KNX - Earnings call transcript Q2 2022 | Knight-Swift Transportation Holdings Inc.

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Operator

Good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Knight-Swift Transportation Second Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Speakers from today's call will be Dave Jackson, President and CEO; and Adam Miller, CFO. Mr. now is meeting the yours. Miller,

Adam Miller

related And Thank our an you we update everyone of full topics thank on current and [XXXX] afternoon, joining you, plan second our update provide discuss Today, year Sylvie. for call. second and earnings (ph) results conditions, good quarter quarter, the to market to the XXXX guidance.

to this on website. posted call our are We that accompany have slides investor

scheduled to go until Eastern PM is XX:XX Time. call Our

as we possible. commentary, Following will many questions answer our as

contained We one to if a call presentation by disclosure. statements the we two, to To And will are question we call we'll may conference predict. participant. you contain This forward-looking per XXX-XXX-XXXX. the -- begin, call, Slide Factors And the future where difficult get Actual directed annual again, move may participant. I'll per the SEC to results uncertainties that that the with of form company question are question made report to a and it's our may discussion not information read for company's can differ. item answer unable States at will one risks risks, affect and company's on that us during you operating XX-K Investors are assumptions the Part X in filed to United results. XA involve the of or Risk

quarter revenue results three. Slide to earnings The charts consolidated on and on second compare a Now three year-over-year slide on basis. our

quarter a GAAP prior adjusted improvement XXXX share and of from XX.X% operating per in second a and grew increase revenue of digits expanded the were business. acquisitions demonstrate leverage and -- first income We double increase and diluted our led which growth, ultimately in revenue for through and segment reportable which the $X.XX, continue a income consolidated to margins, the to XX.X% generate both XX.X% represents meaningful organically Each basis. on for the year. earnings operating a revenue

loss earnings GAAP at per mark per $X.XX. Both Technology. adjusted the share related reduced and per GAAP adjusted expense in adjusted income earnings include in market to share from and investments unrealized Our our per or share by came pretax loss in The other share Embark to both diluted earnings million the adjustment $XX.X a $X.XX. an earnings

as Now on right and the for our Slide from and quarter year the maintenance, our second contributions insurance, the XXXX well date our of quarter of next %age chart highlights on the each to of %age the services. as services, of during periods which other slide. revenue four warehouse leasing the four revenue and revenue illustrates second equipment the from margin include equipment segments, and segments. each our to for of growing rapidly The

We our are significant of the segments. each from by contributions encouraged

the to continues run business ratio operating truckload Our in XXs. an with

business ran LTL improvement for and showed Our the great XXs time. the first

was margins. office low shop logistics have the double XXs Intermodal of tremendous drivers, and Our our personnel. achieved in technicians we brands, Across business all a of and our team business digit

in changes agility Our with strategies the pivot accordingly. team and act anticipate We environment the continues move with to and market. our

expanding business, allows been has able us margins. LTL. and how not we've a our logistics meaningful in in truckload, including do invested been to significantly but have segments, so We logistics leverage only that multiple throughout Technology our grow technology factor assets efficiently to while

efforts brands, Certainly, Cooper our more to we our as well strategies our the networks, our to and connect to MME to be and systems successfully execute tech reporting We our most connection the have market, navigate trailers of team we utilization actual our but connect and in and relentless between cost have leverage build enhanced the revenue opportunities leveraging operating the as and lowest leveraging across Eleos technology our insights, the are our segments. technology are industry. network a to on AAA provide our develop, capabilities also ability deliver truckload to to productive visibility across on

diversifying revenue focus improving in to both business, continues our and segment. margin on each while strategy Our

development of the of truckload our grew in During and but revenue XX% intermodal five. the a surcharge Slide year-over-year, basis, The few income grew progress the expanded truckload quarter provides and our building XX.X% to XX%. network with focus while This as year-over-year XX%, that of LTL over from our our XXXX grew continued truckload on performance streams slides revenue XXXX. starting services is second next third moved revenue services, XX% segment's On discuss logistics to XXXX operating second of a of a quarter parties. segment fuel our towards nationwide will on %age new growing each excluding a total revenue operating result in our

improvement operating point basis XX.X% Our adjusted in ratio the quarter fourth consecutive a of over XXs. and XXX was was the year the prior

XX.X%, grew loaded a XX.X% per decrease tractor per increase and X.X% in revenue revenue tractor. a miles mile per in quarter, by the driven During

Our the year-over-year. demand allowed miles year. trucks has and seeing retaining per length in shift sequentially trends, productivity be but to make Freight be seasonal our was continues we drivers normal a quarter. Recruiting a haul challenge, our strong unseated to and by slow shorter followed improvements to recruit unseated us progress but impacted higher reduction of a intentional to continued tractor and are reducing of in generally throughout negatively ability truck number to drivers. count the the over year This towards

make commitments, we non tender As fewer seeing and are we opportunities. more acceptance higher levels contract

levels and market. we declined, spot to our spot the customers have our with As commitment reduced have exposure rates increased have

truckload customers pool segments. secure seeing and logistics demand to trailer our capacity from are through We strong our

industry leading provides extremely network, We a capabilities to trailers. competitive in trailer advantage trailers scale invest trailers sequentially grew over our customers difficult our and already to X,XXX believe in We continue by that which replicate. our XX,XXX just is to are

-- across has seamlessly us capacity. technology operations our and the trailers dedicated our ample investment slide, logistics business over with our customers our in road to fleet, fleet As on allowed leverage mentioned to trailer provide I road the the previous pool over

six. on to Slide Now

for be in my of the as yield, may have slides LTL favorite businesses one significant slide our margins. expanding increasing this Now and managing strides costs made quarter

To year year MME from is performance a quarter, the operating was revenue surcharge goals one stated $XXX to mid-XXs XXs period. to the fuel the the adjusted to just adding the $XX.X business a OR high XX.X% over When improve last while our excluding the income the of Cooper AAA acquisition, also joined after opinion. million. one our the For and was million three family in year, remarkable achieve KNX was OR

harmonizing leadership scale each in impressed in of are Cooper the the teams leverage AAA on the towards working to MME both in how the strategy rapidly synergies been moving network. The as at enhanced the KNX open minded extremely of with the cost and teams northwest and both well have and the the aggressive now developing portions with other with network AAA at have We MME's leadership, in Cooper's revenue as capturing the mid footprint through and US. have the been footprint and southeast been

welcoming margins. may other connecting will brands, And create We maintain believe very to to who these working join improve revenue LTL approach we Which is towards and opportunities we additional while companies network. continue believe choose this separate networks. to the

to LTL synergy achievement and grow. for by our the We are results encouraged continues very conviction

begun have our already on additional footprint of expect side, several XXX the the facilities. identified new an and several Also in beyond. stages and at nine growth additional or We for LTL to have expand projects organic develop various through we to add rest locations existing doors year or are XXXX

seven. Slide to on Now

to improvements growth continues margin at in service XX.X% also XX.X%. operating operating million remained XXX% adjusted strategic while to more compared margin power-only improvement segment quarter, and quarter. which gross our our spot XX.X% the $XX advantage the traditional expanded ratio. grow rapid income, Demand logistics strong opportunities, Logistics service with offering This provides power-only in year, Our to volumes for brokers. to increased XX.X% XX.X% Gross a our offering led an last to a to margins. Despite revenue pace, leading than fewer with expanding compared a growing is load for combined in year-over-year,

thorough customers costs. to labor network trailer allows and optimize space warehouse expansive Our our our the ability

Third risk, party hours lowers to operating at them that historically freight their it wouldn't their and in. business to them power-only unload each reduces location, capital and able investment be saves load because participate carriers costs access prefer and gives

ongoing We projects continue to party have be the excited about third this that carriers. will business for our experience and several improve

lead and ratio our are to to more well will our that utilize improved more Slide customers intermodal increased as XX.X%. the by XX% results equipment. As XXX.X% opportunities income to eight. as Operating The included to information on seamless operating from internally provide

negatively and as as street the remains rail of Volumes in a impacted container beginning speeds. we contributed door our challenge, quarter a chassis While the softening, be well and consistency These by rail load, to meaningful rail see within decrease notification revenue Labor to increase by times many times, XX.X% and did per in dwell appear partially in count. to improvements were in XX.X% longer network corridors. in velocity inconsistent service rail a customers. more leading the offset network factors challenges improved for

progress we while meaningful transitioning our in are expanding we made have partners. as containers, underutilized margins We rail monetize

will of in some pulled do have and to our operations containers continue into back so We these XXXX.

back and digits the margins half load the double year. We volume increase to expect to remain of in

to develop network season quarter. a Union with throughout that Pacific coming much third better the freight have the on of the We recent used volume that network, bid aligns with

the containers to an and add Additionally, year. second we continue to make over turn investments the business X,XXX throughout in of of added I'll plan now this the growth quarter and to it additional rest XXX Dave. the in

David Jackson

included and it segment. businesses Adam, now our of of segment segments. in investors or hasn't non-reportable strong fastest a growing great focus nine is everybody. building you, that as over are the but the growth years, been one in good Thank illustrates our analysts non-reportable the Slide This afternoon,

XXX% we to overall party essential quarter, in in third increase increase XX.X% revenue a our income. had from is and in services earnings increases operating These the a for strategy and develop carriers. For revenue

primary services. We in objectives carrier have three these

profitable network. a diversify First we And purchasing. such lots using company. way these and relationship much, power under benefits and and or revenue with network our generate that shop maintaining quadrupled Many in leasing on equipment areas risk offerings provide from of Two existing nearly to branded These our management, that income in have leasing revenue much million, with are power of equipment and as our million that tremendous found a is these our proven pace purchasing to carriers leading results, freight in industry million and the and our Iron further number their streams of equipment We interested we purchase expertise their this in warehousing to buying fuel. with as revenue of XXXX. nationwide party is that in runway where is new build to growth maintaining third Services. are leverage projected small larger of trailers introduce year $XX a to interest have with services insurance brand with carriers new our equipment along compared three, services to Truck services network operating of in we've $XX expanded and $XXX loss over leveraging

to to and We cycles. less income streams to economic continue us grow expect prone with are that volatility these through provide services

on the these ten, of from to we diversification separate will diversification noted earnings graph. cycles. us the our in the of We're and of These the us from with income businesses segment. each of adjusted contributions each we company chart report the and the through reportable it make downside Slide mitigate contribution these company. into of the services a as the Swift encouraged illustrate left to non-reportable As our XXXX since make percentage industrial through company The grow quarter that growth On and overall efforts in shows changing and an less composition meaningful develop, pleased progress some makes up the on remain evaluate segment. aggregate and our will businesses of our operating merger We area growth segments whether volatile second intentional businesses non-reportable the of other sense from and help we Knight expect XXXX. freight as truckload

XX Swift from have reduction while where this we Our earnings shift truckload earnings million now in months the more Knight than for share of meaningful right were $XXX that Swift quarters second trailing and tripled represent mind same XX% the adjusted earnings combined our on per merger. merger. total keep a changed, truckload the since of in our Please $XXX full XXXX as we our the the has pro doubled, which earnings quarter in four did and in almost Swift from noted only earnings, of graph the form Knight in year Knight percentage XXXX to earnings chart we million truckload when the XXXX. represents at a of and The rolling shows time,

EPS per time, this share the from $X.XX has to XX months. During per trailing for the moved $X.XX share

to XX XX. to which our used Next to XX%, increase months. in free us. by Since have have priority we Slide worth the of trailing $XX increases billion shareholders making million cash debt in Strong cash second long-term billion and our was through for driven million earnings the $X.X quarter we dividend over down repurchased have the Year-to-date, a $X.X flow, high and paid invested acquisitions shares leases. merger, acquisitions, XXXX remains $XXX Swift in

acquisitions, are and/or pursue purchase debt. we to and Our in growth, down well pay shares, positioned balance is organic dividends more invest increase sheet strong

constantly create value assets. return cash on use our Slide are trend market illustrates maximize evaluating to shareholders. the to conditions of net for XX We our of tangible

results XX businesses; our two, QX is growing which less of cycle. trailing last acquiring return XX% the achieved is intensive These focus expanding freight three, reflect the Our operations. a in businesses; months one, the and on; margins improvement peak improving existing XX.X%, asset during return our and we substantial from

Iron new have have On created variable our for years and as expanded service Services last on business. with logistics brokerage, warehousing streams, mentioned, less side, lines growing asset we a and focused created intensive expanded services. the Truck of traditional our cost truckload power-only four our We've based brand offering, revenue the

growth seeing significant and income are of revenue We each in these in improvements areas.

ability logistics LTL. ability business improve More years, synergies and improve Over to tap our our to between truckload recently, and and demonstrated we've the acquire effectively truckload have the into businesses. we demonstrated

relationships. our the two preserving they could offering. LTL more are while LTL not companies brand, organizations, We their Cooper of AAA building the networks, Now supporting ahead MME as and connected mutually mutual we LTL a -- encouraged acquired and opportunities the with be and connect culture progress in national

this to generate acquisitions, existing to business to our strategic core and additional continue addition In revenue. truckload we improve our assets

in our now focus to significant in we continue to in We allow believe to have leasing to our over these example, program. leverages us opportunity key are competencies unique us our For trailers generate our returns areas core three will that X,XXX of areas that shareholders.

have XXXX XX, Slide Now we of on our second half outlook.

and that may deals as moderate and uncertainty expect the demand consumer higher with digests We in the inflation economy.

we decline continued continue two their continue expect as less as surge Capacity efficiencies peak trailer pressure. will they maximize customers truckload in the clearly non-contract under previous Customers secure to We we is in that opportunities. We visibility pools years. compared that to chains. expect have acknowledge season supply on --

rising combined as and rates, also only interest makes leveraged, are difficult expect and as are We and spot market. expect it and depressed seen energy supply it, with continue that those contraction not costs disincentivizes in higher entrants highly new rates year the that the to proceeds already to but maintenance prices, for equipment with deal carriers fuel high which

are remaining revenue hundred also strong anticipate we as -- to We challenging double sourcing to particularly has basis. demand continue on we continue for small the that drivers looking LTL it with expect carriers have opportunities. in in remain of and it seeing improve a per seen retaining increases as far new will thus has and for been been year-over-year drivers digits as We signs weight

as and entrants exit maintain And carriers. and used interest now increased finish inflationary will the items. cost small credit to up expect for equipment our normalize from with we driver lastly, market securing to in with little Adam cost, carriers related I other smaller on it pressure new equipment difficulty equipment, hand labor also several We costs, expect to to guidance.

Adam Miller

Thanks, Dave.

range be of guidance increase slide outlines does XXXX. now our EPS full for our $X.XX, full adjusted year Slide within last remarks, the $X.XX. an to to year from our $X.XX previous XXXX the sixteen to of which So our We is prepared $X.XX expect quarter's of guidance

during half market third moderating difficult the a the and in may quarter. comparison non second We result less than into late rates of turning the year. declining negative quarter opportunities the of expect fourth rates sequentially. provide in contract is a more This year-over-year the to spot result rather This continuing meaningfully

from year difficult a just So comp a ago.

revenue with truck load per We expect throughout yield remain modest improving the margins Logistics grow count. expected year-over-year. maybe to tractor count revenue to a sequential tractor the improve our and stable is improvement year will growth, seeded shipment moderate in with per sequentially, we will management as through improve miles LTL XXs. while increased ratio the the and to an digits be quarter. most but than volumes mid basis see operates more double likely -- in year-over-year remain be load Intermodal with high in volumes offset will a operating will on to begin we to but and expect margins third

to revenue other when presentation. income expect nine We grow and prior to as Slide this outlined of on years, compared

expenses, inflationary we from labor, will mentioned, maintenance equipment of expect and that Dave to feel driver As pressures non-driving continue.

back We million equipment continues equipment $XX to used range The the quarter. from seeing million moderate. $XX to million $XX to $XX of XXXX And million saying back expect year. million to gains total to to sale total in we're million $XX just to clarify, be $XX, the half for half market the of $XX as the is per of $XX for on not the the we're million

full be of share forecast which be half range by to the rates to Actual tax that quarter. may section is year discussion for Just These guidance $X.XX And could earnings on we million, from of the Factors the And want to previous negatively to XX% $X.XX would $XXX refer compared are unchanged our negatively to information that the $XXX Rising results. cash you had. million previous to around our to our Report of per available. in is may previous second rate affect during CapEx estimates estimates. best interest -- as a these clarify -- We management's impact expected that. for expected results for net from differ Annual risks estimates based the materially is full represent the again, year. company's current Risk the the

our like this concludes end will would PM prepared you remarks. this call that Time. We to at XX:XX Now Eastern remind

allows. your Please questions we constraints, not one will to will XXX-XXX-XXXX, to do time time entertain questions. if due to question answer promptly. now as get please to it call we We as again Sylvie, keep question. able we're best many our will And and follow-up

Operator

Thank you, from sir. ahead. first go Please Jack [Operator Instructions] question Atkinson be Stephens. And your will at

Jack Atkinson

afternoon, for questions. thank good taking Hey, my and you

So I guess.

David Jackson

Hi, Jack.

Jack Atkinson

Hey, Dave.

guess and I really your power-only my question offering. logistics So centers around

a can in you seeing? talk bit of into up Maybe a customers market do even that much freight your that terms what in growth that as if do I the a I dispel particular market. at then, look some really, where business efficiency But have I think quarter that drop loads out grow as investors think that think hopefully what will in think where end XXXX, we provides challenging more freight think, this it terms for line little are that challenging of more service for -- concerns gains? demand volume there? you a help that's customer about trailers, in penetrating about of business you might about power-only you you sort you guess in are that's And of terms

David Jackson

Okay. that Thanks question, for Jack.

we'll our answer that. do best So try to and

your -- the part the was I of acknowledging are benefits to what customer. think question that first

to have stays where the about hours. about can couple refer customer have a where unload we a freight. talking we days, the us our we're a we when industry that loaded talking power-only, We're that's trailers benefit a What and sure to of of as The trailer we and bank of maybe using understood. to of within would make to with trailers bring fill opposed leveraging days available in them for those should XXXX of the hours. freight that norms to truckload a customers that give The couple and is reality that, trailers rates in XX,XXX since customer hasn't wages an industry the And hours rate after early is going part $XX in two a have up, $XX but hour trailer. charge. freight it that get at detention two an After to began two yet. electronic The standard up, going number that logs hour. included hours. with rate were the with gone is then But enforcement unload mandated driver [indiscernible] up, even you there's is Just

One what things of are rates about markets. headhaul backhaul have the is you and its on impact rates in unique freight

that twice rate Phoenix, the is LA versus a in a that's same. charges, be So There market to what we it's have the don't care. that's rate. of no to backhaul would Well, nearly LA might it rate which is headhaul, half backhaul, Phoenix detention they the

And base to so, backhaul charge to hour, every price you if a have have a on the two be on a unloaded. low detention over very, you for lane, very $XX hours add

XX% quickly find moves. And that's a to with with lane yourself on work XX% to supply chains. you extra so, trailer, within would unacceptable completely and a Well, backhaul very never two many hours unload increase can

dock not they or also with isn't only freight between. supply goods, it move those moment they deliveries, store yard efficiency. a more absorb There prior been to us full pool the can to product, today's chain only bring not our just one but years, bring manage that. efficient. that trailer can that. us moving They towards want we that truckload And absorb carriers efficiencies palettes time. create to more but mandate so, it's to touch for and a it the The so one pools in the and carriers the exactly more warehousing Small makes those log have electronic ago, punitive for customer, trailer not world, avoid carriers, In to larger was have of the make to those can on that it it because years efficient, massive trailer in differently because the detention few the enables to just charges, enforced and many only

of kinds And all savings. so, there's cost

as every So XX that one a that, result trailer on both. Swift, a out Knight pool nine at loads today in of involves haul of side, the and if not we least

And requires type significant a of so that business capital clearly investment.

trailers scale have have them You we do. meaningful to like have you have and all the of scattered over to country

that to has I then led some even consistency led that think has through cycle. us a have us—that more so, And durable more XXXX and bit the negative little

is, have have trucks And where So, now the we've a we to do have capacity, fleet what done many tried we've trailer we limit untapped the is of have. finite drivers. within address area only whole the which is pools so leverage we that than and we trailer

on income with you're transaction. noticing it we're able business in And second happen powerfully more able operating quarters do again now to for And -- ratio these a to very our we're to and able more based return to do again, consecutively performed, so loads our several are to efficient way whole carrier, bring in in what not in that efficient that the supply that's it more XXs. for the to And the statement. the is, is we've move third of here been for carriers chain, detriment an high that seen asset what quarter manage party you've able the it's we're

a of next that the of us seeing fleet. do you're in into seeing terms than we closest you've have, the So size with seen what us that good more you're return. is, operating uniquely because And we that leverage twice have, trailer we're tap

in You saw margin the better XX% gross our logistics of segment. than

significantly talk half of market question strong first I volumes the able as so, -- glimpse of XXXX. into that have about very And rather the the think and has to of fact second We to what been year. this there. we've that your part you the get spot happens shrunk And in very, a continue

and we're space we're to the is to premiums network customer bring big -- and our paying meaning, spot, rate premium the the from also into market attractive what power-only both parties paying very large that efficiencies from it's similar transitioning on where carriers. so, attract. on transitioning customer relying to And clearly, a And in to both sides, been paying capacity small in to

So behind a the market XXXX adaptations the the small we $X help whatever prepare new move is what carrier this but reduce all principle most most efficient? as hold, we'll year and might as these their efficient to is in of to within for way miles save to What's a continue paying this, supply we Jack, and to detention guiding hours. truck make way to ready throughout chains? to environment labor what's be the diesel might in Our money them that and best or stop fuel extra plus empty to roll having the any unload the at save on customers two hire

So Adam, that's a little bit of there. color anything?

Adam Miller

Yeah.

Jack, I I'd add. also think

one of with to but that spot I Spot certainly power-only our this would them, notion really only power-only think you many of customer react we spot be alluded is to approach different -- all businesses. needs. There's ways sorts customers. we that

still power-only bit looser. is when time little big customers in plays when projects with short think we a window. that very role a I that even on a see us they of today need to supply some help come And

to pulling power-only help opposed our third of We business able we asset beyond party how freight and support with that to we're power-only type backup trailers any contracted of our customer there. in have power-only a out through just to the them surge surge falls we've we rates, with of really have business business on would our when where out our flows for we tractor we're committed customers who side. contract dedicated line capacity leveraging that dedicated -- a truckload our the ways leveraging able similar and leveraging to where business, to over And then them. a run support as most to volumes We committed haul them on to run capacity do through network. the In just many

And so, our focus change, continue power-only grow areas any of those our markets those capabilities. shift of support and as to we customers to one can to another

Jack Atkinson

guys. for Thank you time the much Okay. Appreciate very it.

Operator

Thank you.

at UBS. Wadewitz Please go Next be from Thomas question will ahead.

Thomas Wadewitz

we seen Great. Adam, of What's Yes. from Dave this you freight? XXXX we're cycles, say a it's fairly that mention lot just know up fall-off big you of of I likely you sense have have your that have prior information through sharp perspective lot Or kind all great businesses. or some or Good a afternoon. feel cycles best kind of Thank perspective, think your the like why of freight like guys and not downturn? cycle? in more it XXXX does and have about see you kind you And setting get moderation to Thanks. to a for this Do does you that don't without you think do of how of you. think a the to evolves? more seeing if feel cyclical this kind

David Jackson

Yes. does it of fast about to is doesn't kind Thanks, more by much you to you most when intermodal. times, in that's than economical -- on cost think airfreight It very when about way transit Well, move a freight think to the far moving trucks move compared truck expedited. or the Tom. the still it on LTL, certainly

more cycles. been place store -- we bottom end And used when off low made that's grossly grocery part, a absorb so back economy to you the just of we the that oversupply takes the to and a that bit the energy at would has because up and in a see wind for tends small starts somewhat it up in it's then by through tends industry prices, I to nature equipment say, to having time has more difficult end times to haul out. prices when resilient little what freight our in little good, carrier a typically of fact sputter work the the cyclical the choppy

if can save thing course, And maintenance you electronic even from other rates costs a make lower an is more rate aggregate, one into as getting non-asset come of go Well, every bundle the was of rate create carriers a where a in And more factors lot same And would so another will, that's is that and further around. based that's more would up broker these themselves you all when they then time the truck. small that different in mandate, down. and for it available. would by those discount of isn't and miles. you try of option the not many miles, oversupplied prior drive and this simply and they by run supply the and running already in to where log virtually was And

the you've and XXXX, of supply, huge huge we XXXX demand for any be much So logs. all because became XXXX changed in self-induced this off Well, XXXX then to an electronic unbelievable between really and the but oversupplying when we XXXX got surge in of drop year didn't even difficult. XXXX example, XXXX, and had saw into

electronic of guys, Now, the as because XXXX, was logs one couldn't run run in why big and because miles was in surge even the big there people it and could difficult an nearly miles wasn't more you oversupplied for the reasons double less environment. down

to prior than is different on So XXXX. a that as we any backdrop have cycle that going

saw era. softer normally So the oil the a you when the in you really in I other summer of we've ever --certainly maybe XXXX to cheapest thing, was, XXXX, in as some fuel. you modern cheap see fuel would have seen In of in economy, alluded prices,

trucking that for was down was to them small now, companies, lot a them even huge the so, carriers And do And they refresh. thing already. this soon. is we energy carriers is, of small huge religion to consistent a appear a underway terms that or to grow and along. process One had of do to dries well from that to brings is small it been up, be kept boom though to lifeline credit Well, next what they that in doesn't huge the changing it due cycle meaningfully prices high has right when shut one country COVID, hurdle anytime know

has cycle so And and in single effective XXXX. been since -- every that

maybe to, XXX% what's a more. XX% at come So these probably we supply. where prices for obviously a We typical what equipment constrain used used off maybe than off, that the double even up has would that were with seen here And or happened we peak. normally unbelievable saw have truck little used more bit

willing in do course, So a to still are were, been but enough normally do securing above would that. now, credit huge the so. And there and to buyers where has people well challenge of be we falloff

have So what if out other is supply and maybe seen same we never come early seems in pace, of I'm than any coming appear all not, be to different demand than out leading the cycle, this, faster to Tom, at so be even to waning.

economic to of of moves points, basis seems we've basis broader historically, swing points. supply the hundreds said in in that tens demand but So GDP

industry demand. to even more we than our our in we're sensitive actually much so, -- it's supply And

that And so, already is we all are contracting indicators speak. as supply

-- one did or with XXXX so, I the XXXX we've some go and really tX like oversupply history. -- that's recent would those ones in to huge did XXXX didn't we of or in a did we in like be like we guess in just we XXXX into biggest And this seen

wasn't so bit this less more supply nearly off, So the that feel leaving orderly is didn't get that has a as and and drop a nearly thinking us early. of just piece could little high because as --

Adam Miller

that, at is I'd next very that to most of allocation really that of orders trailers change And to add similar. trailers. haven't even equipment, terms ability likely of still in new Tom, deliver for and year. lead will pressured Tractors, an looking the new OEMs

a And I an little think still but likely, have better allocation. most pressured very than to again, orders. some doing being there's OEMs able bit others, on deliver on that’s we'll

we're used credit. can't carriers Dave cooling on, small and seeing, afford is trucks the the coming as aren't new find can't prices equipment So market because mentioned,

for about it. So capacity it still carrier. works hands has constrained, your getting Not -- of the economics going just on how be to a speak it's just to small

keeps where go demand. think the all I an supply So maybe changes environment pace, outpaces in those maybe to

Thomas Wadewitz

Yes. very Thank I appreciate That's great. it. That's you. helpful.

David Jackson

Tom. Thanks,

Operator

you. Thank

at next will KeyBanc from Capital be Todd Fowler go Your question Markets. Please ahead.

Todd Fowler

Hey, Dave. great. Hey, Adam. Good afternoon,

is into how what So, half how like your year. I now difficult maybe progress but And guys. like I for spot ask mostly sequentially. guidance market that rates And an on guess, XXXX, us comment Adam, understand I a would wanted somewhat versus the help around your compares. Hi, year spot be think where ago? I then Thanks. to will it's guidance, the that right the been of for contract? not But can given expectation the you on the that rate wanted just book -- the looking also will contract of And any to now? rates about back truckload thoughts commentary sounds even stable have ask assumptions much is on And it right

Adam Miller

Yes, sure.

spot our -- just So exposure.

to closer low to of our market. that this compare XX%. exposure mid in time be year to spot today teens we're down think last I will probably the terms I If the to to XX% probably

to shifts look have like. And opportunities I we there, I than when in quarter really less think do quarter are think may we probably we've projects rate does very surge have or think customers visibility because it's typically And type like time. bids fourth fourth and made position I our sequentially, of wildcard uncertain. So And there. some the the we still this the the the that in the is I we through strategically one what think about we're

to strategic of expect need. our what have They think already some some it yet. of I is know them, they'll communicated customers, have larger -- they don't they've more some

think that we mean essentially rates we'd we've our think year-over-year hit sequentially There will, isn't I the really obviously, larger bid gone from impact customers. be the I expect haven't cycle. I change. But through stable. So to that much

could time how cycle. will quarter what really we big in going forward. late address like play we stage bid a fourth rates And setting And so, really the out be start quarter next plays role changes the the for as those fourth will look the probably new

make without to So on quarter shape really more a bit to little having now, have think starts hate time understand we to I so that fourth a a maybe don't right how read up. I'd great XXXX, comment on

Todd Fowler

Adam, like the opportunity to big built it lot you've got So, planned though, but guidance, now lot fourth quarter. of of transactional a understand there's a in like clarify I right it fourth lot in for you've right quarter now? sound the got sound variability, a doesn't just doesn't a into current

Adam Miller

Yes.

be just projects more just next we're quarter, think as may little we we what on time a based the because on type cautious of the quarter I third And uncertainty know an clarity we what get the there. then. of obviously make that, around adjustment fourth release we'll more of

Todd Fowler

Okay. It it over. sense. makes turn I'll

Operator

you. Thank

at from Stanley. Morgan go question Please be Next ahead. Ravi will Shanker

Ravi Shanker

earnings? that very segment? $X in downturn. you've care the kind more you comments that that I'm that update Would of the would to logistics like on you is sort than of you helpful envision going was you a and into difficult EPS it other company Thanks, trough kind view gents. of made of laying where And scenario here. Do higher it's was and confident here? you in on be paraphrasing with different feel majority the Kind past floor Good in revenue Do and afternoon. of any Dave, out you last traction of spent floor helpful. why than that your feel given kind the $X the in a LTL the is to $X, believe it said Knight call, downturn below

David Jackson

Yes, in conviction quarter improvement more tell continue it a gives by we that us goes Ravi. and higher higher that every you margins, improvement would to Okay. Thanks, in I revenue, that see trough. for

fact overall the And look first, the of so, terms truckload revenue. saw the shrink when full at is, piece that you we a in

a of Now are shrink earnings, terms we've because the earnings the inferior. seen in not

different earnings risk we fact truckload irregular In phenomenal than because lower different fact, exposure -- they businesses other have are business full route has. It's cycles. the have there. And exposure that risk the to to have in

ahead a percentage example, earnings, look get that, working when of time. by larger that OR of business businesses that we've a our proven mean, risked of And of you very we're there better, at enjoyed a much gets doing I LTL, our the consistency They've And with every as schedule of well the the and progress that for over so, result there. bigger, in the made that earnings they're goes they partners, quarter it's LTL out. because job. phenomenal and gets de And

carrier, third we you cost whether in is to If the look our have a there, the party the whether the is the cost components business, at variable rail. other cost key

better were that whether looked try the that out these I every the that so, a to unfair that that better goes there's rivals the we've that's I an of rail that a lengths yes, to moving trough maybe in think all that between great now streams. and it's and painted over by earnings quarter floor over stroke these road would legitimate the with if our operating or that's is, broad whether that bottom companies feel at anybody we cycle truckload differences whenever And point biggest and income the been about rise. of full and our truckloads, out of also transportation point we've of we aren't full the mean, that's number -- superficial, you operating space. -- are income, I have, caps -- market continues

its business. when at advantages, truckload that you includes or the And of we segment with bunch competitive doing multiple the own look more on whether dedicated a that's some in -- Each longer brands we unique in expedited based portion, do cases have has little so, the or truckload brands, of even region haul. a we

robust differently. business port that very there in operates built have We

that many competitors in as fewer well. We have space

trailers -- within that all our so truckload. is that and we difference. and who full same all at beating diverse dead is, base be the matter, versus unloaded that's a before driver trailers truck trailers rather and hundreds customer efficiencies. staged we show immediately get of to And It give the make And horse have one to a is that not facility somebody one kinds them to of the have up customer keep

of a extemporaneous to income our and truckload, risked the cycles de for the on within multitude be so, streams. taken all business have steps we well that to top of endure And

have number. continue I So EPS yes, trough to that think conviction more Ravi, we for

Ravi Shanker

you. Thank Great.

David Jackson

Ravi. Thanks,

Operator

Stifel. question ahead. next Bert your at Please from will go And be Subin

Bert Subin

Hey, good afternoon, David and Adam.

David Jackson

Bert. Hi,

Bert Subin

as as and long your had driver you being clearly we then Hey, bad segments year? ultimately guys. sort about of imagine OR perhaps been TL future result LTL. a excellent of there. about expansion an least a that partially in for a to should you of Or fuel ability a good your the strong think it's think rival Do XQ XXs earnings and as yields in a is term super quarter higher that segment cycles? year, foresee to be at for I power we perhaps sub-XX OR

David Jackson

years to a be we was that in an set with more takes Well, that an and sophisticated, to stability difficult said much there world. OR had do so once up network three up wanted to is has so feels upfront And set than lot fact route much goal it LTL it it our XX. we in points the the initially of so to to carve full is irregular truckload is

at a a on whole LTL think And And can with entire that different come large country say together. so, the parts with -- the running are has the behind nationwide scenes country individual corner the surprised to a beginning end the level as pleasantly there are the synergies synergies businesses. there's working we that a we've available still -- partners of can LTL. with whole work forward TL few of operating We would network front I that in brands that another the been in being going in of that both two magnitude said, the advantages that a

I LTL go. would has And to so say that got ways

for fuel the we year we're that lot much big a run improvement. of that there's benefit, earnings quite but mean, haven't statistics ratio. to XX.X% gets much public. our very LTL business. are very the I driver very meaningful these That $X for billion excited. double is billion, to like We yield We got the that $X And rate But way digit on a be like there us And the some fact the operating to of noted meaningful. a was you've surcharge yes, business.

there's that excluding already some and You there's to leaders hundred bigger $XX.XX, can out there at much rate at find compare our -- per rates the than weight look we've you'll fuel, what is, and industry achieved. what of some

truckload. to That's oh by an regular largely We going forget in It's not, LTL the mean, comparison. right different not put get soul the an love chain. where the about okay, I that to excited doing industry, our is runway because it's lot nationwide length supply heart chaotic appreciate we're it of not us most networks, value boy is, to full there. the most where and good our I we're the a full that. add bit a apples-to-apples the of It's I for and going boy, we not in a created we're -- it's it's abandoned value that. to But that's hauls, truckload. into we're do But But takes route it’s news about Now, and either/or. been we customers. have work. it's

with there And execute doing with the power-only so, we that partnering see continuing huge we're growth we what to opportunities and and done business. way that have already with

we're over of see flow to billion free so, dance, of time go grow with And opportunities sing last the XX can have months we over flourish. $X both in we cash to continue these at that and so both fortunate directions and same and speak, and to

Adam Miller

a but this nice does our core opportunities. stability margin full I from also business. LTL, cycles. growth, there's Yes, through in quarter, And networks I'd additional benefit MME realize even between going truckload still to have to that's think an complement I benefit lead some why it fuel revenue that's think as add that AAA we the provide of we second the like think to When to about connecting although yet we

Bert Subin

Thanks Dave. Adam. Thanks

David Jackson

Thanks.

Operator

Chris at Please Citi. from go be will question Next Wetherbee ahead.

Chris Wetherbee

different be what non-truckload can trough do we to made clearly a some than of the is then thanks Dave we extent think certainly it guess, feels And are is, takeaway, might business and of different a talk guys. previous Hey, like good you every this the and Yes. I earnings I'm sort and performing. point cycles. guess, this, why I cycle pieces lot I maybe guess, about about we getting

to And about to of this as rates the just time? we would think declining a of from so side your normal So, kind I sort far? view shallower said is how as given decline? contract look bottom relative much at get guess, Or guess to down which should everything not previous to I a you about could much the I of reason seen piece could cycle, we've think want rates maybe a I there's on what sense contract cycles out the maybe we spot? think you way truckload right contract sort think more that of of think this as that at sort retracement

David Jackson

answer going out we're -- Okay. we're now. to to time right we're down record because this in about Chris, time, of

trailer significantly think say we what would is, that what The look there, we same inventories network. were better peak to probably And where I in going kind broader lack the during X%. out example case as down based the nationwide saw need there's cycle, XX%, peak value of trailers to right? cases were are rates, of this the contract -- the many our trough Chris, be even that could warehouse a So contract down mismatched into tremendous down trough made than space, recent in like, on on rates more with that the XXXX hold a cycle, there rates broader of we most for

we’re size example the and going contract able was So the in we kind business think there to of -- versus definitely of classic do resilience that like And there's the belief I a be what that XXXX we're given maybe scale would in broader see. to year. reliant half business. broader in irregular the Look perform that it's were carriers kind be, that this first just to the those would like on market, our how businesses route to spot at been at relative look of particularly for what smaller overly of the

And with haven't today are it to company. feel able everybody's appreciate Chris. to in and your Sylvie, those that time will question, conclude. answers to in your to been our follow-up that we back to that queue hopefully free interest we question, turn your get So us. for We you the

Operator

thank and again, Thank for indeed you, we your you then ask you disconnect Once this today's participating. conclude And lines. Ladies sir. gentlemen, please that does conference.

Knight-Swift Transportation (KNX) 20 Jul 222022 Q2 Earnings call transcript