CVLG - Earnings call transcript Q1 2024 | Covenant Logistics Group, Inc.

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Operator

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

Our host for today's call is Tripp Grant. [Operator Instructions] I would now like to turn the call over to your host. Mr. Grant, you may begin.

James Grant

Yes. you. Thank and Call. Covenant everyone, Quarter Group to Conference XXXX welcome morning, Logistics the First Good

the reminder, and at consolidated A call are obligation undertake a million results filings Securities is our Bunn. early challenges revise and I'm on As and freight $XX.X our call this or overall that to to Litigation copy or ago, despite the available statements uncertainties additional quarter. forward-looking financial the prepared the risk review the any Reform pleased publicly weakness approximately Private in differ environment today under most were David website materially. first to comments revenue update severe Act, our Paul cause recent www.covenentlogistics.com/investors. and and weather lingering no a which joined could results subject X.X%. by of Please year operational risks the will the Parker that to on increased Compared quarter's statements. actual contain with SEC forward-looking by We factors. in We information freight

average utilization While the contributors expedited ago. consisting year growth fleet the and were to prior increased or freight our primary segments Adjusted compared improved quarter. approximately tractor to the income the a of compared asset-based operating dedicated in and business each revenue, million XX.X% of segments with grew year $X.X

pretax warehousing decline all freight the income company prior net resulted asset-based expense grew in of equipment growing in Our our quarter. include our of prior $XX.X operating highlights $X.X adjusted million. revenue asset a investment increased operating to income reduced million, approximately and X successful $X.X compared $X.X $X.X were consisting in and year $X.X TEL Compared million of leasing to the adjusted offset million adjusted operating reportable freight segments segments. segments by our Key income million of reduced of interest million income from light managed a of combined to by period, partially from

conditions compared segments utilization reductions navigated X impact added quarter fleet customers in year truckload We X.X% of improved our our and ago, difficult to by X.X%. in the Our the start-ups approximately dedicated a executed combined successfully of weather and pipeline of during new partially offsetting fleet. rate the expedited to new

TEL's to to year-over-year XX% million suppressing as prior revenue used a quarter soft gain compared the used in a per compared versus declined revenue the $X.XX the equipment softening Our TEL net increased primarily share period. a compared equipment pretax declined and XX%. for of operations compared market. capital ago. in costs, expenses, the improved months our per per or diluted $X.X combined a investment a equipment-related including loss total mile total maintenance-related million of diluted of poultry-related result approximately market, operating equipment as fleet XX year. sale year, equipment March to on months resulted $X.XX and the segments XX The million $X.XX earnings to quarter, and in newer, prior expenses gains equipment of a share the our year CapEx on depreciations or primarily truckload specialized revenue-producing Within per gains was costly average by age produced equipment lease result $XX to ago $X.XX Fixed for year equipment mile sale. growth. contribution of for the at XX to net in The consisting $X.X sale more

trailing is adjusted the of X.Xx reduced basis, was the versus attributable quarter On Our in ratio The invested year-over-year X.X% an XX.X%. and debt-to-capital average net of was on indebtedness for leverage March decline yielding as XX.X% million, return XX capital current a XX-month little business approximately to increase adjusted and provide the associated on our ratio now $XXX.X prior the Paul items of the acquisitions year. average color Freight capital fleet. base average will asset-light individual affecting And reducing growth Managed the more with particularly segments. the income, and operating in invested CapEx age from segment of our

M. Bunn

The severe Expedited performed declined as rates Tripp. soft In quarter, compounded well second in rate a seasonally a Thanks, a in utilization and in customer the approximately and XX.X% yielding reset has equipment ratio. to utilization improved attributable on this another the engineered the weather, during segment, more of X% of adjusted adjusted yielding success a start-ups quarter Dedicated improvement result in by reflected newer was have inclement operating principally executing XXXX. fleet OR successfully less downtime. approximately X%. routes key quarter. XX.X% the story, The with by X

us that X opportunities the profitability we capital This time to profitability deploying and and weed hard Over past and unprofitable this requirements. worked return by years, feed improve have towards well has segment meet the in served adding in business business. profitable uneven, over been but has our exiting approach

cargo-related for pressure was aggressively margin. The We We of with improvement at profit to in a with competitive competing the of significant XXXX. adjusted and operating experienced increase continued freight in environment this XXX% improvement X% volumes result upon in in highly segment's the to in and expense expect this improve Managed and the the brokerage adjusted profitability large continue environment. a to adjusted Freight claim primarily revenue are size remains anticipate The pleased over increase year-over-year brokers profit. numerous margin longer operating a term. margin

the improved and from rate is profit Our a where outpacing longer no XXX% prior compared increase at adjusted employee year the we cost retention a which saw rate a our as labor the and Warehouse segment of has capture in customers. market X% revenue stabilizing increase result of labor can to in operating increases

market, in in net the tail versus income by its ago largely decreased gains prior continued used versus and for in million equipment to XXX pretax approximately compared of was decreased minority X,XXX. income contributed investment the trailer quarter the trucks $X.X suppressing by fleet of its to XXXX. the in year $X.X XX% the fleet to XXX,XXX sale and The the by TEL in a TEL's on introduced X,XXX Our million XX% decrease period. truck revenue of equipment. due quarter to deterioration pretax declined quarter first quarter

growth contributions improve growth offset margins quarter from We core sequentially of and that will anticipate our positive momentum us open improve second higher segment, result Dedicated of we outlook each taken with operating past our a young earnings year, excited we reduced for adjusted in for earnings segment. and from we warehousing and growth the we about up fleet the of the our segment, efficiencies the fleet income of operations of Regarding be strong you with questions. as the is optimistic our costs our your expedited much we future. tail, continuation pipeline the into quarter company soft time, execute the this about freight throughout Despite to in will market, by a the durability quarters for direction and in the interest a Thank call new in model X customers our although form the now are for remain as have come a headed. our the operational of

Operator

from first our Stephens And with comes Imbro question Instructions] Inc. today [Operator Daniel

Unknown Analyst

This is [indiscernible] on for Daniel.

walk of puts than others with. that Can result sequentially mile of per would to you through better primarily came compared attribute and takes your and us out some to the peers space? you of rate Firstly, some the what that in was

M. Bunn

contracts expedited long-term has in it. Paul. -- the a lot I would of our is This business attribute it to

of And so we limited in really in dedicated, And dedicated have amount then, very of exposure nature. a course, market. spot is the

I multiyear and lot it's terms. market contractual to So than more exposure with due a business less contractual and business think probably spot most

could tell partner the in things and been that accounts 'XX earnings thought the -- would stabilize a 'XX, going you, of to would advantage we and and made to as decision full probably really I try to market help us that had of be take forward. our we with good One not as strategic we

results company some in what for so trade-offs with really And 'XX kind in in lost the shaping valleys of market that's value 'XX, saw the and market profit in good we to to and try peaks out work a the model we make 'XX and bad. produce of we're business there's especially or probably can more and and and folks, the opportunity how stable in get

Unknown Analyst

around along in of [indiscernible], forward pulling talk we kind have year. the repricing some be color helpful. contract progressing of of And is earlier seen how some shippers maybe to some heard contract just you renewals that? Or would Have some

M. Bunn

through our would of I all we're say pretty Yes. much contracts.

got significance we've think left. any one I of

of them them went so we into effect. April, will March, of lot May, in those January. in some A some of And

through much process. that pretty we're So

really nothing year. but X of As I from left, X said, the or forward end the more pulling

here relatively should so on [ EL from it a ]. And be selling steady

Operator

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

Scott Group

exposure, but any just bottom? and last better I Just obviously, at spot, cycle it where your views Are the demand getting so yet? thoughts? Is we and in far know are? QX trends any on just to we curious

David Parker

continue it Yes, bottom, then we David bottom. wants along we on to out add I it. Scott, the to bounce just mean, think and I'll start and to continue to I bounce the

gotten People it's with But are some to to of kind to are. this everybody that there. think of don't up I I pandemic, take spikes more one there out real what money. me longer-term or coming market. spiky not reminds because down. to companies can 'XX, and in more go this not of to And the of recovery. much will there's costs where the thing used a out of think lose make it back take is and U-shaped trucks test are with those the business more parking 'XX, fleets doing the 'XX, doesn't U-shaped there really whatever gotten probably spikes I sense of of you recoveries kind the down 'XX, if little downsizing really start see 'XX, risk had It's kind historically costs I trying mean, or accurate, longer out mean still we and the

the I at it. is think kind direction. bottom, bouncing to capacity heading we're the other question I exits along enough think of And the million when And so start

Scott Group

well? was just about -- as what was You Any of well, a an was that expedited that contracts. multiyear guess, -- Or -- percentage I comment dedicated comment? that talked

David Parker

I I offerings, year probably have service We've money a 'XX and sure which XX%, would some agreements, business, more that think lot value we with partnership, through for of value-add said made of they're to of we're some do those really, agreements. under again thus treating both. we could us far say additional on renewed hauling they we created earlier, things a as roughly XX% partner than our for couple we these the is to accounts shows half them. the we've and 'XX expedited just than right, really freight appreciate I really in customers did. more Both, create multiyear that multiyear some there other And and we treated try more make of right But their this. niche this some

renewed than would we've of course, longer that dedicated some other is say, yes, quarter that term like contracts. is so the most that dedicated and come protect to for And years in will in And business for the business dedicated little all folks of multiyear expedited the of a poultry space. I the on, except stuff normal contracts first then,

Scott Group

market Like these or would below? coming so you're they pricing, above are those? when right they getting are rates And contracts, you multiyear rate you as now or on down increases -- them, meaning call you're repricing in are are

David Parker

say flattish... would I

where on rate years market. amount customers, retrade escalators number deals, this not and So costs make because back do. ups downs on those sense. and backwards have based doesn't a going some not our out not multiyear ways of we multiyear there's what a -- a not of a can we're with in deals indices of ability cost, incremental those lot with get to on significant go there's the of it But just we're in lot But and or

got costs you making you're been your a a or have for -- time so and solid you a to with way long as customer you should but that's if making margin, a long down, margin. that if as good you're if up go And fair keep adjust -- you that

Scott Group

question. last just then And

this thoughts, talked I any just flat to think I last earnings you don't about quarter, know, any update? positive. year

David Parker

happen. a what day that's this or quarter be And we say pushing We're think said we're we'll comments, year hard in get from maybe still we it. push were still to It's to to in them get were every whether Tripp where make we're grow or but to we incrementally. a will think that I'd grow quarter. sequential X think targeting. his something to not them, going improvement see every we working I really where I with market can back the of hard last But front dictate

James Grant

grow agree Yes. look the that. to base I we year-over-year, And can we I'm with I to can just But income year-over-year. is of on this -- of a proud I said, about But that, whether most year-over-year. thing fact think would add expense, think growing. would that we business I that I bit Scott, if be the is operating have the things a, some the it's to headwind, say, it's those tail from little the P&L whether year are or hindered going interest bigger

say. earnings bit, would those a of not it's I So offsetting be kind significantly, little but going to

Operator

our Elliot And with TD we'll to from Alper question Cowen. Instructions] move [Operator next

Elliot Alper

on tractor questions environment. any guess count about How about should I mean to forward, forward? pricing we've up lock that is first this are Jason other new pressure seeing going in I This you into Seidl. in stepped to at dedicated to about and stepping the new dedicated Elliot some been ask the we I there all going some given from sequentially shippers for wanted expect rates business? current guys quarter. hearing think similar

David Parker

I one-way and count. answer of definitely Yes. trying do let first market. given your mean, dedicated the a , there's to guys in question, me truck get lot

for up while the a count go But it's And that. and bit. because of the count QX, then will truck I business. tough I have then a a truck past to add don't little see a there think truck flatlining lot probably new see go a could you'll QX, you'll I market visibility the little count out up see

on working we're And keep going to pipeline. so the

there, competitive losing. we're far -- out it's there's entrants, as as -- it's and new winning As no but still doubt we're as much

Elliot Alper

other environment, the are outperformance managed I up given in at to well. freight brokerage Curious hear seen you to carriers. the then We've there. your softness hold And guess, margin about so able losses how

of that forward. to guess going second some spoke should You think pressure we quarter XXXX? margins similar of -- maybe to I margin about

David Parker

quarter to our with Yes, make stuff. of line making probably similar I on fourth of second good a to focusing we're revenue money. chasing and bunch really, this last feel We're year. and lose not top is out third we're what sure and yourself trying buy let to mean, about freight not brokerage

on so revenue don't sake And But and if a going sense. it, help it. we world, customer in a we're can of do for revenue's make a lot little our just money to make

on we're we're our a make not of barrel. so to make managing and chasing the overhead can stuff and sure just the to And scrape what trying we bottom doing

Operator

Research come with will Vertical Jeff question Next from Kauffman Partners.

Jeffrey Kauffman

we congratulations X sometimes. face the last business term, mentioned I for and know the But And I quarter start-ups, the the -- challenging X. the to tend very environment. next on terrific dedicated quarter in on you a up freight short to question Thompson. the new a maybe dedicated look of changing beyond Lew follow and or want manage

you that X growth years, of let's miles As X we this out? should XX we franchise? ] growth curve could [ and what out to about in environment then look a really this the new about say, haul, talk the like is shorter years, really means some right since about months, be for for, dedicated -- business normal thinking is months think look way what Tractor And XX can

James Grant

way months. very over we're Thompson One, performed Tripp. Lew with is this last the the that pleased Jeff, XX has Yes.

blessing kind kind And of signing be the has it years Here's XX-month -- say years, term to is you. been growth that strategy us. say will us would that the tailwinds for numbers We've teams this our prior Josh also the I've a acquisition and is short such is put would focus even on together. acquisition But I'm with together. I to I service-oriented the something because experienced of is But in more But them pursuing And new standard future continue excited honestly, of the there and X worked work what high -- we be immediate want a we it's seen. execute we've new and shorter do we what sure anniversary partners working, and some a documents. have X and are out good that we're business, Lou I moved out. well tell nothing guiding be we've there businesses. for well great doing of fact, and the In out lot But on make this job. for start-up the I didn't quite really to existing another of He's same some were that that operator Friday with The the to to when got think would that, of I'd customers help bright, that a hesitant learn we model the previous we've business. service to.

that it publish that is number or It's taking we're about to that more into level happy think but XXXX. excited with a growth to XXXX And we're it got momentum public, I we're new do say preexisting of absolutely that term, growth, all on every short-term making to whether me So it's or that our or customers, on we're for one of happy but sure one sound critical doesn't those make the those But the wouldn't of short continue -- what a would to team -- number. be service. good I will and or be I good we've of confidence to come. for every want the focused call focused that

Jeffrey Kauffman

in talking XX environment? guess of to in And But I sense cost that's were your targets? fantastic, quarters. and and if goals about to just fleet kind savings. the I in Tractor pressure I you from that up Where showing count little your your fleet make is interest out. the reduce or operating expense given and about a down thought maintenance a there some it no? future months leveling than Is think any relative that's You follow-up, debt said bit environment, expense to, can. does shifting said you And this dedicated up capital capital maybe interest shift

James Grant

fleet. fleets. driver expenses and newer tied in in my it. a No. satisfaction, driver And optimization fuel service, about Not We've lot Yes, opinion. a no where seen like not operational They be the younger to but doubt can through of predicting economy And There's we operating the retention. there all saw -- to are event, COVID I'm disruptions supply chain. process, another there COVID

XX equipment, additional your understand higher before up of new XX just a us truck strategized that. time feel I have count every we for disruption lower is. gives all an I'll of ownership gives ownership, obtaining that reason, like decline the it cost age a we or and cost or our I the asset. seeing start of and of us and we fleet worked also a life whatever lowest total are -- fleet think have we keep whatever point so And or our a And total because But costs and the average don't make maintenance just to mean lower for of pockets. I over were bit number, to that service it we with of months if months little there

trucks many We trade the are putting them a pockets on miles cycles of on how year. have different based where different

so at of manage it of the those looking get the and and each trucks most it on to backside out and pull it And from the optimize trying we're well. one actively

I think just not it's So don't it's debt. expense, and depreciation

XXX new But EBITDA. in some of feels you'll in we you little uptick at run a terms growth, a look where see debt, high. if the business nice bit think of today, I the In are rate

So I off spinning think we'll more in cash start future. the

uncomfortable to As leverage Xx profile this help down. We're takes off the leverage. new growth get with not

like on we see a the here us Xx, squirming the sitting -- a I the with some we again, we're areas of advantage at this uncomfortable debt-free, nothing the a Thompson, because never this interest fleet shortsighted in little things new bit. when younger based were today, this to that see comes, the and that's ever up of just of other be think but Lew half but I down we we may that looking -- plan that debt poised be we're at hopefully, really the cycle little that, stated just if take But Now but costs it's not come in advantage think you'll may gets think growth to bit but back bit to group. I want little opportunities, we've year, in take

M. Bunn

X said. add things me let Tripp to what Jeff,

the been you about of is to business lot If which shorter length business. of the added think shorter we've growth a haul is adding length is fund CapEx

is incrementally you're flip flow you're So we've you're in environment you're been free longer, to a trucks you're and having mile free in going is shorter faster more Tripp see higher a what -- where to generate to better environment, profile to the going cash so saying cash than you're holding a flow. able maybe the going trucks forward, if out because

ever is probably whole one that seen. the industry But is new going to talk will to. technology required there's lot the the and to we're what's you us, do. do, years is our regulations what's be trucks about, we're engine probably to rules around that other truck thing And manufacturers And engine EPA. it but hear of The to that engine California to going there think stick. manufacturers a and technology the of being increases to is adjust only not this that going industry price the There's the sure only away going from on a numbers by out couple largest has most equipment have just new EPA about

want the of on a there months equipment when buy of another there's to pre-buy to lot be point, cheaper side just you people significantly be be now. And significant average And want they're question. people. so -- little a -- can before the around than hope we new will next trying with In more I scraping XX your going lot color every young activity, to so going months, truck maybe raking not just be the get here XX need into -- there'll buy don't because and engine increase the to now that of we get age they're a trucks a technology. of we that's And from while Tripp's to that, sit

Jeffrey Kauffman

No, mean vehicles work the you're that. XX,XXX I I trying old recollection my vehicles. and hearing truck. always appreciate we're And fix for NOx to than when more new particulates is don't the better

those the you So response. I think very and credible are thank points, for detailed

Operator

[Operator are And you conference at there Instructions] questions conclude time, today's call. attending. will no this Thank further for this and

Covenant Logistics (CVLG) 25 Apr 242024 Q1 Earnings call transcript