ 262,881 | (7.3%) | | Dedicated - Truckload | 91,581 | 82,676 | 10.8% | 263,827 | 237,124 | 11.3% | | Combined Truckload | 171,765 | 170,039 | 1.0% | 507,489 | 500,005 | 1.5% | | Managed Freight | 72,220 | 63,385 | 13.9% | 206,620 | 186,668 | 10.7% | | Warehousing | 24,802 | 25,175 | (1.5%) | 74,429 | 76,123 | (2.2%) | | Consolidated Freight Revenue | $ 268,840 | $ 258,599 | 4.0% | $ 788,591 | $ 762,796 | 3.4% | Truckload Operating Statistics (Q3 & YTD Sep 30, 2025 vs 2024) | Metric | Q3 2025 | Q3 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | :------- | :------- | :------- | | Average freight revenue per loaded mile | $ 2.99 | $ 2.80 | 7.2% | $ 2.98 | $ 2.74 | 9.2% | | Average freight revenue per total mile | $ 2.53 | $ 2.41 | 5.0% | $ 2.53 | $ 2.38 | 6.3% | | Average freight revenue per tractor per week | $ 5,445 | $ 5,637 | (3.4%) | $ 5,469 | $ 5,672 | (3.6%) | | Average miles per tractor per period | 28,306 | 30,733 | (7.9%) | 84,456 | 93,196 | (9.4%) | | Weighted avg. tractors for period | 2,400 | 2,295 | 4.6% | 2,379 | 2,252 | 5.6% | | Tractors at end of period | 1,487 | 2,306 | (35.5%) | 1,487 | 2,306 | (35.5%) | | Trailers at end of period | 6,851 | 6,484 | 5.7% | 6,851 | 6,484 | 5.7% | [Selected Balance Sheet Data](index=12&type=section&id=Selected%20Balance%20Data) As of September 30, 2025, total assets increased, while total stockholders' equity decreased, and net indebtedness and its ratio to capitalization both rose significantly Selected Balance Sheet Data (Sep 30, 2025 vs Dec 31, 2024) | ($ in thousands, except per share data) | 9/30/2025 | 12/31/2024 | | :------------------------------------ | :-------- | :--------- | | Total assets | $ 1,025,608 | $ 997,768 | | Total stockholders' equity | $ 423,716 | $ 438,340 | | Total indebtedness, comprised of total debt and finance leases, net of cash | $ 268,336 | $ 219,620 | | Net Indebtedness to Capitalization Ratio | 38.8% | 33.4% | | Leverage Ratio(1) | 2.14 | 1.65 | | Tangible book value per end-of-quarter basic share | $ 10.03 | $ 10.17 | [Non-GAAP Reconciliation (Unaudited)](index=12&type=section&id=Non-GAAP%20Reconciliation%20%28Unaudited%29) This section provides unaudited reconciliations of GAAP to non-GAAP financial measures for consolidated and segment operating results, detailing specific adjustments [Adjusted Operating Income and Adjusted Operating Ratio (Consolidated)](index=12&type=section&id=Adjusted%20Operating%20Income%20and%20Adjusted%20Operating%20Ratio%20%28Consolidated%29) This reconciliation details adjustments to GAAP operating income and ratio, primarily for non-cash amortization, contingent consideration, and various one-time expenses Consolidated Adjusted Operating Income and Ratio (Q3 & YTD Sep 30, 2025 vs 2024) | (Dollars in thousands) | Q3 2025 | Q3 2024 | basis points Change | YTD 2025 | YTD 2024 | basis points Change | | :------------------------------------ | :------ | :------ | :--------- | :------- | :------- | :--------- | | GAAP Operating income | $ 7,926 | $ 16,235 | | $ 27,116 | $ 36,147 | | | GAAP Operating ratio | 97.3% | 94.4% | 290 | 96.9% | 95.8% | 110 | | Adjusted operating income | $ 14,977 | $ 19,327 | | $ 40,853 | $ 52,797 | | | Adjusted operating ratio | 94.4% | 92.5% | 190 | 94.8% | 93.1% | 170 | | Adjustments (Q3 2025): | | | | | | | | Amortization of intangibles | 2,653 | 2,372 | | 7,770 | 7,116 | | | Contingent consideration liability adjustment | 710 | 720 | | 2,130 | 9,534 | | | Employee separation costs | 1,375 | - | | 1,375 | - | | | Lease abandonment and customer exit costs | 429 | - | | 429 | - | | | Abandonment of long-lived software | 1,884 | - | | 1,884 | - | | [Adjusted Net Income and Adjusted EPS (Consolidated)](index=13&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20EPS%20%28Consolidated%29) This reconciliation provides a detailed breakdown of tax-effected adjustments to GAAP net income and diluted EPS, including amortization, litigation settlement, and various expenses Consolidated Adjusted Net Income and EPS (Q3 & YTD Sep 30, 2025 vs 2024) | (Dollars in thousands) | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | GAAP Net income | $ 9,093 | $ 13,033 | $ 25,496 | $ 29,202 | | Non-GAAP Adjusted net income | $ 11,517 | $ 15,224 | $ 32,927 | $ 41,297 | | GAAP Diluted EPS | $ 0.35 | $ 0.47 | $ 0.94 | $ 1.06 | | Non-GAAP Adjusted EPS | $ 0.44 | $ 0.54 | $ 1.22 | $ 1.49 | | Adjustments (Q3 2025): | | | | | | Amortization of intangibles | 2,653 | 2,372 | 7,770 | 7,116 | | Discontinued operations reversal of loss contingency | (3,773) | (200) | (3,773) | (600) | | Contingent consideration liability adjustment | 710 | 720 | 2,130 | 9,534 | | Employee separation costs | 1,375 | - | 1,375 | - | | Lease abandonment and customer exit costs | 429 | - | 429 | - | | Abandonment of long-lived software | 1,884 | - | 1,884 | - | [Adjusted Operating Income and Adjusted Operating Ratio (Segment)](index=14&type=section&id=Adjusted%20Operating%20Income%20and%20Adjusted%20Operating%20Ratio%20%28Segment%29) This section provides segment-level reconciliation of GAAP operating income and operating ratio to adjusted figures for Expedited, Dedicated, Combined Truckload, Managed Freight, and Warehousing segments Segment Adjusted Operating Income and Ratio (Q3 2025 vs 2024) | (Dollars in thousands) | Expedited Q3 2025 | Dedicated Q3 2025 | Combined Truckload Q3 2025 | Managed Freight Q3 2025 | Warehousing Q3 2025 | | :------------------------------------ | :---------------- | :---------------- | :------------------------- | :---------------------- | :------------------ | | GAAP Segment operating income | $ 5,079 | $ 4,099 | $ 9,178 | $ 2,960 | $ 2,498 | | GAAP Segment operating ratio | 94.6% | 96.1% | 95.4% | 95.9% | 90.0% | | Adjusted segment operating income | $ 5,140 | $ 4,837 | $ 9,977 | $ 3,035 | $ 1,963 | | Adjusted segment operating ratio | 93.6% | 94.7% | 94.2% | 95.8% | 92.1% | Segment Adjusted Operating Income and Ratio (YTD Sep 30, 2025 vs 2024) | (Dollars in thousands) | Expedited YTD 2025 | Dedicated YTD 2025 | Combined Truckload YTD 2025 | Managed Freight YTD 2025 | Warehousing YTD 2025 | | :------------------------------------ | :----------------- | :----------------- | :-------------------------- | :----------------------- | :------------------- | | GAAP Segment operating income | $ 18,135 | $ 12,272 | $ 30,407 | $ 10,962 | $ 6,258 | | GAAP Segment operating ratio | 93.7% | 95.9% | 94.8% | 94.7% | 91.6% | | Adjusted segment operating income | $ 14,870 | $ 10,905 | $ 25,775 | $ 10,555 | $ 4,521 | | Adjusted segment operating ratio | 93.9% | 95.9% | 94.9% | 94.9% | 93.9% |

Core Insights - Covenant Logistics Group reported third quarter results with earnings of $0.35 per diluted share, reflecting flat year-over-year performance in asset-light business units and lower performance in Truckload business units due to higher costs and under-utilized equipment [2][3] Financial Performance - Total revenue for the third quarter was $296.9 million, a 3.1% increase from $287.9 million in the prior year [6][29] - Freight revenue, excluding fuel surcharge, was $268.8 million, up 4.0% from $258.6 million year-over-year [29] - Operating income decreased to $7.9 million from $16.2 million in the prior year [6][29] - Adjusted net income was $11.5 million, down from $15.2 million year-over-year [6][29] - The operating ratio increased to 97.3% from 94.4% in the prior year [6][29] Segment Performance - Truckload operations generated total revenue of $199.7 million, a slight increase of 0.3% year-over-year [11] - Expedited segment revenue decreased by $7.2 million, or 8.2%, while Dedicated segment revenue increased by $8.9 million, or 10.8% [12][30] - Managed Freight segment revenue rose by 14.0% year-over-year, attributed to new business awarded by a large customer [17][30] - Warehousing segment revenue was relatively stable, with a slight decrease of $0.4 million compared to the prior year [20] Capitalization and Liquidity - Total indebtedness increased by $48.7 million to approximately $268.3 million compared to December 31, 2024 [21][31] - Net indebtedness to total capitalization ratio rose to 38.8% from 33.4% at the end of 2024 [21][31] - Cash and cash equivalents totaled $2.7 million, with no outstanding borrowings under the ABL credit facility [21] Outlook - The company expects Adjusted EPS for the fourth quarter to be lower than the third quarter due to various negative factors, including credit losses and the impact of a government shutdown [23][24] - Long-term outlook remains positive with expectations of improving market conditions and internal plans to enhance profitability [24][25]

Financial Performance - The company reported second quarter earnings of $0.36 per diluted share, with freight revenue growth of 7.8% year-over-year to $276.5 million, marking an all-time high for any quarter [98]. - Total revenue for the second quarter was $302.9 million, an increase of 5.3% compared to the second quarter of 2024 [100]. - Operating income decreased to $11.6 million from $15.6 million in the second quarter of 2024 [100]. - Net income was $9.8 million, down from $12.2 million in the same quarter last year [100]. - The adjusted operating ratio for the second quarter of 2025 was 94.6%, compared to 92.7% in the second quarter of 2024 [102]. - Total revenues for the three months ended June 30, 2025, increased to $302.9 million, up 5.3% from $287.5 million in the same period of 2024 [144]. Shareholder Returns - The company repurchased approximately 1.6 million shares of common stock for $35.2 million during the quarter [98]. - The company distributed $1.8 million to stockholders through cash dividends [100]. Revenue Breakdown - For the three months ended June 30, 2025, total revenue increased to $302.854 million, up from $287.497 million in 2024, primarily driven by a $17.2 million increase in Dedicated freight revenue [114]. - Freight revenue for the six months ended June 30, 2025, was $519.751 million, compared to $504.197 million in 2024, reflecting a growth in Managed Freight and Dedicated segments [114]. - Revenue from equipment rentals and purchased transportation increased to $76.791 million for the three months ended June 30, 2025, up from $62.755 million in 2024, representing a growth of 22.5% [126]. - The percentage of total revenue from equipment rentals and purchased transportation rose to 25.4% in Q2 2025, compared to 21.8% in Q2 2024 [126]. - Dedicated revenue increased by $8.8 million (9.4%) for the three months ended June 30, 2025, driven by an 11.7% increase in average tractors [147]. - Managed Freight revenue increased due to new business awarded during the year, but a key customer departure in July 2025 is expected to significantly decrease future revenue [149]. Expenses and Costs - Salaries, wages, and related expenses for the three months ended June 30, 2025, were $109.148 million, representing 36.0% of total revenue, a decrease from 37.0% in 2024 [116]. - Fuel expense for the three months ended June 30, 2025, was $27.989 million, accounting for 9.2% of total revenue, down from 10.1% in 2024, attributed to lower fuel prices [118]. - Net fuel expense for the three months ended June 30, 2025, increased to $3.392 million, or 1.2% of freight revenue, compared to 0.3% in 2024, primarily due to lower fuel surcharge recovery [122]. - Operations and maintenance costs for the three months ended June 30, 2025, rose to $17.066 million, representing 5.6% of total revenue, reflecting higher demands on equipment [124]. - Operating taxes and licenses increased to $3.436 million for the three months ended June 30, 2025, from $2.283 million in 2024, accounting for 1.1% of total revenue [128]. - Insurance and claims expenses were $17.307 million for the three months ended June 30, 2025, slightly up from $17.148 million in 2024, maintaining a consistent percentage of total revenue at 5.7% [129]. - Depreciation and amortization expenses increased to $23.121 million for the three months ended June 30, 2025, compared to $22.130 million in 2024, representing 7.6% of total revenue [134]. - Interest expense decreased to $2.470 million for the three months ended June 30, 2025, down from $3.799 million in 2024, reflecting a reduction in outstanding debt [138]. - Income tax expense for the three months ended June 30, 2025, was $3.521 million, compared to $3.828 million in 2024, with an effective tax rate impacted by state tax expenses [141]. Operational Efficiency - The company expects to continue managing idle time and tractor speeds while investing in more fuel-efficient technologies to improve operational efficiency [123]. - The company operated 2,401 tractors and 6,639 trailers as of June 30, 2025, with an average tractor age of 1.8 years and an average trailer age of 5.8 years [112]. - The profitability measures include operating ratio and adjusted operating ratio, with the latter defined as operating expenses net of fuel surcharge revenue divided by total revenue less fuel surcharge revenue [111]. Capital Expenditures and Cash Flow - Net cash flows provided by operating activities increased to $46.7 million for the six months ended June 30, 2025, compared to $44.1 million for the same period in 2024 [162]. - Net capital expenditures for the six months ended June 30, 2025, totaled $52.8 million, a decrease from $54.8 million in the prior year period [159]. - The company expects net capital expenditures for the remainder of 2025 to be between $50.0 million and $60.0 million, reflecting growth in the Dedicated fleet [159]. Market and Risk Factors - The company expects fluctuations in purchased transportation costs due to volatility in the Managed Freight segment and potential increases in fuel prices [127]. - The company anticipates that insurance and claims expenses will continue to be volatile and may increase in the second half of 2025 compared to 2024 [131]. - Market risks have not changed materially from those reported in the Form 10-K for the year ended December 31, 2024 [169]. - No material changes to critical accounting policies and estimates during the three and six months ended June 30, 2025, compared to the previous year [168].

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)