enant Logistics (US:CVLG)2022-08-04 16:00PART I FINANCIAL INFORMATION Item 1. Financial Statements The financial statements for the period ended June 30, 2022, show significant year-over-year growth in revenue and net income, with total assets increasing to $701.0 million and net income rising to $24.5 million in Q2 Condensed Consolidated Balance Sheets As of June 30, 2022, total assets grew to $701.0 million from $651.7 million at year-end 2021, primarily due to acquisitions and investments, while total liabilities rose to $345.0 million | Balance Sheet Items (in thousands) | June 30, 2022 (unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $172,987 | $188,527 | | Net Property and Equipment | $357,644 | $346,483 | | Goodwill | $58,217 | $42,518 | | Total Assets | $701,018 | $651,662 | | Total Current Liabilities | $150,443 | $142,745 | | Total Liabilities | $344,987 | $301,963 | | Total Stockholders' Equity | $356,031 | $349,699 | Condensed Consolidated Statements of Operations For Q2 2022, total revenue increased 23.8% year-over-year to $317.4 million, and net income grew 59.1% to $24.5 million, with diluted EPS reaching $1.56 | Metric (in thousands, except per share) | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $317,377 | $256,324 | $608,962 | $477,213 | | Operating Income | $26,873 | $18,332 | $50,720 | $28,843 | | Net Income | $24,526 | $15,417 | $46,693 | $26,559 | | Diluted EPS | $1.56 | $0.91 | $2.86 | $1.56 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash from operating activities more than doubled to $76.9 million, while cash was primarily used for the AAT acquisition and share repurchases | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $76,903 | $34,123 | | Net cash (used) by investing activities | $(62,965) | $19,780 | | Net cash (used) by financing activities | $(17,887) | $(57,344) | | Net change in cash | $(3,949) | $(3,441) | Notes to Condensed Consolidated Financial Statements The notes detail segment performance, debt, leases, the AAT acquisition, and share repurchases, highlighting strong growth across segments and significant contributions from the TEL equity investment - The company acquired 100% of AAT Carriers, Inc. on February 9, 2022, for a total consideration of $54.8 million, including up to $20.0 million in contingent earnouts. AAT's results are reported within the Expedited segment899091 - The company's 49% interest in Transport Enterprise Leasing, LLC (TEL) contributed $13.9 million to pre-tax income in the first six months of 2022, more than double the $6.3 million from the same period in 202185165 - A new stock repurchase authorization of up to $75.0 million was approved on May 18, 2022. During the six months ended June 30, 2022, the company repurchased a total of $43.4 million of its common stock100189 | Segment Performance (Six Months Ended June 30, in thousands) | Revenue 2022 | Revenue 2021 | Operating Income 2022 | Operating Income 2021 | | :--- | :--- | :--- | :--- | :--- | | Expedited | $220,440 | $165,849 | $23,941 | $16,436 | | Dedicated | $185,714 | $157,314 | $5,523 | $(1,990) | | Managed Freight | $166,432 | $123,032 | $19,458 | $12,261 | | Warehousing | $36,376 | $31,018 | $1,798 | $2,136 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported record Q2 adjusted EPS of $1.63 despite cost inflation, with all segments performing well and a full-year adjusted EPS forecast of at least $5.00 Executive Overview and Outlook The company achieved its highest quarterly earnings in Q2 2022 with adjusted EPS of $1.63, and anticipates full-year adjusted EPS of at least $5.00 due to revenue growth, segment improvement, and cost control - Achieved the highest earnings for any quarter in the Company's history, with non-GAAP adjusted earnings per share of $1.63106 - The company expects a combination of higher revenue, improvement in the Dedicated segment, contribution from the AAT acquisition, cost control, and stock repurchases to generate adjusted EPS for the full year of at least $5.00 per share113 - The equity investment in TEL contributed $7.1 million of pre-tax earnings in Q2 2022, a significant increase from $3.4 million in Q2 2021112 Results of Consolidated Operations Total revenue for Q2 2022 increased due to freight revenue growth across all segments, while salaries and wages decreased as a percentage of revenue, and net fuel expense declined despite higher fuel prices | Expense as % of Freight Revenue | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Salaries, wages, and related | 37.9% | 38.1% | 37.5% | 39.5% | | Fuel expense | 18.2% | 11.4% | 16.0% | 11.4% | | Net fuel expense | 0.5% | 1.8% | 1.0% | 1.9% | | Insurance and claims | 5.1% | 4.1% | 4.3% | 4.0% | - Insurance and claims per mile cost increased to 18.5 cents for Q2 2022 from 12.8 cents in Q2 2021, primarily due to unfavorable development of a small number of prior period claims151 Results of Segment Operations All four segments contributed to revenue growth, driven by increased average freight revenue per tractor per week in Expedited, higher average rate per total mile in Dedicated, and growth in Managed Freight and Warehousing - Expedited segment's Q2 revenue increase was driven by a 17.7% increase in average freight revenue per tractor per week, resulting from a 21.5% increase in average rate per total mile169 - Dedicated segment's Q2 revenue increased due to a 24.5% increase in average rate per total mile, which offset a 7.6% decrease in the average number of tractors171 - Managed Freight revenue increased due to handling overflow freight from truckload operations and growth in revenue per load173 Liquidity and Capital Resources The company maintains a strong liquidity position with $22.5 million in working capital and $85.7 million available under its credit facility, with net capital expenditures for H1 2022 totaling $63.0 million - As of June 30, 2022, the company had working capital of $22.5 million and available borrowing capacity of $85.7 million under its Credit Facility178181 - Net capital expenditures for the first six months of 2022 totaled $63.0 million, largely due to the AAT acquisition. The forecast for the remainder of 2022 is a range of $10.0 million to $20.0 million182183 - The company repurchased $43.4 million of its Class A common stock in the first six months of 2022 and distributed $2.0 million in dividends183188 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states that its market risks have not materially changed from those reported in its Form 10-K for the year ended December 31, 2021 - There have been no material changes to the company's market risks since the 2021 year-end report192 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective194 - No changes occurred in the company's internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, internal controls197 PART II OTHER INFORMATION Item 1. Legal Proceedings This section incorporates by reference the information on legal proceedings detailed in Note 10, "Commitments and Contingencies," of the condensed consolidated financial statements - Information regarding legal proceedings is provided in Note 10 of the financial statements, which discusses several lawsuits that have been settled or are being defended1987678 Item 1A. Risk Factors This section refers the reader to the detailed discussion of risks and uncertainties associated with the company's business as described in "Item 1A. Risk Factors" of the Form 10-K for the year ended December 31, 2021 - The company directs investors to its 2021 Form 10-K for a comprehensive description of the risks and uncertainties associated with its business200 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2022, the company repurchased 1,316,251 shares of its Class A common stock, with a new $75.0 million authorization approved in May 2022, leaving approximately $61.6 million available | Period (2022) | Total Shares Purchased | Average Price Paid | Value Remaining in Program ($) | | :--- | :--- | :--- | :--- | | April 1-30 | 510,450 | $19.59 | $13,219,309 | | May 1-31 | 311,534 | $21.91 | $73,373,910 | | June 1-30 | 494,267 | $23.75 | $61,635,068 | | Total Q2 | 1,316,251 | | $61,635,068 | - On May 18, 2022, the Board approved a new stock repurchase authorization of up to $75.0 million, replacing all prior authorizations203 Item 3. Defaults Upon Senior Securities Not applicable. The company reports no defaults upon senior securities - The company reported that this item is not applicable205 Item 4. Mine Safety Disclosures Not applicable. The company reports no mine safety disclosures - The company reported that this item is not applicable206 Item 5. Other Information Not applicable. The company reports no other information - The company reported that this item is not applicable207 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to credit agreements, CEO and CFO certifications, and XBRL data files - Exhibits filed include the Nineteenth Amendment to the Credit Agreement, CEO and CFO certifications (Sections 302 and 906), and interactive data files (XBRL)209