CVLG - Earnings call transcript Q3 2020 | Covenant Logistics Group, Inc.

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Operator

Excuse me, everyone, we now have all of our speakers in conference. [Operator Instructions]. I would now like to turn the conference over to Paul Bunn. Please go ahead.

Paul Bunn

Yes. Shelby. you, Thank Covenant the Third Conference Quarter Welcome Logistics Call. to Group

XXXX. this As Securities forward-looking of call statements reminder, Litigation within Act Private contain the will a of the Reform meaning

uncertainties publicly Forward-looking including, that differ statements and update without from by section our limitation, circumstances. Please contemplated forward-looking in revise those subsequent no to our with disclosures are risks our and materially could XX-K actual filings current results subject Factors cause Form to undertake reflect Form statements. Risk these review the and our the obligation of recent to or any to forward-looking We XX-Q. most statements or events SEC,

by professional and freight per July our this shortage efficiency, both improved Parker; being in from in and and As Chairman quarter resulting the and covenanttransport.com, adjusted Hogan. were: economic robust additional we comments the return David harder significant asset under average, in and downsized in from are exited to acceptable focus morning and bounce attract the as average and to We drivers August capital employed. strategic effort cost inventory where significant quarter, portfolio, could XX% to year freight the an with including as the our factoring tractors July fleet section. of CEO, $XXX in September, Tweed improvement a on website by environment over in the being the John and well a activity, for restocking versus implementing leverage the second versus In capital We reduce a copy plan we and industry-wide qualified highlights back financial The September. mile of proceeds of of am through portion count revenue, sale the to in We cash. I by factors, XX% the by and summary, the progress business the truck sequentially, and drivers. the quarter, at related not a reminder, ongoing key utilized The supply quarter better progressively off sequential TFS Investors XX million generated and on of transaction our than joined from prepared became Joey and our and years. an tractor available seen our aforementioned a pay earn perspective. debt Co-Presidents, sale information levels in factoring on ability experienced our prior million of related $XXX of demand retain disposal the a that the from

second only was years, quarter third the behind XXXX. the quarter in of best of The past the any third XXXX quarter third XX of

several a quarter quarter. source quarter to included for detailed The net Turning share noncash results items the impact adjustments ongoing more the had of per amortization. of positive intangible share to $X.XX third $X.XX plus add-back discrete per that non-GAAP related

the decreased Our while a or at result fleet solo of the an a average quarter for majority total significant percentage XXXX revenue higher in refrigerated model XX%. using more mix tractors, tractor were of: increase average fleet of the fluctuations profile revenue miles expedited freight down a The period. primarily XXX XX%, average operating the to tractors; per segments and focused week. average operating to costs. fuel change Expedited's to and adjusted per per the related up resulting tractor decrease the eliminating ratio the freight in X%, team-driven are XX% was the excluding or a period, in in surcharges, in compared was revenue, expedited $X.XX ago Versus year X%, mile related per XX%

primarily to or year the or has X%, mile ago ratio freight due fuel excluding revenue, better Dedicated's per X%. per $X.XX to XXX XXXX of while Our Versus miles reduction increased segment's dedicated compared tractor the Dedicated average average are Truckload a revenue $XX.X Dedicated's the the result XX%. decreased for operating XX% period, million tractor surcharges, profile. that total a to period. was freight on long-term focusing operating in were adjusted at The down fluctuations operating quarter XX% profile

This plan initiatives solo miles fixed response operating third quarter a result driver compared direct more ago COVID-XX, of network additional for in impact terminal the the to truckload year spread decrease to per fleet, liquidity and tractor cost mile strategic Excluding that of $X.XX decreased and the our or to of improve our effectively expenses downsizing truckload-related short-term our adjustments, XX% total reductions operations. period a is costs.

on of TMS Freight the is Our ongoing revenue large customer. brokerage $XX.X Freight's our year XX% XX%. versus offset $XX.X operating ago brokerage million. adjusted increase impact by that at was to freight was the revenue project-type quarter of XX% million, operating Managed spot increase This as strong quarter XX% was decrease the our constrained. ratio Managed operating in the in a to partially segment's driven as a platform long growth result operating a increased revenue capacity a COVID remain primarily freight by as or The should for in

year business XX% as to and adjusted XXXX. ratio operating adjusted operating new revenue increased million. quarter began Warehousing the income versus a $XX.X XXX. income Our third result increased $X.X startup Adjusted of a X% ago operating quarter that to Both at Warehousing's segment's in of segment for was revenue operating the operating million. the increased

Enterprise investment million our quarter of fourth income turn from the of to quarter key a third Finally, XX% $X.X bankruptcy customer recognized rebound recap At method time, the in over of pretax 'XX, pretax to as items. TEL income we in the that continues in $X.X occurred with a Hogan Joey from Transport Leasing compared million to few call I'll additional XXXX. this equity the

Joey Hogan

satisfied. in GAAP amounts risk reduction of disposition forward-looking of of the policy, creating future period the robust prior and indebtedness; retaining net on were improvement a agreement a flexibility terms, number number quarter better then the of and were excess lastly, any TEL's claims and freight retention to one, related an markets number one less for given are years; the asset-based third credit cost four, market two, claims concerning sold. for premiums portfolio factoring recording to X able and offerings; across segment, the the you, number two, the portion earnings; number of when We've under three, write-off asset and positives subsequent provides. amended quarter our a date, charge that to our The be the with capitalization toughest there of it's end not a market; the utilization; our the remaining returning over a of X-year limits in our were the as no revolving recruitment taking we Xx recorded and eroding three, fees capacity insurance negatives quarter, for main volatility; on potential exposure in to all service mechanism recorded resulting the favorable in sequential driver large a current extension fixed significant XX four, of risk-sharing in the increased a will our spot additional prepaid and assets requirements Thank claims absorption Paul. that both asset in significant reduction facility the main consideration, recognized we to and close and in cost the several The facility reserve the the were: potential of in number

fleet our As the in we're customers to we more years. the focused model to robust take the be we and what in to third limited quarter, peak focusing of flex extent to provides limited Similar and capacity. quarter, peak service advantage shipping trucking expected committed is capacity spot have look to delivering superior a our same season prior very market up with and reduced fourth on the to size

consists Freight do and we focus to will to service the pricing steadily support less the be This and process legacy generated underinvested sequential quarter our overhead and In of growing fourth Managed customer and strategic with by XXXX seasonal contracts, plan, Warehousing which margin support of people our these our improvement. of However, our gradual beyond, expect execution base segments, and of favorable investing intentionally be continued to productivity. growth business improving Dedicated, our improving diversifying our will exposure, safety, reducing relatively and and cyclical unnecessary volumes a be technology percentage in and of and systems and areas.

time less would downward we gradual and earnings our in goal offset sustainable this market I expect investors a that is improvements upward by is at The short-term to effort, susceptible our we manner that multiyear be will to like to As forces. undertake improve returns and forces. and remind

offset cost pricing XXXX, These are progress of pressures. the some For on Over improved time, and predictable we plan certain underlying value to return example, for open efficiency contract and will Thank in creation. you we and be a and opportunity stronger, with now more extent exit cost improved your more to the expect safety. for by expect benefits control, expected sustained business, profitable, questions. Shelby the to for significant the call time,

Operator

first our We'll Caller, Instructions]. ahead. [Operator question. go please take

Unidentified Analyst

Congratulations on quarter. a great

business momentum walk double-digit know want the XXXX, throw think sort So just of kind we increases, rate and heard But take wants as talk out I maybe about into I who to rate it's I don't think this to guess, of through. there. this, to about important others we've the going I in

thought XXXX mix potential we less in a help think more you as have moment? the XXXX? rate historically business the is the guys going for you a than about way increases think Dedicated, which forward different are book that be into about But Covenant in probably of people Can rate business has volatility. kind I about across contractual of bit past, us Your little your of thinking how go for to

Joey Hogan

I to Yes, do on direct Joey. call [indiscernible]. did of call, is this last Jack, kind this traffic I'm what kind going of

take John let to that going I'm So one.

John, don't So why go you ahead?

John Tweed

Joey. you, Thank

So couple of things say. a would I

most most the the commodity X% that side, also contract as of we And operation; change in then through our that part looking off first some consistency get of you need in itself in of lot beginning the commodity to is, to that through this process I of the fourth it right think of which margin our X%. at the contract for has and entire the in working rates wise, and best side type probably quickly, us pricing realize to And that to the our our on trade for cycle. the business X% our looking businesses keep quarter, being business happened very in important transactional business and identify: sustainability you'll those at we rate where we're we're year do, to recognize, cost what the commitment On where to side budgeting of hard unlike to of side, of range of the the see get rates it's in at see the a customers will do at X%. model and what we're and rate But can Expedited we go contract. the is we one, now, up we the profit of that to because

Unidentified Analyst

Okay, John.

clear, that so just the Dedicated? will that piece got of more content of commodity referring when you side So you are more say the the the Expedited to business, be I've and

John Tweed

Yes.

Unidentified Analyst

Okay.

sure. make want about... to Just I'm thinking

John Tweed

Absolutely.

contract Dedicated, Contract our call and Freight our businesses, which we side Management the include will Warehousing our TMS. operations So

Unidentified Analyst

Okay.

sense. makes all That Okay.

of I kind per that thought basis very you cost to the said you significant a just press profitability that's want guess, mean $X.XX had extrapolate where costs the guys you've that. quarter to improvement looking taken structurally release, share of enterprise. I taken per have this that note -- the if interesting of at that the on improve a you've is so you due in about amount And action a of to out mile I the

it you or that think rate year, you'll So about? I your XXXX, see can like we into as but frame about you'll What mean, back your next guys else we've net thinking rate in mean guidance, improve should we be got but to I the feels we favor, the obviously, up should Not costs about just for the next know be you business, the when in able -- look some plus year with got into business we be combine on that when coming we favor. help us how in you broadly? thinking asking specific costs

Joey Hogan

Jack. Yes,

was of then think start, me the what shut one a has lot and I'll down And the was challenge to this I And it pitch Let everybody for of on reasons. for it? when been Paul. economy things a year March,

David Parker

XXth.

Joey Hogan

date I Dave. Thanks, that XXth. just got [indiscernible].

phone, how none us how wide None on situation long, So going was deep, this be. March this of to how of us XX. knew,

So we all ways. in responded various

to we as we as that have We things in made think people mentioned think Paul back decision others. release I "turned the or going also. headwind about, this was talked faster just to that of transformation sustain to a on" We the hold about temporary we're cost because some felt year. as we're slower we kind the us well than going things important through to that committed deemed through to that be it

that. So our from we team got commitment a to do leadership

was waiting. to think just moved we we the where our we've going see are in coming economically, socially, through it back, and all second made, do And we We surveyed have I it's the decisions so come as that the know transformation, back. half situation

think it storm of time. that it's weather in I adjustments we to a important. so made don't see as it see unknown an And some as negative. that's I I kind of

it some choosing a the quarter. quarter, people to quarter. second back on sometime lot it so first And turn turn third on back kind of of We're

talking So what about. that Paul around is kind cover of is

take why the don't you Paul, question? So cost

Paul Bunn

Yes.

of have little at I'll We QX a in third mentioned about OR start from bit far talk but a thus the the environment as do And or of bit it little kind quarter. Jack, giving a bit can in to lot it's benchmark to of of and fourth rate, expect to even I'm you later your is back gating, we couple kind quarter freight the use little then So spot. talk point, October. and from pay, because we'll environment, going your maybe about coming this. sure we're driver very about by things. a the starting improvement good A freight QX of in some

QX? better So materially do we than QX. than to be Not expect QX better

take rate contract rates As later come into QX come about pay, when know. we to are and in take if next you the look going the driver year, the talked expedited then the the kind John we what said you of here's increases will rates year. John sooner,

mile, we'll big rate out of we we increases a And pretty driver side pay the there, $X.XX think the give the to you that before business. get on then have of the take put $XX kind I if that Expedited a it's million number.

out but across of increases didn't that balanced year, back some they cost quarter I through coming it. Joey really kind think people haven't costs, we and gating cut before so as with in a And weather of the of coming rate, the just next either off said, lot first kind those costs

the people on. have some And put cost back already

Ours are in QX. coming

rate deteriorate from QX. to some to the adjusted good a We're will in OR you're as we containment. XXXX. in say OR much the that list from safe next We've of we into will XXXX seeing got -- go as I get OR going cost backwards But do to and think to think some quarter overhead Our it's of can things. year do third and everything continue cut much push

Joey Hogan

I Paul's to to not Jack, happen. hard have we that are in So think statement, summary, working

Some of of a, that businesses things of impact is the side other there as Management that startup non-expedited, on that business, Freight so the start-up is, Dedicated, can costs Warehouse, our business. and new

drivers as like are dedicated the truck grow the space. piece available. on of we'll that so that, And We

side, the there and start-up Warehousing is Management On Freight costs.

a that And there standpoint. to the some those, are is push business. But so favorable costs grow we as as we market grow from pricing

model, will be a But I that we goal think consistent important. as improve is our think, I today, margin. extremely building So to it our see

next we possible move it's ORs into our we're And but year, little deteriorate hard measured a taking could passe, that we're working approach happen. but to a bit, not that as so for

Operator

We'll next question. Caller, our take please ahead. go

Jason Seidl

at levels, about 'XX? Cowen. from this in fleet we total your going business I little and catch-up 'XX. year be I have be there we It's would really some a should then think to guess, like your Jason to big How in bit lower going of thought growth talk CapEx about for about really, that? low Seidl -- least think different wanted are than Is lines a probably which is next to

Joey Hogan

Yes.

kind I just Jason, of to think, I alluded it briefly.

the year. it. plan a to in is for this been year of huge next hold fleet through Our change We've amount

said, reduced business. situation, almost We've significantly. but the huge. same decisions, As really the kind Paul facilities. tough of some versus XX%, also buyer the out. We've has of some XX% the made the ago, year of been a fleet for closed taken time been our only because period not fleet We've That's

amount has enterprise a been the tremendous so change. through of And

So the grow piece grow our like unseated our right seatedness now, to if that, sake. position. not to in We'd are growth's We're trucks a dedicated intending our again, on for of if just holding we're good planning fleet. or

on that's the moving So and business rapidly look used of doing highway good it's job. what kind we solo and housed, reefer portfolio, if was that out of of you a the call to the got truck We side Expedited services. is

So today, spot. that a I think, is, good is franchise in

to the margins for been to But going think continue I additional improve. it's capital. are not targeted

So with them if good keep in spot, it, we're seatedness happy hold we that. a can

time, place, little a seatedness, see right bit grow next the opportunity, might us Dedicated year. On right that you good side, right

Paul Bunn

not the your The it free should on we CapEx, as million on release $XX point is $XX of specifically, Jason, CapEx. It you of a and CapEx, low million a we have year maintenance in cycle, other next to know, put lot you're back pay net the way. year that, next plus after we're down flow so see or boomerang a to debt CapEx whatever. to cash going about on

is Dedicated, haul length a of think Dedicated and more dedicated. of of lot our some shorter into I result of moving the this

the of time So trucks. they're getting more out

to we're year of that. advantage the is going take year so this And

then So of low next to year CapEx maintenance that. levels and back after kind

John Tweed

goal Jason, working at not our could fully the mean for all. next and that's fleet you? our is be I to What business. more more profitable I of add the years, here on grow across multicycles something to going through business X is consistent we're rationalizing

about, So if there you're of our own But trucks business numbers growth, stream revenue one to question the our get an goes model is, and I themselves, then our entire that. earnings transition to warehousing those speak revenue business. we we're our XXXX it transforming also look we're hear you freight earlier much of as growth things and staying talk that at at our back think, on planning on little we more emphasis to the asset-light pretty parts assets to so and to the But management those through a while go going us growing the of improving across going to we're our we're today. placing at we're do other

wanted So add I to just that.

Jason Seidl

sort I assuming changed on cash debt And everything months last has I to at comfort flow we level? should here mean, X. sheet and sort a don't of How where's a that bit balance to look obviously, you leverage the stay so. X I'm want lot of your take to little the ratio? else. or over want

Paul Bunn

interest X I the Yes. around doesn't I make X agree with these low with makes you, sense. comfortable. think rates, most I debt mean, really probably us

this see see actually year, I and fourth cash next go to X, us quarter off you'll down dip flow continue year. but coming in below then the leverage back go to up think You strategically, of with may the

in comfort for term. below us probably that that and X.X, but down X you're to I term, going level dip between long it short is the see think

Jason Seidl

little were saying your bit were too. a dip Last color, I below, bit you little want follow-up commentary. That's to you question, talking Okay. good OR might that a you When operating adjusted between that assuming about for segments, was half assuming. And of was that not I I'm the X truckload your on full the for 'XX, the year? back commentary sort ratio of

Paul Bunn

-- below, be would say debt it think I No, improve? you when

Jason Seidl

exactly. get Well, yes, worse,

Paul Bunn

next businesses I a could year. little get large will. truckload think that it The

freight will the how warehousing capacity the managed on does remains. business And depends really same. think high market spot the about I stay the what then and

Jason Seidl

is... this But Right. \

Paul Bunn

business. coming costs truckload be the side will back in that of of Most the

Jason Seidl

you're was a you of this had there year, up the ORs back half in putting of year the for half XXXX. But commentary hefty the front that Right. where, obviously, the some not pretty

a to we you year full look as So improvement at are basis? it, good on have pretty going

Paul Bunn

Yes. Yes.

Operator

We'll go take please question. Caller, our ahead. next

David Ross

follow-up do through got and you've year-over-year. Ross hard first this understanding on enough to a again sure able And Dave contract I'm work to going cost to want OR I quarter almost window. pricing question, to to having I'm can't XXX not type a a the the because costs to margins are are OR year, that from next and the in the you higher still customers. out I XX raise talk want? in pressures, wouldn't of because improve those cost why environment, up so Stifel. earning not really you're the to margins your time and second year Jason's to mean, you're not capital But capacity just obviously, price going get if why you be getting that

Paul Bunn

a Yes, On year year, This that will doubt next is there's or Paul basis, improve. here. Dave. no full

are going XXXX, we question we think I think because that able than just than be all were plus on QX, offset pay, will we that to enough back, year, what get more the where go OR just be you where into going we better. we next But to are out -- did year It's but were rate next to can't the that I earnings are is, see the to full And will year. what going costs just year talked costs of going get rate, there we'll this QX about that? driver costs annualize have rate to to are and come nets XXXX. with that be higher in back, run minus to that we as the come come in to there's is trying out

David Ross

Yes.

to extra So the X% that's get to an margin. you just rate extra I points the able to an advise basis be XXX that, on push would do to

Paul Bunn

And said, darndest. going to try we're our Joey as

more and as move as being think contract-type rates some move dollar think I business the expedited, percent that we to business, I with contract the that's of those of are million multiyear now the And question. higher can the much. the deals, a fast than and

David Ross

pay Yes. the usually you mean impact driver margin. those the news the Dedicated pressure, I main on is could to negotiate pay driver good not if individually is the and contract, recover increased cost

Paul Bunn

Yes.

David Ross

on But or comment OR the around the in little sequential way improvement.

historically, do have case OR improvement several XQ months. it XQ. we've the year to said, Is this you from not for Now have been material peak just people already because some at operating

the happened type has XQ, step function and that So business now, XQ? so not change and surge a it's expeditor in peak already got in and benefit you

Paul Bunn

I things. think a couple of

increase QX looking you get we total $X.XX was give point miles I'll can so If unseatedness, paint to full mile. QX already number of year, back $X.XX I we're can Last and operate in a per it truck in from the as data turn, there's mile the drivers one; XXXX, think have, much from the basis. I rate a you was about in a not turning mile two, trucks on the we really But at. that standpoint. to left a many average utilization seats as a I it was enough and XXXX

when the pop don't biggest it to because we the when as some lot will couple don't peak capacity so our have contract. -- I think to rate be be and used in and of And driver it's to like at throw quarter, much going a have QX, made of money anything pay, the I think we're we just growth was QX in a

better And going it's but -- don't so I QX it's be we again, QX, materially to better. think think going not be than is to

David Ross

just question, last then expedited side. And the on

made comment that's was easiest because the increases price expect be year. I freight maybe would place see going able freight think that you expedited is where take is capacity would the back most necessary. get Curious as the to is, half because important absolutely why longest that and to that's to that of the I expedited the to next until

David Parker

expedited and of Yes. us This most there, years with you those to of on on that going you the is don't those to if you remember lived but XX years this, years, major thing The I time the don't May, and June XX them most for have David. that remember, contracts expect got side, frame. happen most until of years,

happening. that the second And a large customers quarter, those we major are it's quarter with event starts expedited do so all the business of second the late side that from And before world.

just a of And to our quarter. freight, until so late doesn't the we portion that our business up increase got available for second come rates large

things. two So

The the is of a it, when the the starting And we it's it's volatility nicely very of all seen care new our out and us signs with is, model that it's increasing that do accounts that, business our It's as take part years that's been the so other robust and is great, is of freight have there. get may and we speak, years today, that but that forever you advantage don't as to we've not business, if to side years that nicely. show is did, and of of is... freight But of well. to the any eliminating have do got, it ago, we of expedited they is business when whole that goal on Joey, And total years comes portion for a we're increasing market trying expedited that and great. poor, business. the was disappear, because we're nice XX% take And

Joey Hogan

XX%.

David Parker

the business. of XX%

So that. seeing you're

out sale, peak. So run it's

So to therefore, do, going we're whatever.

I the as time, $X.XX You We're $X.XX, money to share boy, much. quarter. to all it. of At in is remember, back go going saying, side same a first we're because I not that make not that eliminating it's be peak, the going hope

about business I to though, we're down bottom ago So start Delta grown the know we back. the to of seeing said one path, are probably back. of off started, God, here, it plan, But got the say, got the that David, come and this it. bounced of model through volatility that us the Thank we've going we would and the XX% talking that's with purchase bought we the X the work, the XPL now the the we're the that you're warehousing, there. something first side years consistency issues going and we is this started Landair then that more But Airlines, in on Board into all TMS, got piece dedicated, leave and we coming I

year, two business, quarter. for the -- report that as about I so business that reports, two years been within through that operating the about been that it, look And has I owned owned at business, all very the OR really we've that I'm this of has we're virus, entire piece mean, business this had. it's highway out consistent very coming growing of coming we and refrigerator and with happy but business solo of that the it's service, very that that, every since nicely, been out we've

so, and used fourth the first you're is to you X $X.XX on because that to it got throw to the going quarter And the trucks not be, in we volatility help earnings in to anyway, as be Does to any? have as quarter bad not X,XXX but going peak.

Operator

Caller, question. go [Operator Instructions]. please our next ahead. take We'll

Scott Group

it had the understand there's just quarter third I best we I of quarter, feels always second I been. money. got It's quarter, losing Scott there's ever, Group volatility. the I don't it to were tough, good to as your we like point of this that Wolfe. in I from that and same It In want one was Because, go know guess, when third volatility guess, back it. the still first

in must I'm the And I so I something. sure missing not why that be continue guess wouldn't quarter. fourth

Joey Hogan

Yes.

it kind and of and between prepared trucks of half. over of XXX mentioned I taken just second has the our and first been half keep X half. We've the between out in comments, fleet mind, but sold think, first second in the the that Scott, things the half facilities

non-driving a we've We've our portion of is areas, so in And if quite laid you but certain non-driving, added unfortunately in workforce a bit. off workforce. will, total, our down

that's and done on savings. a a And cost other cost things Paul pure mean, $X.XX in his from reduction model of that in work done that been in to mentioned so comments. of we've side, addition the adjusted I a cost the mile lot there's lot

extremely From work that the question. side, identify of to and $X.XX great to back on tried temporary in nature. right, a were done we've volatile, you're probably cost a and hold a say, of that is come lot going minute, standpoint transparently we've so And looks of but, on

we've call will. 'XX a we've out of But able had come carryover that So the trailers trucks it I mean lot. and a fleet -- capital $X.XX, if a you been lot of been of we has dispose from into ton has done -- to on 'XX of. cost

cost, going as has quote significantly, one's interest to think So mentioned. expense reduced I and continue been i.e., that Paul to drop,

since also to the number but So the I kind one; volatility, of the like is people a of side done transformation is that revenue significant the it's another March. has things -- two pointing that transformation we're been is wouldn't are necessarily we've word of using, on model lot impacting restructuring work transformation side,

Paul Bunn

ballgame path. on the in the think we're getting early on this plan I moved

right. we you got exited, I March the you're We've -- We've solo will of the less back, so losing a the early just XX. in half step debt in bunch at had agree terminals reefer a if business as we in of you were got said, XX,XXX-foot proof -- Joey than money. where And that And pudding. kind the be game, if but ball take we're a but Scott

a We're And mean structurally the so a it. rid the bit a costs, that gotten stuff, stuff the capital. I little gotten I will lot kept margin keep of be good more lot going consistent. should think help us. kept tweaking of to it of consistent of We've stuff, lot a

tight we since we'll exiting wait be as And want consistent. it, the it that's it see. been more want excess X. you all will be it all reefer But talked will as April as we business, people, about, and -- terminals, equipment, changes solo Now those done just

here, find we've invested try tell to I to time, over ways results. to I So return you, improve see capital think cut the come don't costs, the the And every afforded you're chance in see it reduce capital. day on going improve our But and think consistency. I'll to we margin,

Scott Group

-- and stuff you're there? about game, talking Or word go April, quarter? Meaning, if if you a there back I out? you're that see the done more I so ball -- in come mean, that's talking that that still still we've that have that of is incremental quarter restructuring, the to why coming we did not in that of could we all weren't about are is your we're everything the doing early here, lot impact cost third full of the the million since third done in guess, $XX just and And costs apparent

Paul Bunn

what Here's I'd say.

impact the fruit. the saw You of low-hanging

was And some fruit low-hanging but was it get there. decisions, of to it rather hard

and projects a have list We are take working, out business actively we of of the continue cost will overhead. reduce to that that

to we'll are see XXXX strip we out. in think those continuing successful in I how

Joey Hogan

the driver mentioned market. Paul

years. to the to us more good because as I going do there's mile those what January. a sets yes, some to coming seen we going from you're I around The allow to that's starting situation keep much like back to We've now temporary And that to we've is move. some see of got in were. going standpoint, disclosed that to around says going there's up, and going the costs, market loosen think, is, that. believe $X.XX we cost but -- we're anything or said, the seated, have for that driver be pay range cost that I do it in from what don't on And it's said, market a XX get -- So worst are a up. as right don't reductions in to to standpoint, capacity Dave It's you've

some insurance there's the headwinds. potential we lot I think about, So but talked think market, haven't that a I

all way renew excess from primary, of in All more policies the X. policy, our of through all our April them, our all. And general, [indiscernible] everything,

anticipating, a see years and hearing seeing market, to changing. it's that And don't And industry incredibly we're I the difficult whole so going for in what of couple now. based for be on the we're

better, and that's if to incident tight even our And so just tough our overall say get profile market. continues to

having we one foresee, there's another increase. meaningful a so planning And we're that and on

are pressure side, And on biggies cost and temporary. be so putting two besides probably will wages those two interests. that the are the are biggies driver Those

Scott Group

assumption rate, just you next maybe, one assuming out last double-digit contract rate pricing And up rates being comment? van just increases David, like then than what be comment assuming? are should help up expedited around the that year? typical your double the if rates us digits, OR what year And are is then you third Are the worse within maybe actual Okay. making were quarter run next others

Paul Bunn

says, let he I'll So the tell you assumption, then X%, David John range is a be. X% to That what's gave give could me in of low-single got And from X dedicated the in so assumptions deterioration or the side. to an digits, side. X% X% not That's pricing got the mid-single in again, rate, the on probably run expedited QX that's you and of what Scott, let -- probably kind what X% for basis. that's on the OR the probably annual digits, the

the can David the past. what be talk so what And and it in could -- what seen he's through

David Parker

or whether that's don't of our expedited the that's there, side, I dedicated saying disagree side business, whether sides both Scott. what On you're with the

hope doing, XXXX what that increases. out going control? not anybody world more all And a -- on that to I XX%; XXX,XXX of increases. quarter, I'm there, industry to Well, years. a of keeping that is this the the out? all shutdowns? saying to itself the driver more what and in that up the pressure That's I'm quarter: and on more going they does say than I no coming Are Or be the XX-feet go of to But under it or XX,XXX-foot doubt, -- they the in a to sitting can double-digit to drivers economy? I how the is. today normal? the not from fourth going GDP, schools Right the now, know to the double the reason X%. kill is in mean, they hoping, of level under I get a Can what's the were in in come us been happen come people X% go, XX into better that There how back I've the all side numbers over to are is we're the think are disappear? -- back. more vehicle Or going leader does that are going think virus doubt feeling or Do going in get going no with that's economy. not here we're control industry double-digit do spacing? expedited of things that does get the and virus is don't start from third standpoint year is to election over market? the almost Does I can whatever that the we economy good straightened you why Those motor is are the probably seeing that a do But there's get size driver there situation. we

know, doing is so pricing the is side as the business. expedited on marketplace, absolutely And can assure in that what think of particular, probably I we on only you I you, attuned in will be the

is is. too But Today, can believe what you. lying in-tune We I X% there. is economy that I it number in I'm based election, think X. hope to not say, today. that there it not I confident just XX%, to said, I it to upon doing. X% January I I'm able come everything I'm to But gets be be I virus, that. to will that yet And may perform be that we change there don't more that I'd feel

tell. be able is to to time only going So

Scott Group

if Right. just one I more. And can try

say, optimistic we say, the XX% connect would on and if dots Just different? Paul, just to let's your and to want your be -- be we get comments say, we to wanted margin price, would

Paul Bunn

the run but get QX We'll the slides, improve. rate. be margin would the financial It than Yes. Yes. better would

Operator

next We'll go ahead. Caller, question. our take please

Jack Atkins

This is Jack Atkins from Stephens.

from Just sort everything question balance you over a opportunity from opportunity demand John, mix the upside of the as we just about contract your source that that significant dedicated of for set John. as term? for to wanted within ask business, maybe mix, and shippers a there's the industry XXXX? there, in your capacity. within is revenue Is seeing others an dedicated a dedicated upgrade longer of to hear think potential Are your you follow-up

John Tweed

Jack, neck. your were hug is the objective. exactly you I'd if here, That

so couple -- Jack, of things. in look you a If

Landair. look we good we're just that have through see model that is with If dedicated amount that really business. what COVID, trying you unstable that the People, a relationship inside in we tremendous business we what's our we're of of with, and scaling quality lost to contracts you -- going on from wasn't can't today, value the accomplish the people prop our didn't

-- time, and us lot those to we're add the at on earlier to sustainable. going relationships, the business at our get that return we're are is the we going will to improve trucks, point I that same capital the our invested. make of was a we're that not looking we've relationships to So trying developing pay margin And need

we a half we're that's we as Jack, some deals us and relationship And from that going go to of build it want appreciate relationships to break people transition the table some in customers cases, we it. build part long-term to to our that So a with, but margin trucks gave going prop value-add future pricing can with exactly what go you're see we see. ahead allowed them that bring us a the think the COVID, to with, let and In first people they're that with they'll the people struggle we get to of way during didn't cut a XXXX, started. the through some that we

Jack Atkins

warehousing That in about the segment? that talk Could of maybe thinking a last maybe business the particular for my about All question, Okay. new And you just sense. right. pipeline wins for moment. makes kind business

John Tweed

should I probably in I've deals early can't think that the me. would close our time. quite have remember pipeline, It's some Biggest was I I looked I in But numbers, seen the it in of time it $XX exact front last XXXX, million. like big. at

Jack Atkins

would be is that that a now? of business? in Or And double-digit of segment mix a seeing right sort you're that all different at margin, like

John Tweed

when takes then of Well, the typically, up. that, the much margin engineering margin. bonus double-digit the the and It's that values than is not when we additional the from part then year hold, comes less first goes our creating get

Joey Hogan

agree But least that of warehousing, size good target? year John, you say, is a at of one start-up, one start-up would

John Tweed

absolutely. of is And said XXXX. double I to earlier, Well, our goal size that this thought the I guess, I through

Joey Hogan

right. That's

So Jack, in what's that $XX number, the pipeline. that's million

one But year work historically, pipeline one and side. the going that's what big million. is we're to warehouse pretty so on on so a we're And -- to It's year hard -- not $XX working now.

John Tweed

one. of instead here two do to And

Our been has two. history one. want We take to it to

David Parker

a today, Right. kind over seeing three But that's spread of you think you're it at fair way from double the to ratably. I what next look and it

John Tweed

driver's other tremendous the going trucks. amount engineered the on extra allow that not million point our there's drive multiple we once and to million be think to bringing for about dedicated that managing I value allowing out get will that consistent, out our day. is think plan The going be routes I customers we're there that spot, that $XXX is, freight to the get customers us $XXX engineer other we throw thing hours to freight would with X-year our creating more include management, a the us our under of more at to solutions to value of in trucks that's

Operator

yes. go question. We'll take please ahead next Caller, our

David Ross

Follow-up here, gentlemen.

and fleet you are is Where to X-year average to an out associated the years? As the where about on pointing rationalization year OR few you where division? the I mentioned there, target expect you in everybody be, talk And fall want of truckload should a kind in the an plan, the with organization guess, towards? and you of you

Joey Hogan

or Dave Scott? this Is

David Ross

Dave It's Ross.

Joey Hogan

you. thank Dave,

is year-in, to average For expedited our an need cost low get for kind vision year-out long-term justify we of to mid-XXs of to expedited, of expedited to capital. the mid-XXs,

mid-XXs similar. can needs good run expedited XX% on expedited long-term and that's on have running to of good Dedicated, a the invested invested for return is And the you a Kind so capital, target, just a where return get on. to. capital,

that off dedicated, lot be trailers, to again, a capital, of return kind because improvement to would the pulling of So invested same expedited too. on that's XX% a get it of the that customers -- a on at at has lot solo

side. invested average capital capital on side. less longer, trucks you're invested the your expedite Plus than dedicated your so So running is the lower much on is

kind dedicated solo primarily the difference hence, targets to model. our of in in the X, OR because between So

on you with would looking side agree better targets or returns XX% John, side. justify that dedicated XX% is long-term for. kind or the better that? I So we're expedited say the of on the do to

John Tweed

wholeheartedly. No, add I just to that. agree I'd

lot It's is growing share model If additional expedited the overhead some off. reveal today, and investment parts the quicker. the business, more you off our a look with itself it create of at -- that around far that just expedited of we value can of the model will the bring it truth other not and

Operator

no in at And queue this have we the time. questions more

Paul Bunn

it's say Well, lot call. disclosure for a us. of you work, thank new of I but as on for your appreciate Thanks, our leading to everybody, time patience. we whole. want is the different. for market the publicly, A hope Shelby, their required for thanks helpful a I this lot that team. It's it's financial

last refine job good And months. let what's get as done X of in to exactly a continue the so a questions, has the But and disclosures to result if we'll have lot know, of us group it the please a needed. changes you

day, a you and to next talk So good Bye-bye. we'll quarter. you have

Operator

gentlemen. and ladies you, teleconference. today's Thank concludes This

disconnect. now may You

Covenant Logistics (CVLG) 27 Oct 202020 Q3 Earnings call transcript