KNX - Earnings call transcript Q4 2017 | Knight-Swift Transportation Holdings Inc.

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Operator

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Knight-Swift Transportation Fourth Quarter 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. Speakers for today’s call will be Dave Jackson, President and CEO; Kevin Knight, Executive Chairman; and Adam Miller, CFO. Mr. now is meeting the yours. Miller,

Adam Miller

and Thank has to who afternoon the you, call. Rob joined everyone good

We to this website, is have which in have provided our address new is on slides web past. the investor.knight-swift.com/events. accompany and this in different Please address this the note as is from change posted the site call we investor

So, quarter XXXX fourth the Knight-Swift first off, Transportation’s we would call. like to welcome you to earnings

XXXX the which this for to the fourth opportunity quarter quarter for the Swift of the We Knight are excited of represents financial report full first and results combined entity.

go Our call the is X:XX Time scheduled similarly calls to and structured will in to our until be Eastern past. p.m.

to you Following as our we questions answer get commentary, may due as able many your time to call hope allow. question time XXX-XXX-XXXX. restrictions, we to will not If are

that a by we questions of difficult company results operating the the questions any question are we company’s conference rules Form future quarter, and call, provide well are XX-K and will affect may call in the topics of Part if the refer States I on this risks Investors to risk the participant, may the future filed SEC contain specific risks, an Report XA the as To uncertainties that This United statements to will also Item following. in or information the Actual Annual the directed presentation past. clearly X synergy to update on Page I factors plan made with asked. differ. cover read contained fourth predict. market. results. results discussion The on the will of on merger the for presentation of the as provide to may and assumptions to forward-looking X the During disclosures and initiatives outlook the the remain that you answer involve maybe and company’s per a don’t same question, first One begin, X follow-up for question as our

Slide fourth discuss represent to and move An quarter only figures XXXX the fourth requirements to is the XXXX table will a the historically at Due year-over-year quarter X note, were we on results associated of less on to per circumstance consolidated with the due item meaningful. results more however, XX, The comparisons $X.XX. basis. the to around year-over-year earning results. earnings Now, accounting Knight the merger Later provide level ended that important are Transportation’s presentation Slide December the X revenue compares quarter. this to results. reported in plan Diluted for the year-over-year to context share we unique transaction,

of tax adjusted passed related action that and our these merger our expense to $X.X legal income estimate believe share is excluding Act Tax impact at million the came of are representing the in through Our related to per the infrequent benefit of the comparability $X.XX core operations. lawsuits. amortization earnings Jobs net We an results by items to the of unrelated $XXX management’s of $XX.X and Cuts improved reserves quarter, million, excluding of million class

year-over-year included believe Now, this adjusted in to and this a operating surcharge comparison. income. provided X, excluding revenue, results a we fuel comparison, as we on X-year grey comparison we of Slide have In historical have provides the better Swift

the XXXX, reported separately in Again, adjusted $XXX what combination operating adjusted XXXX revenue the entity the if improved quarter quarter each reported of we with If $X.X million the for fourth of combined quarter fuel excluding unchanged With was compare The fourth in XXXX, was the revenue combination compare from of of what billion. the of each year. was Swift, quarter of prior excluding we entity year. fourth prior the income separately with the fourth the consolidated relatively quarter. of addition fuel operating income XXXX the our surcharge XX% quarter from fourth

Our encouraging. quarter results the the absent for merger first were full

to well more favorable the efforts as results beginning synergy terms of freight of a impact as We our the in of see market are demand. dynamics

turn let’s X, balance view we a competitive a Now strong Slide advantage. sheet to as

In As balance we and equipment leverage purchases both continuing accelerated committed remain when quarter, off the sheet and believe improved strengthen tax timing act. the jobs to of under cuts and and provides strategic EBITDA the it tax operating flexibility. we sheet benefits on de-leveraging our through balance to continue to We debt. possible maximize of fourth ratio

revolver cash as increased decreased a CapEx. result and to sequentially debt the As fund we utilize

fund expect capital $XXX to range This million net represents in and replacement million Swift to comparability leases portion of pull relates equipment will of trailers has our Swift. CapEx intend to in range of assumes primarily balance which it off historical which the Historically, there limited the $XXX Therefore not revolver. cash in our expenditures service be sheet we with through may future XXXX and tractors to historical We CapEx financing to during be purchases CapEx as the sheet year. utilized results balance a included funded are numbers. of be of on will the operating out CapEx all

a age changing size strategically manage maintain and environment. returns the market to continue in We to fleet

us positions invest Jackson. to We to sheet the growth continue future to balance will believe in our to flexibility Dave it turn now current opportunities. over have also I

Dave Jackson

Kevin. Thanks

This an increase primarily Slide revenue partially per into Knight inter-segment non-contract driven the average to January. market count. in X.X% opportunities throughout provided increase Trucking a related offset trucking surcharge and adjusted X.X% fourth improvement over Revenue XX.X% strong segment tractor, per in by costs. quarter a quarter the revenue partially a by the basis is XX.X% our by The truck ratio, which at our offset increased freight operated was in tractor, decrease and revenue excluding fuel by prior improvement operational driven increase transactions in operating driver X, an point XXX the in Now the year.

down narrow utilization in count average able of were XXXX X.X% and sequential from was the to ability to in tractor negative quarter achieve tractor the year-over-year source X.X% in decrease quarter we increase our ending a improve of the retain we as the XXXX to quarter the negative in drivers. continue the third count during to While fourth and

Our non-asset basis X.X% primarily based brokerage logistics an Logistics segment produced a increase driven last to XX adjusted point year. X.X%, a XX.X% ratio in by is increase revenue. which compared revenue increased operating

per revenue by increased XX%. while maintaining flat gross year-over-year business XX.X% brokerage Our at margins load

load was Our growth partially brokerage volume. offset a revenue X.X% brokerage decrease in by

implementation requirements, impact headwind our combined income improved we continue what operating the improvements a operating cost long-term previously to of to adjusted We XX.X% market, XX.X% freight our positive the Slide be will of the X, seeing on segment benefit we requirements count, compared In reported positively ratio. more be driver but our results. hiring our our to in with began The by improving stringent quarter when and believe Next achieved controls on Overall, to an business. a are Trucking results segment for as Swift we additional have driver short-term have a to impacted these hiring difficult will Swift was our operating were XXXX. environment, synergies in each by implement. Swift adjusted fourth

tractor per X.X%. revenue increased Our

increased an per X.X%. dedicated segment of XX.X% achieved Our ratio as operating adjusted average truck revenue

revenue an segment achieved XX.X% as operating X.X%. increased per average ratio of truck refrigerated adjusted Our

compared most down truck quarter and fourth count quality sourcing the drivers average overall XXXX is retaining Our the challenge we as Swift X.X% face. to high of remains significant

as X.X%. per intermodal segment of container increased ratio by XX.X% Our achieved revenue operating an adjusted

of economy continues a increased broader likely all driver the durable for the the X, Slide signs growth growth, industry headwind tax considering Act. from be the and continues to impact to recent future, and and on manufacturing relief especially Jobs of construction to to Tax ability the spending, consumer Now space. the capacity Cuts will to the and increase the point in prospects positive The show in shortage goods

We that thus into late the which quarter ELD believe began an the quarter, has in on first also mandate far. continued impact capacity to have the

this we industry service turn increases to to over in and environment, in order and inflationary expect in now high Given the the single-digits rate the see our business throughout the it market strength low we pressures experiencing continue will driver in freight monitor in both will markets In is to I Knight. yields. wages, Kevin customers the to double-digits the to our maximize levels XXXX. to contract

Kevin Knight

it share Thanks, best would distinct commitment Knight I Knight Swift first reaffirming I to our brands with the by be. want and to talked Knight be that them to the Dave. to best fact I can with Swift Swift like want brands, be that and all be it start the time that to the can and management. our people I distinct our

support over driver safety at additional continue There and result, change safety work importance we synergies Swift. little our some we will to time. enhance at utmost facing no service we is together of opportunities confident the to closely are expect customer we areas, performance of and operations have believe a will businesses. our realize significant we for to to We and are As where all the and Excelling to service activities.

us expect to a driver Swift. and While continue ahead term, capabilities to the challenging the confidence, sourcing and we witnessing teamwork headwinds of we Knight us overcome of near-term are environment. the face give we driver opportunities Longer through the

to our Knight’s new academies to competency Swift’s leverage development increase and Specifically, to Swift an and new leverage unmatched drivers. of sourcing Knight source drivers to we experienced driver train advantage believe drivers approach capabilities. further Swift to plans plans has and the train through source and

across Sourcing a and our retaining top remains priority fleets. drivers

experienced We more we are have improve. and at Swift, opportunity to margin improvement Knight understand encouraged we both with the but have

in cost Our and developing committed high-quality mile enhance service transaction. teams and performance safety working drivers to per reducing together markets, managing our and to improving cost remain per our

Slide high Knight Swift collaboration the platforms. swing, across Now are efforts and reflecting our XX, synergy and a in degree full dialogue to of

schedule are We $XX we synergy synergies. in XXXX that both happy and to we are million expected of report cost to benefits revenue ahead and realize in of

of believe Actual to adjusted announcement combined provide efforts improvements April of Our at operating the intention income. improved synergy will in was be realized we achieve we could targets the with both an estimate providing with the merger the companies. of time in improvements

million adjusted improved tractors. over During year-over-year the despite fourth income X.X% less quarter at of XXXX, operating $XX Swift

may we specific not synergy forward, Moving provide updates.

of year-over-year the our income on improvements of each operating However, business lines business be changes a our in in basis. in the in visible the will

Swift also will the XXXX for questions. million appreciative to for line work we am that to like and I the We and outstanding Knight, million are synergies by solid and presentation of will with respectively. both quarter this reaffirm would increase up close Rob, XXXX these who $XXX to how results. fourth want our expressing $XXX in of the expectation the for that And employees ultimately open all responsible now I

Operator

Morgan from Shanker Ravi of line from comes question Stanley. first your And Instructions] [Operator

is line open. Your

Ravi Shanker

just pricing for Thanks. Good upside I XXXX, on said throughout commentary up half the through high of Thanks. your you to to second you that. double-digits does about roll spot people even most improve ‘XX And contract contracts, talk once afternoon, bit everyone, imply the can of is given be also of I pricing the on think follow-up this increases year, your kind just you little expected to more low can typically a of price single-digit how could your the think time in there pricing year? in we timing the the the

Dave Jackson

some of – try and rates. happens of middle increased increase XXXX. transitioned have saw inflection at season previous the and what look perhaps into kind through we part It an non-contract can has will When take bid of that I as second cycles some of have Ravi. the and world that Hi, half experienced is the kind of this volatility next hit in we reduce more we rate the that. the what community come shipping last typically of the about happened rates find the we in more year and of how Yes.

and very And in so we just is environment. we contractual of we you early that of result ‘XX. expect some season And end the the really January, as improvement ‘XX would at even will of meaningful the remind meaningful in stages strength with back so half to continued what that I I bid the and see to rates negative a rate have see its contractual the improvement is market. of we kind at would throughout in see that saw say that

seen volatility we have have significant – we since So XXXX.

we of for think some seeing the catch up are that. I

be on heading. the to customers market understanding our be from seems to the appears appears with think this there that I early committed our in to interactions be or that upper lower in that is the single-digit, some bids, double-digits where largely an cases

And the the might market and couple perhaps for clearly that. of be some so the non-contract few year has times of of there that last a been months

reported would year-over-year look then comparing now – see the into XXXX, see we of out just come ‘XX we about positive just we that continue As a it’s the show going a from the difficult come basis. and is lot year ‘XX that environment. a the improvement is from be non-contract to year-over-year improvement And are we from against quarter talking expect a of on that of kind fourth we the and increases have to increases rate �� and of to on throughout quarter basis. what contracts when – we a would But will I happen will not expect the XXXX for fourth that the meaningful to

something and I what to that. we is to ‘XX similar seeing in think So happened that’s are ‘XX going similar into what

Ravi Shanker

I you going think figure up are – you you to and helpful to you very keep? driver be just the to color. That’s much how able pricing what am you I Can it just what wages trying in ask will XXXX, quickly of them out and to are juxtapose quantify actually follow-up

Dave Jackson

and the moment, the always goes than typically driver. of over of time but to increase in Well, couple exactly XX% – a around XX% XX% it’s the the that not points to maybe higher

at I As know typically to X% you businesses would and driver largest are we they these expense year. non-contract any you way. wage driver. seeing right in of follow indices, very say that end wages some if should are industry see you we that but are in the in so of out towards that the itself I not driver will XXXX saw in Ravi, the There XX% some find think time, kind it definitely the pressure way think expect the neighborhood saw that increase given an And are have fact the seeing somewhere towards see and you over so its there the drivers the now X%. of in the is look around in I rates the when wages we XXXX manifest to third-party increase up did to pent-up the you and little of the

Ravi Shanker

Great, thank you.

Dave Jackson

Thanks.

Operator

from of & next question Your comes Seidl from Company. Cowen line the Jason

Your line is open.

Jason Seidl

project fleet much CapEx the a to little is really the of bit playing the operator. what and terms towards of I by your think outlook, you now age chat the are you of Yes, down a just bit bill? geared going benefits how to thank catch-up and wanted fleet see of really new year you the how that do end little about get your you much do in to with then some of CapEx is age just tax this

Adam Miller

Jason. So, I This will take Adam, that. is

we number year. X age currently to come of at I So, Swift the would probably standpoint from to standpoint, average a Knight X.X by and an say age closer end is at down think expect the would currently is X.X, from fleet I that

at be the think our pulled age be purchases as new growth the only that the We so planned CapEx refresh for thing it forward planning some And is going I change moved improve relates much get growth strategy the a the today. that but within The on may our see the we side, will CapEx. Again, of this certainly first quarter We to quarter CapEx to catch-up from we fleet. average are rates, some little did CapEx to the the generally for some law. to it didn’t from side. were Swift fourth any CapEx to is and into replacement Knight but not not was that probably the we where the of higher speaking, and deduction the tax

Jason Seidl

you you am line to as that are add be going XXXX, about with that? as longer you to I thinking closer thinking in I X, into be want correct what will forward term get where to age you in more But probably you down then thinking am guys if

Adam Miller

fair. Yes, I that’s think

at we take think where been while, when look sub we historically I a that Knight range has in give think a months. few but for X are quite or you been, comfortable I X have

Jason Seidl

quick any am you what of asking? Okay. going Ravi’s high a to have there more And Is under about increases, difference get I terms market get between single-digit the business Swift question, increases. if is and the rate in guess Knight Swift follow-up is I Knight what the can than is historical is talked to rate what is I going to

Kevin Knight

portfolio think just Jason, expectation. the of would we my I services. is get have different mile at Knight this revenue levels to is Swift, that a per necessarily I Kevin. won’t is, say probably Swift,

I a at as stated again, Knight Swift Knight. than probably one-way dedicated best our are up So, to for broader businesses, be everything over in dedicated around to look businesses. and of is Swift’s all it’s the the line X,XXX dedicated haul. for if be the Swift best earlier, you you When goal different tally and segments, has trucks Swift portfolio characteristics

We you in length look length of businesses, to look haul and be tend at our haul a that Knight to tend down superficially when any our anyway. plans to our also at of when Swift, at really longer we we than at Swift don’t line-haul we be you push have in

still pieces part, we than of currently understand. to that most am some trying better little There of really it a I what Swift. I that have the understand book like at the business For I are bit

would I of have opportunity one-way be segment the improve of the Swift and improvements diligently profitability book biggest side I per and mile call that seen. that in pleased what Reefer will not irregular But and especially with of business business the their in in to probably think route that refrigerated. expect book was that book is we the I irregular revenue working of you for of business best are

how that’s that’s – how so And it. I see

entities. to from of like So would the I at with numbers Swift market having non-contract look been yields these the bigger bigger improve percent that see have afforded, going for that than merging standpoint. probably and Swift I in I don’t it has Knight as anywhere capacity presence a a expect expect the wouldn’t I are ever would road, area down presence we that both

I So that’s Jason see helpful. basically hope it how I that’s I that’s hope –

Jason Seidl

And Thank for That’s thank guys. very the color. great you time you much.

Operator

comes the from Brian from question next Ossenbeck Your line JPMorgan.

open Your line is

Brian Ossenbeck

Hi, question. good afternoon. Thanks for my taking

Dave Jackson

Hi, Brian.

Brian Ossenbeck

some call it’s So I can of the can I quite during of of just think best upside, on also last comments is an you think more that one services over some could time, was we strategic the your of intermodal refrigerated of segments, that some you operating us said, been wondering if the that some color upside where I decent give a us sense the a update you last little like fit but business rail it sounds should especially in positive us give on on see the made the past, be, but I way that? you had we not where it imagine so given give also bit

Dave Jackson

and about learning are large, that, has I excited on first piece kind happy overall really red Yes, but offering our that it’s well. so revenues. we but to. not that performs be trajectory on non-asset very would and on intermodal our off based a of brand, we of a the good It’s business that small got What have intermodal way

own boxes. asset more where As Swift much significant, own it’s far we its as our based

as the of Swift’s have think don’t are know They highest probably our the quarterly revenue we extremely As per customers. that improving and but service, now And do on from – in we our we focused intermodal reliant box our always to we we improve provide on We fourth to perspective, partners. develop. continue of I the level rail And see will most in right to you market not we of the opportunities on service believe also that of that’s focusing basis primarily improvement always think, a our highest ensure structure. yields to continues good business. have that provided we our how value on made of our terms level gray on the this area to we opportunities there That’s can more we provide are good quarter. improve the are sides I cost on.

a or but costs, this legitimate, as side On as quarter If reported we would where drayage drayage XX a we a which costs. would be have wouldn’t long-term. we be experienced the to little tough like intermodal or XX far was not possibly could higher have a

do figure potential how think before out want to certainly a to bit are And important that But to and is won’t come are good improve do of around the closer we in job the business experienced XXX% are we in we our an are certain do there we yet, think competitors getting improve a not business. more at offering what customer to we be to and but our and sure working I we it’s And I the we area. are much understanding grow some will that customer to we good for of make I our and our we doing believe we know as disciplines so this closer. this base yield area, And but here. that, important our customers us who it’s as

that’s I had intermodal an that the would additional from on? side. you Was a there say So question line an commentary

Brian Ossenbeck

No, that was great.

positive the last that and I called out was the have you comment one more a on think you intermodal reefer. on being specifically call the

leave So, the it details. we for all will there. Thanks

synergies got Just in follow-up sense us see you you quick perspective right XXXX give moving the could from rate us some direction you how you real of Adam gave a stacking up the in potentially if next you EPS you of do guidance modeling we seen be have I growth ahead sort some What think range quarter than thought? year? trajectory or should originally typically know, faster for past. the we have

least first would helpful? year feel of at quarters this Thanks. a half next to can develop of wanting how the just in be us the for give couple So, the story

Adam Miller

on not of the of we the think maybe Knight. are we has and I give much a to to of EPS like last deeper probably first trying instance, call, both understand to shared And just fourth going from businesses, history are Swift compared guidance given earnings for from that we to quarter drop-off quarter a Sure. different cadences as

understand trying that the and the driving are to help we think this at So, a you guidance their that. with what’s certainly mitigate not maybe the little pieces a around with are efforts in help I to synergies market, all people But in that’s would position give moving think point. I the on will want give I the to tax think models. rate because most side, I number, we update

on We revenue be help future, we you around to XX% do not things given trying at have are in and position we but down put guidance, a this see it to point will potentially in terms are out some of we EPS transpire. how to expecting side some that the the

Dave Jackson

it’s kind Knight that things. business, than the you on heavier book and know a beverage kinds those fourth add Swift up intensifies and the a and of I Yes. in lightens it just in than some then of food retail our side of would And really band quarter on bit of more retail

would I said. what Adam just So, with reaffirm

feels how this like hanging We we year quarter. is Swift, to through get definitely with here market got of from a understand with quarter really quarter – have to kind that from change it where of us. The in quarters news good things is full

to we have and won’t just that the blue we doing in were also a Swift are brand. we drop-off the three how two work fully has there the really as think cadence the hopefully a will referred another down past of like year project in past, to appreciate quarters at them but were have know the we to to I of projects. And Swift lot or lot so see going end so for And road things I get

Brian Ossenbeck

Appreciate great. for the Okay, Thanks all time. it.

Operator

comes Securities. Casey from next Your from Fargo the line Deak Wells question of

is Your open. line

Casey Deak

revenue to in if mile earlier, and what you are looking look doing bringing forward to market booked, routes I this that exclude you what those on kind kind you attack what can dedicated, under of you as can that Swift can of is at Swift be happens day versus of you. back may the Jason well? Hi, employ If loaded irregular asking Swift is at you the the thank Knight was entering so go the doing at what Knight spot strategy if per

Dave Jackson

some. We makeup a is independent majority where of Swift’s fleet fleet will do of Swift, the also their higher is different contractor.

we But on token want so beast level provide we question make of the if have are of day. the is less every And committed. we enough service, kind freight committed a to higher there keep moving same to no sure that will we

a And need we additional respond. position in committed do doing when customers it number so by for our us opportunity expectations. And being a less non-contract capacity, Number an to have by gives that, customer to will two things. one, be two, our exceed

will more we yes, of do So that.

there. that are in We it of Swift, be our time blue respectful want will works do how more over to we process sure our but and at make that still deliberate of and we brand

Casey Deak

Thank you how in top they That’s bringing are facilitate that, – you them, that of could entities Swift to managerial change talent managing that and to because on so separate mindset? If you. add from are maybe helpful. you Knight I to are

Dave Jackson

to the way business, but also some We profit have other the a of to more we brought have side operating ratio, that focused be talent Swift on too. of the little help done some the

that an they they I Swift few a bigger much at we I are. tell is operate it you folks Swift, And at help that would and how to old help opportunities and asked team our company. where Swift. amazing guy think just I And a am because and greatest me takes that’s I an So a have of know have how lot

and you people by a excited But some that stability they there added talented Swift at to from moved yes, have received amazing people we I will about we people that have have I leadership very believe that team. are the there handful group, perspective. well tell So, a been extremely Swift help but an of have the that we

And approaching we yes, that’s are so it. how

Casey Deak

great. Thank very you Alright, that’s much.

Dave Jackson

you. Thank

Operator

next line Please Your comes Oglenski. the company state from question your of Brandon affiliation.

is line open. Your

Van Kegel

for or Hi, for to to Brandon question improvement on next to that offsets with and through of to now other out how it of this of the any so with on could guys. rate margins guess they I think X at synergies X% from the call about is how Van costs range, in the some question taking the of passed expectations Thanks XX% X you that mean maybe XXX, of or afternoon. or my temper With points you is might the talk kind XXX driver us Barclays. you XX% year, Kegel and outlook – Swift? Good talk can margin after items and I

Dave Jackson

I equipment in and of Maybe market. much quarter’s talked the didn’t of some jump trailers here stop my supplement of very but a rates we in earlier then cost last cost and of we as by years, see fuel of a Yes. way bit. out depressed But and will didn’t course trucks of couple about over the are we the that used

be get this be we fact inflationary. be and thing catch that to likely driver definitely be wages though kind growing, for forward bit have environment But not be. we So, again will is There as the economy. cost, largest up. that of only a a of to a could And caught up It strengthening might will know the the that here seems seen our creep looks costs need we that cost out. going inflationary

the that we goal out line can. as to to So we much be get of is to to as as going look bottom drop our

now kind ever how think of to to I – We forecast line to the I that loaded many would We the get. as to not on has our And cost line. like have bottom drop is the see per probably you normally look the have. are track how on much with to we drop of are right there. OR might up at points much of of track think If that got pent can to fourth we didn’t do been improvement we to we history some mile going quarter bottom our able had that our cost rate of in the record this just kind as and not record past

are rates. you highest sense where we these a third-party really indices where the the however to improvement is. side at of we seeing those to that’s – look look for And rate group a to expect asset our the you So I this a the base lot on particularly mean costs. that’s that on can a are the business I think And basis purchase now logistics is business. because see get pressure than that pricing and that you terms unclear of place of will to stop now reasonable it’s difficult and just for maybe in more of volatility so and saw going is when plunge assume deep is should and year-over-year the When there right of come see number the it factors it’s in in because side, the back trends that. that’s a on that

to us side year because quarter, we year-over-year margin logistic continues season be through based will going beyond on improvement, would and expect like the hopefully carry them. improvement asset certainly tougher enough we the every there that quarters four this feel but the the So is is bid side, and next to strengthen make

Adam Miller

see add cost inflation I standpoint. expect from X% to X% just to to a that historically And we per think normally mile to would

point on there However, we inflationary will we pressure than in but that side also just logistic also where purchased well. market trends had be the trends where the would wages driver you as inflationary some And the be side, owner past. operator are be group there our much probably a in asset purchase on have will they not more I also on

margins So would see year. probably to inflationary in strengthening expand certainly our the hope normal we pressure environment, but than we a in would more

Dave Jackson

you And are to I add your cycles going when Yes. or in the find think just it that maybe quarters four get to the these best in would you past, takes that I OR cycle. would of quarters easily five

looks on how it typically of based in an points could would indicate than so that trucks most, the when into we have the points improvement, depending or side XXX of the there we longer basis seen the market. perspective many depth we breadth Now that could XXX the – creep last into like on this the than of cycle high-XXs when marketplace. depends kind from Knight it in on really new have maybe that, ORs hit there, asset and basis it get better But

the or On points be within XXX Swift of basis that. that XXX side, we basis would would hold points we

dedicated. including that’s probably not unrealistic goal for On base maybe probably the asset an dedicated, side

would would how it. that’s so I that’s how And I see –

Van Kegel

I it the one. keep guys. for Thanks will insight, to

Dave Jackson

you. Thank

Operator

next comes from line the UBS. Tom Your question of Wadewitz from

open. is line Your

Tom Wadewitz

the the was think peak quarter afternoon. I truck. XX.X%. I ‘XX guess Dave, good exceeded on strong on results. already you pricing in that you like was Congratulations And fourth achieved have Yes, red The

anyways numbers, a the figure you put pricing the what bit I it’s ask about just little hard to to and to get these contour out kind wanted big of So, the model. of in you to

the Knight of in market side how business on spot was the much contract the you fourth your fourth actually much So, did at in in how quarter quarter? re-priced and

Dave Jackson

Well, thanks, Tom.

First thing, mean the about Knight I both work time at name, imagine look of could was you have my question that as of we people whole percentage market. is your you non-contract when Army just – at team, there a you, not and said talked rates on you or the and what correct just now so it’s spot to

Tom Wadewitz

boosted quarter the that rate probably spot many fourth just overall versus in how recognizing Yes, realized? in the

Dave Jackson

experience single-digits the close that high was didn’t the we been range. believe in quarter have a percentage in year-over-year would of premium probably have Yes, the the of to ‘XX mid fourth over to low XX% high to of market number course the And seen we the for the fourth mid kind to what that perspective and quarter of to compare on ‘XX, in XX%, X for of north months. anywhere here perhaps that we X single-digit to last that,

about time had kind off to the contractually you gives of saw you is that that mean, pricing are into an previously. a that I with the dealing talk of X kind place we contracts. gone months when X really what hopefully So you idea of the for year

of much a nearly there an contractual as on increase basis. So, wasn’t

we will that see two We the expect. next over quarters here change

are maybe what the be first half of really battle. on back awarded another were the you year. in the compared customers though the heated Now, don’t you get here routing that going as day-to-day into and our is or deeper it factor basis half to tendered as guide little year the on there to until you the a of know And going appears a

you expectations season. the have hopes for And and bid perhaps so

a driver that And first found so had I be and year, as ourselves a getting thought the priced in increase. an not of given been it played the needed where we to the out needed they in place difficulties we loads half think that of we lot

were capacity. the a on finding we so half year, upon guiding that little this also think the of the just into us you having customers but tendered agreed tougher and rate, the rate improvement those were back being at loads And time of just have from seen route our I part was deeper a that

increase loads we yet have a found loads those year-over-year a at So, those but ourselves year-over-year modest, would hauling and come increase.

with market you disruption of or and way what combination front that, any to to in the the our this to in some in them certain spot to combination exposure to is things that saw. led the a the customers priced non-contract of provided get capacity rate efforts of avoid the of So, get we

to bid in keep slightly more different so work, plugging of away. quarters next process And couple way and in so the we but here a will the through continue

Tom Wadewitz

it’s appreciate Adam the team noticing I that brought among out others. you that. only and And particular to didn’t for our Yes, that strong I mean was quite good performance, just obviously, metric Kevin single

if might that second year-over-year that peak, about mile of revenue ask think this metric of So, peak? that also per year can how do loaded we think quarter change about you feel, you terms this how when I in or is maybe the year-over-year maybe I might would change when actually

Dave Jackson

quarter. Well, stages quarter. at typically, beginning is to to get take a the pricing Much throughout just second the of various contract we effect usually and

typically it quarter see warmer between we fourth robust temperatures. but We in what than so you as know a more quarter. and a market would normally quite and seasonal all the Second shifting a with of impact and see that quarter comes more so beverage has to there, just first course, like non-contract season not nice

I year, contract of won’t impact seasonality So, probably we until but the quarter. we the see still third will pricing this feel imagine strong full the

the to will the in fourth if to largely I prepared mean, year. degree I I we we will and saw in get we watch when first half the So, of out we will of surprised how have non-contract see that I think come just to have – be things this be market. would same volatility plays think for quarter.

year ‘XX Now, way reasons restrained what there saw that haven’t we seen to both and in ‘XX had what where are broader and we a happen than to growth different saw is a chance or that’s strong those than have that ‘XX. could in economic of different because in there we a we capacity growth believe

And so we will that have to see plays out. how

see the will kind quarter budgeting of you of that are not fourth if a end at really would we We similar XXXX.

Kevin Knight

the very think going events and of on. retail the all off was would the were the a requirements. disruptions seasons. strong by participate all I chain top introduction that, weather what little of I top Tom, add, in caught guard then on and of probably dynamics weather the was And of on that, supply a us then It ELD And that initially then few of bit

significant at as So, that good our that contract they capacity. will folks sourcing the on are and capacity would capabilities for to that quarters next awards ourselves serious focus such couple very very supplying pricing customers have good at making expect I over of

you even some So, could have dips.

Tax really into and remains, the the also could strengthening way and some and it dips what strong the just economy Jobs I have Cuts could its you system. finding happens really depends capacity some with You what does how Act on think have additional and

it. we have got just So,

in have it got and way the navigate We through it just as comes it best take to possible.

Tom Wadewitz

Thank Great. the you for time.

Operator

question next from Please line Brad your affiliation. Your state of Delco. the comes company

open. Your line is

Brad Delco

with Stephens gentlemen. Brad This afternoon, Good Inc. is

Dave Jackson

Brad. Hi,

Brad Delco

driver Kevin, get I will rates. up you, Swift, is I the message to little go that of for and Dave, at to this heard fleet, wages a need good feel deliver Dave, focus maybe go direction on the you when Knight’s wages like the bit wanted you driver up afternoon. I have

that about start that saw think going you trucks we quarter. the seeing When a the and way and fleet to a So, count other move? what it XXX rate you down from both see turn the in is wage so perspective take do or fourth to

Kevin Knight

you it’s Knight. that that question will existed exist too, to I wish at at introduced have have didn’t answer Brad, we that Well, a but degree process tell the I its I Swift in the they had disciplines on-boarding some

And Swift feel about isn’t like Swift. that about like like think drivers Knight. develops think And that experienced nobody helping, trains but and drivers nobody you you I when so Knight, when develops

to couple the are probably driver going really than supply I got that in away his to at Dave Swift, bigger we we I really have to And where quarters past. and have are invest you under in more make from And spending few and tell feet enormous introduce I that in area, we strong business. finding that we our least the and at start at time. have us a with months going know that is and our Dave building better appreciate got and working is been like so but and disciplines, team it for at we going believe and Knight last now be be to I on that. that’s of we Knight more feel time stronger positive will in Knight his When to will and amount you that’s we the bottom, of And are has able maybe territory you an development are more very to area an group are we retention and Swift

out from for now driver good is are rates good got from have And driver to improve. so where the Swift, driver how better do perspective, in development basically perspective, you situation at position playing a a but a see a from and your rate puts we drivers, only to that rates Brad, retention were the that more that’s And driver going it and I pay to rates driver thing continue – not about perspective.

to to way and you so be we to but have out focused work the clarity, are with having stay going very, and just more little us, for have we should stick very to it are apologize And I to going well. all trucking do not a patient

Brad Delco

is to Kevin, expect the $X.XX take the there. Knight, suggested if you catch need I $X or place? $X.XX at can that just point there going Dave up to range to the little a on clarifying at same driver Swift bit is that a of

KevinKnight

close certain too but not about higher not Yes, I am XXX% could far we are pretty that. bit off, Knight little be a

think close, I Brad. we really pretty are darn

so on up I catch And see don’t Swift. necessarily any

One get of the to his a on good things improve that to driver cost we had the at own. had we to do Swift was

started. cost is we since shortly we been so have experiencing after that that a started, but we And

driver So, hitting or side, those far becomes Brad. so pretty own, his already are as costs her and the as on are a low we once darn Swift close, but

Brad Delco

time. Okay, Thanks the for great. guys

Dave Jackson

Thank you.

Operator

meeting turn I And over all that the our for presenters. this will is today have to questions. time we back

Dave Jackson

a get will for Linda try questions we and asked a get many to have there not evening. have appreciate Have have we back you us XXX-XXX-XXXX that will with be grab your a in those and we at who to did really of those give wonderful message We time that you joined question, you. would call welcome touch to and and

Operator

call. This conference concludes today’s

You may disconnect. now

Knight-Swift Transportation (KNX) 31 Jan 182017 Q4 Earnings call transcript