enant Logistics (CVLG) - 2025 Q2 - Quarterly Results

Financial Highlights 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] - 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] - 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] Segment Performance Analysis 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 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] - 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] - 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] Expedited Truckload 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] - 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] Dedicated Truckload 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] - Growth was primarily driven by an 11.7% increase in the average total tractor count to 1,546 units[10] Managed Freight Segment 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] - Growth is attributed to new business awarded during the year and the team's efforts to handle overflow capacity for the Expedited fleet[17] Warehousing Segment 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] - 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] Capitalization, Liquidity, and Capital Expenditures 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][21] - The net indebtedness to total capitalization ratio increased to 39.2% at June 30, 2025, from 33.4% at December 31, 2024[20] - As of June 30, 2025, the company had $65.5 million of available borrowing capacity under its ABL credit facility[21] - 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] 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] - 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] - The company's goals are to grow profitably, expand the dedicated fleet organically, evaluate acquisitions, and gain operating leverage as conditions improve[24] Appendix: Detailed Financials and Reconciliations 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 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 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 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 |