- Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen. My name is Collin. I will be your conference operator today. At this time, I’d like to welcome everyone to the Knight-Swift Transportation Third Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. Instructions]. [Operator Mr. is meeting yours. now the Miller,

Adam Miller

related and Thank our an you we update everyone, of full topics thank on current and XXXX afternoon, joining you, plan third our update provide discuss Today year Collin, for call. third and earnings guidance. results conditions good quarter quarter, the to market to the XXXX

We investor Web our are posted have on slides to accompany this call which site.

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

In questions to Following get order to our topics. will to as to going answer as we're related one commentary, limit participants many to these we questions per possible, participant. the

to If in at This may the your to presentation X question, the forward-looking call Page XXX-XXX-XXXX. differ. begin, United second questions you question please Factors report XX-K on back company answer may of contained We'll the disclosures to the following. to I’ll risks, able company's as Item many that Risk and uncertainties the of annual X get for filed Part If predict. may that difficult States you you get have directed with restrictions, in the a that statements queue. affect allows. Form call results. the results as the first due operating conference Actual to made feel the the may SEC risks assumptions of discussion company's future note a time To are refer information time Investors XA involve free on and not presentation we're and us are contain or by to

and X.X%. X. basis. a the while earnings lower adjusted revenue rate year-over-year earnings our per higher a came fuel sale, for interest grew gain approximately EPS at Revenue, The results basis, operating by by Slide on diluted expense, higher XXXX our were and GAAP X.X% on $X.XX charts impacted on EPS compare adjusted quarter quarter year-over-year $X.XX $X.XX. Slide on third and adjusted declined by of share. consolidated excluding share in surcharge, income a our third Now X to On tax per

move year-to-date third Slide each segments. freight the in operating the of illustrates the and our Despite remains quarter income of adjusted next market, to Now for periods a strong let's our X performance revenue segments. our across each slide. changing and

XXs, rapidly freight growing what revenue of the positions this as complementary four the of our other coming Our diversify we low during We strategic the our of outperforming while at generate insurance, from LTL and quarters. the percentage partner equipment develop challenging in company as set logistics the the to which navigate environment our services, that more our chart carriers. continues to is of diversification teens maintenance, equipment focused make truckload believe margins, on of business continuing mid revenue time from successfully segment services in well be year-over-year value a the targets bring improvements leasing XXXX and operated could each segments acquisition. our third warehousing continues to intermodal to services. and our highlights right quarter the include percentage on our We to remain customers and The segment

to forge relationships with brands and new services customers our grow encouraged and continue opportunities collaborate well are We how to existing different to new with with find customers.

performance, ratio. and operating and few provide operating slides, performance while this grew accountability Because revenue, declined fully capabilities. starting feel each excluding the with up our chain. a change to We segment's leaders made on operating for surcharge, solve our supply throughout X. truckload with to market. truckload we strengths successfully to different discuss and the services positioned but our also We brands leverage XX.X% X.X% we team, with is next vertical of different well fuel Our income that value difficult horizontal in bring Slide structure, our have scale of solutions creative adjusted on the as company brands The business, challenges. collaboration year-over-year XX.X% have navigate unique each across On our an operated basis, we'll we optimize

diverse quarter, our notably, in and X.X% more improvement trucks market which see the a revenue During and strategy. insurance. X.X% and cost loaded maintenance tractor in nearly we our was with provides expenses, driver-related revenue and of pressures tractor. we cost grew pressures a by to and conditions per an The including than to increase by brands and us tractor some services, inflationary equipment and continue X.X% segments, in adjust group business. driven per have per Most per mile across Within decrease revenue dedicated offset miles truckload X,XXX flexibility

trended back For the example, the top basis. volumes grown the below third on patterns seasonal business has and have quarter, into trends line margins become our over dedicated robust demand have half as October. and a year-over-year road in truckload typical less year-over-year, improved these of Freight revenue continued

the depressed year. equipment the customers costs, rise. likely exposure peak who have making we now we still this truckload and are that pool both year. prices, through changing the have commitments capacity rates, our exposure, more These in likely currently trailer carriers, to scale since demand now have pivoting see with higher interest seeing a significant dealing We've accelerate logistic higher costs, the led and in declined Spot segments. fuel attrition beginning market, season quarters. and been bid the insurance in will been opportunities market. season capacity at Given value that continue Small we most reduce coming rates significantly, doing towards fixed muted our trends, expecting these to spot rising attrition to spot are the Despite will elevated this are this typically of most our and have factors we and

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

let's X. Now Slide to move

we the at of well goals Our continues is and time set LTL segment to the exceeding perform acquisition.

the quarter, was This XXX in third which surcharge, a operated and remains trends year, point the results. seasonal an at strong. quarter ratio. that our from we quarter XX.X% basis revenue, last first represents fuel included the Volumes Cooper was For XXX adjusted improvement normal while pricing excluding operating followed AAA we million

increased per Our revenue, XX.X% hundredweight, excluding fuel year-over-year. surcharge

at each and us this services towards and culture while quarter provide positions We additional our both to as this for with extremely the maintaining relationships. have as seamless our We create the believe existing work new as customers leadership customers, systems Cooper merging connectivity to MME been we AAA impressed company. train brands well of to customer

with the who and network large a LTL in and Swift many existing short to network long network customers with us capacity. larger support LTL then providers, LTL regional opportunities larger truckload Knight deep deal national brands further in cases with term enable Our super relationships in creating or will find term shippers have our the a to

results choose this LTL Again, very very believe are also synergy achievement to We grow. join the may approach continues by for other encouraged we is our to conviction and LTL welcoming companies network. this to who

X. Slide to move let's Now

continues XX.X% segment to year-over-year. logistics grow with Our count load volume up

quarter Gross year. the was quarter ratio. an last XXXX, XX.X% to resulted in decrease in margin in just XX% expanded to last adjusted the quarter to despite year, to a compared third X.X% per revenue also slight compared income This down leading the in a to of XX.X% XX.X% As load. compared revenue improvement operating operating same

which we services continue Our growth to provide XX.X% volumes. value the led load power-only customers in power-only to a

customers the warehouse Our their vast space our and ability allows to network labor growing costs. and trailer optimize

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

business remains this We will chassis and our that improve within that carriers to continue to to initiatives our internally as challenge provide experience network. equipment. technology information opportunities as ongoing Network several availability the our more will be seamless utilize and lead and a to fluidity party have customers excited our more third for well about

we the the and in freight However, made to our progress partners network align and rail both bid have season better to East. West the our

intermodal Our turns as docks now the expanded turn over it XXX to Dave. grow containers we to year. to goal capacity added during as improve to well as approximately continue third I'll is quarter this

David Jackson

Okay. are that Thanks, X and good Adam, included in illustrates businesses Slide segment. everybody. in afternoon, the our non-reportable the growth

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

company. profitable growth one revenue objectives quarter, As these potential in further primary diversify that our the introduce outlined carrier to last with streams new services are number three

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

XXXX each we the The adjusted company, in pleased through the shows will income and slide the help through segments our other Swift Slide growth from report the the These since of percentage of to and on our area an from quarter services earnings our efforts illustrates operating industrial to non-reportable last chart us less progress in of of five Now into This cycles. the years. mitigate changing company. contributions merger freight of the truckload a business each the downside expect Knight us and over XXXX. meaningful make XX. diversification composition the of third intentional We're left volatile

we to share from million Knight-Swift per the merger were shift where rolling following time for of year has Swift XXXX the Knight since truckload which Our earnings same truckload Knight four of changed months. improving per This Swift in percentage $X.XX has XXX immediately at EPS this a combined quarter now XX truckload our forma earnings our for the $X.XX to earnings earnings only this merger. share and year. the and trailing full reduction while meaningful shows significantly earnings represent third chart right The XXXX in moved on earnings, XX% time. from from million represents quarter per XXX the XX trailing of share our the months adjusted during pro

of X.X for we've invested ample leases. shares M&A acquisitions. generation and driven Moving down in XX. in by used remains capacity to debt to months. XXXX million free to acquisitions cash Strong paid X which Year-to-date, Since long-term with have and flow XX%, third merger, trailing Slide high our us the repurchase our was strong Making increases worth the million cash billion priority quarter the cash and in increase we've over earnings through a $XXX opportunities. billion XX our XXX shareholders flow, provides dividend Knight-Swift

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

a XX you we've evaluating tangible maximize return tangible over the on where been achieved assets remains the graph few use substantial our our past us which Return is are from shareholders. from value to XX.X% see for on of past cash can a We've We for to market key a create XX. Slide months. assets, improvement in years. the to net conditions constantly On metric net

one, margins businesses; Our existing goal expanding key in is on growing businesses; improving and to two, less focusing and by operations. improve our intensive metric three this three, acquiring areas; asset

we've brokerage. less our quarter, During and our our our many from year-over-year addition truckload power-only time. revenue in we our In logistics every volumes opportunity XX% truckload Services or business saw key for truckload than service doors. that continue over our less these returns network in We to acquired, in objectives expanding they areas coming course, a saw year-over-year. core three of allow truckload, the the in we be to significant increased progress unique these of with over We intensive load than and asset those or we're generate revenue improvement to warehousing, will of terminals are shareholders less XXX% of offering. warehousing XX% businesses, leverage quarter new and in us fourth with part asset of focus experienced in In four increases large competencies Iron our XXX third made synergies areas. We've believe increase our to business over LTL, significant the over us

on kind I'm just Now market we and see of XX, going to the and next to the little as and it. slide, give a Slide moment background bit into of a view take

the as and So changing I'll disruption bear see give and the some them little than timeframe saw A for typical I which to try sub downturn I'll quickly on demand action, seeing changes this. start one and seasonal commentary ways and to beginning seasonal preparing seeing started one. what the head -- won't cover We've this been next in those in that the into bullet some experienced points, back the now at saw has April with but of the before since COVID-XX. towards to jumped XXXX we're one a adapt me of here last at end easier another, into freight we in or the of hit we through the COVID-XX XXXX, we way kind of made XXXX even what come the a of as demand from walk perform. for the of just May each XXXX and prepare predict into anticipate, freight originally to year but When I we of market. started and unexpected demand, kind immediate we're of summer market continued more all-time and really high we in been from

only preparing year focus been for We the exposure although adjustments playbook performed year. entrance to A the investors. high market the company remarkable of with our major entry with to slow. for as the continue, route. increase the long and at would followed have that Now and volatility two and option about LTL Mitigating market to the percentage volatility economy something truckload talk we've the mitigating frequently cost spot to for be last the business made cyclicality certain has that's major was that decades. over LTL reduced the we consistency last year their of market in associated which the part rationale reduced It hoping barriers truckload beginning for the this the was a we've opposed to throughout the over in the full used our into carrier's the market of a our truckload real regular been market our considerably dedicated has with to has the strength and

challenges be as industry's a and or on carriers customers These that very cyclical increase and have of trailers increase labor providing cash size access concentrations to in partner ability chain we entry high the the meaningful very and for two trailers driver unloading pools to driver XX or unloaded and small if is of electronic and industry expect is and or they operate maximizes offer will unique rationalization continue customers cost a hours this to trailer accrue our we we in trailers supply secure power are of LTL XXXX, -- carrier today, their are third OR by maybe but in that that industry loading increased or and partner per unloading us. challenges truckload our loads leading most intensify industry massive in portfolio efficiencies helps as has opposed invest loading nearly to carriers driver may unprecedented and there what log reduce will capacity truck value be afforded years Similar well fleet, Since trucks operating already a both a trailer cities the Our with when highly impactful massive to insurance the These capitalized, to mile. but not create that to truck carriers party our day already relationships. flow pool or flexibility availability related charges to facing is less us challenges they a in the ago, four what to when with to to to awards more profitable rates for further challenged tale versus lowest business our shipper maintenance, with one waiting. expect result and arrives our and such industries based of carriers. two The the in strong loads from states further additional supply. our even as trailer and our of in largest volatility leading of It creates two the waiting. unload more for provide all value mandate flexibility The market. to barrier own and and for freight to from well contract shorter the very pools term been those we

We few guidance now over to opportunities quarters. I'll our it the to slide. acquisition attractive finish next expect up with meaningful, turn Adam

Adam Miller

Thank you, Dave.

is our expectation year to fourth range which So for of guidance quarter to the $X.XX adjusted down the the and for Slide to EPS $X.XX, of full XXXX. which $X.XX We performance the expect turn be full outlines previous within we'll quarter's XXXX year XX, now from of $X.XX, reflects quarter. guidance our which third

result a combined is on market this expected basis. comparison we rates meaningfully negative muted Keep year-over-year cause This difficult quarter, freight that a in spot more a seasonal declining expect than to of mind sequentially. to is the rates a turn with For environment opportunities. fourth significantly fewer

of number the increase seated trucks. to continue We

has per in improved year-over-year XXXX. quarter a result, our change in each As tractor miles

have in than these to the tractor due fourth fourth quarter would that offset we adjusted in per the year-over-year We we and disruptions. lower holiday significant tractor truck Normally, quarter per sequentially projects be count declined our EPS miles productivity. improve in our the expect to deficit will more spot quarter Absent expect third opportunities, typically stable. than quarter. as remains the decline opportunities the from Miles in in fourth third to

as per volumes year-over-year. both not expect seasonal our QX. in business margin will LTL Logistics improve fourth LTL load as typical patterns and quarter the with in revenue follow high XXs. operating with single strong QX to be We year-over-year high margins to to Intermodal load in volume ratio the QX consistent and basis. revenue being with to with on mid digits are an a expected remain the improving

other to revenue and prior pressures to well. expect will of labor driver continue expect presentation. be the equipment, from and maintenance, compared in year, non-driver to And income outlined grow expenses, we've we Slide as continue inflationary X when We this as to inflationary

to for these These stay differ range We between in XX be for based expect rate rates, rising million year, from on used sale this Net and to continue moderate. as expected million equipment best million full continues market to estimates. will XXX the total estimates we XXX XX to increase. for available. management's the cash that year. the information equipment expect expense may interest to and gain to Actual materially year, million on represent results of to current is CapEx our XX% QX, estimates around interest Due tax

the section that to risks remarks. annual affect you We like now call that the company's concludes the Eastern. may to ends of will This a you X.XX this results. our discussion factors prepared refer for risk We'd at remind of report

as many time answer to question time your call to able If it XXX-XXX-XXXX as get best our to we'll to concludes we're question. to allows. and do one please prepared questions follow-up not keep That constraints, promptly. Again, remarks. our please We will due

questions. We entertain will now Collin?

Operator

you. Thank Instructions]. [Operator

Okay.

from Your Fowler is first from Todd, Markets. ahead. question Todd going please Capital KeyBanc to come go

Todd Fowler

Great. Good afternoon. Thanks.

David Jackson

Todd. Hi,

Todd Fowler

Adam. Hi, Dave. Hi,

it Dave, the so. the I guidance, about quarter mean, difficult that as can proxy? about is when Is down very everything I part that fourth in last it's almost quarter. and still I quarter a some in that should levers 'XX, know fantastic fourth we other was year. start, difficult But midpoint cost So maybe implied lined just a XX% XX%, first there are what think at pull this about side. the or to or just up on a have think really the you comps You the of comp

order earnings Thanks. here Just magnitude trying kind think rate fourth into in year? and of of quarter about next to the the the of run

David Jackson

Yes. Thanks, Todd.

things had I moving I year. that of us. normally there we And we isn't about would to urgency project significant coming we're orderly. think, high as peak are the appears There -- was would say for a that move be now and same peak. There a season, was be was as everything in seeing the we're you It noted, through, Capacity pricing think muted that last I Inventories seeing more freight. what kind imports much saw and significant pull in. appear we're tight strong. into that the was we that working where into in this as last year that

there's -- of don't last and our up catch feels so on -- like business definitely aren't a there's level appears some they it had And that going customers year. we the project have that it

the reasons true way comparison you for I that is that that year-over-year to that for the year. wouldn't doesn't same is quarter, say that hold But into it on off move comparison. the as So next fourth be

are business going have and quarter. in to the we Now see project normally peak is of soften. continue don't all economy to a kind indications the we But don't first

second. extrapolate Todd, through so and and be quarter careful, first the read for And in what would fourth see you or I to try

Adam Miller

of happens EPS terms into that you normal would. uplift from Hi, you Todd. to don't because QX just model what with I also have you the transition, change I'd as typically to add that. wouldn’t QX the seasonal QX in

QX you for QX think But put I you out to in we would would. less see haven't EPS yet year. from think typically I QX So guidance -- next would volatility than

Todd Fowler

I'll turn it time fair thought. a Okay, over. Thanks tonight. for the that's

David Jackson

Thanks, Todd.

Operator

please from Jack comes ahead. Your Jack, next from Stephens. question go Atkins

Jack Atkins

evening and guys. for Good questions, thank great. taking you my Okay,

David Jackson

Jack. Hi,

Jack Atkins

provided miss days and sort as ago, investors I'm that mind on assume ago, said you I around of I XX could ago. the a maybe, any your you of give So seen or in anticipated Dave six would over days And free $X macro feel the help to but even I confidence are of a to cut recession what you all at top in months chime than $X Could terms in that modest guess think on what things the earnings freight and think well, imagining after Adam recession? on this guidance of changed for slowing trough has months? faster you plus? us sort you maybe last that number level maybe us magnitude a outlook of would the is the that really of of down based have here XX few update most you've course just

David Jackson

the Yes. Jack. Appreciate question,

a We continue north is floor $X to that that of have conviction share. for

type look and a can we've side, And can to mid it see environment continued that at performance we've low look last the not in able we but business are logistic maybe upper XXs particular, business. side numbers to LTL way the intermodal. the in quarters you and seasonal and fourth being has perform and worked the low in remarkable almost on the quarter. at in has spot you of into XXs XXs just sub in even more seasonal changing of has been now much our And the been the these you to a now still XXs has go in our that side, low given as our that Those do a nonexistent what things a pattern, been truckload have you market three at at kind where OR lot been isn't can on look what look spot. in You one market

I don't that's by earnings And this durable know totally maybe people per of appreciated and really are. business the that that so know the I don't appreciate share how market,

been I better LTL us things a more market. And that our good obviously say businesses in continue have acquire as will has up little continue things related, transportation related bit flow. here we've quite about transportation companies. we transportation -- are give to that would start And we and that. for are opportunities pile that and buyer's a And not hopefully Jack, favor just adjust bit, opportunities working but not free talked to So it to cash conviction a to

in So to we to that's that you grow truckload has the muted where that demand that you're from to an wonderful broader afford under market, also in see cycles the kind before enough a add though learned going a business can at -- market to might market uncertain the eventually that I supply demand. supply we the freight where even will would recover we see to continue that gets supplied opportunity even you come market maybe at rationalizes in out point see us our because or truckload full we've recovers, find time. as this have of prior that usually least point equilibrium and expect

as we've as that believe saw the -- noted we've come right been it accelerating We and out really that were that -- in seen now. not capacity been cycles seen away additions that's not before early has cycle in has seen capacity and slipping come contract seen we've capacity never there never of out cycle, even previous this so rates negative. we've there this of And we kind we've last

chance has recovering. the recovering industries economic are few demand so And have before there a of a prospect that broader of a

is full the I one think so of truckload those. And

anything? So, Adam,

Adam Miller

Yes.

it as Just now. the Jack, for plight to ever small reiterate, right is severe the carrier been as may have not

equipment just the even with rates, market had very used we're XX% third that's from rates. last impacting And very about used is with data. party last month. have that real BLS You elevated rising off from was under FMCSA data fixed very seeing several shows and Drug of there's higher XX,XXX here if where of the just the the factors higher finance think a seeing revocations We're probably just over truck with we what net and employment elevated carriers last locked even now range, And they at The we're year-over-year. the equipment scenarios deal Alcohol couple month is years. inability We've X,XXX seeing lot that. is August or do for the purchased signs on weeks pretty the couple to of with elevated costs in just of been down. trending challenge, off new anecdotal equipment has are over Clearinghouse sharply been interest and authority, demand fallen a

been So, demand. robust. It's not we’ve as talked about

I think much has the fact the great it will quicker other that's pretty clear. capacity believe confidence us $X cycles we in trough. that But gives over still than rationalize

Jack Atkins

Okay.

David Jackson

stay Jack? Can one I on for more continue topic to this second,

Jack Atkins

sure. Yes,

David Jackson

as that $X sit getting that position space, It especially get does $X and have time a the supply it carriers, of for larger would but share what take and over And acquire business some typical out to that up continue wouldn't the here give a be that what mean much don't would down is we carriers, to would about We to as we in midsized unsustainable. eroding wouldn't share, of well. businesses for even have to -- see it give small would we assume that work. our do up far. they what to a Well, improve us also to the to with that So many a even talk what earnings per share? for carrier, for

per myriad So us that a that conviction X share reasons help have doesn't to and of rationales a handle. drop below our earnings there's

Jack Atkins

for Well, I appreciate the Thanks really the additional guys. Okay. color. time,

David Jackson

Jack. Thanks,

Operator

comes go ahead, America. Hoexter question from Your Ken Ken. from Bank of next Please

David Jackson

Ken. Hi,

Ken Hoexter

So How want I the because are the think of little that to you and fourth and you're set bar $X looking with in Good theme right, stick I a afternoon, you? Adam. kind bit, rate on right, so David at that now run quarter. that discussion,

you that And how of I of are to 'XX about? And so the the you're that given it quarter relative saying seeing talk like about you number so want talking differs seeing leaving? $X think it you understand you're you're as for I fourth are get that that saying just demand is pace rates where market just of early costs, kind costs just versus your toward understand breakeven the level, in thoughts to on in those we -- trending maybe seems your about you're into terms already carriers

David Jackson

all signs difficulty. having small around are carriers see we Well, that

equipment went I that. be can truck they a young four have And real built of industry is truck had don't high saw somebody that upgrading average eight-year-old truck used them right orders, and into a would now that owner-operator find should truck looking assure acute market a and midyear our last or in by average to been all-time built earliest nine-year-old to getting and to find at that The not their to were to think materialize and what now. industry. massive of difficult age you in record when for that the and owned we we have that equipment for a previously interested. pace the an age. had The to significant anybody so put years buying program is where else equipment upside over two a down do need out right from five-year-old truck. interest and because be or very new I This wasn't be maintain half builds to the this should a truck individuals that's appeared everybody's should

contra And and trend on the it's completely always age way the so worked. based average

turned truck a hand think on carriers their overpaid last anybody small that's half where just And part we beginning. it year are today. for have the have valuations that I with them. on of very began grossly the And has and has it You it very, from a carriers, that ugly did over hear has accelerated get early based those year and quickly receivables small and who Anecdotally, dramatically. used

market to to there through. of broker used bail out holding a dependent be a because that higher a much and on the them just dependent hope wouldn't to so quarter, on be aren't surprised quarter charge carriers have the the just pressures lot of a spot fourth tougher stock the of pass non-asset rate themselves strong or many customer them found that very who able very to with a to many continue I mount. small And summer fourth out no if were for

And has so that changed.

not and And so Well, that we're one roll that that driver -- to to in. change us? when we does truck one how different needs what be Ken, is unloaded

distorted chains we try supply of We customers the to and out commitments help smooth service level supply been that chains and kinds of our trailing last have know where have deep them all over contractual and disrupted them of years. couple we provide and high and capacity help a

result or spot -- what months. we close eight of a experiencing not market the contractual for the experienced the been as has last so to has that market anything And nine

start it's much And a pressure the so urgency, rates. and different But happened no cools on naturally than economy spot contractual you story been what to there's to as see rates.

factors. I so of think And that's one those

And speak. is so there happening rightsizing as we that's

think BLS that as which they September, don't was think most Adam from data month reported, I I it August, the quoted was think I the recent that was August.

not employment when was with, not to And drivers record have down qualified. grateful the X,XXX. we're at and to the nearly of which for that's supplied revocations high begin you Drug meaningful, to Alcohol that For XX,XXX of over are be it's continue trucking that Clearinghouse rates and it

a quarters and in been not and will kind mode all multiple any for have definitely of attrition, we that growth, expect it's So of about that we continue. now

Ken Hoexter

Thanks, Adam. David. Thanks,

David Jackson

Thanks, Ken.

Operator

Thank you.

go from comes ahead. from Morgan Ravi Stanley. question next please Your Shanker Ravi,

Ravi Shanker

Good afternoon, Dave, Adam. Thanks.

that on touch just came think in I the something Q&A. to earlier up So

telling decline. Kind inventory are that of you or like is a fairly the current same weeks not peak XXXX changed think tone the I now? lot a broad view like? more in of looks recession, just a of your panned ago. just think unpack have situation of think do since kind and out? You you, saw and kind message What that right you significantly thing. that message few it's release a season? this mentioned you your of downturn us? Do your your last your Laguna you what's your a Again, lasts? thinking over month has content conference how customers a What of help your the your little done September of long peers Can your how consumer for kind of has Basically, downturn, XXXX, a freight light unwind

Adam Miller

in so There's let take have they up But spot I'll probably go lots type some clean seasonal Laguna. into a there. see stab and anything right? these missed get opportunities. not And you perfect and were quarter, Dave fourth And to still kind what we typically difficult with for didn't we visibility then quarter I companies unpack some uplift of and that question, pay fourth large expecting And a are typically with scale, of especially a Ravi, of that to projects it's our rare handle. out of there we We in premium. projects of

And think spot ways talked customers, of say we of inventory with. most a the and type And of out certainly that as closer process next during like opportunities, other seeing term quarter see a that's bit out we rare rationalized, where over to so players just in help it's that our position than to to that And row that it'd got nine we move fourth stuff they've coming just scale solve. are period overhangs customer typically never as we've cycle. inventories about that now into that any the of I to be would bring opportunities, none just anecdotally, Dave, have in and anything how be and those be it's we to second conversations, that in of shorter But on long they want are to add? they think eventually lasted out. the in right? faster support capacity And and have capacity, earlier -- of think not we But and of capacity I balanced realized without by think you goods they great about that's type how value probably customers. large position like going business. we months. in can to their got and talking QX of it's from spot with will into to have seen that's a see they're a seen our fourth plays a the unique the and next We few materialized, a industry come trailer And more that with the feel add to market is to attrition their would. And in lack I be probably strategy detail could be will much And see quarter each we'll feel really I in a the urgency market I that the got we're why all think just still translates differently. in view But issue do that quarters a six think opportunities. year, time some they own any the deal unique resolved depending premiums in

Ravi Shanker

Great. Thank you.

David Jackson

Thanks, to add. Nothing Ravi.

Operator

Deutsche Bank. Please Amit question next ahead. from from comes Mehrotra Your go

David Jackson

We're making the operator work today.

Amit Mehrotra

Thank you I question. very have one much. really I guess

But really seen reflects mentioned. the you look freight opportunities XXX better that all. operating was we basis was utilization the sequentially. actually at But up haven't all in crack points, at contract yield the to stuff the I deteriorated if quarter, yet, which obviously real So the rates X%, ratio like project,

And so just sensitize I'm trying to model. the

in EPS $X But it contract convicted coming we number. trough haven't down. You seen to actually plus as real seem relates rates pain the the

seeing freight base of sand contract that a I'd if And kind defensible the XX see feel plus greatest you're you've that? the project of to of in in underwriting little if actually you selection bit starting this kind actually weaker take of love estimate a a And, you so, combination weaker a mid line XXs being Is bit. market. and or like then what's can environment rates do of that months? talked Dave, OR still you bad you're than you're to or very crack contract provider, And worse $X as number about start ball little kind your largest obviously, next kind over how crystal latest contract -- get evolve of the to a about rates and Adam, kind rates asset think the

David Jackson

try answer your of three Amit, okay. here, all we're going to and questions

one. I'll maybe up Adam, you can So pick last start and that

to contract idea think you I operating for our explanation instructive it is has somewhat buy microchip Cost materially this a not maintenance a that. it inflation you're throughout job needed, of in cost there's I you deterioration We're is fair the it the this and was you there and on not We've used something, and That's the backtrack over it $XXX the continues. progress and look maintenance utilization first, you where the of now as and there And gone our So a how have for that ratio, but wages fortunately up don't situation rates. items works. driver there -- just business, What trying timeframe to you in downturn. equipment, that or the $X.XX managing that appropriate. meaningful cost forward service. to the was is done costs for and and tells think and mitigating

inflation. by affected we're around, look we As

in floor pricing do lack from whatnot a that of carriers as for while maybe can not don't a get bit create I to little they're be does a bit finding haul of as project non-asset with the so able brokers a floor based and a load the quarter if freight a this in wouldn't terms customer. And pricing. fourth much believe feel surprised of in pinch that of I

we year-over-year up per at up this was more than what on in our are our did loaded if digits only And in quarter truckload quite look a where clearly the was first the so business, single digits mile and while single costs rate basis. our a rate

industry sure this we into is that performed. operating that I'm there's and going would that than say that how bid managed carriers the truckload the we've have as that based better not our So And in anybody way season. cost ratio, the on I that's we facing are reality the

with rates. only just and with room we carriers so other compete and in contract for so much go to work have And

went Second highest the peak period saw bounced take thing that weeks and had would be contract about And place. to go give where when a go we would back from an predict have and to back. anticipate then from the example the late XXXX we downturn months go to oversupplied to of few XX over best we to took XX-month 'XX, note from I the period Amit, rates, unbelievable and with, trying to or industry, things take, XXXX, rate, to grossly the lowest spring went see trough by

there. saw Sorry, we XX% had an XX% to massive a drop that we mute timeframe, spot off Over unintentional in rates.

spot Now, than year full that period. XX-month rates. approximately off in arguably, even this be saw what more for seen that And carriers small may we've only contract we X% rates

go of many room a with mile there's that cases into are So that rates. contractual in I'm on to expecting increases imputed bid as we season irreversible, per legitimate not cost cost, retrench whole the kind operating a lot

we the little the we Or maybe through a of timing on where more go can things customers have some we this do based efficiently. renewals, as process, opportunity perhaps bit there's an in the that since thus We've results the of numbers And year, to January. our those and been something secure far. volume. are first for doing some since do us Now

mute have all -- right, we so own that go its there. And to a on likes button

we the It's have keep and more now do. you we we we scale about us And and why can have maybe we able this can far with. opportunities. that that to going rates things deal already small talk to of one provide our of We and if carriers trailers. unique so kinds can business, this. partner find There's a of business were more things loads partly us than to come up and economies thus have when that And those that are is and way other to for going all of have where to meaningful carriers in And want have can to the year. will at a find things efficient they haul gave more we where to much can't, efficiencies This exploited the some we we interest so there do we're continue power-only. right loads is imagine definitely had in small up to we that others some are logistics are we've that sometimes we our margins offer come

create we're wins the efficiencies through and season. as we move so to And to ways create bid finding Adam?

Adam Miller

Yes.

Just what got to bid I about how to had this rates through to off. this halfway But add, as Amit, season, played elevated, come is there spot bid the needed opportunity to rates year really you're season that the going still up rates move spot Early time last be. probably contract think started, year. were recall you was out

the contract season. of back And improvement on so lot a a year-over-year the basis in wasn't of rate half bid there

you they in to the not through based year's at. on be there's renewed lanes this customers And with near so bid as what go movement going those season, needed those

kind fleets So of off. there. more environment. I you we a typically just realize with The There's two see into go labor bid want of well cities more season Also stable difficult large well to tale to played a that sure fleets networks. make -- capitalized the come large capitalized

see And have so trucks, opportunity most more productive. an to we'll more be likely

can our are, to where our from empty discipline. standpoint. percentage think we'll I offset organization miles then seated rate but will mile in Our already dig our deeper our any we to And a help allow become likely cost pressure feel. certainly the most very we We know to progress and cost you culture make reduce with goal of is us more trucks run may to really

Amit Mehrotra

it. got Okay,

Adam Miller

your you Hopefully, answer. got

Amit Mehrotra

it. you Thank very I really appreciate much.

David Jackson

Amit. Thanks,

Operator

ahead. question Wadewitz Tom, Tom from please from next Your comes UBS. go

Tom Wadewitz

you Dave some you about indicate M&A that had some afternoon. comments and Dave, good Adam, that optimism. think seems have to it I

also transportation you doesn't of the you several said to have be to referred kind maybe next related think said, well, quarters, I and LTL.

would to focused people Do perspective? think able next LTL. could to do some deal be can think offer you in by you. perspective us if give further Thank LTL I And I point you an a most know Or more transportation to might Wanted you you are are then you on say optimistic related, you -- if what quarters? us other that? see things? several when don’t mean you you

David Jackson

Thanks, Okay. Tom.

lot at fair. would many different many, deals say enter certainly that we noticed hard looked an really worked really, you've before are economic we've looking like a into seen if I I particularly equity here think a appears and new that's influx some of deals. I think of optimism, private a environment. for Boy, home

kinds everything situations. in And lot is things of a these so at. Timing looked of we've

think -- collaboratively us we are and trying closely. have there's individuals have serious and we then how that we to help are We of multiple to understand about we've a lot us like feel a lot that be watching businesses And we the closely have. brands built, probably local business preserving other watched their better

you for like will, with. others we've So somewhat we if we're feel had conversations auditioning, that

all a headway. going have little see capital, like mute environment some When when it it's for button, feel own. change a access doesn't underway, new making to -- a individuals and that's on get get in we're So harder the you we’re to that I to mute one to its

saying like headway good there So got some is, what feel I some good was we relationships. we've and

a source and grow solve be can and to that next individuals what's for we for business. their only capital acquiring Our continues some interest of for in are issues looking

And Now relative feels perhaps that very we we've is It will still valuation. be a our that there. through to unbelievable through been economically And an in time being well think said, coming way has in been business to LTL. continue interested navigate peak there LTL businesses. other whatever like that

Tom, network to we're to that that AAA in expand under have worked will that with this seamless have to And in working we one this and about to a there our were be the the already regional way. way we've fourth already Cooper, optimistic level. one We have going new efficiencies MME release together. going that's here network. a talked to we been continue, very two so quarter, some in And take totally the brands, matches it independent super And together

into we're we So seen. LTL already everything love a over year just and we've

very change interesting typically is us. that that start in I time to say we the over valuations truckload cycles, roll full over we to world. so would as on see And

reward have companies they kind given full this. And time of like a I been in know so the that that truckload historically deserve don't

If months multiple to at return at what normally assets a name in business multiple RPE, just tangible at. see you stat, especially that the last look a would the net like and kind of XX.X given you XX trade a particular, on

times we sometimes to like well it's of what game market moving interest we like plan going their be as these that as is. So full have the anticipate often because times this in reassess where again, that truckload it's and businesses

expedited of say part different I would be But bought feel when we've be a and us. and So we for transportation truckload we companies there may half is truckload last how in year and that over LTL broker variety we and like overdue some between a truckload for shortage non-asset out just and to it types the firms. and business because related, businesses no there, sure of to two of would do interesting be tech know

So intended shared earlier, I Tom. with I that's what what

Tom Wadewitz

great. Dave. Appreciate That's it. Thanks,

David Jackson

call. for we that analysts our tell nine to queue your I that Thanks, time that questions. in have that able Tom. the not our get will were we to still it call Well, you concludes appears are

and And you'd us so everyone's still a Thanks to the gave earlier to safe. Be to again, we we if out would like phone interest. give have a discussion. number refer you reach call phone for

Operator

call for that lines. Ladies this your thank and participating disconnect today. concludes and you ask your you please We gentlemen, for

Knight-Swift Transportation (KNX) 20 Oct 222022 Q3 Earnings call transcript