enant Logistics (CVLG) - 2025 Q3 - Quarterly Results

Company Announcement & Executive Summary Covenant Logistics Group announced Q3 2025 results and a conference call, with the CEO commenting on mixed segment performance and strategic initiatives Announcement Details 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] - A conference call to discuss the quarter is scheduled for 10:00 A.M. Eastern Time on Thursday, October 23, 2025[2] Chairman & CEO Commentary 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] - 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] - 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] - 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 ($0.11 per share) in Q3 2024, primarily due to accelerated customer bankruptcies[5] - Acknowledged the unexpected passing of Lew Thompson, founder of Lew Thompson and Son Trucking Company, which was acquired in April 2023[6] Third Quarter Financial Performance Covenant Logistics Group reported increased total revenue for Q3 2025 but significant declines in operating income, net income, and EPS on both GAAP and adjusted bases Consolidated Financial Highlights Covenant Logistics Group reported a 3.1% increase in total revenue for Q3 2025 but significant declines in operating income, net income, and EPS Q3 2025 vs Q3 2024 Consolidated Financial Performance | Metric | Q3 2025 ($ 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 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] - A $3.8 million gain from discontinued operations related to a litigation settlement was recorded[8][9] - 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][9] Segment Operating Results 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 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 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 $199.7 million, with freight revenue growing 1.0% due to a 4.6% increase in the average tractor fleet, partially offset by lower equipment utilization[13] Combined Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ 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 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 $7.2 million (8.2%), primarily due to a 3.4% reduction in average total tractors and a 5.0% decrease in average freight revenue per tractor per week from lower utilization[14] Expedited Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ 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 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 $8.9 million (10.8%), driven by a 9.7% increase in average total tractors and a 1.0% increase in average freight revenue per tractor per week, despite a 5.7% decrease in utilization[15] Dedicated Truckload Operating Data (Q3 2025 vs Q3 2024) | Metric | Q3 2025 ($ 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 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] - 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] - 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] - 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] Managed Freight Segment 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] Warehousing Segment 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] Capitalization, Liquidity and Capital Expenditures 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 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] - Net indebtedness to total capitalization increased to 38.8% at September 30, 2025, from 33.4% at December 31, 2024[22] - 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] - 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] - Expectations for net capital equipment expenditures in the fourth quarter are $15 million to $20 million[25] 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 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] - 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] - These negative factors are expected to more than outweigh a modest peak season boost to Expedited and Managed Freight[25] Intermediate to Long-Term Outlook 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] - 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] - Internal plans include growing certain dedicated and warehouse businesses and holding or downsizing other Truckload capacity until returns improve[26] - Expected outcome is operating leverage and higher earnings and return on capital over time, though individual quarters may be volatile[27] Additional Information This section provides conference call details, a company overview, explanations of non-GAAP measures, forward-looking statements, and contact information Conference Call Information 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] - Access the call by dialing 877-550-1505 (U.S./Canada) or 0800-524-4760 (International)[27] - An audio replay will be available for one week at 800-645-7964, access code 3895[27] Company Overview 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] - Primary services include asset-based expedited and dedicated truckload capacity, and asset-light warehousing, transportation management, and freight brokerage[27] - Transport Enterprise Leasing (TEL) is an affiliated company providing revenue equipment sales and leasing services[27] Non-GAAP Measures Explanation 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] - 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] - Non-GAAP measures are not substitutes for GAAP measures and have limitations, including potential comparability issues with other companies[28] Forward-Looking Statements 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] - 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] - 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] Contact Information 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] Key Financial and Operating Statistics (Tables) This section presents key financial and operating statistics in tables, including income statement data, segment freight revenues, and truckload operating statistics Income Statement Data 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 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 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) 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) 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) 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) 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% |