Earnings call transcript Q2 2023

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Operator

Welcome to today's Covenant Logistics Group Second Quarter Earnings Release Conference Call.

Our host for today's call is Tripp Grant. At this time all participants will be in a listen-only mode. Later we will conduct a question-and-answer session.

I would now like to turn the call over to your host, Mr. begin. may you Grant,

Tripp Grant

Good second and quarter Jen. Covenant to Logistics Group XXXX morning, you, welcome everyone, the Thank conference call.

information this Litigation risk are review our reminder, the factors. actual results uncertainties to statements. comments a call today no Paul filings obligation materially. on publicly available financial forward-looking cause A and contain As Please of differ undertake statements that Private revise joined could Securities to forward-looking and update Bunn. Reform website We any subject by our which prepared copy the SEC to additional Act, risks and I'm will and under at is most recent on or David www.covenantlogistics.com/investors. Parker call the

The quarter, midst freight a in comparative We are which compared down year pleased weighted showed comparable overall by of environment. freight Consolidated very Freight operating the with the freight soft revenue freight handled due was to tough prior to our X% environment in peaked. and the overflow decline resilience operations very lower to our a tractors truckload average for segment results related primarily less when fewer demand. Managed XX% approximately our

in approximately offset year by income Freight an increase result respectively, $XX Dedicated XX% operating approximately the declined or our by million prior segment. which segments, fell Adjusted our Expedited to and million quarter, million, $X.X compared a as Managed primarily million of and approximately $X $X.X of

shares a earnings of share per compared ago program. share net repurchase average quarter. year income to $X.XX decreased to result Adjusted decreased to XX% and as XX% share million, diluted per decreased our $XX.X the adjusted Weighted

Lew and of specializing business profitability & of Son haul of Inc., comprised transportation. include; and all the in dedicated Managed Expedited, Key second a approximately Trucking, improvement in in highlights for XXX sequential achieved carrier poultry Dedicated, four acquisition segments, live quarter; contract our Thompson Warehousing, including the quarter the Freight tractors,

to results about the that with growth pleased opportunities ahead. been date operational lie the excited and have We are

on combined $X.XX And a truckload revenue our declined by the total flat maintenance-related year. fixed per sale, expenses equipment, including depreciation XX%. on cents Within equipment to costs, prior compared lease mile segments, basis operations gains and remained and or

of compared at at Trucking. March largely sequentially due XX, age remained Son the average from & June XX our XX The Lew fleet to flat to equipment acquired months Thompson XXXX,

our of on equipment current remainder to order, the improvement For sequential our of we XXXX, equipment. based the average anticipate age

year. was $X.X million Gain on compared sale quarter revenue the of in the in $X equipment prior to million

the company per share TEL compared per investment $X.XX produced diluted share Our period. leasing to $X.XX versus year ago

net indebtedness result at an approximately X.Xx the year. as on adjusted current was return the Our a the $XXX.X and primarily quarter of of to June XX.X%. in climbed the a leverage prior ratio quarter, yielding capital basis, versus XX% in ratio invested acquisition, for On of million debt-to-equity XX XX.X%

Paul will more color the Now business individual the on segments. items affecting provide little a

Paul Bunn

the reduced The equipment by in improvement principally XX% miles to fleet a downtime. total results our freight Taking offset per prior declined a declined but reduction X% in over was average year a year, to fleet. dive moment the newer into with for our truck by Thanks, XX%, to starting due attributable just the in what segment, were X% drove Tripp. compared Expedited deeper ago. a compared revenue Rates in to largely quarter, almost the improvement average and to utilization

total will challenging year-over-year segment's While we mile improvement, revenue are pleased remainder be per to with freight for utilization the continue recognize comparisons of we the that XXXX.

somewhat variable-based compressed offset for from margins, with improvements they cost wages to salaries fixed the and costs While and costs headwinds equipment were equipment quarter.

on of it our with profitability reduction underperforming result reduction our continue experienced Son in both X% when the unprofitable business of our the quarter that per to Dedicated a expect fleet, requirements. of revenue term. the an pleased the and Despite as in revenue and Thompson segment meet the upon this replacing number and arise Trucking compared of XXXX the trucks, offset or exiting sequential strategy opportunities and reduction were addition improve in margin overall over or We truck. freight profitability Dedicated year-over-year adjusted to improvement fleet segment Lew an long a to & average increase X% aligns by with XX% return Our total to XXX the segment's

in freight operating a reduction to Freight aggressively XX% profit. competing significant was adjusted segments. brokers in total revenue experienced no margin competitive Managed attributable of The We reduction reduction primarily expense highly the our little numerous environment. truckload and anticipate brokerage asset-based The a profit for remains in continued with operating XX% and revenue freight pressure margin. from overflow at this of volumes environment to

resulting Our the previous the during from increase XX Warehouse new of saw freight segment a revenue the in start-up year, to compared prior customers months. XX%

executing consuming. top pleased are the phenomenal and which this done We the line job we've achieved start-ups, a are growth these in has intense both in team segment, with and time

significant despite the about only segment, a the growth we've seen profit adjusted to prior in XX% in the However, year. compared operating improvement top-line

continue rate profitability utilization improving with sequential through single-digits and segment, Although on at we're increases this pleased mid focus customers. existing within profitability will with to improvement the labor improved the we

prior TEL and compared on sale net pretax of gains XX% The 'XX. in year increased the quarter fleet its due by in decline truck pretax quarter income of largely reduced X,XXX grew $X.X equipment the investment by trailer in TEL its ago versus was used to XX minority X,XXX. of quarter TEL's a XXX $X.X the trucks grew year quarter compared million the revenue by to to decreased income the Our versus second year in and the million period. fleet to the contributed ago. XX%, to for

their small fleets and and shippers, equipment managing to of As clients, trailers cause focuses on procurement to losses quarter-to-quarter. a Due of the a a leasing program. in reminder, TEL gains purchase model, aiding are through for and programs fluctuate from buy-and-sell clients and can disposition lease and business earnings part to equipment the business the of on model sale equipment robust TEL's trucks normal

in from other XX, and consolidated of investment received we million anticipating on approximately received cash be Our original during million million June half sheet $XX TEL, the in million our from XXXX, is second assets we as XXXX. In balance of grown and $XX.X has our to XXXX, investment TEL included in XXXX. to are of in $X.X $XX.X dividends

progress we'll of the economy how the are at but primary responds, behind focus is the by improvements. quarter, As we on optimistic examples strategic that in remains this. freight Lew third to continuing long-term plan. make technology & to equipment, cautious of enter see areas the our Thompson us people, that acquisition Son Regardless cycle freight for of revenue-generating trough our the are us, rate opportunities our invest and investments of new which provide The in the we are on about forward

and for open you for call your Thank the questions. now up time, we'll

Operator

Thank with question come today And our first you. Seidl [Operator Instructions]. will TD from Cowen. Jason

Jason Seidl

Carolina that here, in you the last Gentlemen, trucking in I'm that broader Thank on morning. sequential than truckers there lowball from how like but a that comment think less North good pricing you, we still off some wanted on offered. private mile basis? some you to bottom of out industry. a we're some pricing Because just terms the in paid guys at about with I'm I talked being about from really queue of should $X getting sort operator. feedback

at we about least near-term? So in that how the think should

Paul Bunn

up we're under is seeing most would say still as I Jason, rates. here's contract what reminder, a too. stuffs But our tied that, of

So in we've exposure that's continuing we the about to talk see margin got to that. when pressure really brokerage, where

any pressure Expedited going in the to side, think see On Dedicated pricing near-term. don't the and we're I

I do next think rates we'll see what year. contract

that's stuff affect negatively think I market, and exactly probably the to in on spot little there yes, the of that's bit, the probably year. I next brokerage affect the a the it's it year. lot out for what but going it But are think mean, Dedicated shouldn't to I larger too do balance Expedited And have those the tell a will of early will us. effect

Jason Seidl

That at should gains sale. out what look makes going And market forward? Also, sense. on a little a look equipment sale How called like? on lot you the of we gain does bit of

Paul Bunn

little July the was been continued to Let just market, market Tripp let kind seems But but in a free dropped precipitously a about of since and I'll about has me equipment of July talk It a bit Used pretty hit floor little a drop. the has equipment maybe talk bit March, It a big to market, to in gains sale. March. drop. on March it's of used January from kind like fall.

Tripp Grant

the some cost best. it for see few that of on Yes, the but us. and fleet, fixed speaking, is say, over continue dropped look the year would variable and and kind at previous the a It's about going It We're fleet is especially we've this -- a to upgrading continue calls, half, and I of for ongoing the -- a rate, getting continue next been the optimized benefits really, agree. has I over used heavy think way with we're think both, better last in market the months. me don't it's honestly, months. cost very I we've year this last in to investing any we us that, to an -- the this talked is there's uptime. for because do in provides CapEx operating really would six This the it's you when I equipment I say, just eight -- quite And

what But here's say. I would

you're forward, lot growth the newer to -- in yes, count equipment. we're back going see which more of of that means do equipment, of selling the to we half not a going fleet Going too. be year, a lot We're have not

to think going to bit, So gains in don't that but QX little matter may QX, I -- huge it a I going don't on see drop. it's of just significant continues see see I think anything and you're to think sale much losses a don't also how you're either.

depreciation would be think appreciate sure it's watch So I and we're that we we our it and say. equipment marginal, we'll depreciating I our make But there. on adequately, -- okay

Jason Seidl

in acquisition quarter, about color. before else you niche marketplace how fewer I there's down lot calls When talking a with Do that them road, smaller you about lot was industry the you got a sort have in acquisitions. two-thirds it over some Thompson, market yourself a good a other you in you end little foresee I'll a of opportunities here. for financial like guys, a somebody buyers great of hosting to because one, really of multiples the Lew looks quarter, That's getting niche come in. were people earlier this bit? for weren't Okay. Last and for turn

Paul Bunn

I A, for contractual-type buyers in say. would we're those niche, B, I really market; agree, there's always what looking less here's Jason, financial the value-add, businesses.

And did so then did got and just of April. we in to Thompson in Remember, AAT digest. we February 'XX, we

any So and we at out comes that we like stuff to good we'll there, type But got of as margin, continue digest. niche, are keep that looking businesses -- to field calls yes, about. contractual it

Tripp Grant

months just acquired most additional we of, foot, starting on acquisition, and executional just with bit that our recently anytime do little I at we of is or focus, two kind the that to But AAT Thompson, in our gate play But say, the that right And different, adding at the getting business or lot off, absolutely it's really balance out first since is -- Lew which -- sheet I there's it's Paul sure of you as on whether would a mentioned. niche something Thompson, a something a look want an of Yes. making may risk learning could them. had we the to Lew have future. and main bit focusing support

really the to sure sure a in already make executing we're kind future from refine we'll level. execution. right way. think done at I and of those those to on make And We But if that that continue we've the high focused reap do benefits want we're can we we

Jason Seidl

always. as thank gentlemen. appreciate I Well, time you the

Tripp Grant

Jason. Thanks

Paul Bunn

Jason. Thanks

Operator

And Group with question come from Scott will Wolfe our next Research.

Scott Group

the further just Good and guys. year year? growth talk thanks. sequential half the us how through the are earnings an of from Can into about Hey, standpoint? you half back What see of Do QX earnings thinking back we takes? from you morning the puts you're think

TrippGrant

part that recession, mean be back and and get we're the giving We've of Yes, to as I about defined at we in of of a talked got, I XQ, got to in got if want about well release, the of into optimistic our like like -- is like two how We just I fruition earlier early mean some but freight Lew look Expedited. the year. next feel read of opportunities lot we're the half any we've of it guidance, don't feel running trough probably later out LTL sort about and year. of there's, the Thompson we've may said due Lew that well at We've we months you may got the Thompson. growth customers optimism come in the We've that the as potential model. to gate year you've

So I being QX. in think increase sequentially optimistic I'm to able about earnings

year with bullish XXXX. I the year, mark. that this a I'm holidays virtually nothing. question we're part year for sure big big not about on and peak And think question of is half there's I contribute there's was there's a the mark big business, us. peak, of how it the last but that's a to yes, some downtime QX, But think much next just not our in going

Paul Bunn

Yes, agree said. add that. everything Scott, one let thing with to me I Tripp

think to one I thing the of our one And could back year. it watch accident share direction. direction accretive bad the going pull count, in right be the few other half the a really in reduced could things with the is

everybody I or leverage bad leverage lot also think the you has the is a lot to there's of the that's up, a accident -- you share things have of one count on but with have earnings remember this a downside. something, reduced of got

with the on said. what So agree I Tripp balance,

and the back of the quarter-over-quarter. I to I think we can continue half year, earnings optimistic about improve think we're

Scott Group

got as then are What to so in now scrambling are helpful. just or And lot market of How [indiscernible]? the last a you -- this Okay, you so LTL yellow? leave mentioned you customers. shippers week in seeing right the is

Paul Bunn

a of the calls Expedited fielding We're number in division. Yes.

with business and know, major division. forwarder do in we freight you every As LTL that practically

to Expedited Expedited in probably maybe the in a X% third a be lot the continue none that we people second on to incremental some There of of definitely as field so it's And growth was on quarter. need calls going during quarter. mean I And it's capacity. positive the really revenue quarter.

positive the and Expedited fourth. So into third in it should be a the likely quarter for

Scott Group

increased to pause you Yes. do going it? sort And the earnings just then lastly, the about aggressive is buyback of with Are you with to think you of plan be forward? leveraged What buyback. mentioned the you continuing be the How because Do that? going it?

Tripp Grant

buyback parameters really can't I give and I has mean, will right with All parameters. we have portion big last how really say, it bank repurchase now do I based of some deployed guess, those we've years, what on can is specifics. over I that that have plan say, like around would the the an that that. I I But buybacks a of couple capital been here's open

I we're in QX, I going think but as think saying go So of them. benefits -- that I -- or in back deployment that always to not go to potential our warrant, to the there that think shares as there always buy to amount from X playbook, are QX to capital on going be seen the going of to activate We've to a our be go playbook them. We plan. part like are circumstances

that question it you decisions? see change, to think be I future or I warrant. types those probably about the when The and forward us another they're guys you And think in how it one there. and think circumstances And is, of circumstances do reprioritize always will about going with move as things talk

Scott Group

Thank you sense. Make guys.

Tripp Grant

Thanks Scott.

Operator

Jack from come will with question next Stephens. Atkins our And

Jack Atkins

and Congrats morning for quarter. a guys. thanks taking Good great. on Okay, questions my great

it it of -- looking line moment. approaching for commitments that a deploy you market? that trucks about LTL you that have mean into a of you'd are the really additional longer-term Is of some thinking market? capacity back the willing be Expedited additional going secure guess, function and part haul longer-term guys partnerships to of there for sort there. just to into LTL to How comments I kind I is deploying the So

Paul Bunn

there But we lot -- going a Yes, -- be trucks, I to hit few folks to Jack, here, the that a of would folks. mean I we're significant have longer-term partnerships to of it's few say add a there's trucks it. volume with. trucks you us for a we're with

cycle, it's partners cycle. folks the -- 'XX trucks they've with to 'XX, partners longer-term And for those yes, towards been move they're that us heavily we and with that be are we as the to going this a so, weighted sign were been -- up around, on more 'XX basis and willing part through through those have

teams going allocate these trying And them. grow so how to our resources for we're on to that's

Jack Atkins

think these I you base? point to about business just make you of of bring perspective, This asking question of investor the particular is, some from trying I'm a sort as short-term there, there activity longer-term this is But customer part potentially on this business new for I'm or gap this stop isn't sort an the guess a in your of guys. step-up with as

Paul Bunn

Yes.

high a we'll digesting add percentage your and think, on they're basis. model keep growth changing. point, of whatever this these their to is we a customers I with Because longer-term

yes, to the people trying make so, grow sticky. where most And for we're we strategically that's sure going be to is

Jack Atkins

Yes. No, absolutely.

David Parker

XX% about mind, on in contracts. to keep is guaranteed Jack, Expedited of revenues XX% that Because,

Jack Atkins

yes, makes Right. -- sense. Absolutely. makes that That

David Parker

do we we're that's as Paul partners got we that We going those agreements us. that to add customers us, of long-term between these have whatever are part and was -- Yes. when on saying, trucks, partners, and we been that to partnership

Jack Atkins

sure. the last And that's couple paid dividends Absolutely. for over years, of

the guess, help cycle. could here? to maybe more off bottom hear a next good how where perspective about of this. your and sort terms of in the cycle as of from I headed are kind I about a And think maybe lot guess I you of us would six bring less terms you you coming and where voice. of we're know all capacity we or love optimistic you're the you about your get So well puts perspective about as to I guess, sort David, in of just thinking months? are the takes, over perspective to think

David Parker

last whole when Yes. that to think get things you smaller conference but I -- carrier to carriers, carrier the when a bunch anywhere around went last two was you going going and spring, big We going better group insurance, the day at because the think think panel months things of from, week And I on had And because was, conference from a [indiscernible] when I heard happening. to heard -- December. there's Jack, spring, with question now, the do I I panel. a the heard XX room, handle are come? the do were was that is heard time, I --

truck but had leaving days. that last to about for we've economy. the question going of over But because the next I'm going the it's in XX going in was one I the through. on the answer not I feel said And to by the it's capacity we're left again, to the and are added believe sure And that in I prices industry, way just it to there on not Paul to XXXX of believe do is I'm couple the guys it's fact capacity be last truckload I going industry, September. feel because all is months trucking happened this what the used the constraints. of better And our than believe. XX saying because that's last fill gone -- months

good over a make power disappointed And will But It it this right we used we're sell for days. and last It leaves, pricing as pricing shortfall that's return, hurts whatever it's happened up the now. hurts, for. month. XX all because the will in truck and that didn't overall, capacity hurts the

I believe where of kind are economy Those start will as hangs next at a So in capacity, least and of my it's the long really as at trucking timing today. months, sensing it thought. couple stays of the

Jack Atkins

truckload your strategically. think into Lew highly and market Okay. Thompson assets long-term All appreciate guys of like for outside of commitments growth? AAT, and truckload like you LTL. of market, more more Expedited deployed mean, last you that assets cyclicality mix of was it can the market do within parts have the longer-term I where question, Maybe the kind Son, compounded you've been & of right. team kind the between things about business to the No, you the about really way think of parts that. the How see truckload, traditional investing mix really niche your I traditional long-term you'd within over-the-road, removed long-haul, of as OTR cyclical

David Parker

would when feed I and around. get to XXXX would that been this Delta went said, actually and company be we we've better famine the say change our to going We're over now say hope this. this I in tomorrow. Airlines. journey I on we're for brought really not things to going Board

road. We are going another down

in fruition started so It And and of when into Covenant solo really XXXX. got we came in It side out XXXX with fruition over-the-road that SRT the business. solo the shut really business, in Landair. of down acquisition of we the in the came we into XXXX

we're at at both those things the value value We this the two two the value of brokerage bring looking we're market is That's our value, Expedited, and as customer Managed not to really of not is relationship bring whole And that And got day, we're if eventually that street end. us. end because but the Freight. value, at bringing has in bringing avenues. we got to way customer Managed a I will to that be look to the customer, and happen. if bringing four to is Dedicated, the going Freight got to are And And get at Warehousing we TMS. of really

Something happen. will

because market back. doing been is just our okay, rates today tired years, years over we're whatever it's The up, And market not of, were the go or it's all it let's bringing is or value. all years give that, we and XX those X%. so model And XX down, is increase let's

our we're of of one doesn't there. providers teams, out our side business, the team everybody largest teams, have Expedited Our

then need the great truly there we'll you If operate be times XXXX, me side. and for teams, these me what teams, it pay Expedited costs of to during the

It's back, the work they sure I make trucks, ROI in ones with you customers rate. year, came as that on to pipeline And in then larger of business. give our OTR be of we just broker is think, filling is got -- that we and got able that side know, can down And business. to care a we've last the of XX. XX not side instead They And brokerage a up high you down. up came on this to and the long we that. But and as our it's really on and barges are that as take

And those call are so niches four about that, you the in. internal areas very through as concentrating growth areas to are pleased the through we're Warehousing. talked and that with we're and that the it, or Paul those to going But of kinds those acquisitions, build And then things. I'm either continue

that's love and and We something that's value the it that to love. So what we do customer. something hard brings doesn't everybody

that's our model. So

Jack Atkins

it's like it hand it over. I'll David, working. looks clearly

Operator

our Barry Sage Management. And Instructions]. comes [Operator next from with Haimes Asset question

Barry Haimes

in you David, about there look when the might so on the work able get a Thanks that guys. capacity of Good be wanted all comment Is I questions. two with. that terms you had much. I One on segment, back read at carriers your circle to Hi brokerage -- quarter. you very your is, leaving industry. to

go that little could or talk more? out And there about to bit So anecdotal but had you numerical either flesh I ahead. question, a then one other anything is that

David Parker

Yes. that's on that have small the And thing we going say would no reached is that not that's what's is main point want we a they're carriers I can't the have capacity side, brokerage get seen on And can. out any the for side there. you I than just lower say, happened to that rate the the yes, broker what lower.

like So starting that not because to it's is were. are they little the falling showing you tighten rates capacity bit a

Barry Haimes

it. Got

those other where the businesses the question then any pointed most ago? they And the more asset-based are the in is spring? Thanks. you out, you. rates have where for as versus contract, or And in a might now of Thank Okay. on months feel contract are year are that, market six been roll

Paul Bunn

single-digits -- is most when on would Pricing Dedicated is in contracts David, if people if than you you those mid would is have more you probably I most down of the OTR Yes, of asset-based say would say mid to more that? our And of our down and kind January spring. of on exposure, to We weight mid I probably Expedited, able those. stuff they are Call lot a type I April U the say probably combine to more say pricing is any reset. Haul down single-digits color that want add single-digits.

David Parker

on this at It's I agree And Paul No, I thing. agree. when rates bringing year a bit we looking start with next rate starts, again. then

Barry Haimes

one that. quick on follow-up just last And Great.

as about next the for about 'XX thinking puts there Are we're thinking Thanks. or looking big cost year. in So takes about we as at we should cost side next think year, structure 'XX? versus start any

Tripp Grant

And cost with we've last with in starting really year, been a we've costs, seen. I an I on focused, seen. So we've laser mean the the fourth would of what kind been as pleased the enterprise lot quarter side, of of say,

say cost the I really on business And a to just enterprise, on response unit in it throughout first or savings XXXX. the of that, great a been think we've a has job as whole as we November to and a significantly -- whether in felt it's And we focused safe cost. done enterprise kind a of pretty laser-focused back office.

say, disruptions seen far. there. new fleet a tractors. big have part I that where we pull some our had the of But success, go only being investment think P&L story in that we've early can created the painful the created impairment of on And last is We so on was said, to I and success year. done And trucks and some drag charge. It a some and would lot

back the muddy. If a was QX little bit read release, it you and go

retention, improved equipment, seeing we're fuel We're But it's think because we to it newer like -- efficient. they're We're are in but improved equipment, of a better seeing more market, improved that different economy. seeing maintenance costs. we'd in and

has And utilization so as our well. improved

as So continue to we'll our I see upgrade fleet. of do think to we improvements reduce continue the cost that average and age

It up of Fuel goes kind another and is month. month goes a one wildcard. down

directionally, be see lot going it's down. reduction a honestly, going But don't to of I wages. think quite in I

little squeeze type that a feel But hard a we have cost our mixed of and pretty I this to bag. date. when good it's year. So leverage, bit about XXXX, turn journey of we it

-- have of the because that I in can do what offset downs date. to can hard we've some control, happy to there. good we it's some answer, how of those we we a and about kind things there's we're think the But leverage And really and question But with done of ups costs? kind to feel

Barry Haimes

luck. Great. Thanks Good very much.

Tripp Grant

you. Thank

Operator

[Operator appears Instructions]. at no And Grant, the this or closing back additional call time. any it I'll to there turn are Mr. questions for you further remarks.

Tripp Grant

with afternoon. so very to Yes, speaking and about today. are everyone with pleased and we everyone future. the optimistic a thanks Jen, and results look Thanks participation the excited next much, your thank quarter. quarter, And wanted much. our time good I for just have We're about forward to

Operator

attending. Thank This for concludes today's you conference call.

Covenant Logistics (CVLG) 28 Jul 232023 Q2 Earnings call transcript