KNX - Earnings call transcript Q1 2018 | Knight-Swift Transportation Holdings Inc.

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Operator

Good afternoon. My name is Vincent, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Knight-Swift Transportation First Quarter 2018 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 W. Miller

and Thank you everyone, thank afternoon, joining you, the Vincent, for call. and good

We have slides Investor to accompany this call is website, posted investor.knight-swift.com/events. which on our

Transportation welcome So, to like off, XXXX to first the call. we'd Knight-Swift first quarter earnings you

go scheduled our and to X:XX PM in the past. Our will to Eastern structured be call until is similar calls Time,

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

this associated and also to of to compares a statements you the questions less Later first question. you earnings the the first contained Part in presentation. the results reported following. future During the revenue year-over-year risks, plan one XA may specific basis. to participant. there are for This presentation, company's to X merger The We'll Item of results States ask Transportation's per discuss diluted that in quarter quarter To to our of level question begin, quarter. queue of requirements I'll future may any United we topics and are earnings are If difficult company market. XX-K quarter uncertainties note, the is call, we'll cover provide the provide assumptions for risks get to the item Annual the call directed the this slide on SEC for however, the results. or is Report may Investors in slide the the the Risk and Due year-over-year $X.XX. involve refer were represent around discussion and disclosures figures X outlook to and Knight meaningful. that read on your the slide the X invite results. consolidated accounting Factors, a to back questions per circumstance, we by rules table the operating presentation follow-up share results on first comparisons GAAP to the on and with transaction, X are I'll at results. predict. of XXXX contain An on historically now filed differ. only conference more information the context made forward-looking XXXX with to important to X The results Form company's the that, due first affect of unique the first the move and year-over-year Actual that question,

$X.X adjusted excludes EPS, of million came which in merger, expense $XX.X to at or Our amortization $X.XX. million, related after tax, the

and in to due rate primarily quarter we the Act] Cuts passed XX.X% Job to tax was towards the Act prior Jobs and (sic) tax the effective expect [Tax the On was a in that approximately year, XX%. of end XX.X% basis, XXXX. Cuts go-forward rate Tax of Our compared a normalized

in surcharge gray income. better We Now, comparison. provided comparison, we've results believe In a historical the adjusted provides three-year slide included of this and year-over-year as fuel X. revenue, excluding on to operating Swift comparison we this a

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

$X Our even competitive Abilene, strong the trucking results and and favorable a first Net means the the through were of fourth results we in cash well debt as net ended X. We quarter, it reduce of through flexibility. funded of a and our million, timing in the by strengthen synergy balance our continuing XXXX of committed of operating sheet turn advantage, cash $XXX order, now both able view market our due to typical encouraging we quarter more which XXXX efforts our CapEx million the with we're sheet capacity. million remain to balance larger and at as the I'll slide our of than on the In as quarter of CapEx quarter, as the in leverage demand continued delivery for acceleration was we of impact which constrained which equipment acquisition was freight as reported. and was debt. believe strategic balance provides ratio the EBITDA quarter to improved facility. as dynamics seeing sequentially previously $XXX were in to to We debt sheet deleveraging of off terms credit

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

increased liquidity Our was the unrestricted of million $XXX our available quarter. $X.X total at end and the million cash first

have months. Our over dividends XX to paid shareholder past billion, we out million equity $XX and increased the $X.X of

free we cash the cash Our of resulting operations generate million first as operations during of able flow $XXX were remained strong, quarter. from million to $XXX flow in

to to XXXX. to of maintain the of quarter continue and sale market environment. first We the in changing a quarter on for size the for million was Gain of $XXX,XXX $X.X strategically returns manage equipment XXXX age fleet first compared

to However, first comparison. not And positions the year the $X.X which Dave recorded have to now to believe of to prior balance invest I'll quarter reported us in note, to is continue our XXXX, future sheet turn opportunities. flexibility million We our current over Jackson. in it consolidated growth in Swift

David A. Jackson

the primarily I Virginia, dry the Express. runs Swift typically van Thank and fleet, on in low good a with in Abilene you, compared controlled March and providing and in They're everybody. X. some operating the slide Motor start an Adam, afternoon announced over-the-road Abilene of ratio we is annual XX, XXs, Richmond, and based an trucks On has temperature acquisition customer XXX unique base about generates existing provides $XXX approximately brands. and relationships million to Knight customer revenue. services that will

Our to is other acquisitions. strategy very similar Abilene at

on join customers, of include Abilene brand and focus the Knight closed our continue reduce the in Since acquisition weeks be two will late synergies first have and results The results our great have the March. quarter, of last team. a quarter to as included They are We're will results and Abilene Abilene will We great in distinct drivers segments. costs only and great keep revenue. people. developing improve to that them excited for the consolidated

in offset truck partially XXXX into the over Now, costs, segment was which Trucking adjusted prior improvement back inter-segment in XX.X% to provided increase XX.X% operated operating a surcharge by at count increase quarter, tractor, an ratio basis an X. and fuel more freight increase driven revenue year, on market transactions, trucking X.X% slide income improvement first and in revenue opportunities Knight of driven XX.X%, $XX.X tractor, average non-contract to a the a from point in driver partially and In primarily by related XXX from year-over-year. quarter carried $XX.X than excluding first of quarter quarter. the million strong the This our operating the the per the the decrease offset increased doubling in revenue half was in the throughout XXXX in Revenue, first resulted per of million XXXX by by XXXX. operational

year-over-year, even count the we grow the truck per excluding year-over-year, average also the Miles additional still X.X% was of improved from acquisition average from able resulting were trucks While the truck operational we again, when XX tractor tractors Abilene. exclude fourth XXXX, down of count by Abilene. our to quarter

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

XX per brokerage X.X% and business basis points improved margin Our by partially brokerage growth brokerage XX.X%. by a by was percentage to revenue year-over-year volume. load decrease The revenue increased in offset gross load XX.X%,

slide Now, X. on to

reported quarter. efforts, of synergy These offset believe from control, the increased same its what each of the had over estimates. by of adjusted which Swift see XXXX this partially still improvement we driver momentum in We the first the and Swift adjusted on positive the by our improved what and segment the was in to million is quarter, believe previously costs related $XX.X original schedule have when to headwinds the in cost XXXX. reportable our managing result to operating ratio, XXX% compared focus for reported freight or a strong We improvements environment improved operating are segments, market. continued ahead income Swift In markets, first previously quarter as our our challenging were

hiring the retention the investment the trucks a and increasingly driver quarter. results believe fourth count, may for our During recruiting implemented in stringent to market, short-term we We safety. declined our quarter create improve These initiatives the into regards fourth efforts will our with additional efforts. these several pertaining increased financial long-term. but to uncompromising in have To to from merger, these XXX and difficult quarter XXXX. requirements first quarter of count began in XXXX, continued counteract of more Since our driver truck the headwind first the by the the truck initiatives commitment we

As a driver the past few count our efforts, over weeks. result has stabilized these of

year-over-year, utilization was trucks. per Our of a unchanged from year increased due primarily tractor segment tractor by per X.X% segment. Truckload in by X.X% number a in to offset decrease Dedicated prior revenue partially XX% per an largely the Swift in driven mile, increase loaded revenue unseated Revenue our increased

achieve However, contractual able to we margin in the some were shifts mix. business reductions and through some increases, rate improvement cost

mile was revenue of Refrigerated utilization in number X.X% from was Swift was revenue largely the result in offset prior X.X% utilization. by average per decrease an in a the segment, length loaded our the as decrease tractor trucks. of The year, haul a and unseated the a For in decrease in increase increase unchanged per of

approximately Our over-the-road of in Refrigerated segment, as portion revenue which revenue per XX% segment, a mile. a result tractor the the XX% increase XX% of is loaded of increased per

were results which Kevin a primarily a our operating is best Knight. of an turn it segment, and achieved revenue a I'll XX.X% volumes We quarter. by Intermodal historical adjusted per which load container. ratio a in to are a These over of for increase result improvement our encouraged XX.X% now first XX.X%, in

Kevin P. Knight

These market. in factors, driver increase challenging may the Thanks, shortage impact for especially signs economic resulting considering recent Dave. point be capacity durable increase Cuts the more the increased broader to to prospects vocational growth. relief show competition the to the labor, likely to of growth Act. in headwind positive ability future, Consumer industry economy and continues goods and manufacturing however, growth The for The potentially will the driver and continues and all from a Jobs space. Tax construction, of in the tax the spending, a

impact had throughout We also the quarter. the believe an that mandate ELD

season, bid single-digit retaining and So increased conditions, low increases, are the rate the far associated double-digit strong with XXXX market inflationary hiring well the by seeing such expenses as as drivers. as in we driven to high pressures

to In each yield. well maximize environment, sense We expect gaining pleased rate work teamwork we best Swift continue brand to are implementing a and throughout from levels order feel how in to our On Knight sharing monitor with continue from we are of to teams practices. XX, will continue Groups And service and employees. we together. the our XXXX. these and this slide we markets increases to are both

thoughts committed the remain We from Swift both are We be. safety and it importance it to businesses. is the our best Abilene. and at and improvements our Barr-Nunn Excelling all of with at best practices be both Swift Knight service similar Knight goal brands the can to best utmost making of have Knight seeing these Swift. And and of about can we

happen positive implement to see both safety are at improve begun initiatives already trends our overnight, These have to service beginning do We in not and Swift. we several performance but changes metrics. to

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

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

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

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

to to improving Our together transaction. questions. and managing up will Vincent, working cost enhance reducing call, open we service, mile teams cost per the remain while markets, high-quality our committed safety improving developing performance now our also that, per drivers and our and And with in for

Operator

of from comes the We Tom from question line have a Wadewitz UBS.

Your line open. is

Thomas Wadewitz

Adam. Dave, Yeah. Kevin Good afternoon, and

that wondering how function pricing in you I see I'm seasonality of guess, offer you the the change had. and – kind of if that thoughts some can mix may quarter the the had you Let's on

trucks Knight market. in legacy spot a the You of had lot in

that stronger, you seasonally fourth similar? how more think kind being would you you from as thought offer you in kicker maybe maybe you your might over if see in second spot? on in you And think amount that had more of a pricing was? at put and can of I I Was spot quarter, XX%. then, the where in just And quarter have changing the Swift of look kind

David A. Jackson

non-contract our Knight run I'll fourth It Okay. in back XX-something Thanks, to, that the Tom, estimate This for that. was the more a that, take XX% the probably percentage nature. maybe as we was XX% is of We contractual would business. you question. alluded first were was Dave. in And a that somewhere likewise the quarter, in what quarter, was terms in in at to – market. estimate versus we in what of that we range of non-contract

second we to Swift at say things. and range, as would it change dramatically as closer XX% that the in of at point we Swift from that we expect and kind the didn't estimates we'll was refined how get next, look of our don't quarter, exposure. has the this percentage best of fleet to just that but that measure to more those probably quarter XX% Our was one to dramatic the more in I change terms look

upper-single minute to seeing on an Of going us. we're just right it's, low-double alluded there, to through digits that now. bid to perspective course, a recently, ago, season digits from a increased And as encouraging we're the we that's –

how swings And make try not a so, kind – we're of you expect shouldn't composition in us to and works. dramatic of in shifts the that or

Thomas Wadewitz

Okay.

comments So, third to in are your quarter? to we overall rates contract how coming the rates second contour out – quarter, to anchor of come figure going or should your on kind in of on

David A. Jackson

a I bit these ago the think but that's discount; the to makes non-contract a fair piece little year at arguably, look a that market a tricky comparisons double-digit at, is discount. was

willing at look unsustainable were that to you And first scraping at and very you So, at fast now found premium. last short market healthy move you sometimes rates. if year you the and in forward, yourself non-contract loads a quarter, things

makes while a weak comparison so, have here in market it And was a these first we a year quarters, ago. bit very a exaggerated over what it few

favorable comparisons, to And of so, look will going when going XXXX. begin rates. we away But the is to to quarter at quarter to those second second is non-contract – go have half be second get you as

Thomas Wadewitz

results, and you thank Okay. Yeah, great. Well, good time. the for

David A. Jackson

Vincent, you. Thank ready for we're next the think I question.

Operator

the Allison from Suisse. of Credit from comes question Next Landry line

Your line open. is

David A. Jackson

dollar the a thinking think sort about backdrop XXXX? of Suisse equation M. of can dollar you're that Hi, guys drivers. labor that Securities months, mentioned Or about will is think and every labor it? that's does Landry that go of about the for that increase that last side, (USA) question how of over developed every you one the you question? - thinking and My to sort I you your Is still Allison has rate last the attain tighter Allison. as how few $X.XX What's changed call on and that one LLC Credit on your the

David A. Jackson

Allison. question, Good Yeah.

it's to the been of its it's Historically, the driver that to find quickly. in that fairly think way improvement rate fairly would increasing. XX% efficiently, I XX%

the for trainee range, we And it end been last even or Knight that in for upper two quarters, to and so, at have if we're higher. by somewhere If take. varies pay, look we're the definitely sometimes what range for them driver. versus wages not X%, of call up on for Swift, experienced that X%, pushing digit it trending upper-single give really, from percentage X%, a that, between And

that What where, up market so immediately. industry, when probably to has it's now, much and up up, rates really target. up we there pay we goes drivers and is driver gone dynamic entire it's And almost to And different across moving ourselves been going know all very it's what's of a ways, find a kinds little driver out go pay gone confusing on. in the in understand the

it's dynamic. So, very

working the with we that have sure to find to help safe our competitive drivers be line at walking same trucks, a we're So, way the of customers to enough to high-quality to time. able make fine have sure that we remain fill can to our drivers make us

it provides Excellent. And Securities - that, still Allison of for the we for if – M. a business Okay. XX% for share - the all in LLC it driver, so, customer. (USA) stakeholders, large, Landry value Credit – the call of make Suisse for lot increase hopefully, is the and, for somewhere you of Thank and typically the to work that it, the can by revenue work

David A. Jackson

Thanks, Allison.

Operator

line... question next Your comes the from

David A. Jackson

ready. Vincent, I think we're

Operator

Brandon of from line the Barclays. Your next question Oglenski comes from

Your line is open.

Brandon R. Oglenski

guess... for one everyone, afternoon, and thanks question. Good I my taking Hey.

David A. Jackson

off We leaving end up always people Thanks, I'm you'd unintentionally. Brandon. asked. glad

So...

Brandon R. Oglenski

fast I'll for Well, you. keep it

get Truckload but guys business we've in you to even on Knight in past the profitability sure that levels running this the over the Dedicated calls, I'm can't there Refrigerated match is and and – segment any reason and as Swift business, time? deeper covered think legacy the So

Kevin P. Knight

Yeah. we at business can be under Brandon, Kevin. expectation have to just profitable that our an approach as this we that Certainly, at Knight. Swift can as is we

doesn't Now, way. the that same that exact going get we're to necessarily mean there

been being And bigger structurally past. or fundamentally anything I Knight don't a we be I player keep a so, the see see Swift instance, really market from there. in than what the market in that see as getting will For bigger being. we'll – Certainly, we've non-contract the in non-contract don't player you us know as

some got you've that time improve. to realize Now, things take to

are there you'll It's see those foundation, things we have common, can our there So, in years business, that and us don't come. outperforms hair areas And some have just convincing fairly groundwork fairly results. and then keep see patient. that lay going are just the that Swift you've And the Knight get business, or dry four the some Refrigerated where some nothing. areas gray There our later, the to quickly. in three yeah, But, got that are be to of already. guys to we

a a between we have I dedicated that people Now, and probably say player because two trucks. grocery dedicated approaching perspective, the big do Swift amount our the from work of in were we is And we probably brands, Refrigerated would dedicated actually X,XXX in segment. is realize, bigger massive segment a than

Knight. are portion those Now, a small of

you're Swift love teasing. are that if so, And a XX% a up. In in just I'm in to of be And this won't want of tell in XX% in dedicated with And see all more So, operate contracts at significant to we words, perspective, our XX% efficient we of result barriers you Knight, an put our good primary just dedicated lot – than Swift. OR. contracts part be you trouble, my competitors me. it. that's dedicated world, if the little and we've as people a those at as the happy as guys you business or can. we probably what from that, a to is I'll our what, not have the we some at In look large an We low-XXs. large other Knight. of of on participated possibly at who But But our new other we tend those no in culture, side. or dedicated got past

whether or there over is And top-notch, I Our executing. we does or about doesn't it team have grocery talking just we're amazing believe nobody and really dedicated it what, people matter better.

to anything no, don't see we financially us same. us Swift. credit it. give performing And from way close keep that So, the to I make us mean earn earn in any plan at our it. standing we should And don't

Brandon R. Oglenski

you. Thank

David A. Jackson

Thanks, Brandon.

Operator

line next The comes Group. Scott your Scott of is question from line the Group, open.

Scott H. Group

guys. Thanks. Hey. Afternoon,

and sort look and I in compare normal did of Truckload if Knight quarter, fourth Truckload right quarter better at seasonality, than results So, versus seasonality. first the much line with was normal Swift

should of rest I'm better And wondering the you of seasonality second the and this, margin be and year? quarter normal about and this saw I of than maybe more highlighting? guess earning think synergies the we think sort difference maybe, think should that the guys as fleet, So, you quarter. we because how into driver Swift's why because importantly, forward, the were you not it Do or of going

Kevin P. Knight

would customers clear take to quarter our area. of a quarter not historical that take care Swift And quarter hoped exposure serve released performed fourth we results first going few the that the get compared Yeah. arms you performed fourth that call quarters Swift seasonally. had we it's I mean, quarter that admirably in way told and has I Swift first amount the fourth off, Swift to to were quarter. earnings holiday. the first around our take the maybe at people when our of has very out how say staffs should a And in the Scott. in us retail in I'll perform in and we to all historically the seasonal we that that, massive And that pull

was are there brand, in fourth the what's first know that our Swift of at and Knight we good. difficult try setup Now, came well first make quarters performed you brand, very the we recognizing the typically to sure than historically. Knight we that worked quarter to quarter, better just perform and very out At our and especially off

And throughout year, and be as performer, progress Swift build should of a so, more Knight progress the we our I would we the is expectation. steam consistent throughout will say year, little as a

Now, there's what on but just work, no that's promise expect. there, the how based two we brands

Scott H. Group

Just want Are what to you're sure I suggesting make seasonality? better understand. that Swift doing or should comfortable now Is normal you than start that trying to say, Kevin?

Kevin P. Knight

necessarily. very I I'm been Swift's and saying the not first the fourth quite No, that And in typically quarter. and light strong there second quarter in a quarter. haven't third honestly, in

of So, we go, we're the we Scott, but we people them support quarters can. as than very that a them team work them very to do. help and best we and the with we second can get up and And have better best just that third kind of they we'll large learning produce

Scott H. Group

you, it. Thank Appreciate right. All guys. Okay.

Kevin P. Knight

you. Thank

David A. Jackson

Thanks, Scott.

Operator

from question Mehrotra of the Amit Bank. Your comes Deutsche next line from

Your line's open.

Amit Mehrotra

you Thanks, much. guys. question. taking so the Thanks Hey. Appreciate

I the on you one, in Any that's just the that if you synergies that quarter? ex sense Dave, that, the first those profile kind quick How helpful. returns? the And So, three would on inflation, there mean, million like leverage quick is for cost appreciated. in you're And you – guys of helpful the I give the side synergies business actually or count? truck wage severe guess, quick is without one, operating synergies, you the be Swift Any have is be then, for more help driver about that talked the are could trended of so the this would the what it how decremental the Thanks. was that the $XX the unseated be you and are And questions But about quarter? us of seeing. of much year. you'd drop-through then talked very realized wage seeing inflation had. seeing also lastly, I

David A. Jackson

Yeah, those are three.

one answer which Amit, you to for us you? would So, like

Amit Mehrotra

question. good a That's

last margin question, How the see. about incremental Let one? me the

David A. Jackson

Okay.

Amit Mehrotra

I can you repeat want. it, if

David A. Jackson

don't lost I Why quick. two? after you it, because Go you question repeat ahead,

Amit Mehrotra

Okay.

next synergies haven't is inflation, but talked the going that the the you're of You over have. talked ex about company the driver really profile what margin wage you quarters, incremental about several to

thoughts any Thanks. there? So,

David A. Jackson

Yeah. the a that if XXX% of per clearly. but saw good improvement, look, line, Well, you to revenue mile not dropped the business bottom

It's a so, a was talk on meaningful the we sourcing it's expense of effort more more the associated find driver. drivers, as try and with side, pay. working just about recruiting goes portion everything recruiting are It and includes a greater And and same up not the group. all to driver that When drivers. advertising people

that on we as month, Fuel, than recently second as a sale. and that. headwind. in continues more you the more not the by non-driver been has expertise So, depending on inflation were far seeing is move on addition clearly the now, soft, mechanics, largest late. equipment well, the the We're there the been now, in related gain that, driver consistently of of in which in (XX:XX:XX) in And but feel the the be portion But equipment. to the inflation shop, used to side, you headwind we as often seeing even it's technical into quarter, side see it market a

factors. So, our those are inflationary

on able we asset-based the that particular. some on saw in on overcame like to improvement of in those You the side, point basis the the to order ratio We saw Knight business. be operating Truckload we XXX drop improvement saw the

kind rate our is paid understand the the allows inflationary in that exceed weighted So, business, reinvesting to – needed order keep what do fleet. like at keep of the to us return feel with average understand cost to this of we least get in to costs increases are is we a up we this have where to and provide is capital and that ultimately,

isn't basis Knight's as mile to that but dropping the line as level, done. per So, on approaching historically a much has rate it still bottom

see side, Swift Knight, have the and I improve that to room drop able of to our Swift to in line as others and terms at thus was a both compare we compare charge than and better I bottom the at bottom most, industry Knight that lot and to On more done not line. the look dropping the much to led in rate have Swift that released far. if have how

keep So, those will, of like we be and issue at we second ready not and, help earnings we internal areas just look But keep today to if our when guidance wouldn't factors you issue are we quarter, that hopefully, ready and haven't the I've when as quite that yet share. to to we quarter, in best we forward. earnings we third again, try, private, guidance we your will make we own where just done be and we're decided are going do estimates some outlined projections ready that'll and didn't

Kevin P. Knight

Yeah.

Amit Mehrotra

Okay.

Kevin P. Knight

just business, to the our has first quarter this job year, how Knight XXX a the same mean, good the our I good folks add. Dedicated one Refrigerated quarter, the look the a Amit, Dedicated first segment, And I Intermodal significant Swift, got me an we points. When And token, our every we at competitors. you OR quarter. did last look segment, businesses. it's been in would But dedicated just improved And those all Trucking of competitors, not I see performed interesting segment, work in basis for for to the at in the the that improvement think I amazing the am when job. red of grateful out last our segment, really at on I in ORs did brand.

market, end – compete we control can of we the how how control and we it's of finish but we the kind at the day. So, can't

that And so, I additional the question. Appreciate an that's just have. comment

Amit Mehrotra

guys. Appreciate That's it. helpful. you, Thank

Operator

line Your next Brad Delco. of question the from comes

Your line open. is

Brad Delco

Good afternoon, gentlemen.

David A. Jackson

Brad. Hi,

Brad Delco

give you you? like about comments are your think the real this going remained how quick. market often if not that you concerns whether what mean on on the in or to industry. made thoughts they've I on And some make elevated. remained Dave, truck what's would and Dave, for wars, elevated, I'll they

bad So, it thing. that's tell me And not that's for why me. a

David A. Jackson

just bomb Wow. and dropping Yeah. for off. popping Thanks that

Brad Delco

I'm sorry, Dave.

David A. Jackson

that baby. years with I can Four tell you're in a two sleep-deprived is new lot. babies

with new little sibling doing So, hope there. are well triplets the their baby

So, congrats to you.

Brad Delco

you so much. Thank

David A. Jackson

probably to one demand orders soon they you if should a want are if a a how and new you degree So, negative. as of study it's as in I be supply negative, and to think line, be and matter truck what closely can industry, this bottom

age. it's in short to few orders, a the component on look every there's the labor there's when Trucking things And be think its that not, a way would that's the a is account. who which piece. to have labor portion that don't that, so, second group in even economics boomers low still vocation as be vocational seen manufacturing, I goes growth industry on important. as XX, there's seeing seems the even think more the that's because And And disproportionately the number that's range the in of up, a a significant it's one Perhaps relationship, top we And at growth most in important seems certainly, I you've then we are have third to component into because then high a where second supply and we're end really scarce already, scarce. construction, of the truck our of component – has things simple of, of take baby on therefore really of workforce labor. the that's XX

of that both our coming and vocational that's and when replace quality a so, couldn't because position with know age U.S. or labor I into has, this vocational vocational we're the look current, that a the probably of challenge try to in should what labor. because call one but And the somebody the life – average workers I deal in it with to don't concerns at if worse the crisis Trucking of of we of be it trying not,

we big have into piece equation also we to be then a look whole going same the what orders at that equipment has you account This at saw would this at record-high And this used taken prices. equipment huge may time be we used when but we on saw part saw third with orders. be what's look of XXXX, we the look at So, new XXXX, course, we of XXXX, when prices. – –

equipment not And and into precipitously late XXXX, prices throughout in as recovered, XXXX. continues throughout still end of XXXX they really used throughout XXXX, – and peaked so, XXXX fell that have

going market, go days to there say, is cost have. can you well, were which $XXX,XXX shipper or truck if you out to truck the to would one lot truck XXX And going you for to in the $XX,XXX is to the place a regardless so, you And strong old say, to an can today it take same put customer and a you carrier, work. wanted and go buy one small would receive carrier, it you that's a a of order or your pay of grow delivery four-year rate, advantage the for and drive and reality you off

suggest given equipment into And has immediately perhaps run are of there, bloated that the and these logic shouldn't it used finding and so, pricing given the stayed that quite inventory where way we would new their judgment weak trucks to driver. that with marketplace the

– glasses – outlook of the is two bad compete and to that but probably I'm three hard other is that I taken that's that factors number hope with I and there. that's should rose-colored hey, with, that's So, of not orders. mean, those in. those too one be And But really

Brad, on be that a long if question, would too of thoughts. I that took couple So, but

Brad Delco

truck used you, We'll attention it. pay appreciate values. I Thank sir. to

David A. Jackson

Thank you.

Operator

JPMorgan. comes question next line Brian from of The Ossenbeck from the

Your line is open.

Brian P. Ossenbeck

afternoon. Thanks question. for Good Hey. my taking

side see on the truck contraction just the assuming we Swift on strong to I'm you the by continue the the as business, that sales, on to expect mine's pretty So, bit a driven primarily in gain million, $X should quarter, count? continue, of of

Adam W. Miller

volatility, know that we anything it Swift we was and of don't want that that the little could Yes, what Brian, question. which think it I reported said at just equipment gain in it pace. used continues year significant. I comments sale on I'd million. include the last know previously have our $X.X I'll equipment don't I the would take Again, to not but does think a – probably say from or $XXX,XXX – – that does

it the release. a as in But changes maybe is different as would standpoint. not trends gain we the comparison any expect So, from looks, press just looking significant at the

Brian P. Ossenbeck

Okay. a lot. Thanks

David A. Jackson

Thanks, Brian.

Operator

next from of Your comes Dave Stifel. the the from question Ross line

Your line open. is

David G. Ross

the but to trucks? terms those a more some outside Yes. standards might a number driver Back hiring – Knight at at drivers, being in off reason of you greater be reason Good stringent for of much there of drop are Swift the at mentioned is than that Knight gentlemen. Swift, applied to that, afternoon, that than

Kevin P. Knight

a and would has whenever you change culture issues. to And can the I expect. go you a also starts a bit, whenever little say Dave, just it leadership it just Well, that more might I say, with do than to few would through shift create that

second it So, since It last the literally, steam XXXX. Swift, in did XXXX, or maybe built we few the driver steam or got have been been build good third quarter it XXXX. we And when news going our positive built for company count in and boy, half of of negative But steam the weeks. or out there the driver is, quarter for flat first at weeks, six Swift. on either last we've five count

acquisition, we successful we an example just has changed. to shaping you approach why Abilene now is you that an and our it's know Barr-Nunn So, give extremely do, of, I'll successful Dave, up extremely an acquisitions been be acquisition. think like I all and

have that. we've four drivers, we've that we anywhere sure three lost Abilene, management at I'm and if the that I'm there, of. adjust we've think culturally not I or And or to supported aware had not two

he seven how old much through over it you that. tough. that And then you enters, marched I be on, at I into you Swift yesterday. going These you things was bother around chatted the our to hear a put close, walking good. things? stopped them, shared leaves announce of are you And and but up and like But He I doesn't associates effort thought have trucking there. it's will C-suite it's one months then he a so employee how close, are the and to and here. are you're floor. eight or feeling building on me. And my takes said, it this. And a There know mean, going you a many going said, It's that looking as stuff matter to C-suite to asked And how from company to and for challenging. with all And you. of it, he story it was and I especially say important wasn't with office and Swift, the I – guys an just ground then merger, busy, then they

trenches. folks these So, our are in the

adjustment. And so, it just bit of takes a

in retention, standards really, our we we development, those all call driver type I order of foundation us crazy, with safety, certain but modified that some productivity, service, really be a that And – know we of hiring of those need to mean, things. successful

conference couple tough driver some we proud our these And five they've so, But Swift, six gain I'm traction. people front. We'll us really we hey, – to six the started give call, still said weeks of real last a changes. or to quarters. ago, yes, some how months And of embraced on at and like it's have you're a going of been it's to

but telling improving. hey, out yet, results am that are woods I the we're I'm you not you telling So, of the

had brands. Knight why, Dave, be at other it opinion, of would Swift that or any than in slippage we've So, my more at was our –

David G. Ross

helpful. That's you. Thank

Kevin P. Knight

you. Thank

David A. Jackson

Dave. Thanks,

Operator

question comes Buckingham Your Brooklier line Matt Research. of next from from the

open. line Your is

Matthew Brooklier

Hey. Thanks and afternoon. good

synergy Swift. an my get just we of past, where are be. question can the provide that in of could you are is to you terms impactful example prospects delta around update that process. curious you've you. was and I maybe given terms Thank maybe in sales you talked for if there's was synergies update of that of of year, able an So, were terms just but any in in sales business, where the that you business reprice and what know to of an at you like the potentially to the and, us are the repricing I there's terms remainder color how some number a in yeah, what think it in the

Kevin P. Knight

So, Matt, I question. that appreciate is that. I'll This take Kevin.

I think were Swift. more you to specific

or take depending through And business, three And a your business takes can of your year the basically on years on two or your of it Dedicated lengths contract. four it on so, really, irregular book to route. work

and Now, for ability back on side ask to the we also have the go Dedicated help.

into we are digit supported. sometimes, price don't it into depends the business the bid we even get And bid on we're mid-double it single-digit, we increases. cycle, we're get is, seeing how and where that priced. was, it was so, sometimes, and season, supported well just to really And up well But high where

can that we We have our significant have we developed. brands and get our intelligence technology just market in that through

our problems the – situation but the opportunity have in commitments And right where kind know them. were past of when just commitment their change been in honored we or are, the a it's Are under fix the we now. a to that to still and of are where customers so we okay hasn't we a case, we're matter do that

do that bullish the to couple less And figure still non-contract then, do? way say a And Swift would to opinion. because so, area, it's we we next our results those more and quarters perspective, more you if good strong, chances from the And job process. bullish where a really, I little and working would would in you've still through our are cycle driver got first through a And be market. very that we say quarter from you process or ago, we we'll but, holes the maybe that take then, are to but the doing halfway the stay fill out, a I cycle. team okay, up Knight sometimes both a And we're than We when away I hey, our seeing got business. at market in can in a that through – not need no and lose pay good. is about the say the we're But start at process, we're very go what were we're we Swift

answered your I hope question. I So,

Matthew Brooklier

color. appreciate the you. You Thank I did and

David A. Jackson

Matt. Thanks,

Operator

Lynch. Ken question comes of the next Your line America Merrill from from of Bank Hoexter

Your line is open.

Ken Hoexter

Kevin, competitors a it's the it can grow in Dedicated, to in Good and of kidding feeling your you how just to it's on earlier that margins, in before little on or about chasing Refrigerated, I it? afternoon. structure profile, completely your XX% business commentary. But change returns or in and me all whether a Great. in lower whether answers want about bit you you look did the concern is your one business get business, you keep shrink can much Dedicated rates if to you return if that that

Kevin P. Knight

or what environment on Refrigerated XXs those more depending we're rate. Yeah. And in. No, operated both side. we at plan have historically We like our it or about Dedicated of low-to-mid we We've our businesses have the to Knight on intention shrinking those business. efficient. effort businesses the no isn't in cost And got get Those just profitable, work of more to do businesses.

brands, at And love to always our so, like we've but our room business we just of – any I part our of improve. just any and – Dedicated business Swift, at there's

side make continue business, we improvements. nonetheless, as might would to businesses. to to no, but expect expect So, as It improve those not of route our fast irregular the we come

Ken Hoexter

Thanks, Kevin.

David A. Jackson

Ken. Thanks.

Kevin P. Knight

you. Thank

Operator

Next question of Ravi comes line Shanker. the from

is open. line Your

Ravi Shanker

Thank you.

David A. Jackson

Ravi. Hi,

Ravi Shanker

claims see rest to prepared the in insurance Good And latest in flat to year? evening, the truck of gains you likely and of Is quarter also, half Hey. years? number slightly in the the gentlemen. do drivers, now remarks, then how the second your but expect the sequentially and going in do of from quality up missed better the count I coming for going forward I it that back have be costs in think you this we year? if apologize, the

David A. Jackson

quick you in we're get the because answer, Ravi, several to give still. queue, and to got we've trying I'm going to a try

from we'll Swift attrition that we then, then I decide modeling what half say, middle count the the size. January, in at the – Swift, of stop we'll we'll truck count to would which we the fourth to wouldn't we're year, of get in terms maintain we So, of said and the the goal happened fleet fleet where go there. once But working in stabilize back quarter call, for that, our would stabilize suggest year in I as – fleet. the on was growth be point, to can the And that's hopefully, the by the

the first X% year, quarter, add X% made move progress deeper that in optimistic we back or would the Knight Knight we the the the trucks be On there's maybe fleet, remain fleet in we down basically as the which into might XXXX. given that went added that in

expect we particularly we'd that And per how claims associates model will, to would in we cost and if item. to lower see insurance that's materialize the line driving the that qualifications mile, growth. improving, as So, the of fleet in you hire,

will that And take so, some hopefully, materialize. It time. will we'll,

long-term, next we to per mile as immediate headwind, there hopefully, talked is an tailwind over cost a years. about, So, but few the

Adam W. Miller

we've the Ravi, opportunities then, I opportunities. the fact established growth the hope certainly to find that that is inorganic and mean, we that, we path add, on to And matter would Knight, doing we the inorganic And at continue I have side.

there. we'll away So, plugging keep

Ravi Shanker

Thank good. you. Very

David A. Jackson

Ravi. Thanks,

David A. Jackson

were Well, do we have our not out were did and lovely ran answered believe, get Unfortunately, evening. appreciate you. would to joining out those that a mark. hour to ask best We we at our time we at you questions We hoping Have of least encourage I at to have reach that five, back we'll questions that to. XXX-XXX-XXXX, to that us. call us

Operator

This concludes conference today's call.

You now may disconnect.

Adam W. Miller	Knight-Swift Transportation Holdings, Inc.
David A. Jackson	Knight-Swift Transportation Holdings, Inc.
Kevin P. Knight	Knight-Swift Transportation Holdings, Inc.
Thomas Wadewitz	UBS Securities LLC
Allison M. Landry	Credit Suisse Securities (NYSE:USA) LLC
Brandon R. Oglenski	Barclays Capital, Inc.
Scott H. Group	Wolfe Research LLC
Amit Mehrotra	Deutsche Bank Securities, Inc.
Brad Delco	Stephens, Inc.
Brian P. Ossenbeck	JPMorgan Securities LLC
David G. Ross	Stifel, Nicolaus & Co., Inc.
Matthew Brooklier	The Buckingham Research Group, Inc.
Ken Hoexter	Bank of America Merrill Lynch
Ravi Shanker	Morgan Stanley & Co. LLC

Knight-Swift Transportation (KNX) 25 Apr 182018 Q1 Earnings call transcript