Q4 2023 Covenant Logistics Group Inc Earnings Call

Welcome to today's Covenant Legislation.

Welcome to today's Covenant Logistics group fourth quarter earnings release Conference call. Our hosts for todays call is trip grant at this time all participants are in listen only mode. Later, we will conduct a question and answer session I'll now turn the call over to your host Mr. Grant you may begin.

are hosts for today's call.

At this time, all participants are listening.

Later we will conduct.

Speaker Change: I'll now turn the call in

Trip Grant: Good morning, everyone and welcome to the Covenant logistics groups fourth quarter 2023 conference call. As a reminder, this call will contain forward looking statements under the private Securities Litigation litigation Reformat, which.

Speaker Change: Good morning, everyone, and welcome to the Covenant Logistics Group's fourth quarter 2023 conference call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act.

Speaker Change: which are subject to risks and uncertainties that would cause actual results to differ materially.

Trip Grant: Which are subject to risks and uncertainties that would cause actual results to differ materially. Please review, our SEC filings and most recent risk factor should we undertake no obligation to publicly update or revise any forward looking statements.

Speaker Change: Please review our FCC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements.

Speaker Change: A copy of the prepared comments or additional financial information is available on our website at www.covenantlogistics.com.

Trip Grant: A copy of the prepared comments and additional financial information is available on our website at www Dot Covenant logistics Dot com slash investors.

Speaker Change: I'm joined on the call today by David Parker and Paul Bunn.

Speaker Change: I'm joined on the call today by David Parker and Paul Button.

Speaker Change: Before we address the fourth quarter's results, I'd like to take a moment to reflect on the year as a whole.

Speaker Change: Before we address the fourth quarter's results I'd like to take a moment to reflect on the year as a whole.

Speaker Change: As challenging as it was, 2023 was a pivotal year for COVID.

Speaker Change: As challenging as it was 2023 was a pivotal year for covenant, we are able to demonstrate the durability of our improved business model by achieving the second best adjusted earnings per share in company history.

Speaker Change: We are able to demonstrate the durability of our improved business model by achieving the second best adjusted earnings per share in company history while setting the stage for future growth and improvement through the accretive acquisitions of Lou Thompson and Sun Trucking and Sims Transport.

Speaker Change: Setting the stage for future growth and improvement through the accretive acquisitions of Leu, Thompson, and son tracking and Sam's transport.

Speaker Change: These achievements would not have been possible without the commitment from our talented people and many years of planning, execution, and collaborative teamwork.

Speaker Change: These achievements would not have impossible without the commitment from our talented people and many years of planning execution and collaborative teamwork as.

Speaker Change: As we enter 2024, we do so with a resolved commitment to forward progress in our strategic long-term plan and improving upon these results in the future.

Speaker Change: As we enter 2024, we do so with a resolve commitment and forward progress in our strategic long term plan, improving and improving upon these results in the future.

Speaker Change: Focusing now on the quarter.

Speaker Change: Focusing now on the quarter, we were pleased with our first and fourth quarters results. Despite the lingering weakness in the overall freight environment compared to a year ago consolidated freight revenue was down approximately $15 3 million or 6%, primarily as a result of year over year tractor count in rate declines in our asset based truckload businesses.

Speaker Change: We were pleased with our first fourth quarter's results despite the lingering weakness in the overall freight environment. Compared to a year ago, consolidated freight revenue was down approximately 15.3 million or 6%, primarily as a result of year-over-year tractor count and rate declines in our asset-based truckload.

Speaker Change: <unk> combined with little to no overflow freight handled by our asset light managed freight segment.

Speaker Change: Combined with little to no overflow freight handled by our asset-light managed freight

Speaker Change: Partially offset by improved utilization of our assets.

Speaker Change: Partially offset by improved utilization of our assets.

Speaker Change: Adjusted operating income declined approximately $4.9 million or 22% compared to the prior year quarter, primarily resulting from a $6.1 million decrease in our managed freight segment, partially offset by a $1.2 million improvement to the profitability of our warehousing.

Speaker Change: <unk> operating income declined approximately $4 9 million or 22% compared to the prior year quarter, primarily resulting from a $6 $1 million decrease in our managed freight segment, partially offset by a 1.2 million dollar improvement to the profitability of our warehousing settlement segment.

Speaker Change: Thank you for watching this segment.

Speaker Change: while the combined truckload operations were essentially flat.

Speaker Change: While the combined truckload operations were essentially flat.

Speaker Change: Adjusted net income decreased 24% to $14 8 million and adjusted earnings per share decreased 22% to $1 seven per share compared to the year ago quarter.

Speaker Change: Adjusted net income decreased 24% to $14.8 million, and adjusted earnings per share decreased 22% to $1.07 per share compared to the year ago.

Speaker Change: Weighted average diluted shares decreased approximately 3.5% because of our share repurchase.

Speaker Change: Weighted average diluted shares decreased approximately three 5% because of our share repurchase program.

Speaker Change: Key highlights include despite.

Speaker Change: Key highlights include

Speaker Change: Despite a 9% rate decline and 4% average tractor count reductions, our combined truckload operations generated roughly the same adjusted operating income in the fourth quarter of 2023 as they did in 2022.

Speaker Change: Despite a 9% rate decline and 4% average tractor count reductions our combined truckload operations generated roughly the same adjusted operating income and income in the fourth quarter of 2023 as they did in 2022.

Speaker Change: The Lou Thompson & Son Trucking operation continues to perform well with near-term opportunities to meaningfully grow the business in the first quarter of 2020.

Speaker Change: <unk> Thompson and son trucking operation continues to perform well with near term opportunities to meaningfully grow the business in the first quarter of 2024 are.

Speaker Change: Our net capital investment for revenue producing equipment was approximately $91 million for the quarter, consisting of approximately $48 million of normal 'twenty twenty-three replacement capex $13 million and specialized equipment capex for poultry related growth and $30 million and pull forward of norm.

Speaker Change: Our net capital investment for revenue-producing equipment was approximately $91 million for the quarter, consisting of approximately $48 million in normal 2023 replacement CapEx.

Speaker Change: 13 million in specialized equipment capex for poultry related growth and 30 million dollars in pull forward of normal replacement capex originally scheduled for 2024.

Speaker Change: Replacement Capex originally scheduled for 2024.

Speaker Change: Okay.

Speaker Change: The average age of our fleet at December 31st improved to 19 months compared to 26 months in the prior year and 23 months at September 30th 2023.

Speaker Change: The average age of our fleet at December 31st improved to 19 months compared to 26 months in the prior year and 23 months at September 30th, 2023.

Speaker Change: within our combined truckload segment.

Speaker Change: Within our combined truckload segments compared to the prior year operations and maintenance related expenses declined by 11 cents per total mile or 38% and fixed equipment related costs, including lease revenue equipment expenses depreciation and gains on sale on the only increased four cents per total mile.

Speaker Change: Compared to the prior year, operations and maintenance-related expenses declined by 11 cents per total mile, or 38%, and fixed equipment-related costs, including leased revenue equipment expenses, depreciation, and gains on sale, only increased 4 cents per total mile.

Speaker Change: Gain on sale of revenue equipment was

Speaker Change: Gain on sale of revenue equipment was.

Speaker Change: 0.2 million in the quarter compared to 1 million in the prior year.

Speaker Change: Point 2 million in the quarter compared to 1 million in the prior year.

Speaker Change: Declining fuel prices and lagging fuel surcharge recovery rates created a tailwind for our combined truckload truckload operations, which helped us overcome the negative impact of a cyber event with a major customer in the United Auto workers strike in the quarter.

Speaker Change: Declining fuel prices and lagging fuel storage recovery rates created a tailwind for our combined truckload operation.

Speaker Change: which helped us overcome the negative impact of a cyber event with a major customer and the United Auto Workers strike in the quarter.

Speaker Change: Our tail leasing company investment produced 25 cents per diluted share compared to 21 cents per diluted share versus a year ago period.

Speaker Change: Airtel leasing company investment produced 25 cents per diluted share compared to 21 cents per diluted share versus a year ago period.

Speaker Change: Our net indebtedness is of December 31st with $248.3 million yielding an adjusted leverage ratio of approximately two times

Speaker Change: Our net indebtedness as of December 31st with $248 3 million, yielding an adjusted leverage ratio of approximately two times and debt to capital ratio of 38, 1%.

Speaker Change: and debt to capital ratio of 38.1%.

Speaker Change: On an adjusted basis, return on invested capital was 8.9% for the current quarter versus 17.7% in the prior year.

Speaker Change: On an adjusted basis return on invested capital was eight 9% for the current quarter versus $17 seven in the prior year the.

Speaker Change: The decline is attributable to reduced year over year operating income partition, particularly from our asset light managed freight segment and the increase in the average investment invested capital base associated with acquisitions growth Capex and pulling equipment purchases for now.

Speaker Change: The decline is attributable to reduced year-over-year operating income, particularly from our asset-light managed freight segment.

Speaker Change: and the increase in the average invested capital base associated with acquisition.

Speaker Change: growth capex, and pulling equipment purchases forward.

Speaker Change: Now Paul will provide a little more color on the items affecting the individual business.

Speaker Change: Now Paul will provide a little more color on the items affecting the individual business segments. Thanks true expedited outperformed our expectations during the fourth quarter, yielding a 91 point for adjusted operating ratio the negative impact of the cyber attack on a major customer in the quarter was largely offset by the benefits of fuel recovery.

Paul Bunn: Thanks Tripp. Expedited outperformed our expectations during the fourth quarter, yielding a 91.4 adjusted operating ratio.

Paul Bunn: The negative impact of the cyber attack on a major customer in the quarter was largely offset by the benefits of fuel recovery lagging at a declining DOE price.

Paul Button: Lagging a declining D O price in this segment rates have declined by approximately 12%, but utilization has improved approximately 5% the.

Paul Bunn: In this segment, rates have declined by approximately 12%, but utilization has improved approximately 5%.

Paul Button: The improvement in utilization was principally attributable to more engineered routes in the newer equipment in our fleet with less downtime dead.

Paul Bunn: The improvement in utilization was principally attributable to more engineered routes and the newer equipment in the fleet with less downtime.

Paul Bunn: Dedicated reflected another success story, yielding a 91.4 adjusted operating ratio also, representing our best quarterly results for this segment in company history.

Paul Button: Dedicated reflected another success story, yielding a 91 point for adjusted operating ratio also representing our best quarterly results for this segment in company history.

Paul Button: Similar to expedited our dedicated operations saw a positive impact of profitability as a result of declining fuel prices offsetting the negative impact of the United Auto workers strike in the quarter.

Paul Bunn: Similar to Expedited, our dedicated operations saw a positive impact to profitability as a result of declining fuel prices, offsetting the negative impact of the United Auto Workers strike in the quarter.

Paul Button: Over the past three years, we've worked hard to improve the profitability within this segment by exiting unprofitable business and adding more profitable business. This weed and feed approach has been clunky at times, but has served us well and deploying capital towards opportunities that meet our profitability and return requirements. We are pleased with the year over year improvement.

Paul Bunn: Over the past three years, we have worked hard to improve the profitability within this segment by exiting unprofitable business and adding more profitable business. This weed and feed approach has been clunky at times, but has served us well in deploying capital towards opportunities that meet our profitability and return requirements. We are pleased with the year-over-year improvement to adjusted margin and expect to continue to improve upon this segment's size and profitability over the long term.

Paul Button: Adjusted margin and expect to continue to improve upon this segment size and profitability over the long term.

Paul Bunn: Managed Freight experienced a 15% reduction in total freight revenue and a 69% reduction of consolidated adjusted operating profit. The significant reduction in revenue and operating profit was primarily the product of little-to-no high-margin overflow freight from our asset-based truckload segments. Nevertheless, the asset-like nature of the business still generates an acceptable return on invested capital at a 95.8 adjusted operating ratio, which was achieved in the fourth quarter.

Paul Button: Managed freight experienced a 15% reduction in total freight revenue and a 69% reduction of consolidated adjusted operating profit the significant reduction in revenue and operating profit was primarily the product of little to no harm margin overflow freight from our asset based truckload segment's Nevertheless, the asset like nature.

Paul Button: The business still generates an acceptable return on invested capital at a 95.8 adjusted operating ratio, which was achieved in the fourth quarter there.

Paul Bunn: The brokerage environment remains highly competitive with numerous brokers aggressively competing for volumes at the expense of margin. We anticipate continued margin pressure in this environment.

Paul Button: The brokerage environment remains highly competitive with numerous numerous brokers aggressively competing for volumes at the expense of margin. We anticipate continued margin pressure in this environment.

Paul Bunn: Our warehouse segment saw a 16% increase in freight revenue and a 428% increase in adjusted operating profit compared to the prior year as a result of the combination of new customer startups and rate increases with existing customers over the last 12 months.

Paul Button: Our warehouse segment saw a 16% increase in freight revenue and a 428% increase in adjusted operating profit compared to the prior year as a result of the combination of new customer start ups and rate increases with existing customers over the last 12 months. Although we are pleased with the improved profitability within this segment.

Paul Bunn: Although we are pleased with the improved profitability within this segment, we will continue to focus on improving the profitability through improved labor utilization and rate increases with existing customers.

Paul Button: We will continue to focus on improving the profitability through improved labor utilization and rate increases with existing customers.

Paul Button: Our minority investment entail contributed pretax income of $4 7 million for the quarter compared to 3.9 in the prior year period. The increase was largely due to suppressed 2022 earnings resulting from increased depreciation and 22 taken on certain high mileage tractors that were being prepared to sale.

Paul Bunn: Our minority investment in TEL contributed pre-tax income of $4.7 million for the quarter compared to $3.9 million in the prior year period. The increase was largely due to suppressed 2022 earnings resulting from increased depreciation in 2022 taken on certain high mileage tractors that were being prepared to sell.

Paul Bunn: Tells revenue in the quarter to climb 14% and pre-tax income increased by approximately 20% versus the fourth quarter of 22.

Paul Button: <unk> revenue in the quarter declined 14% and pretax income increased by approximately 20% versus the fourth quarter of 'twenty two.

Paul Bunn: Till decreased its truck fleet in the quarter versus a year ago by 106 trucks to 2,131 and reduced its trailer fleet by 339 to 6,810.

Paul Button: <unk> decreased its truck fleet in the quarter versus a year ago by 106 trucks to 2131 and reduced its trailer fleet by 339 to 6810.

Paul Bunn: Due to the business model, gains and losses on the sale of equipment are normal part of the business and can cause earnings to fluctuate from quarter to quarter. Our investment in TAIL is included in other assets in our consolidated balance sheet and has grown to $66.3 million at December 31, 2023 from the original investment of $4.9 million. In 2022, we received $14.7 million of cash dividends from TAIL and received $9.8 million in 2023.

Paul Button: Due to the business model gains and losses on the sale of equipment or <unk>.

Paul Button: Business and can cause earnings to fluctuate from quarter to quarter. Our investment in sales included in other assets on our consolidated balance sheet and has grown to $66 3 million at December 31, 2023 from the original investment of $4 9 million in 2022 received $14 7 million of cash dividends from tail.

Paul Button: We received $9 8 million in 2023.

Paul Button: Regarding our outlook for the future 2023 provided as challenging a freight environment as we experienced in years, but we were extremely pleased with the performance of the model and the team.

Paul Bunn: Regarding our outlook for the future, 2023 provided as challenging a freight environment as we experienced in years, but we were extremely pleased with the performance of the model and the team.

Paul Bunn: This is a different team and a different model than the covenant of five to ten years ago.

Paul Button: This is a different team in a different model than the covenant of five to 10 years ago.

Paul Bunn: As it relates to 2024, we see no immediate macroeconomic or industry catalysts, but believe continuing to execute on our strategic plan and capacity attrition from the market will result in incremental improvements to operating conditions throughout 2024. As a result, we believe we can surpass our 2023 results with higher adjusted earnings per share and greater free cash flow that allow us to reduce our indebtedness and or exercise other capital allocation alternatives.

As it relates to 2024, we see no immediate macroeconomic or industry catalysts, but believe continuing to execute on our strategic plan and capacity attrition from the market will result in incremental improvements to operating conditions throughout 2024 as a result, we believe we can surpass our 2023 results with high.

Host: Welcome to today's Covenant Legislation, the hosts for today's call. At this time, all participants are listening.

Paul Button: Our adjusted earnings per share and greater free cash flow to allow us to reduce our indebtedness and or exercise other capital allocation alternatives. Thank you for your time and well now open up the call for questions.

Operator: Later we will conduct. I'll now turn the call in. Good morning, everyone, and welcome to the Covenant Logistics Group's fourth quarter 2023 conference call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act, which are subject to risks and uncertainties that could cause actual results to differ materially. Please review our FCC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements. A copy of the prepared comments or additional financial information is available on our website at www.covenantlogistics.com. I'm joined on the call today by David Parker and Paul Bunn.

Speaker Change: Thank you for your time. We will now open up the call for questions.

Speaker Change: If you would like to ask a question

Paul Button: If you would like to ask a question. Please press star one on your telephone keypad now you'll be placed inside of Q Auto received please stay prepared to ask your question one pumpkin once again to ask a question. Please press star one on your phone now.

Speaker Change: Star 1

Speaker Change: and many more.

Speaker Change: Are you prepared to ask your questions questions?

Speaker Change: Again, to ask a question.

Speaker Change: Star 1

Speaker Change: Our first question comes from Jason Seidl from TD Cowen. Please state your question.

Speaker Change: Our first question comes from

Speaker Change: were all counted.

Speaker Change: Thank you, Opper. David, Paul, Tripp, good morning, guys.

Jason H. Seidl: Thank you operator, David Paul trip, Yeah, Good morning, guys.

Hi, Jason.

Speaker Change: Jason Seidl

Jason H. Seidl: Wanted to touch a little bit on Lou Thompson there, sort of two questions. One, was there any startup costs related to that new business you guys are gearing up for?

David Ray Parker: Wanted to touch a little bit on our leu Thompson there.

David Ray Parker: Sort of two questions.

David Ray Parker: One was there any startup costs related to that new business you guys are gearing up for an <unk>.

Speaker: Before we address the fourth quarter's results, I'd like to take a moment to reflect on the year as a whole. As challenging as it was, 2023 was a pivotal year for COVID. We are able to demonstrate the durability of our improved business model by achieving the second best adjusted earnings per share in company history while setting the stage for future growth and improvement through the accretive acquisitions of Lou Thompson and Sun Trucking and Sims Transport. These achievements would not have been possible without the commitment from our talented people and many years of planning, execution, and collaborative teamwork. As we enter 2024, we do so with a resolved commitment to forward progress in our strategic long-term plan and improve upon these results in the future.

Speaker Change: There was I mean, you know there was some some inefficiencies Jason and then we capitalized.

Speaker Change: There was. I mean, you know, there was some inefficiencies, Jason, and then we capitalized, you know, the stuff that could be capitalized in accordance with GAAP. So, you know, a little bit of inefficiency hit in Q4, and then, you know, we were able to capitalize what the accounting rules allowed us to capitalize over the term of the contract.

Speaker Change: The stuff that could be capitalized in accordance with GAAP. So you know a little bit of inefficiency hit in Q4, and then we were able to capitalize with accounting rules allowed us to capitalize over the term of the contract.

Jason: That makes sense. And did I hear you right saying that there's opportunities as early as one cue? I thought they were going to be flowing more in the back half of the year.

Alright that makes sense and did I hear you right, saying that theres opportunities as early as <unk> I thought they were going to be flowing more in the back half of the year.

Jason: I would say that, yeah, there's definitely, we'll probably add.

Speaker Change: Yeah, I would say that yeah, there's definitely will probably add.

Jason: 100 probably on average 100 trucks for the first quarter into that space and then there's there's additional startups in the second half so I would just say based on some customer movement that's probably moved to you know most of the startup activity getting going in the first half of the year it'll be on plane you know it'll take it some time to plane out and you probably won't see the full effect until the second half and similar to you know the question you just asked on the fourth quarter you know there'll be a balance of some some inefficiencies that are expensed and and other items that were able to capitalize over the contract term.

Speaker Change: 100, probably on average 100 trucks for the first quarter and into that space and then theres additional startups in the second half. So I would just say based on some customer movement, that's probably moved.

Speaker: Focusing now on the quarter, we were pleased with our first fourth quarter results despite the lingering weakness in the overall freight environment. Compared to a year ago, consolidated freight revenue was down approximately 15.3 million, or 6%, primarily as a result of year-over-year tractor count and rate declines in our asset-based truckload, combined with little to no overflow freight handled by our asset-light managed freight, partially offset by improved utilization of our assets. Adjusted operating income declined approximately $4.9 million, or 22% compared to the prior year quarter, primarily resulting from a $6.1 million decrease in our managed freight segment, partially offset by a $1.2 million improvement in the profitability of our warehousing. Thank you for watching this segment, while the combined truckload operations were essentially flat. Adjusted net income decreased 24% to $14.8 million, and adjusted earnings per share decreased 22% to $1.07 per share compared to the year ago.

Speaker Change: Most of the startup activity getting going in the first half of the year it'll be on plane you know it'll take some time to play it out and you probably won't see the full effect until the second half and similar to the question is asked all my fourth quarter, you know there'll be a balance of some some inefficiencies that are expense and other items that we're able to capital.

Speaker Change: Over the contract term.

Speaker Change: So given that outlook and all the things being equal, it looks like the back half of the year should be stronger for you guys.

Speaker Change: So given that outlook and all other things being equal it looks like the back half of the year should be stronger for you guys.

Speaker Change: without any help from the overall truck

Speaker Change: Without any help from the overall truckload marketplace.

Yeah, I would agree with that Jason I think we're excited about the momentum we have.

Speaker Change: Yeah, I would agree with that Jason. I think we're excited about the momentum we have.

Speaker Change: and Lou Thompson.

Speaker Change: And Lou Thompson.

Speaker Change: Both the legacy low Thompson team and some of the team that we've committed from legacy Covenant.

Speaker Change: Both the Legacy Lou Thompson team and some of the team that we've committed from Legacy Covenant to go out there and help grow that business in a manner that Lou Thompson has not done in the past. He's grown his business pretty much organically in his region, and we're offering the capital and the people to help grow outside of that region, and it's been nothing short of a blessing for sure to be able to grow it at this clip. But again, all eyes are on it. Management is completely focused. This is one of the biggest.

Speaker Change: To go out there and help grow that business in a manner that Lew Thompson has not done in the past he's growing his business pretty much organically in his region and you know we're offering the capital and the people to help grow outside of that region and.

Speaker: Weighted average diluted shares decreased approximately 3.5% because of our share repurchase. Key highlights include: Despite a 9% rate decline and 4% average tractor count reduction, our combined truckload operations generated roughly the same adjusted operating income in the fourth quarter of 2023 as they did in 2022. The Lou Thompson & Son Trucking operation continues to perform well, with near-term opportunities to meaningfully grow the business in the first quarter of 2020. Our net capital investment for revenue-producing equipment was approximately $91 million for the quarter, consisting of approximately $48 million in normal 2023 replacement CapEx.

Speaker Change: You know, it's been nothing short of a blessing for sure to be able to grow it at this clip.

Speaker Change: But again all eyes are on it management is completely focused as one of the biggest.

Speaker Change: You know, initiatives we have this year is to ensure these things are successful.

Speaker Change: Initiatives, we have this year is to ensure these things are successful.

Speaker Change: That makes sense. Let me switch to dedicated real quick. Looks like a good quarter from dedicated, especially given the environment. Can you talk a little bit about what your customers are telling you?

Speaker Change: That makes sense, let me switch the dedicated real quick.

Speaker Change: Looks like a good quarter from dedicated especially given the environment can you talk a little bit about what your customers are telling you in terms of demand.

Speaker Change: Yes, I would say.

Speaker Change: Yeah, I would say

Speaker Change: Jason it's kind of flattened out.

Speaker Change: Jason, it's kind of flattened out. You know, new business pipeline, we've got some good pipeline, but it moves slow. And, you know, I think most of the capacity reductions, I mean, we've still got a few in the first quarter that are trickling in, but by and far, most of the, you know, capacity reductions were, hey, I had 20 trucks and I only need 15 or I had 35 and I only need 27. We've seen most of that come to an end. You know, there's pressure with the one-way market out there. And so here's what I tell you, as soon as the one-way market firms up, it will help dedicated.

Speaker Change: Net new business pipeline, we've got some good pipeline, but it moves slow.

Speaker Change: And I think most of the capacity reductions I mean, we've still got a few in the first quarter that are trickling in but by far most of the capacity reductions, where hey, I had 20 trucks not only need 15, or I had 35 and only need 27, where we've seen most of that come to an end.

Speaker: 13 million in specialized equipment capex for poultry-related growth and 30 million dollars in pull forward of normal replacement capex originally scheduled for 2024. The average age of our fleet at December 31st improved to 19 months compared to 26 months in the prior year and 23 months at September 30th, 2023, within our combined truckload segment. Compared to the prior year, operations and maintenance-related expenses declined by 11 cents per total mile, or 38%, and fixed equipment-related costs, including leased revenue equipment expenses, depreciation, and gains on sale, only increased 4 cents per total mile. Gain on sale of revenue equipment was 0.2 million in the quarter compared to 1 million in the prior year.

Speaker Change: Yes, theres pressure with the one way market out there.

Speaker Change: And so here's what I'd tell you as soon as the one way market firms up.

Speaker Change: It will help dedicated.

Speaker Change: across our industry.

Speaker Change: Across our industry that makes sense and you talked a little bit about the.

Speaker Change: That makes sense. And you talked a little bit about

Speaker Change: The cyber issues that SDs had, are you now seeing a business come back to them for the SD?

Speaker Change: The cyber issues that <unk> had or are you now seeing.

Speaker Change: Business come back to them for the Sps.

Speaker Change: <unk>.

Speaker Change: Yeah, there was a period of a few weeks there where we had some reduced volumes, but by November that was back up to where it was pre-any issue.

Speaker Change: Yes.

Speaker Change: There was a period of a few weeks there were you know we had some reduced volumes, but yes.

Speaker Change: By November that was that was back up to where it was pre pre any issues. Okay. It makes sense last question trip you pulled forward capex into 'twenty.

Speaker Change: Last question, Tripp, you pulled forward CapEx

Speaker: Declining fuel prices and lagging fuel storage recovery rates created a tailwind for our combined truckload operation, which helped us overcome the negative impact of a cyber event with a major customer and the United Auto Workers strike in the quarter. Our tail leasing company investment produced 25 cents per diluted share compared to 21 cents per diluted share versus a year ago. Our net indebtedness as of December 31st was $248.3 million, yielding an adjusted leverage ratio of approximately two times and a debt to capital ratio of 38.1%. On an adjusted basis, return on invested capital was 8.9% for the current quarter versus 17.7% in the prior year.

Tripp: and at the end of 23 there, what do we expect in 24?

Speaker Change: And at the end of 'twenty three they're on what should we expect in 'twenty four.

Speaker Change: Okay.

Tripp: So you're going to have a mix. I think the range that we disclosed in our release was $55 to $65 million of CapEx, of which that includes some growth CapEx.

Speaker Change: So you're going to have a mix.

Speaker Change: I think the range that we disclosed in our release was 55% to $65 million of Capex of which that includes some growth capex.

Tripp: But a lot of our, I would say the majority of our maintenance CapEx is taken care of.

Speaker Change: But a lot of our I would say that the majority of our maintenance Capex is taken care of.

Tripp: So, $55 to $65 million. And the other thing I would say is you may see that gated towards the second half of the year. So, we may even see some projects.

Speaker Change: So 55% to $65 million and the other thing I would say as you may see that gated towards the second half of the year.

Speaker Change: So we may even see some part just sells of equipment and things like that you're not going to see much net capex in the first two quarters of 2024 other than a little bit of growth Capex and then I think all of the maintenance staff will start kicking in in the second half of the year Q3 and Q4.

Tripp: sales of equipment and things like that. You're not going to see much net capex in the first two quarters of 2024 other than a little bit of growth capex. And then I think all of the maintenance stuff will start kicking in the second half of the year, Q3 and Q4.

Speaker: The decline is attributable to reduced year-over-year operating income, particularly from our asset-light managed freight segment, and an increase in the average invested capital base associated with acquisition, growth capex, and pulling equipment purchases forward. Now Paul will provide a little more color on the items affecting the individual businesses. Thanks Tripp.

Speaker Change: Oh, that makes sense. Well, listen, gentlemen, impressive quarter and difficult times. I appreciate the time as always. Congratulations.

Speaker Change: That makes sense, we'll listen gentlemen, impressive quarter in difficult times I appreciate the time as always congratulations.

Speaker Change: Thank you, Jason.

Speaker Change: Thank you Jason.

Speaker Change: Our next question comes from Scott Group from Wolfe Research. Please state your question.

Speaker: Expedited outperformed our expectations during the fourth quarter, yielding a 91.4 adjusted operating ratio. The negative impact of the cyber attack on a major customer during the quarter was largely offset by the benefits of fuel recovery lagging at a declining DOE price. In this segment, rates have declined by approximately 12%, but utilization has improved by approximately 5%. The improvement in utilization was principally attributable to more engineered routes and the newer equipment in the fleet with less downtime.

Jason: Hey, thanks. Good morning, guys. So, you just made a comment about...

Scott H. Group: Hey, Thanks, Good morning, guys, so nice job.

Scott H. Group: You just made a comment about.

Jason: Last question. Once the one-way market firms, so where do you think we are in that? Have we hit sort of the bottom of the one-way market? What are you seeing with respect to pricing as we're getting into the early days of 24-bids?

Scott H. Group: Last question once the one way market firms, so where do you think we are in that.

Speaker Change: Have we hit sort of the bottom of the one way market. What are you seeing with respect to pricing as we're getting into the early days of 24 bid season.

Speaker Change: Yeah.

Speaker Change: Scott, a couple things. I think, yes, I think we are bouncing along the bottom, and hopefully we're about to bounce up off the bottom.

Speaker Change: Got a couple of things I think yes, I think we I think we are bouncing along the bottom.

Speaker: Dedicated reflected another success story, yielding a 91.4 adjusted operating ratio also, representing our best quarterly results for this segment in company history. Similar to Expedited, our dedicated operations saw a positive impact on profitability as a result of declining fuel prices, offsetting the negative impact of the United Auto Workers strike in the quarter. Over the past three years, we have worked hard to improve the profitability within this segment by exiting unprofitable businesses and adding more profitable businesses. This weed and feed approach has been clunky at times, but it has served us well in deploying capital towards opportunities that meet our profitability and return requirements. We are pleased with the year-over-year improvement to adjusted margin and expect to continue to improve upon this segment's size and profitability over the long term. However, Managed Freight experienced a 15% reduction in total freight revenue and a 69% reduction in consolidated adjusted operating profit.

Speaker Change: And hopefully you know we're about to bounce off the bottom.

Speaker Change: <unk>.

Speaker Change: Customers where you're creating value for them, there's low single-digit rate increases to be had.

Speaker Change: Customers, where you're creating value for them.

Speaker Change: They are single digit low single digit rate increases to be had we've signed.

Speaker Change: multiple, you know

Speaker Change: Multiple you know that.

Speaker Change: you know, a good number of those. But then the folks that are in really commoditized environments are really still, you know, they're trying to squeeze the last blood of

Speaker Change: A good number of those but then the folks that are in really commoditized environments are really still.

They're trying to squeeze the last border.

Speaker Change: last amount of blood out of the turnip kind of deal. And so it's kind of a mix of what we're seeing out there right now. Commoditized stuff, people are trying to get the last amount out before things go the other direction. And longer term partner type accounts where you're really key to their network, you're really key to servicing their customer base, a lot of customer facing type stuff. There's some low single digit rate increases to be had. And those conversations really have not been that hard. The harder ones are some people coming in here wanting, they start throwing out numbers, I want another 10% off and there's not another 10% to give. And so I think you're going to start seeing small truckers, medium sized truckers, big truckers, people start throwing those numbers around. They're going to take it and reprice it as soon as they can, or they're just not going to take it and folks will sit some trucks against the fence. So I think we're at the bottom. And I think the real partnershippers, the real sophisticated folks know, hey, if I can get this thing for

Speaker Change: The last amount of blood out of the turn up kind of deal and and so it's kind of a mix of what we're seeing out there right now commoditized stuff people are trying to get the last amount out before things go the other direction and longer term partner top accounts for you know you are really key to their network you are really key to service.

Speaker Change: And their customer base.

Speaker Change: A customer facing type stuff there is some.

Speaker Change: There is some low single digit rate increases to be had and those those conversations really have not been that hard.

Speaker: The significant reduction in revenue and operating profit was primarily the product of little-to-no high-margin overflow freight from our asset-based truckload segments. Nevertheless, the asset-like nature of the business still generates an acceptable return on invested capital at a 95.8 adjusted operating ratio, which was achieved in the fourth quarter. The brokerage environment remains highly competitive, with numerous brokers aggressively competing for volumes at the expense of margin. We anticipate continued margin pressure in this environment. Our warehouse segment saw a 16% increase in freight revenue and a 428% increase in adjusted operating profit compared to the prior year as a result of the combination of new customer startup and rate increases with existing customers over the last 12 months. Although we are pleased with the improved profitability within this segment, we will continue to focus on improving profitability through improved labor utilization and rate increases with existing customers. Our minority investment in TEL contributed pre-tax income of $4.7 million for the quarter compared to $3.9 million in the prior year period.

Speaker Change: The harder ones are you know some people coming in here.

Speaker Change: They start throwing out numbers I want another 10% off and Theres not another 10% the guild and so I think youre going to start seeing you know small truckers medium sized truckers big truckers paper start, though in those numbers around it.

Speaker Change: It and re price it as soon as they can or.

Speaker Change: Or there is not going to take it and folks will sit some trucks against the fence. So I think we're at the bottom and I think the.

Speaker Change: The real partner shippers, the real sophisticated folks know hi, if I can get this thing for you know.

Speaker Change: Breakeven to one or 2% then.

Speaker Change: Break even to 1 or 2 percent, then...

Speaker Change: They're not going to come in here and reprice me, and we'll have another pricing discussion this time next year, and they just want to move on with business.

Speaker Change: They're not going to come out here and Reprice me and we will have another pricing discussion. This time next year and I just wanted to move on with business.

Speaker Change: Okay, but it sounds like some of like the vanilla dry then.

Speaker Change: But it sounds like some of the vanilla drive-in

Speaker Change: and so on.

Speaker Change: Stuff is still seeing some downward pressure.

Speaker Change: It is. The really, really commoditized stuff is still seeing a little bit of downward pressure.

Speaker Change: It is really really commoditized stuff is still seeing downward a little bit of downward pressure right.

Speaker Change: Okay.

Speaker Change: As you know, Scott, that's not a lot of our business, but in the pieces of it we have, yes.

Speaker Change: As you know Scott that is not a lot of our best not a lot of our business, but in the in the pieces of it we have yes.

Speaker: The increase was largely due to suppressed 2022 earnings resulting from increased depreciation in 2022 taken on certain high mileage tractors that were being prepared to sell. Tells revenue in the quarter to climb 14% and pre-tax income increased by approximately 20% versus the fourth quarter of last year. Till decreased its truck fleet in the quarter versus a year ago by 106 trucks to 2,131 and reduced its trailer fleet by 339 to 6,810.

Speaker Change: Right right right.

Speaker Change: Your comment about earnings lower in Q1 was that a year over year comment a sequential comment I just want to make sure I'm understanding.

Speaker Change: Your comment about earnings lower in Q1, was that a year-over-year comment, a sequential comment? I just want to make sure I'm right.

Speaker Change: It was a sequential comment.

Speaker Change: It was a sequential comment. No doubt they're going to be lower than Q4. I think analyst consensus right now is lower than prior year quarter. And I think where we fall out in Q1, quite frankly, is going to be a function of weather. And if we have a bunch more of what we had last week, it's going to put some pressure on it. And then really how much inefficiencies are in these startups because Q4,

Speaker Change: No doubt they are going to be lower lower than Q4 I.

Speaker Change: I think analysts consensus right now is lower than is lower than prior year quarter.

Speaker Change: And I think where we fall out in Q1 quite frankly.

Speaker: Due to the business model, gains and losses on the sale of equipment are a normal part of the business and can cause earnings to fluctuate from quarter to quarter. Our investment in TAIL is included in other assets on our consolidated balance sheet and has grown to $66.3 million at December 31, 2023 from the original investment of $4.9 million. In 2022, we received $14.7 million of cash dividends from TAIL and received $9.8 million in 2023.

Speaker Change: Is going to be a function of weather and you know if we have any more a bunch more of what we had last week, it's going to put some pressure on it and then really how much inefficiencies are in the startups because you.

Speaker Change: you know I mean we're starting up

Speaker Change: I mean, we're starting a hunter.

Speaker Change: 100 to 150 trucks.

Speaker Change: 100 150 trucks.

Speaker Change: Okay.

Speaker Change: Its dependent on if some of them get accelerated could be more than that in the in the first quarter on dedicated and you won't see all of those on the truck count because its kind of weighted some of those or.

Speaker Change: Depending on if some of them get accelerated, it could be more than that in the first quarter on dedicated. And, you know, you won't see all those in the truck count because it's kind of weighted. You know, some of those are...

Speaker: Regarding our outlook for the future, 2023 provided as challenging a freight environment as we have experienced in years, but we were extremely pleased with the performance of the model and the team. This is a different team and a different model than the covenant of five to ten years ago. As it relates to 2024, we see no immediate macroeconomic or industry catalysts but believe continuing to execute on our strategic plan and capacity attrition from the market will result in incremental improvements to operating conditions throughout 2024. As a result, we believe we can surpass our 2023 results with higher adjusted earnings per share and greater free cash flow that allow us to reduce our indebtedness and or exercise other capital allocation alternatives. Thank you for your time.

Speaker Change: February March startups, but how much inefficiency due we have especially in our winter season, getting the pump primed and getting those things running out there with our low share count as you know it doesn't take much to make it pop you know to make it go up but it doesn't take much to pull it back so you know that.

Speaker Change: February, March startups. But how much inefficiency do we have, especially in a winter season, getting the pump primed and getting those things running out there? With our low share count, as you know, it doesn't take much to make it pop, you know, to make it go up, but it doesn't take much to pull it back. So, you know, I think once we get through this quarter and get those startups digested and get them on plane, we'll have a lot better feel of where we're going to be. But, you know, here's the thing. We're excited about first quarter. I mean, there's nobody out here hanging their head, right? I think we're going to be excited.

Speaker Change: I think I think once we get through this quarter and get those startups digested and get them on plane will have a lot better feel of where we're going to be but here's why we're excited about first quarter I mean is there.

Speaker Change: There's nobody out here hanging their head right I think we're going to be excited.

Speaker Change: Okay, and then just overall when you I know, it's early but when you think about the full year do you think your life.

Speaker Change: Okay, and then just overall, I know it's early, but when you think about the full year, do you think you're...

Speaker Change: likely to grow earnings or not this year? And then maybe when you think about the different segments, which ones are best positioned to grow earnings and where maybe do you see another

Speaker Change: Likely to grow earnings or not this year and then maybe when you think about the different segments, which ones are best positioned to grow earnings and where maybe do you see another step back in earnings.

Operator: We will now open up the call for questions. If you would like to ask a question, Star 1 and many more. Are you prepared to ask your questions? Again, to ask a question. Star 1, Our first question comes from you. Thank you, Opper. David, Paul, Tripp, good morning, guys.

Speaker Change: Yeah, I mean, I think expedited, I think expedited earnings probably, you know, about the same, maybe backwards a hair, depending on the governmental business. Some of that governmental business took a step back in the fourth quarter, and that's a volatile piece of business, so we'll see how that goes. But I'd say expedited back, maybe a little, but it's all dependent on the governmental. Dedicated forward, because that's, you know, we talked about a lot of the growth that we've already got in the pipeline and starting up. Managed freight, again, as you know, that's our exposure to the one-way market. Managed freight's probably moving back a little bit, and warehousing's moving forward.

Speaker Change: If anywhere.

Speaker Change: I think expedited.

Speaker Change: I don't think expedite earnings.

Speaker Change: About the same maybe backwards or higher.

Speaker Change: Pending on the governmental business.

Speaker Change: Some of that governmental business took a step back in the fourth quarter.

Speaker Change: And that's a that's a volatile piece of business. So we'll see how that goes but I'd say expedited back maybe a little but it's all dependent on the governmental dedicated fall work because that's we talked about a lot of the growth that we've already got in the pipeline and starting up <unk>.

Jason H. Seidl: Jason Seidl, wanted to touch a little bit on Lou Thompson there, sort of two questions. One, was there any startup costs related to that new business you guys are gearing up for? There was. I mean, you know, there were some inefficiencies, Jason, and then we capitalized the stuff that could be capitalized in accordance with GAAP. So, you know, a little bit of inefficiency hit in Q4, and then, you know, we were able to capitalize what the accounting rules allowed us to capitalize over the term of the contract. That makes sense. And did I hear you right when you said that there's opportunities as early as one cue?

Speaker Change: Manage fright again as you know that's our exposure to the one way market managed freight is probably moving back a little bit and warehousing is moving forward.

Speaker Change: I think managed freight could improve. You know, we'll have a four-year effect of the SEMS acquisition. That's true. We took a couple of big hits that we've kind of.

Speaker Change: I think maintenance rate could improve.

Speaker Change: We will have a full year effect of the <unk> acquisition yesterday.

Speaker Change: Look a couple of big hits that we've kind of had.

Speaker Change: had to absorb in Q1. We didn't call it out as a gap to non-gap adjustment or anything like that because it's part of the game, but they were, it was a material hit in Q1, I would say, with some theft. And what I would say is I think that the team and the combination of the team and the acquisition and the improvement in the freight market could give us a little bit of an improvement and manage freight year over year, 24 compared to 23.

Speaker Change: <unk> had to absorb in Q1, we didn't call it out as a GAAP to non-GAAP adjustment or anything like that because it's part of the game, but they were material hit in Q1, I would say with some theft and what I would say is I think that the team and the combination of the team and the acquisition and the improvement in the freight market could give us a little.

Speaker: I thought they were going to be flowing more in the back half of the year. I would say that, yeah, there's definitely, we'll probably add. 100 probably on average 100 trucks for the first quarter into that space and then there's there's additional startups in the second half so I would just say based on some customer movement that's probably moved to you know most of the startup activity getting going in the first half of the year it'll be on plane you know it'll take it some time to plane out and you probably won't see the full effect until the second half and similar to you know the question you just asked on the fourth quarter you know there'll be a balance of some some inefficiencies that are expensed and and other items that were able to capitalize over the contract term.

Speaker Change: A bit of an improvement and manage freight year over year 23 to 24 compared to <unk> 23.

Speaker Change: And then I would also say warehousing.

Speaker Change: And then I would also say warehousing, you know, warehousing as small as it is has a lot of really positive momentum that we're seeing. And I think that'll continue. Warehousing's best two months of the last three years were November and December.

Speaker Change: Warehousing as small as it is has a lot of really positive momentum that we are saying and I think that will continue that warehousing best two months of the last three years were November and December of.

Speaker Change: of 23rd.

Speaker Change: 2003.

Speaker Change: Okay. So so hopefully three of the four businesses with some earnings growth.

Speaker Change: So hopefully three of the four businesses, what's emerging.

Speaker Change: Yes.

Speaker Change: Yep.

Speaker Change: Very helpful. Thank you guys.

Speaker Change: Thank you guys.

Speaker Change: Thanks Scott.

Speaker Change: Thanks, Scott.

Speaker: So given that outlook and all the things being equal, it looks like the back half of the year should be stronger for you guys, without any help from the overall truck. Yeah, I would agree with that, Jason. I think we're excited about the momentum we have, and Lou Thompson. Both the Legacy Lou Thompson team and some of the team that we've committed from Legacy Covenant to go out there and help grow that business in a manner that Lou Thompson has not done in the past. He's grown his business pretty much organically in his region, and we're offering the capital and the people to help grow outside of that region. It's been nothing short of a blessing for sure to be able to grow it at this clip. But again, all eyes are on it, and management is completely focused.

Speaker Change: Our next question comes from Jack Atkins from Stephens. Please state your question.

Speaker Change: Our next question.

Speaker Change: Okay, great. Good morning, guys, and thanks for the time. So I guess maybe kind of taking a step back and, you know, Paul, I think your comments around it.

Jack Atkins: Okay, great. Good morning, guys and thanks for the time, so I guess, maybe kind of taking a step back and you know Paul I think your comments around just.

Speaker Change: Well I guess that the physician shippers are taking going through bid season is really kind of interesting I mean do you think that that's because that they're anticipating a change in market dynamics as we move through this year I would just be kind of curious to get.

Speaker Change: You know, I guess the position shippers are taking going through bid season is really kind of interesting. I mean, do you think that that's because that they're anticipating, you know, a change in market dynamics as we move through this year? I would just be kind of curious to get...

Speaker Change: You know, just to take it, you know, that you guys might have on, you know, how close we are to maybe, you know, starting to see fundamentals begin to improve. Do you think enough capacity has come out to maybe set the stage for that?

Speaker Change: You know that just to take it that you guys might have on on how close we are to maybe starting to see fundamentals begin to improve do you think enough capacity has come out that maybe set the stage for that or is there more than needs to sort of exit here over the next six months.

Speaker Change: more than he needs to sort of exit here over the next six months.

Speaker Change: I mean, I think more exits are going to help.

Speaker Change: I mean, I think more exits are going to help, and they're continuing to happen. And again, Jack, I'll just reiterate, the folks who want a 12-month deal and they don't want to be monkeying with this thing, you know, and a bunch of back and forth because they're focused on running their business, they're...

Speaker Change: And they're continuing to happen and again, Jack I'll, just reiterate that the folks who want to the folks who want a 12 month deal and they don't want to be monkey and with this thing.

Speaker: This is one of the biggest. You know, initiatives we have this year are to ensure these things are successful. That makes sense. Let me switch to dedicated real quick.

Speaker Change: And a bunch of back and forth because they're focused on running their business there.

Speaker: Looks like a good quarter from dedicated, especially given the environment. Can you talk a little bit about what your customers are telling you? Yeah, I would say, Jason, it's kind of flattened out.

Speaker Change: It's a pretty easy discussion, you know, in the low single digits right now. Folks that are, you know, big commoditized shippers that are just, you know, trying to squeeze every penny out of it and do a bunch of mini bids and all that kind of stuff, you know, they're the ones that are still pushing for lower. And so I think what you're saying is, yeah, you can read something into that, is that...

Speaker Change: It's a pretty easy discussion with the in the low single digits right now.

Speaker Change: Folks that are you know big Commoditized shippers that are just trying to squeeze every penny out of it and do a bunch of many beds and all that kind of stuff you know that they are the ones that are still pushing for lower and so I think what you're saying is yes, you can read something into that is that.

Speaker: You know, new business pipeline, we've got some good pipeline, but it moves slowly. And, you know, I think most of the capacity reductions, I mean, we've still got a few in the first quarter that are trickling in, but by and far, most of the, you know, capacity reductions were, hey, I had 20 trucks and I only needed 15, or I had 35 and I only needed 27. We've seen most of that come to an end.

Speaker Change: I think it I think the fundamentals are starting to slightly change, but nobody's getting crazy with it.

Speaker Change: I think the fundamentals are starting to slightly change but nobody's getting crazy with it.

Speaker Change: Yeah, got it, but I mean, you know

Speaker Change: Yeah got it but I mean, you know what.

Speaker: You know, there's pressure with the one-way market out there. And so here's what I tell you, as soon as the one-way market firms up, it will help dedicated spending across our industry. That makes sense.

Speaker Change: Would you say that youre, starting to see some indications that the markets.

Speaker Change: Would you say that you're starting to see some indications that the markets, you know,

Speaker Change: Getting close to being back in balance I mean, whether its because capacity is at today and where are you.

Speaker Change: Getting close to being back in balance, I mean, whether it's because capacity is acting, I mean, are you, as you look at the tea leaves, you know, in your business, are you starting to

Speaker: And you talked a little bit about the cyber issues that SDs had; are you now seeing business come back to them for the SD? Yeah, there was a period of a few weeks there where we had some reduced volumes, but by November, that was back up to where it was before any issues. Last question, Tripp, you pulled forward CapEx, and at the end of 23 here, what do we expect in 24? So you're going to have a mix.

Speaker Change: The tea leaves on your business or are you starting today.

Speaker Change: You know, see some of those signs.

Speaker Change: See some some of those signs it you know we're at a point where things could change quickly if we get a little bit of help on the demand side.

Speaker Change: You know, we're at a point where things could change quickly if we get a little bit of help on the demands.

Speaker Change: Yeah, Yeah, I think that they are I mean, I think Paul's comments about maybe some of the conversations we're having with customers on rate expectations I mean, if there wasn't.

Speaker Change: Yeah, I think that they are. I mean, I think, you know, Paul's comments about maybe some of the conversations we're having with customers on rate expectations. I mean, if there wasn't.

Speaker Change: and overall feeling in the environment that it's going to change in the near future. I think we would be talking about.

Speaker Change: And overall feeling in the environment that it's going to change in the near future I think we would be talking about.

Speaker Change: Some pretty difficult conversations with customers across the board.

Speaker Change: Some pretty difficult conversations with customers across the board, and I think customers have started kind of accepting the fact that we're kind of on the tail end of this thing. I mean, if you just think about it logically, and there's a lot of things that are illogical about our business, but, you know, we've continued to watch capacity exit the market. We keep talking about it, and at some point it's got to happen where it's going to kind of flip the fundamental, and I think we're closer to that than ever. And, you know...

Speaker: I think the range that we disclosed in our release was $55 to $65 million of CapEx, of which that includes some growth CapEx. But a lot of our, I would say the majority of our maintenance CapEx is taken care of. So, $55 to $65 million.

Speaker Change: And I think customers have started kind of accepting the fact that we're kind of on the tail end of this thing I mean do you just think about it logically and Theres a lot of things that are illogical about our business, but you know we've continued to watch capacity exit the market and we keep talking about it and can talk at some point, it's got to happen, where it's going to kind of flip them.

Speaker: And the other thing I would say is you may see that gated towards the second half of the year. So, we may even see some projects, sales of equipment, and things like that. You're not going to see much net capex in the first two quarters of 2024, other than a little bit of growth capex. And then I think all of the maintenance stuff will start coming in the second half of the year, Q3 and Q4. Oh, that makes sense. Well, listen, gentlemen, an impressive quarter and difficult times. I appreciate the time, as always.

Speaker Change: Fundamental.

Speaker Change: And I think we're closer to that than ever.

Speaker Change: And you know.

Speaker Change: our whole business model is based on creating value for our customers who create value for us and we want to make sure it goes both ways and we were fair to customers when the market was good and they've been fair to us when the market is bad and when it flips we're going to continue that relationship is going to continue but I do think that we're closer than ever just based on the tea leaves and based on the conversations we're having and based on the data that we're observing that you

Speaker Change: That's our whole business model is based on creating value for our customers who create value for us and we want to make sure. It goes both ways.

Speaker Change: We were fair to customers when you know.

Speaker Change: The market was good and they've been fair to us when the market is bad and you know and when it flips we're going to continue that relationship is going to continue but I do think that we're closer than ever just based on the tea leaves and based on the conversations we're having and based on the data that we're observing that.

Jason H. Seidl: Congratulations. Thank you, Jason. Hey, thanks. Good morning, guys.

Speaker Change: I don't think it's going to be an immediate light switch type of thing, but I think it's going to be a dimmer switch, Jack. They're going to just gradually turn the lights on. It's going to be probably U-shaped recovery, and Jack, as we've said before,

Speaker Change: I don't think it's going to be a an immediate light switch type of thing, but I think it's going to be a Denver switch Jack it's going to be they're going to ask gradually turn the lights on so it's gonna be prior U shape recovery and Jack as we've said before.

Speaker: So, you just made a comment about... Last question. Once the one-way market firms, where do you think we are in that? Have we hit sort of the bottom of the one-way market? What are you seeing with respect to pricing as we're getting into the early days of 24-bids? Scott, a couple things.

Speaker Change: Where you've got specialty drivers specials. These certifications on drivers specialty equipment.

Speaker Change: where you've got specialty drivers, specialty certifications on drivers, specialty equipment, you know, really engineered networks, customer-facing product.

<unk> really engineered networks.

Speaker: I think, yes, I think we are bouncing along the bottom, and hopefully, we're about to bounce up off the bottom. Customers where you're creating value for them, there's low single-digit rate increases to be had, multiple, you know, a good number of those. But then the folks that are in really commoditized environments are really still, you know, they're trying to squeeze the last blood out of the last amount of blood out of the turnip kind of deal.

Speaker Change: Customer facing product.

Speaker Change: is less is less sensitive to than, you know, stuff that.

Speaker Change: As Les is less sensitive to then.

Speaker Change: <unk> that.

Speaker Change: Any broker in America could haul. That's where the pressure's at, is the broker world, really.

Speaker Change: Any broker in America could hall.

Speaker Change: Yeah, well, that's one of the pressures that is the broker world really.

Speaker Change: Okay, okay, no, that's helpful. I guess a couple of last questions and I'll turn it over. But when we think about your TEL joint venture, you know, that's below the operating income line, what's your outlook for that in 2024? You know, there's a lot of concern about the used equipment market out there. Just sort of curious, you know, how that would impact.

Speaker Change: Okay. Okay. No. That's helpful. I guess, a couple last questions and I'll turn it over but.

Speaker Change: When we think about your your tell.

Speaker Change: Joining venture that's below the operating income line, what's your outlook for that in 2024, you know there. There's a lot of concern about the used equipment market out there just sort of curious you know how that would impact.

Speaker: And so it's kind of a mix of what we're seeing out there right now. Commoditized stuff; people are trying to get the last amount out before things go the other direction. And longer-term partner type accounts where you're really key to their network, you're really key to servicing their customer base, a lot of customer-facing type stuff. There are some low single-digit rate increases to be had. And those conversations really have not been that hard. The harder ones are some people coming in here wanting, they start throwing out numbers, I want another 10% off, and there's not another 10% to give.

Speaker Change: that piece of

Speaker Change: That piece of your business in 'twenty four.

Yeah, I don't see it materially changing.

Speaker Change: Yeah, I don't see it materially changing. I don't see it growing from what it achieved in 2023. But, you know, that team has worked hard to grow a big or to grow their business in a quality way with credit quality customers who need those leases in a long term manner. And, yeah, they're just like everybody else. They're impacted by the, you know, the equipment market and the freight environment. But at the same time, they've got a good foundational based business that is poised for growth long term. I do think that they'll, you know, maybe take a step backwards slightly, but I don't think in terms of materiality to covenant, it's not hugely material. But. But with increased interest costs and the year over year impact of that and the debt that they carry, they're going to have some kind of some hits, I think, on that on that front and maybe a full year effect of softer equipment market. But, again, it's just that's part of their business model. And I don't expect them to tank. And if you look, I like to focus on the long term with them because it's a nice, you know, graph upwards and how they performed. You know, there is some year over year volatility. I think we're just as excited today about the long term at prospects of tail than than we've ever been. You know, Jack, I'll echo Tripp's comments. They they took the big reset this last year and it was pretty much on gains on sale. You know, they were they were getting some really big gains on sale and were opportunistic in twenty one and twenty two, primarily twenty two. And and we know, you know, just like a lot of the truckers took a rate reset in twenty three, they took a gain on sale reset. But to Tripp's point, materially, they're I expect twenty four to look a lot like twenty three from an earning standpoint. And they have done a lot from a people standpoint, from a sales standpoint, from a succession standpoint. I mean, it's they're they're looking to the future and looking to continue to grow and invest, not not get to where they were the last two years and just sit there. OK, that's great. And I guess last question is just on cash flow. So, Cash, I mean, you know, you guys pulled forward some CapEx into the into the fourth quarter opportunistically. You know, you should have some pretty strong free cash flow in twenty twenty four based on the CapEx numbers you guys just outlined. You know, I guess the priority for that use for for that cash flow is going to be for paying down debt or just given where the stock is trading here at a substantial discount to peers. I mean, would you look to accelerate the.

Speaker Change: Okay, I don't see it.

Speaker Change: Growing from.

Speaker Change: What it achieved in 2023, but.

Speaker Change: You know that that team has worked hard to grow a big.

Speaker Change: Or to grow their business in a quality way with credit quality customers, who really need those leases and a long term manner and yeah that they there just like everybody else they are impacted by the <unk>.

Equipment market and the freight environment and.

Speaker Change: But at the same time, they've got a good foundational base business that is poised for growth long term.

Speaker: And so I think you're going to start seeing small truckers, medium-sized truckers, big truckers, people start throwing those numbers around. They're going to take it and reprice it as soon as they can, or they're just not going to take it, and folks will sit some trucks against the fence. So I think we're at the bottom.

Speaker Change: I do think that though maybe take a step backwards slightly.

Speaker Change: But I don't think in terms of materiality to covenant, it's not it's not hugely material, but with increased interest costs and the year over year impact of that and the debt that they carry theyre going to have some kind of some hits I think on that on that front and maybe a full year effect of our software.

Speaker: And I think the real partnershippers, the real sophisticated folks know, hey, if I can get this thing for, break even at 1 or 2 percent, then... They're not going to come in here and reprice me, and we'll have another pricing discussion this time next year, and they just want to move on with business. But it sounds like some of the vanilla drive-ins, and so on.

Speaker Change: <unk> market, but again, it's just that's part of their business model and I don't expect them to tank and if you look I like to focus on the long term with them because it's a nice.

Speaker: It is. The really, really commoditized stuff is still seeing a little bit of downward pressure. As you know, Scott, that's not a lot of our business, but in the pieces of it we have, yes. Your comment about earnings being lower in Q1, was that a year-over-year comment or a sequential comment? I just want to make sure I'm right.

Speaker Change: You know graph upwards and how they performed you know there is some year over year volatility, but I think we're just as excited today about the long term prospects of tail than we've ever been Jack.

Speaker Change: Jack I'll Echo trips comments, they took the big reset this last year and it was pretty much on gains on sale.

Speaker Change: They were getting some really big gains on sale and we're opportunistic in 'twenty, one 'twenty two primarily 'twenty two and.

Speaker: It was a sequential comment. No doubt they're going to be lower than Q4. I think analyst consensus right now is lower than the prior year quarter. And I think where we fall out in Q1, quite frankly, is going to be a function of weather. And if we have a bunch more of what we had last week, it's going to put some pressure on it. And then really, how much inefficiencies are in these startups because Q4, you know I mean we're starting up, 100 to 150 trucks. Depending on if some of them get accelerated, it could be more than that in the first quarter on dedicated. And, you know, you won't see all those in the truck count because it's kind of weighted. You know, some of those are February and March startups. But how much inefficiency do we have, especially in a winter season, getting the pump primed and getting those things running out there?

Speaker Change: And we know just like a lot of the truckers took a rate reset in 'twenty three they took a gain on sale reset, but the trip point materially there I expect 24 to look a lot like 23 from an earnings standpoint and.

Speaker Change: They have done a lot from a people standpoint from a sales standpoint from a succession standpoint, I mean, it's there they're looking to the future and looking to continue to grow and invest not not get to where they were in the last two years and just sit there.

Speaker Change: Okay. That's.

Speaker Change: That's great and then I guess last question just on cash flow and your use of cash I mean, you guys pulled forward some capex into the into the fourth quarter Opportunistically.

Speaker Change: You should have some pretty strong free cash flow in 2024 based on the Capex numbers you guys just outlined.

Speaker Change: I guess is the priority for that use acute for that cash flows are going to be for paying down debt or just given where the stock is trading here at a substantial discount to peers I mean would you look to accelerate.

Speaker: With our low share count, as you know, it doesn't take much to make it pop, you know, to make it go up, but it doesn't take much to pull it back. So, you know, I think once we get through this quarter and get those startups digested and get them on the plane, we'll have a lot better feel of where we're going to be. But, you know, here's the thing. We're excited about the first quarter. I mean, there's nobody out here hanging their head, right?

Speaker Change: the re-purchase program.

Speaker Change: The repurchase program.

Speaker Change: Yeah, I completely agree with your point about.

Speaker Change: Yeah, I completely agree with your point about

will result in incremental improvements to operating conditions throughout 2024. As a result, we believe we can surpass our 2023 results with higher adjusted earnings per share and greater free cash flow that allow us to reduce our indebtedness and or exercise other capital allocation alternatives. Thank you for your time. We will now open up the call for questions. If you would like to ask a question..., press 1, place into the.

Speaker Change: We're going to have some pretty nice free cash flow.

Speaker Change: We're going to have some pretty nice free cash flow in 2024. If you look at our 2022 capital plan, it is in 2023. It is, without a doubt, clunky is the only word that comes to mind because we were –

Speaker Change: In 2024, if you look at our 2022 capital plan.

Speaker: I think we're going to be excited. Okay, and then just overall, I know it's early, but when you think about the full year, do you think you're... likely to grow earnings or not this year? And then maybe when you think about the different segments, which ones are best positioned to grow earnings, and where maybe you see another. Yeah, I mean, I think expedited earnings will probably be about the same, maybe backward a hair, depending on the governmental business. Some of that governmental business took a step back in the fourth quarter, and that's a volatile piece of business, so we'll see how that goes. But I'd say expedited back, maybe a little, but it's all dependent on the government.

Speaker Change: In 2023, it is without a doubt clunky as the only word that comes to mind, because we were.

Speaker Change: <unk>.

Speaker Change: We had a strategic plan of converting operating leases in 2022 to owned equipment. We exited that took a hit on charges to get out of those leases because they were underperforming we bought new equipment to replace that.

Speaker Change: We had a strategic plan of converting operating leases in 2022 to owned equipment. We exited that, took a hit on charges to get out of those leases because they were underperforming. We bought new equipment to replace that. You know, then we're trying to get the, as equipment has become available, we've been able to bring down the average age of our trucks from, I think it peaked at 29 months. Now we're down to 19 months. And so, you know, we bought, just in 2023 alone, we bought about 1,200 tractors, which is over half of our fleet. And so what that means for 2024 is, from a maintenance CapEx perspective, you know, you're probably looking at $40 to $45 million on, and I'll just use round numbers, $140 million of EBITDA, I'll call it. And that's going to produce some options for us. You know, right now we're about two times levered. And, you know, we can. We can use that to pay down debt or it gives us options for other capital allocation opportunities that we've exercised in the past, whether that's stock repurchases or M&A activity or increased dividends or any of those things. We're not committed to one of them or, but we may do one or both or all. So.

Jason H. Seidl: Be prepared to ask your questions, again, to ask a question, star 1. Our first question comes up. Thank you, Operator. David, Paul, and Crip, good morning, guys.

Speaker Change: And then we're trying to get the as equipment has become available we've been able to bring down the average age of our trucks from I think it peaked at 29 months now we're down to 19 months and so you know we bought it just in 2023 alone we bought about 1200 tractors, which is over half of our fleet.

Hi Jason. I wanted to touch on Lou Thompson there. You know, sort of two questions. One, was there any startup costs related to that new business you guys are gearing up for? There was, I mean, you know, there were some inefficiencies, Jason, and then we capitalized the stuff that could be capitalized in accordance with GAAP, so, you know, a little bit of inefficiency hit in Q4, and then, you know, we were able to capitalize what the accounting rules allowed us to capitalize over the term of the contract. All right, that makes sense. And did I hear you right when you said that there's opportunities as early as one queue?

Speaker Change: And so when we said look what that means for 2020 for us from a maintenance Capex perspective.

Speaker: Dedicated forward because that's, you know, we talked about a lot of the growth that we've already got in the pipeline and starting up. Managed freight, again, as you know, that's our exposure to the one-way market. Managed freight's probably moving back a little bit, and warehousing's moving forward. But I think managed freight could improve. You know, we'll have a four-year effect of the SEMS acquisition. That's true. We took a couple of big hits that we kind of had to absorb in Q1. We didn't call it out as a gap to non-gap adjustment or anything like that because it's part of the game, but they were a material hit in Q1, I would say, with some theft.

Speaker Change: You're probably looking at $40 to $45 million on and I'll, just use round numbers of $140 million of EBITDA call. It and that's going to produce some options for US you know right now we're about two times levered and we can use that to pay down debt or it gives us options for other capital allocation.

Speaker Change: Opportunities that we've exercised in the past whether that stock repurchases or M&A activity or <unk>.

I thought they were going to be flowing more in the back half of the year. I would say that, yeah, there's definitely, we'll probably add, a hundred, probably on average, a hundred trucks for the first quarter into that space. And then there are additional startups in the second half. So I would just say, based on some customer movement, that's probably moved to, you know, most of the startup activity getting going in the first half of the year. It'll be on plane, it'll take it some time to settle out, and you probably won't see the full effect until the second half.

Speaker Change: Increased dividends or any of those things, we're not committed to one of them or or but we may do one or both or all so.

Speaker: And what I would say is that the team and the combination of the team and the acquisition and the improvement in the freight market could give us a little bit of an improvement and manage freight year over year, 24 compared to 23. And then I would also say warehousing, you know, warehousing, as small as it is, has a lot of really positive momentum that we're seeing. And I think that'll continue. Warehousing's best two months of the last three years were November and December, of 23rd.

Speaker Change: Like I said, that's just one of the things. I focus on cash a lot, and I'm excited about kind of watching some of that cash come in next year.

Speaker Change: Like I said, that's just one of the things that I focus on cash a lot and I'm excited about kind of watching some of that cash come in next year.

Speaker Change: Well, it's great to have options. So that's great to hear. Thanks very much for the time, guys. Yeah, exactly. Take care, guys. Thank you.

Speaker Change: It's great to have options. So that's great to hear.

Speaker Change: Yes, yes, exactly take care guys. Thank you.

Speaker Change: Thanks Jack.

Speaker Change: Thanks, Jack.

Speaker Change: Our next question.

Speaker Change: Our next question comes from Michael Vermouth from Newland capital. Please state your question.

Speaker Change: are moving.

And similar to, you know, the question you just asked about the fourth quarter, there'll be a balance of some inefficiencies that are expensed and other items that we're able to capitalize over the contract term. So given that outlook and all the things being equal, it looks like the back half of the year should be stronger for you guys, without any help from the overall truck. Yeah, I would agree with that, Jason.

Speaker Change: Hey guys, how are you doing today?

Michael Vermouth: Hey, guys how are you doing today.

Michael Vermouth: Hey, Marc and Mike.

Speaker Change: Hey, Mark. Hey, Mike.

Speaker: So hopefully, three of the four businesses, what's emerging. Yep. Thank you guys.

Speaker Change: So, I'm kind of building on

Michael Vermouth: So, yes, im kind of building on what Jack was just asking so and your stock now trading at let's give or take 11 11 times rate significantly below.

Speaker Change: Exactly.

Speaker Change: your stock now is trading at

Speaker Change: take 11 times, significantly below.

Speaker: Thanks, Scott. Our next question. Okay, great. Good morning, guys, and thanks for the time.

Speaker Change: 20 to 20 times.

Michael Vermouth: The group's 20.

Michael Vermouth: 20 times, you know that.

Speaker Change: and the rest of the group's training. And no one's come close to

Michael Vermouth: The rest of the group is trading at and no one's come close to.

Michael Vermouth: What covenant has done but you guys have done the resiliency that we've had this year you bought back stock.

Speaker Change: What Covenant has done, what you guys have done, the resiliency that we've had

Speaker: So I guess maybe kind of taking a step back and, you know, Paul, I think your comments around it. You know, I guess the position shippers are taking going through bid season is really kind of interesting. I mean, do you think that it's because they're anticipating, you know, a change in market dynamics as we move through this year? I would just be kind of curious to get... You know, just to take it from you guys on how close we are to maybe, you know, starting to see fundamentals begin to improve. Do you think enough capacity has come out to maybe set the stage for that? more than he needs to sort of leave here over the next six months?

Speaker Change: You bought back stock at an excellent price last year, and it seems from what you're saying that the cycle were at the bottom, close to the bottom. I'm not sure how much worse it can get.

I think we're excited about the momentum we have, and Lou Thompson, both the Legacy Lou Thompson team and some of the team that we've committed from Legacy Covenant to go out there and help grow that business in a manner that he has not done in the past. He's grown his business pretty much organically in his region, and we're offering the capital and the people to help grow it outside of that region. And it's been nothing short of a blessing for sure to be able to grow it at this clip, but again, all eyes are on it, and management is completely focused. This is one of the biggest, You know, initiatives we have this year to ensure these things are successful. That makes sense. Let me switch to dedicated real quick.

Michael Vermouth: Excellent price last year, and it seems from what you're saying.

You know the cycle, where we're at the bottom you know close to us, but I'm not sure how much worse it can get really.

Speaker Change: Luke Thompson

Can you just walk us through how you are.

Michael Vermouth: Looking at it behind growing the Lou Thompson poultry business and the returns we should expect there versus.

Speaker Change: Country Business

Speaker Change: The returns we should expect there versus...

Michael Vermouth: Doing a significant buyback here you know at 11 at 11 times I can't see that.

Speaker Change: are all doing a significant buyback here. At 11 times, I can't see that at a trough,

Michael Vermouth: And at a trough.

Speaker Change: at a trough in a cycle, trading at 11 times with the...

Michael Vermouth: At a trough in the cycle trading at 11 times with.

Speaker: I mean, I think more exits are going to help, and they're continuing to happen. And again, Jack, I'll just reiterate, the folks who want a 12-month deal and they don't want to be monkeying with this thing, you know, and a bunch of back and forth because they're focused on running their business, they're... It's a pretty easy discussion, you know, in the low single digits right

Michael Vermouth: The performance that we've done it's just absurd so take us through kind of the math and how you look at those two and then you know bill.

Speaker Change: and the performance that we've done.

Speaker Change: just absurd so take us through

Speaker Change: kind of the math and how you look at those two.

Speaker Change: Building on that

Speaker Change: Building on that yeah, Yeah, you can remember this.

Speaker Change: Yeah.

Speaker Change: Just look into how you intend to grow that

Speaker Change: Give us a look into how you intend to grow that piece of the business.

Speaker Change: and the OR we can think about as you grow it over the next one,

Looks like a good quarter from dedicated, especially given the environment. Can you talk a little bit about what your customers are telling you? Yeah, you know, I would say... Jason, it's kind of flattened out, you know, new business pipeline, we've got some good pipeline, but it moves slowly. And you know, I think most of the capacity reductions, I mean, we've still got a few in the first quarter that are trickling in, but by and far, most of the capacity reductions were, hey, I had 20 trucks, now we need 15, We've seen most of that come to an end. You know, there's pressure with the one-way market out there. And so here's what I'd tell you. As soon as the one-way market firms up, it will help dedicate it across our industry. That makes sense.

Speaker Change: Or we can think about as you grow it over the next 123 and four years down the road and could this become a third of the overall business right you know assuming theres no recovery in the other businesses, how accretive and how we can kind of add on to the financials over the next 234 years, just growing that business alone.

Speaker Change: Thank you for joining us.

Speaker Change: right you know assuming there's no recovery in the other business

Speaker: Folks that are, you know, big commoditized shippers that are just, you know, trying to squeeze every penny out of it and do a bunch of mini-bids and all that kind of stuff, you know, they're the ones that are still pushing for lower. And so I think what you're saying is, yeah, you can read something into that, is that... I think the fundamentals are starting to slightly change, but nobody's getting crazy with it.

Speaker Change: how creative and how we can kind of add on to

Speaker Change: and the financials over the next.

Speaker Change: is just growing.

Speaker Change: Organically.

Speaker Change: Okay.

Speaker Change: Hey, hey, Matt.

Speaker Change: Go ahead.

Matt: Go ahead, David. Yeah, this is David.

Speaker Change: David.

Speaker Change: I'll let.

David Ray Parker: I'll let Tripp and Paul talk as well there. A couple of comments, because I was looking at this yesterday. You know, you look at, you know, we're trading at 11, and our peers are...

Speaker Change: I'll let.

Speaker Change: Paul talk as well there.

Speaker Change: A comment because I was looking at this yesterday you know you look at.

Speaker Change: We're trading at 11.

Speaker: Yeah, got it, but I mean, you know, would you say that you're starting to see some indications that the markets are getting close to being back in balance, I mean, whether it's because capacity is acting, I mean, are you, as you look at the tea leaves, you know, in your business, are you starting to see some of those signs? You know, we're at a point where things could change quickly if we get a little bit of help with the demands. Yeah, I think that they are.

Speaker Change: And our peers are.

David Ray Parker: 18, 19, you know, Hunt's up 24 or so, but just the rest of them are in that 18, 19 number. We're at 11.

Speaker Change: 18 that pain.

Speaker Change: Hi, it's up 24, or so but just the rest of them are.

Speaker Change: <unk> 18, 19 number at 11 am.

David Ray Parker: it's just interesting that you know we've been on this we've been on this journey now for

And you talked a little bit about the cyber issues that SDs had. Are you now seeing business come back to them for the SDs? Yeah, I mean, there was a period of a few weeks there where, you know, we had some reduced volumes. But yeah, by November, that was back up to where it was before any issue. Makes sense.

Speaker Change: It's just interesting that.

Speaker Change: We've been on this we've been on this journey now for.

David Ray Parker: Whether you want to use the Landair acquisition in 18 or you want to even go back to 15 when we got into logistics business with Delta Airlines in 15. But let's just go back to 18 when we bought Landair. They got us into real dedicated and really operating the company and the warehousing business and really operating the company, the dedicated side, in the correct fashion. And we've done nothing but grown with that. And then we go into 2020 and we get out of 95% of the OTR business that was not even in our portfolio anymore. And, you know, got out of the refrigerated OTRs, got out of 95% of the solo operations that we've got and really concentrating on the expedited with long-term. Half of that business being long-term contracts that have proven out in 23 that it's bringing value to the customer. Because not one of those accounts asked for any rate decreases in a market that has just got slaughtered with rate decreases. So it's showing that, you know, that we're bringing true value on the dedicated side. Rates did not go down. Very few rates went down. It was virtually more adjustment of 30 trucks down to 25 trucks or 50 trucks to 40 trucks and those kind of things more than it was pressure on the rate side. And the warehouse. The site has done nothing but improved. And over the last.

Speaker Change: Whether you want to use the land air acquisition in 18 or you wanted to even go back to 15, when we got into logistics business with Delta Airlines.

Speaker: I mean, I think, you know, Paul's comments about maybe some of the conversations we're having with customers about rate expectations. I mean, if there wasn't an overall feeling in the environment that it's going to change in the near future, I think we would be talking about it.

Speaker Change: 2015, but let's just go back to 18, when we bought land there that got us in depth real dedicated really operated the company and the warehousing business.

Tripp: Last question, Tripp, you know, you pulled forward CapEx. And at the end of 23 here, what do we expect in 24? So you're going to have a mix.

Speaker Change: We operated the company the dedicated side in the correct fashion and we've done that the grower that and then we go into 2020, and we get out of 95% of the OTR business.

Speaker: Some pretty difficult conversations with customers across the board, and I think customers have started kind of accepting the fact that we're kind of on the tail end of this thing. I mean, if you just think about it logically, and there are a lot of things that are illogical about our business, but, you know, we've continued to watch capacity exit the market. We keep talking about it, and at some point, something has got to happen where it's going to kind of flip the fundamentals, and I think we're closer to that than ever. And, you know, our whole business model is based on creating value for our customers who create value for us, and we want to make sure that it goes both ways, and we were fair to customers when the market was good, and they've been fair to us when the market is bad, and when it flips, we're going to continue that relationship. But I do think that we're closer than ever, just based on the tea leaves and based on They're going to just gradually turn the lights on. It's going to be probably U-shaped recovery, and Jack, as we've said before, where you've got specialty drivers, specialty certifications on drivers, specialty equipment, you know, really engineered networks, customer-facing products are less sensitive to than, you know, stuff like that. Any broker in America could haul them away.

Tripp: I think the range that we disclosed in our release was $55 to $65 million of CapEx, of which that includes some growth CapEx. But a lot of our, I would say the majority of our maintenance CapEx is taken care of. So, $55-$65 million, and the other thing I would say is you may see that gated towards the second half of the year, so we may even see some profits, sales of equipment, and things like that. You're not going to see much net capex in the first two quarters of 2024 other than a little bit of growth capex, and then I think all of the maintenance stuff will start kicking in in the second half of the year Well, listen, gentlemen, an impressive quarter and difficult times. I appreciate the time, as always.

Speaker Change: <unk>.

Speaker Change: Not even in our portfolio anymore and got out of the refrigerated OTR got it.

Speaker Change: 95% of the solo operations that we've got and really concentrating on the expedited with long term half of that business to be in long term contracts that that have proven out.

Speaker Change: 'twenty three that it's bringing value to the customer because not one of those accounts I asked for any rate decreases in a market that has this got Florida with rate decreases so are showing that.

Speaker Change: We're bringing a true value on the dedicated side rates did not go down very few rates went down it was virtually.

Speaker Change: More adjustment up 30 trucks down to 25 trucks or 50 trucks to 40 trucks and those kind of things more than it was a pressure.

Speaker Change: Pressure on the rate side, and the warehousing side has done nothing but improved and over the last.

Operator: Congratulations. Thank you, Jason. Any questions? Hey, thanks. Good morning, guys.

Speaker Change: Few years, but again.

David Ray Parker: A few years, but again, since.

Scott H. Group: So you just made a comment about, Last question, once the one-way market firms, so where do you think we are in that? Have we hit sort of the bottom of the one-way market? What are you seeing with respect to pricing as we're getting into the early days of 24 bids? You know, Scott, a couple things.

Speaker Change: July started will be six years, it's when it's when we started down this path.

David Ray Parker: July 3rd will be six years. It's when we started down this path. And the company has been transformed tremendously. In 22, we buy, you know, get into the DOD and all the things that Paul was talking about, the difficulty of operating that. You do not have everybody's brother running into operating in that business because you got to be an expert in it. And it's got to be something that's part of your bloodstream, similar to our expedited side. Everybody's brother just doesn't go in and start getting into teams there right now. They could, but they don't because it is difficult and it is hard. And that is okay. And that is good. And then last year buying the poultry and the Lou Thompson and everybody doesn't get involved. Because it is hard and it is tough. And it is something that is not commoditized. And it's something that, you know, those birds have got to get to the farms, even if it was last week and we had ice and snow all over the United States. And how are you reacting into that? And how are you able to deliver those birds, you know, to the plants on time? And that's what the value is. And, you know, the thing that we've seen. We've heard for many years is that eventually the stock price will follow. Just keep doing it. Keep doing it. Keep doing what you're doing. Well, it's been six years of doing this. And I will only say as the largest shareholder, it's time for the market to respond to what this team is doing. And I couldn't be any more proud of what the team has done in the last couple of years. You know, I went into 20 into 23 with our. Board say, you know, this is a great test. It's a great test for our management team. It's a great test for all the new folks that we've had involved in the company since 2018. Yeah. Does anybody want to go through a deep recession? No. Does anybody want to go through what trucking has gone through last year? No. But at the same time, this team has tested, has been tested and has been proven that they've done great. And I couldn't be any more proud of what they've done. So, you know, we said four or five again, three or four years ago, as we started buying some of the stock that somebody is going to love us. Either Wall Street can love us or we're going to love ourselves. And and that has not changed. We haven't bought back any stock in the last, I don't know, six, eight, 10 months or so that we have that, you know, that we have it. But, you know, with the cash flow that projected in 24, there's a lot of different options out there that, again, somebody is going to love us. And 11 times it's not Wall Street's not loving us. And, you know, if that means we need to be buying back some more stocks, then we will. Or if Wall Street starts loving us, then thank the Lord for that. And we'll cherish that. So I will say that that starts the internal conversations that will be leading us in 2024. And anyway, I'll shut up and let Paul and Bill talk a little bit about.

Speaker Change: The company has been transformed tremendously in 'twenty two we buy.

Speaker Change: Getting into the Doj and all the things that Paul was talking about the difficulty of operating that you do not have everybody. His brother running and operating that business because you got to be expert in it and it's got to be stuff that that part of your blood stream similar to our expedited side everybody's breath just doesn't go.

Scott H. Group: I think, yes, I think we're, I think we are bouncing along the bottom, and hopefully, you know, we're about to bounce off the bottom. Customers where you're creating value for them, there are single-digit, low single-digit rate increases to be had, multiple, you know, a good number of those, but then the folks that are in really commoditized environments are really still, you know, they're trying to squeeze the last blood from that last amount of blood out of the turnip kind of deal. And so it's kind of a mix of what we're seeing out there right now. Commoditized stuff; people are trying to get the last amount out before, you know, things go in the other direction.

Speaker: That's where the pressure's at, in the broker world, really. Okay, okay, no, that's helpful. I guess a couple of last questions and I'll turn it over to you. But when we think about your TEL joint venture, which is below the operating income line, what's your outlook for that in 2024? You know, there's a lot of concern about the used equipment market out there. Just sort of curious, you know, how that would impact that piece of. Yeah, I don't see it materially changing.

Speaker Change: Oh in and start getting into teams. They are right now they could but they don't.

Speaker Change: Because it is difficult and it's hard.

Speaker Change: And that is okay that is good and then last year band.

Speaker Change: Altria and the Lou Thompson, and everybody doesn't get Indiana, because it is hard and it's tough and it is something that is not commoditized and it's something that.

Speaker Change: They've got to get to the farms, even if even if it was last week and we had asked and snow all over the United States and how are you reacting to that and how are we able to deliver those birds.

Speaker: I don't see it growing from what it achieved in 2023. But, you know, that team has worked hard to grow a big business or to grow their business in a quality way with credit-quality customers who need those leases in a long-term manner. And, yeah, they're just like everybody else.

Scott H. Group: And, and, you know, longer-term partner type accounts where, you know, you're really key to their network, you're really key to servicing their customer base, a lot of customer-facing type stuff. There are some, you know, there's some low single-digit rate increases that can be had. And those, those conversations really have not been that hard. You know, the harder ones are, you know, some people coming in here wanting, you know, they start throwing out numbers, I want another 10% off, and there's not another 10% to give.

Speaker Change: To the plants.

Speaker Change: And thats, what the value add.

Speaker Change: The thing that we've seen for the hard for many years is that eventually the stock.

Speaker Change: Price will follow just keep doing it keep doing it keep doing what youre doing well it's been six years.

Speaker Change: And.

Speaker: They're impacted by the, you know, the equipment market and the freight environment. But at the same time, they've got a good foundational business that is poised for growth long term. I do think that they'll, you know, maybe take a step backwards slightly, but I don't think, in terms of materiality to covenant, it's not hugely material.

Speaker Change: I would only say as the largest shareholder it's time for the market to respond to.

Scott H. Group: And so I think you're going to start seeing, you know, small truckers, medium-sized truckers, big truckers, people start throwing those numbers around. They're gonna take it and reprice it as soon as they can, or, or there isn't going to take it, and folks will sit some trucks against the fence. So I think we're at the bottom. And you know, I think the real partnershippers, the real sophisticated folks know, hey, if I can get this thing for, you know, break even at one or two percent, then they're not going to come in here and reprice me, and we'll have another pricing discussion this time next year, and they just want to move on with business. But it sounds like some of, like, the vanilla drive-in stuff is still seeing some downs. The really, really commoditized stuff is still seeing a little bit of downward pressure. But that's not, as you know, Scott, that's not a lot of our business.

Speaker Change: To what this team is doing and I couldn't be any more proud.

Speaker Change: What the team has done in the last couple of years did I went into 2020 three with our board. This is a great. It's a great task for our management team. It's a great task for all the new folks that we've had involved in the company since 2018, yes, but I want to go through a deep recession.

Speaker: But with increased interest costs and the year over year impact of that and the debt that they carry, they're going to have some kind of hits, I think, on that front and maybe a full year effect of a softer equipment market. But, again, it's just that's part of their business model. And I don't expect them to tank.

Speaker Change: Does anybody want to go through what trucking has gone through the last year no but at the same time. This team has tested has been tested and it's been proven that they are doing great and I couldn't be any more proud of what they've done. So we've said for a fight against three or four years ago as we started on some.

Speaker: And if you look, I like to focus on the long term with them because it's a nice, you know, graph upwards showing how they have performed. You know, there is some year over year volatility. But I think we're just as excited today about the long term at the prospects of the tail than we've ever been. You know, Jack, I'll echo Tripp's comments.

Speaker Change: The stock that somebody is going to allow us either wall Street can open a lot of our.

Speaker Change: And.

Speaker Change: And that has not changed waiver bought back any stock in the last I don't know six 810 months or so that we had that.

Scott H. Group: But in the, in the pieces of it we have, yes. Your comment about earnings being lower in Q1, was that a year-over-year comment, or a sequential comment? I just want to make sure I'm.

Speaker: They they took the big reset this last year, and it was pretty much gains on sale. You know, they were getting some really big gains on sale and were opportunistic in twenty one and twenty two, primarily twenty two. And and we know, you know, just like a lot of the truckers took a rate reset in twenty-three, they took a gain on sale reset. But to Tripp's point, materially, I expect twenty-four to look a lot like twenty-three from an earnings standpoint.

Speaker Change: But with the cash flow that projected at 24, there's a lot of different options out there that again somebody has got a lot of us in 11 times does not wall Street's not loving us Ed.

Scott H. Group: It was a sequential comment. I mean, no doubt they're gonna be lower than Q4. You know, I think analyst consensus right now is lower than it was for the prior year quarter. And I think where we fall out in Q1, quite frankly, is going to be a function of weather. And you know, if we have any more, a bunch more than we had last week, it's going to put some pressure on it. And then really, how much inefficiency is in the startups because, You know, I mean, we're starting up. 100 to 150 trucks, you know, depending on if some of them get accelerated, could be more than that in the first quarter on dedicated.

Speaker Change: That means we need to be buying back some more stock than we will with wall Street sparse loving us.

Speaker Change: I'll answer that as well and will cherish that so.

Speaker Change: I will say that that starts the internal conversations that will be leading us in 2024 and.

Speaker: And they have done a lot from a people standpoint, from a sales standpoint, from a succession standpoint. I mean, it's they who are looking to the future and looking to continue to grow and invest, not just get to where they were the last two years and just sit there. OK, that's great.

Speaker Change: Anyway, I'll shut up and let Paul talk a little bit about your questions.

Speaker Change: questions on poultry.

Speaker Change: Excellent.

Speaker Change: Excellent. Thank you.

Speaker Change: Right.

Paul Bunn: Mike, I agree with everything David said. I'll go back specific to your poultry question. I mean, the Lou Thompson business is about 225 trucks when we bought it in April of last year. It'll be over 500 trucks by the end of this year based on contracts already signed. And, you know, we've got line of sight, you know, just based on pipeline and other things to grow it. You know, probably another 250 trucks past that. And, you know, and again, it could grow more. So, you know, if you can triple the volume on something and...

Paul Button: Mark I agree with everything David said.

Speaker: And I guess the last question is just on cash flow. So, Cash, I mean, you guys pulled forward some CapEx into the fourth quarter opportunistically. You know, you should have some pretty strong free cash flow in twenty twenty four based on the CapEx numbers you guys just outlined. You know, I guess the priority for that use of that cash flow is going to be to pay down debt or just given where the stock is trading here at a substantial discount to peers.

Paul Button: Go back specific to your poultry question I mean, the low Thomson business is about 225 trucks. When we bought it in April of last year.

Scott H. Group: And, you know, you won't see all those in the truck count because it's kind of weighted, you know, some of those are... February, March startups, but how much inefficiency do we have, especially in a winter season, getting the pump primed and getting those things running out there? With our low share count, as you know, it doesn't take much to make it pop, you know, to make it go up, but it doesn't take much to pull it back down. So you know, I think once we get through this quarter and get those startups digested and get them on the plane, we'll have a lot better feel of where we're going to be. But you know, here's the thing; we're excited about the first quarter. I mean, there's nobody out here hanging their head, right?

Paul Button: It'll be over 500 trucks by the end of this year based on contracts already signed and we've got line of sight.

Paul Button: Based on pipeline and other things to grow it.

Paul Button: Probably another 250 trucks pass that in and again it could grow more so you know if you can triple the volume on something.

Speaker: I mean, would you look to accelerate the re-purchase program? Yeah, I completely agree with your point about We're going to have some pretty nice free cash flow in 2024. If you look at our 2022 capital plan, it is in 2023. It is, without a doubt, clunky is the only word that comes to mind because we were. We had a strategic plan of converting operating leases in 2022 to owned equipment. We exited that, took a hit on charges to get out of those leases because they were underperforming, and bought new equipment to replace them.

Paul Button: And.

Mike: Three, four years, that's a win in our book, especially stuff that operates well, has good contracts, good driver base, and a really good customer base. So we couldn't be more excited about the prospects for the poultry business.

Paul Button: Three four years, that's a that's a win that's a win in our book, especially stuff that is operates well has good contracts good driver base and in a really good customer base. So we couldnt be more excited about the prospects for the poultry business.

Scott H. Group: I think we're going to be excited. Okay. And then just overall, I know it's early, but when you think about the full year, do you think you're likely to grow earnings or not this year? And then maybe when you think about the different segments, which ones are best positioned to grow earnings and where maybe do you see another? Yeah, I mean, I think expedited.

Mike: Can you just walk us through what the margins, what the OR could look like? Let's say we get to that 750,000 trucks, which off of our base is a significant portion.

Speaker Change: Can you just walk us through what the margins.

Speaker Change: Or could look like.

Speaker Change: Let's say, we get to that 750000 trucks, right, which as you know off of our base is a.

Speaker Change: Significant portion.

Mike: of our fleet, right, of what we're running. What two, three years down the road kind of OR, I assume it's a better OR

Speaker Change: Of our fleet rate of of what we're running what what two three years down the road kind of or I assume it's a better or than the than the overall 91 before.

Scott H. Group: I think expedited earnings probably will be about the same, maybe backward a hair, depending on the governmental business. Some of that governmental business took a step back in the fourth quarter. And that's a volatile piece of business. So we'll see how that goes. But I'd say expedited back maybe a little, but it's all dependent on the governmental, dedicated forward because that's, you know, we talked about a lot of the growth that we've already got in the pipeline and starting up. Managed freight.

Speaker: You know, then we're trying to get the, as equipment has become available, we've been able to bring down the average age of our trucks from, I think it peaked at 29 months. Now we're down to 19 months. And so, you know, we bought, just in 2023 alone, we bought about 1,200 tractors, which is over half of our fleet. And so what that means for 2024 is, from a maintenance CapEx perspective, you're probably looking at $40 to $45 million on, and I'll just use round numbers, $140 million of EBITDA. I'll call it that. And that's going to produce some options for us. You know, right now, we're about twice levered. And, you know, we can. We can use that to pay down debt, or it gives us options for other capital allocation opportunities that we've exercised in the past, whether that's stock repurchases or M&A activity or increased dividends or any of those things.

Mike: Overall, they're 91-4. Yeah, I think the combination... Remember, we're still probably 80-90% the way through that weeding feed. I mean, some of what you saw in the fourth quarter, some of what you saw was poultry. Some of what you saw was, you know, there was a couple of counts that...

Yeah, I think the combination remember we're still we're still.

Speaker Change: Probably 80%, 90% of the way through that weight and feed I mean, some of what you saw in the fourth quarter. Some of what you saw was poultry some of what you call. As you know there was a couple of accounts that.

Speaker Change: We did not have good returns on it we had multi year deals.

Mike: did not have good returns on. We had multi-year deals and one of those ended in August and one ended in September. So Q4 was addition by subtraction on a couple of those accounts. And so, you know, there's still, you know, there's still a few of those accounts left. So the combination of weed and feed in the dedicated space and the poultry business, you know, we've got a target to, I'll say, get the OR mic down to best-in-class industry margins in dedicated. And, you know, that's probably somewhere, you know, between an 87 and an 89.

Speaker Change: One of those ended in August and one ended in September. So Q4 was addition by subtraction on a couple of those accounts and so yeah. There are still there's still a few of those accounts layoffs. So the combination of weed and feed in the dedicated space in the poultry business, we've got a target.

Scott H. Group: Again, as you know, that's our exposure to the one-way market. Managed freight is probably moving back a little bit, and warehousing is moving forward. I think Managed Freight could improve, you know; we'll have a four-year effect of the SIMS acquisition. That's true. We took a couple of hits, big hits, that we kind of... had to absorb in Q1. We didn't call it out as a gap to non-gap adjustment or anything like that, because it's part of the game.

Speaker Change: So I get the <unk> down to best in class industry margins and in dedicated and that's probably somewhere between an 87 and 89.

Mike: Over the long term. And that's not short term. I just want to emphasize the fact that that's not just poultry. That's a combination of...

Speaker Change: Over the long term and that is not short term ultra I just want to emphasize the fact that that's not just poultry that's a combination of.

Scott H. Group: But there was a material hit in Q1, I would say, with some theft. And what I would say is that I think that the team and the combination of the team and the acquisition and the improvement in the freight market could give us a little bit of an improvement and manage freight year over year, 24 compared to 23. And then I would also say warehousing. You know, warehousing, as small as it is, has a lot of really positive momentum that we're seeing, and I think that'll continue. Its best two months of the last three years were November and December of 2013.

Mike: of some of the new, you know, really good business that we've acquired and that we've maintained and have improved in our legacy operations.

Speaker Change: Some of the new really good business that we've acquired in that we've maintained and have improved in our legacy operations in <unk>.

Speaker: We're not committed to one of them or any of them, but we may do one or both or all of them. So, like I said, that's just one of the things.

Mike: and as well as some of the growth that we've got in poultry as well it's it's a combination of a few different things but I would say meaningful improvement is what we're shooting for meaningful continued improvement I mean if and and I think it's fair to say like just continue the chart that we're on or the trajectory we're on today I look at dedicated zoar in 2023 it was a hundred

Speaker: I focus on cash a lot, and I'm excited about kind of watching some of that cash come in next year. Well, it's great to have options, so that's great to hear. Thanks very much for your time, guys.

Speaker Change: And as well as some of the growth that we've got in poultry as well. It's it's a combination of a few different things, but I would say meaningful improvement is what we're shooting for meaningful continued improvement I mean.

Speaker: Yeah, exactly. Take care, guys. Thank you.

Speaker Change: And and I think it's fair to say like just continued the chart that we're on are the trajectory. We're on today I look at dedicated as a law in 2023 it was 100.

Scott H. Group: So hopefully, three of the four businesses will make some earnings. Yep. Thank you guys.

Speaker: Thanks, Jack. Our next question is about moving. Hey guys, how are you doing today?

Mike: And you go to 2022, it's a 96-2. All this pre-poultry. We get to 93, or 2023, it's a 93. So our goal from a strategic plan standpoint is to continue that path forward.

Speaker Change: And then you go to 2022, its a 96 two all of this pre poultry we get to 93 or 2023, it's a 93. So our goal from a strategic planning standpoint is to continue that path forward.

Speaker: Hey, Mark. Hey, Mike. So, I'm kind of building on, Exactly, your stock now is trading at take 11 times, significantly below 20 to 20 times, and the rest of the group's training.

Operator: Thanks, Scott. Our next question. Okay, great. Good morning, guys, and thanks for the time.

Jack Atkins: So I guess maybe kind of taking a step back and, you know, Paul, I think your comments around, you know, the position shippers are taking going through bid season are really kind of interesting. I mean, do you think that's because they're anticipating, um, you know, a change in market dynamics as we move through this year? I would just be kind of curious.

Mike: Okay, so the poultry business is possibly, let's say, a mid-80s kind of OR when all is said and done, we can add all the trucks.

Speaker Change: Okay. So the poultry algorithm the poultry business is possibly let's say a mid eighties kind of it'll aylwin when all of a sudden done we can add all the the trucks in there.

Speaker: And no one's come close to what Covenant has done, what you guys have done, the resiliency that we've had. You bought back stock at an excellent price last year, and it seems from what you're saying that the cycle is at the bottom, close to the bottom. I'm not sure how much worse it can get. Luke Thompson, Country Business, The returns we should expect there versus.., all doing a significant buyback here. At 11 times, I can't see that at a trough, at a trough in a cycle, trading at 11 times with the..., and the performance that we've done, just absurd. So take us through kind of the math and how you look at those two. Building on that, Yeah. Just look into how you intend to grow that, and the OR we can think about as you grow it over the next one. Thank you for joining us. Right, you know assuming there's no recovery in the other business, how creative and how we can kind of add on to and the financials over the next one are just growing. Hey, hey, Matt. Go ahead, David. Yeah, this is David.

Speaker Change: Or yeah there.

Mike: were in the mid-80s, upper 80s, somewhere around there. But my point is that it's not all dedicated. I would call it, yeah, it operates more where we're heading. But I agree with, you know, Tripp. We started this thing three and a half years ago. Dedicated was, you know, three and a half years ago was over 100. Then we got it down to 100, and then 96, then 93, now 91. 91, we're just going to keep, you know, again, keep pushing it. And, again, a lot of it.

Speaker Change: Yeah, I think that's fair.

Speaker Change: Brady somewhere around it but it's about him I pointed I will call. It I would call. It up it operates it operates.

Jack Atkins: Your, you know, just to take a guess on how close we are to maybe, you know, starting to see fundamentals begin to improve. Do you think enough capacities will come out to maybe set the stage for that? more than eight to sort of exit here over the next six months.

Speaker Change: More where we're heading but I agree with trio.

Speaker Change: We started this thing that when we started this thing three and a half years ago dedicated was three.

Speaker Change: Three and a half years ago was over 100, then we got it down to 100, and then 96 and 93 now 91, we're just going to keep again keep keep pushing it.

Jack Atkins: I mean, I think more exits are going to help, and they're continuing to happen. And again, Jack, I'll just reiterate, the folks who want a 12-month deal and they don't want to be monkeying with this thing, you know, and a bunch of back and forth because they're focused on running their business. It's a pretty easy discussion, you know, with the prices in the low single digits right now. Folks that are, you know, big commoditized shippers that are just, you know, trying to squeeze every penny out of it and do a bunch of mini-bids and all that kind of stuff, they're the ones that are still pushing for lower. And so I think what you're saying is, yeah, you can Yeah, I got it.

Speaker Change: And again a lot of it.

Mike: Some of it's wheat and feed, some of it's poultry, some of it's customer mix.

Speaker Change: Some of its weight and feed some of its poetry some of its customer mix.

Mike: you know some of it's cost control so there's a lot that there's a lot of things that are going to go into continuing to try to improve that margin and you know it's going to take you know it's going to be a multi-year effort to get there.

Speaker Change: Some of it's cost control. So there's a lot. There's a lot of things that are going to go into continuing to try to improve that margin and it's going to take.

Speaker Change: It's going to be a multi year effort to get there.

Mike: And I'd say a couple more things on that is that, yes, the poultry is good operating, and it should be for what's required. We've got great partnerships with our customers out there, but the demand is unbelievable from a standpoint of the service demand that you've got to perform. So, yes, it is absolutely going to help us. And keep in mind, we didn't buy it until April of last year, and predominantly what we've done then is just grow it. So there's a lot of startup cost that's involved in that growth since we got into the poultry business, and it's definitely going to help us in the next few years. But what we have seen on the dedicated side, and getting it down on those numbers that Paul and Tripp are talking about from 100 down to 91 ORs, the poultry has helped. But it's not been the major reason. It will be in the future because it is operating better than 91 ORs. It does operate in the 80s, and we're very happy. But we think the whole dedicated will operate in the 80s because that's what's best in class.

Speaker Change: And I'd say a couple of more things on that is that yes. The poultry is a good operating and then it should be for what's required we've got great partnerships with our customers out there, but the demand is unbelievable from a standpoint of what <unk> got to service demand that you've got to perform so yes. It is absolutely going to help us.

I'll let Tripp and Paul talk as well there. A couple of comments because I was looking at this yesterday. You know, we're trading at 11, and our peers are... 18, 19, you know, Hunt's up 24 or so, but just the rest of them are in that 18, 19 number. We're at 11, it's just interesting that you know we've been on this journey now for, whether you want to use the Landair acquisition in 18 or you want to even go back to 15 when we got into the logistics business with Delta Airlines in 15. But let's just go back to when we bought Landair.

Speaker Change: And keep in mind, we Didnt died until April of last year.

Speaker Change: Predominantly what we've done Dan it just grow in it so there's a lot of startup costs thats involved and that growth since we got into the poultry business and it's definitely going to help us in the next few years, but while we have seen on the dedicated side and not getting it down.

Jack Atkins: But I mean, you know... Would you say that you're starting to see some indications that the markets are getting close to being back in balance? I mean, whether it's because capacity is activating, I mean, are you, have you looked at the tea leaves, you know, in your business, are you starting to, you know, see some of those signs? You know, we're at a point where things could change quickly if we get a little bit of help on the demand side. Yeah, yeah, I think that they are.

Speaker Change: And those numbers that Paul talked about from 100 down to 91 hours.

Powertrain payout, but it's not been the major raised it it will be in the future because it is operating at better than 91 or is it does operate in the eighties and we're very happy, but we think the whole dedicated will operate in the eighties, because thats what best in class.

Jack Atkins: I mean, I think, you know, Paul's comments about maybe some of the conversations we're having with customers about rate expectations. I mean, if there wasn't an overall feeling in the environment that it's gonna change in the near future. I think we're going to be talking about some pretty difficult conversations with customers across the board. I think customers have started kind of accepting the fact that we're kind of on the tail end of this thing. I mean, if you just think about it logically, and there are a lot of things that are illogical about our business, but we've continued to watch capacity exit the market. We keep talking about it.

Speaker: They got us into real dedication and really operating the company and the warehousing business and really operating the company, the dedicated side, in the correct fashion. And we've done nothing but grown with that. And then we go into 2020, and we get out of 95% of the OTR business that was not even in our portfolio anymore. And, you know, got out of the refrigerated OTRs, got out of 95% of the solo operations that we've got, and really concentrate on expedited with long-term. Half of that business was long-term contracts that have proven in 23 that it's bringing value to the customer because not one of those accounts asked for any rate decreases in a market that has just got slaughtered with rate decreases. So it's showing that, you know, that we're bringing true value on the dedicated side. However, rates did not go down. Very few rates went down.

Speaker Change: Excellent all right well look for the stability you guys have created in this year and in the earnings.

Speaker Change: All right. Well, look, for the stability you guys have created in the earnings, I would assume you should be trading at the higher end of the peers than the lowest one out.

Speaker Change: I would assume you should be trading at the higher end of the peers than the lowest one out there so phenomenal job guys.

Speaker Change: Phenomenal job.

Speaker Change: Thank you, Mike.

Speaker Change: Thank you Mike.

Speaker Change: Our next question comes from Barry Haimes from Sage asset management. Please state your question.

Speaker Change: Our next question comes from Barry Himes

Barry George Haimes: Thank you.

Barry George Haimes: Thanks very much. Good year, guys. I had a few. First, quick one. There's a little bit of a discussion on used truck prices. Could you give a feel for how much lower they are now versus, say, a quarter ago?

Barry George Haimes: Thanks, very much good year guys.

Barry George Haimes: I had a few first quick one.

Barry George Haimes: A little bit of a discussion on our used truck prices could you give a feel for.

Jack Atkins: At some point, something has got to happen where it's going to kind of flip the fundamentals. I think we're closer to that than ever. Our whole business model is based on creating value for our customers, who create value for us, and we want to make sure it goes both ways. We were fair to customers when the market was good, and they've been fair to us when the market is bad. And when it flips, we're going to continue. That relationship is going to continue. But I do think that we're closer than ever, just based on the tea leaves and based on the conversations we're having and based on the data that we're observing. I don't think it's going to be an immediate light switch type of thing, but I think it's going to be a dimmer switch, Jack.

How much lower they are now versus say a quarter ago.

Barry George Haimes: Yeah.

Speaker Change: You know, Barry, here's what I'd tell you. It all depends on mileage band above 500,000 miles.

Speaker Change: Here's what I'd tell you.

Speaker Change: It all depends on mileage ban.

Speaker Change: Above 500000 miles.

Speaker Change: It's not good because there's just so much old equipment that, you know, miles got ran up during the pandemic. There's a lot of that equipment coming out, and so those are trading at really big discounts right now. There's a lot of 400,000 to 500,000 mile trucks hitting the market, and I think those are trading, you know, I would say

Speaker Change: It's not good.

Speaker Change: Because there are just so much older equipment that miles got ran up during the pandemic.

Speaker: It was virtually more an adjustment of 30 trucks down to 25 trucks or 50 trucks to 40 trucks and those kind of things more than pressure on the rate side. And the warehouse. The site has done nothing but improved.

Speaker Change: There's a lot of that equipment coming out and so.

Speaker Change: <unk> are trading at really big discounts right now Theres a lot of 400000 to 500000 mile trucks, hitting the market and I think those are trading.

Speaker: And over the last few years, but again, since. July 3rd will be six years. It's when we started down this path. And the company has been transformed tremendously. In 22, we buy, you know, get into the DOD and all the things that Paul was talking about, the difficulty of operating that. You do not have everybody's brother running into operating in that business because you got to be an expert in it. And it's got to be something that's part of your bloodstream, similar to our expedited side.

Speaker Change: I would say.

Speaker Change: Thank you for watching.

Speaker Change: Compared to last quarter, you know its hard to say, but I don't know if they've gone down any but there there really.

Jack Atkins: They're going to just gradually turn the lights on. It's going to be probably a U-shaped recovery, and Jack, as we've said before, where you've got specialty drivers, specialty certifications on drivers, specialty equipment, you know, really engineered networks, customer-facing product is less sensitive to than, you know, stuff that any broker in America can haul. That's where the pressure's at, in the broker world, really.

Speaker Change: Over 500, it's hard to move them four to 500 pricing is what I would call it a pretty weak spot and then you know.

Speaker Change: 300 to 400. There are still buyers out there, but they're probably shopping them pretty hard.

300 to 400, there are still buyers out there, but there are products shopping them pretty hard so.

Speaker Change: It's more of can you get rid of it than what can you get for it.

Speaker Change: I'd say used to it's more of can you get rid of it and what can you get for it.

Speaker Change: and um and but you know they're not totally in the tank unless you're over 500,000 miles.

Speaker Change:

Speaker Change: But they're not totally in the time unless you're over 500000 miles.

Speaker: Everybody's brother just doesn't go in and start getting into teams there right now. They could, but they don't because it is difficult and it is hard. And that is okay. And that is good. And then last year, buying the poultry and Lou Thompson, everybody doesn't get involved. Because it is hard and it is tough.

Speaker Change: Scott, thanks. That's a good caller. And then my second question had to do with what you're hearing from customers around D-stock. So we know that there was a lot of D-stocking going on.

Speaker Change: Got it. Thanks, that's good color and then my second question had to do with.

Jack Atkins: I guess a couple last questions and I'll turn it over. But we think about your tell-tale joint venture, you know, that's below the operating income line. What's your outlook for that in 2024? You know, there's a lot of concern about the used equipment market out there. Just sort of curious, you know, how that would impact that piece.

Speaker Change: What you're hearing from customers around destock. So we know that there was a lot of destocking going on.

Speaker Change: Last year. And do you have any idea, just anecdotally talking to customers, you know, what inning we're in, you know, are a lot of them have inventories in line now or there's more to go maybe in the first half of this year? We'd love to hear any. And then, again, do you have any feel from customers today?

Speaker Change: Last year and do you have any idea just anecdotally talking to customers you know what inning we're in.

Speaker: And it is something that is not commoditized. And it's something that, you know, those birds have got to get to the farms, even if it was last week and we had ice and snow all over the United States. And how are you reacting to that? And how are you able to deliver those birds, you know, to the plants on time?

Speaker Change: Are a lot of them have inventories in line now or there's more to go maybe in the first half of this year would love to hear any and then.

Jack Atkins: Yeah, I don't see it materially changing. I don't see it growing from what it achieved in 2023. But that team has worked hard to grow a big business or to grow their business in a quality way with credit-quality customers who need those leases in a long-term manner. And yeah, they're just like everybody else.

Speaker Change: Do you have any feel from customers.

Speaker Change: You know, what percent bounce might you get in freight when the destock is over? So assuming the economy just stayed the same, but there's no more destock, any feel for, you know, is it 5%?

Speaker Change: What what percent balance might you get in free.

Speaker Change: When the Destocking is over so assuming the economy just stayed the same but there is no more destock any feel for you know it was a 5% 10%.

Speaker: And that's what the value is. And, you know, the thing that we've seen and heard for many years is that, eventually, the stock price will follow. Just keep doing it. Keep doing it.

Speaker Change: Love any caller in.

Speaker Change: So I'd love any any color around that thank you.

Speaker: Keep doing what you're doing. Well, it's been six years of doing this, and I will only say, as the largest shareholder, it's time for the market to respond to what this team is doing. And I couldn't be any more proud of what the team has done in the last couple of years. You know, I went from 20 to 23 with our board saying, you know, this is a great test.

Speaker Change: A couple things. I'll go back to, you know, last year's, instead of destock, I'll just call it restock.

Speaker Change: A couple of things I'll go back to last years, instead of destock I'll just call it restock.

Speaker Change: Because of coming out of the pandemic folks just didn't they had the wrong stuff and the wrong season, and so that created a major destocking you know when you had Christmas trees.

Speaker Change: because of coming out of the pandemic folks just didn't have you know they had the wrong stuff in the wrong season and and so that created a major de-stocking you know when you had Christmas trees you know in January and February and patio furniture coming in in in October and so they just created a lot of you know mix issues then Barry they went you know went into the de-stocking I think most customers inventory levels uh between de-stocking and then they're really focused on them with rising interest rates I think they kind of are where they are and and then you know there'll probably be some restocking as we get into the warmer weather you know kind of seasonal upticks in in you know April May um I don't see it being anything super material for us you know again it will a little a little bit though in the one-way market can go a long way to help you know our brokerage freight and other you know other verticals and so I think I don't know if there's going to be a direct impact to us with some of the you know hopefully seasonal uptick when it gets warm um but

Jack Atkins: They're impacted by the equipment market and the freight environment. But at the same time, they've got a good foundational business that is poised for growth long-term. I do think that they'll maybe take a step backwards slightly, but I don't think in terms of materiality to covenant, it's not hugely material.

Speaker Change: In January and February and patio furniture coming in in in October and so that just created a lot of.

Speaker: It's a great test for our management team. It's a great test for all the new folks that we've had involved in the company since 2018. Yeah. But does anybody want to go through a deep recession? No. Does anybody want to go through what trucking went through last year? No.

Mix issues, then Barry they went into the Destocking I think most customers inventory levels.

Jack Atkins: But with increased interest costs and the year-over-year impact of that and the debt that they carry, they're going to have some hits, I think, on that front and maybe a full-year effect of a softer equipment market. But again, that's part of their business model, and I don't expect them to tank. And if you look, I like to focus on the long term with them because it's a nice graph upwards of how they've performed. There is some year-over-year volatility, but I think we're just as excited today about the long-term prospects of Tel than we've ever been. You know, Jack, I'll echo Tripp's comments.

Speaker Change: Between Destocking and then they're really focus on them with rising interest rates I think they kind of are where they are and then.

Speaker Change: There'll probably be some restocking as we get into the warmer weather kind of seasonal upticks in.

Speaker: But at the same time, this team has tested, been tested, and has been proven to have done great. And I couldn't be any more proud of what they've done. So, you know, we said four or five times again, three or four years ago, as we started buying some of the stock, that somebody is going to love us. Either Wall Street can love us, or we're going to love ourselves. And And that has not changed.

Speaker Change: April may.

Speaker Change: I don't see it being anything super material for US you know again, it will have a little bit, though and the one way market can go a long way to help.

Speaker Change: Our brokerage freight.

Speaker Change: And other.

Speaker Change: Other verticals and so I don't know if theres going to be a direct impact to us with some of the.

Speaker: We haven't bought back any stock in the last, I don't know, six, eight, 10 months or so that we have had that. But, you know, with the cash flow that we projected in 24, there's a lot of different options out there that, again, somebody is going to love us. And 11 times out of 12, Wall Street is not loving us. And, you know, if that means we need to be buying back some more stocks, then we will. Or if Wall Street starts loving us, then thank the Lord for that.

Speaker Change: Hopefully seasonal uptick when it gets warm.

Jack Atkins: They took the big reset this last year, and it was pretty much gains on sale. They were getting some really big gains on sale and were opportunistic in 21 and 22, primarily 22. And we know just like a lot of the truckers took a rate reset in 23, they took a gain on sale reset. But to Tripp's point, materially, I expect 24 to look a lot like 23 from an earnings standpoint. And they have done a lot from a people standpoint, from a sales standpoint, from a succession standpoint. I mean, they're looking to the future and looking to continue to grow and invest, not get to where they were the last two years and just sit there. Okay, that's great.

Speaker Change: But.

Speaker Change: But there'll be some indirect benefits for us.

Speaker Change: But there'll be some indirect benefits for us.

Speaker Change: Got it. And then my last question, a little more of a strategic one. You talked about managed freight and how competitive it is, and obviously there's some very large competitors in this space. So could you talk a little bit about where you see your competitive advantage there and or sort of why you ought to be in that business?

Speaker Change: Got it and then my last question.

Speaker Change: A little more of a strategic one you know you talked about managed freight and how competitive it is and obviously, there's some very large competitors in this space. So could you talk a little bit about.

Speaker Change: How do you see your competitive advantage, there and sort of why you ought to be in that business versus you.

Speaker: And we'll cherish that. So I will say that that starts the internal conversations that will be leading us in 2024. And anyway, I'll shut up and let Paul and Bill talk a little bit about questions on poultry. Excellent. Thank you.

Speaker Change: and some of the other businesses.

Speaker Change: You know some of the other businesses, you're in where maybe it might be.

Speaker Change: We're in where maybe the ROIC might be better. Thank you. But think about, Barry, our managed freight is a lot of us an extension of our asset-based businesses. If I looked at our top customers in that space, we also have asset relationships with them. And so what having that business allows us to do is provide overflow, flex capacity. You know, if we get out of balance in markets, we can use the managed freight business to kind of rebalance the markets. And so it is.

Speaker Change: Think about our managed freight is a lot of as an extension of our asset based businesses. If I looked at our top customers in that space. We also have asset relationships with them and so what what having that business allows us to do is provide overflow flex capacity if.

Speaker: Mike, I agree with everything David said. I'll go back specifically to your poultry question. I mean, the Lou Thompson business had about 225 trucks when we bought it in April of last year. It'll have over 500 trucks by the end of this year based on contracts already signed. And, you know, we've got line of sight, you know, just based on pipeline and other things to grow it. You know, probably another 250 trucks past that.

Jack Atkins: And I guess my last question is just on cash flow and your use of cash. I mean, you guys pulled forward some CapEx into the fourth quarter opportunistically. You know, you should have some pretty strong free cash flow in 2024 based on the CapEx numbers you guys just outlined. I guess the priority for that cash flow is going to be to pay down debt or just given where the stock is trading here at a substantial discount to peers.

Speaker Change: If we get out of balance and markets weaken we can use the managed freight business too to kind of rebalance the markets and so.

Speaker Change: <unk>.

Speaker Change: That business, we internally call it Solutions, was started back in 06 to really benefit our customers and augment our asset-based businesses. I would say it is still that today. They do have a number of their own customers as well that we've grown over time. But it was started to basically help be an asset overflow and augment the asset-based businesses. It still does that to a large degree, and once we capture freight internally, hopefully we can run it on one of the two segments versus giving it back and letting a competitor run it. And then again, they've done a good job growing some of their own business in that space as well. I will tell you, we've got a saying internally in our managed freight, we're here to stay, we're not here to sell. It would be hard to unpack our managed freight business because it is so intertwined. It's intertwined with our asset operations, and so we're not chasing...

Speaker Change: That business that we internally we call. It solutions was started back in <unk> six there really be benefiting our customers and augment our asset based businesses I would say it is still that today. They do have a number of their own customers as well.

Speaker: And, you know, and again, it could grow more. So, you know, if you can triple the volume on something and... Three, four years, that's a win in our book, especially stuff that operates well, has good contracts, a good driver base, and a really good customer base. So we couldn't be more excited about the prospects for the poultry business. Can you just walk us through what the margins, what the OR could look

Tripp: I mean, would you look to accelerate the... the Repurchase Program? Yeah, I completely agree with your point that we're going to have some pretty nice free cash flow in 2024. If you look at our 2022 capital plan, what it is in 2023, clunky is the only word that comes to mind because we were. We had a strategic plan of converting operating leases in 2022 to owned equipment. We exited that, took a hit on charges to get out of those leases because they were underperforming. We bought new equipment to replace that.

Speaker Change: We've grown other overtime and so yeah.

But it was started to basically help me and asked that overflow and augment.

Speaker Change: The asset based businesses it still does that to a large degree and you know once we capture fright internally hopefully we can run it on one of the two segments versus giving it back and letting up letting a competitor run it and then again they've really they've done a good job growing some of their own business in that space as well I will tell you we've.

Speaker: Let's say we get to that 750,000 trucks, which off of our base is a significant portion of our fleet, right, of what we're running. What two, three years down the road, kind of OR, I assume it's a better OR. Overall, they're 91-4. Yeah, I think the combination...

Speaker Change: Say it internally on our and our managed freight we're here to stay we're not here to sale it would be hard to unpack our managed freight business because it is so intertwined with our asset operations and so we're not chasing big.

Tripp: Then we're trying to get the, as equipment has become available, we've been able to bring down the average age of our trucks from, I think it peaked at 29 months. Now we're down to 19 months. We bought, just in 2023 alone, we bought about 1,200 tractors, which is over half of our fleet. What that means for 2024 is, from a maintenance CapEx perspective, you're probably looking at $40 to $45 million, and I'll just use round numbers, $140 million of EBITDA, I call it. That's going to give us some options. Right now, we're about twice levered, and we can use that to pay down debt, or it gives us options for other capital allocation opportunities that we've exercised in the past, whether that's stock repurchases or M&A activity or increased dividends or any of those things. We're not committed to one of them, but we may do one or both or all of them. Like I said, that's just one of the things.

Speaker: Remember, we're still probably 80-90% of the way through that weeding feed. I mean, some of what you saw in the fourth quarter; some of what you saw was poultry. Some of what you saw was, you know, there were a couple of counts that did not have good returns on. We had multi-year deals, and one of those ended in August, and one ended in September. So Q4 was addition by subtraction on a couple of those accounts. And so, you know, there's still, you know, there's still a few of those accounts left. So the combination of weed and feed in the dedicated space and the poultry business, you know, we've got a target to, I'll say, get the OR mic down to best-in-class industry margins in dedicated. And, you know, that's probably somewhere, you know, between an 87 and an 89.

Speaker Change: business just to add top line volume like a lot of brokerages because a lot of these you know small to mid and even large brokerages they're just trying to chase top line revenue and and you know

Speaker Change: Business just to add top line volume.

Like a lot of brokerages, because a lot of these small to mid and even large brokerages, they're just trying to chase top line revenue and.

Speaker Change: margin, top line margin, even if they operate, you know, in the red at a loss for the whole goal of selling to somebody and getting bought up. Well, our goal is not to sell it. We probably couldn't sell it. It's rolled up within our asset operations, just how tightly they're wired. And so what that does, it allows us to, we try to say yes if we can make money off of it. If we're going to lose money, somebody else can have it.

Speaker Change: Margin top line margin, even if they operate in.

Speaker Change: The rate at a loss for the whole go or sell them to somebody and get bought up all our goal is not to sell it we probably couldnt sell it it's rolled up within our asset operations, just how tightly their wired and and so what that does it allows us to we tried to say, yes. If we can make money off of it we're going to lose money if somebody else can have it.

Speaker Change: Got it. Thank you very much. Appreciate it.

Speaker Change: Got it. Thank you very much I appreciate that.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Geoffrey Kauffman from vertical Research partners. Please state your question.

Speaker Change: Our next question comes from Jeffrey Kaufman.

Speaker: Over the long term. And that's not short term. I just want to emphasize the fact that that's not just poultry. That's a combination of.., of some of the new, you know, really good business that we've acquired and that we've maintained and have improved in our legacy operations, and as well as some of the growth that we've got in poultry as well it's it's a combination of a few different things but I would say meaningful improvement is what we're shooting for meaningful continued improvement I mean if and and I think it's fair to say like just continue the chart that we're on or the trajectory we're on today I look at dedicated zoar in 2023 it was a hundred, And you go to 2022, it's a 96-2. All this pre-poultry.

Jeffrey Kaufman: and other partners.

Jeffrey Kaufman: Thank you very much and thanks for squeezing me here at the end. A lot of my questions have been asked, but I wanted to circle back on two items. I'm going to start with the CapEx.

Geoffrey Kauffman: Thank you very much and thanks for squeezing me here at the end.

Geoffrey Kauffman: Lot of my questions have been asked but I wanted to circle back on two items I'm going to start with the Capex.

Tripp: I focus on cash a lot, and I'm excited about kind of watching some of that cash come in next year. Well, it's great to have options, so that's great to hear. Thanks very much for your time, guys.

Geoffrey Kauffman: I think David you mentioned about $40 million to $50 million of maintenance Capex based on where the fleet is right now in the budgets kind of 55 to 65 net.

Jeffrey Kaufman: I think, David, you mentioned about $40 to $50 million of maintenance capex based on where the fleet is right now, and the budget's kind of $55 to $65 net.

Jack Atkins: Yeah, exactly. Take care, guys. Thanks, Jack. Our next question: Hey guys, how are you doing today?

Jeffrey Kaufman: Could you give me an idea of kind of where that implies the net fleet is on the tractor side at the end of the year and maybe differentiate the dedicated side of that versus expedited? And then the kind of the follow up to that is, you know, let's say we're wrong about U-shape and let's say some good things happen in the second half.

Geoffrey Kauffman: Could you give me an idea of kind of where that implies the net fleet is on the tractor side.

Geoffrey Kauffman: At the end of the year and maybe differentiate the dedicated side of that versus expedited and then the kind of a follow up to that is let's say, we're wrong about U shaped and let's say some good things happen in the second half.

Hey Mark. Hey Mike. So, yeah, I'm kind of building on... Jack. So your stock now is trading at, take 11, 11 times, right? Significantly below, 20 to 20 times, that the rest of the group's trading at, and no one's come close to... what Covenant has done, what you guys have done, the resiliency that we've had. You bought back stock at an excellent price last year, and it seems from what you're saying that the cycle, we're at the bottom, close to the bottom, not sure how much worse it can get. Just walk us through the math, how you're looking at it behind growing the Lou Tom business, the returns we should expect there versus a significant buyback here, you know, at 11 at 11 times. I can't see that, you know, FEMA.gov It's just absurd.

Speaker: When we get to 93, or 2023, it's a 93. So our goal from a strategic plan standpoint is to continue that path forward. Okay, so the poultry business is possibly, let's say, a mid-80s kind of business. Or, when all is said and done, we can add all the trucks were in the mid-80s, upper 80s, somewhere around there. But my point is that it's not all dedicated. I would call it, yeah, it operates more where we're heading. But I agree with, you know, Tripp.

Jeffrey Kaufman: and we start to see freight rebound. With the excess free cash, how much flex is there to go back out and say, okay, well, we may need to add to the fleet? How much wiggle room do we have in terms of where the net fleet might be 12 months?

Geoffrey Kauffman: And we start to see freight rebound.

Geoffrey Kauffman: With the excess free cash how much flex is there to go back out and say, okay, well, we may need to add to the fleet how much how much wiggle room do we have in terms of where the net fleet might be 12 months from now.

Speaker Change: I can answer that, Jeff. So, you know, part of the $55 to $65 million of total CapEx that we disclosed in our expectations for 2024

I can answer that.

Speaker Change: Jeff So.

Jeff: Part of the $55 million to $65 million of total capex that we disclosed in our expectations for 2024.

Speaker Change: included about $20 million of growth capex, which, you know, implies just call it $35 to $45 million of...

Jeff: Included about $20 million of growth Capex, which.

Speaker: We started this thing three and a half years ago. Dedicated was, you know, three and a half years ago was over 100. Then we got it down to 100, and then 96, then 93, and now 91. 91 We're just going to keep pushing it, you know. And, again, a lot of it. Some of it's wheat and feed, some of it's poultry, some of it's customer mix, you know, some of it's cost control. So there's a lot that there's a lot that are going to go into continuing to try to improve that margin, and you know it's going to take, you know, it's going to be a multi-year effort to get And I'd say a couple more things on that, yes, the poultry is operating well, and it should be for what's required.

Jeff: Implies just call it $35 million to $45 million of.

Speaker Change: of maintenance capex and you got to remember so 30 of that was brought into 2023 kind of in the last month of the year uh to take advantage of some tax benefits tax incentives that weren't unveiled weren't or are not available in 2024 so we brought some of those purchases in-house or in earlier strategically which is about 30 million dollars which

Jeff: Maintenance Capex and you got to remember so <unk> of that was brought into 2023 kind of in the last month of the year to take advantage of some tax benefits tax incentives that werent in Vale want are not available in 2024. So we brought some of those purchases in <unk>.

So, take us through, kind of, the math and how you look at those two, and then... Building on that, yet. Just a look into how you intend to grow that, and the OR we can think about as you grow it over the next one, more years down the road, and could this become a third of the overall... Right, you know, assuming there's no recovery in the other business, how creative and how we can kind of add on to the financials over the next few years is just growing. Hey, hey back. Go ahead, man. Yeah, I'm going to... This is David.

Jeff: House.

Jeff: In earlier strategically, which is about $30 million, which.

Speaker Change: That means your maintenance capex for us on just an ongoing basis is somewhere in the neighborhood of $65 to $70 million, I would say, conservatively. I think we are going to generate some free cash flow for sure, and I think that to the second part of your question, if we do need additional capex or additional funds for growth, we'll have plenty of availability. Whether that's on the equipment side or the M&A side or...

Jeff: That means your maintenance capex for us on a kind of just an ongoing basis is somewhere in the neighborhood of $65 million to $70 million I would say conservatively I think.

Jeff: We are going to generate some free cash flow for sure and I think that.

David Ray Parker: I'll let... I'll let Tripp and Paul talk as well there. A couple of comments. As I was looking at this yesterday, you know, we're trading at 11, and our peers are, 1819, you know, hunts up 24 or so, but just the rest of them are in that 1819 number. We're at 11, and it's just interesting that you know we've been on this journey now for whether you want to use the Landair acquisition in 18, or you want to even go back to 15, when we got into the logistics business with Delta Airlines in 15. But let's just go back to 18.

Speaker: We've got great partnerships with our customers out there, but the demand is unbelievable from a standpoint of the service demand that you've got to perform. So, yes, it is absolutely going to help us. And keep in mind, we didn't buy it until April of last year, and predominantly what we've done then was just grow it.

Jeff: The second part of your question, if we do need.

Jeff: Additional.

Jeff: Capex or additional funds for growth, we will have plenty of availability, whether that's on the equipment side or the M&A side or.

Speaker Change: you know whatever and we've done both of those in the last

Jeff: You know.

Whatever and we've done both of those in the last.

Speaker Change: and a couple of years. And we like our strategy of capital allocation. And just because our debt ticked up towards the end of the year, it wasn't kind of unplanned, if you will. It was just a matter of kind of gating. So we do think, you know, absent significant growth capex and the clunkiness that goes with that and or some other M&A opportunity, we do see some sequential declines in our net debt number.

Jeff: Couple of years, and we like our strategy of capital allocation and just because our debt ticked up towards the end of the year. It wasn't kind of unplanned. If you will it was just a matter of kind of gating.

Speaker: So there's a lot of startup cost that's involved in that growth since we got into the poultry business, and it's definitely going to help us in the next few years. But what we have seen on the dedicated side, and getting it down on those numbers that Paul and Tripp are talking about from 100 down to 91 ORs, poultry has helped. But it's not been the major reason. It will be in the future because it is operating better than 91 ORs. It does operate in the 80s, and we're very happy.

Jeff: So we do think absent.

Jeff: Significant growth Capex.

Jeff: And the Clunkiness that goes with that and.

Jeff: And then some other M&A opportunity, we do see some sequential declines in our net debt number.

David Ray Parker: When we bought Landair, they got us into real dedicated and really operating the company and the warehousing business and really operating the dedicated side in the correct fashion. And, And we've done nothing but grown with that. And then we go into 2020.

Speaker Change: going into 2024.

Jeff: Going into 2024.

Speaker Change: Okay, and just one other follow up if I can. In the management commentary, you were talking about how the effects of the cyber attack and the UAW impact were net net offset by, you know, fuel surcharge minus fuel.

Speaker Change: Okay, and just one other follow up if I can.

Speaker Change: In the management commentary you were talking about how the effects of the cyber attack and the UAW impact where net net offset by.

Speaker: But we think the whole dedicated will operate in the 80s because that's what's best in class. All right. Well, look, for the stability you guys have created in the earnings, I would assume you should be trading at the higher end of the peers than the lowest one out. Phenomenal job.

David Ray Parker: And we got out of 95% of the OTR business that was not even in our portfolio anymore. And, you know, got out of the refrigerated OTRs, got out of 95% of the solo operations that we've got and really concentrating on the expedited with long terms, half of that business being long terms contracts that have proven in 23 that it's bringing value to the customer. Because not one of those accounts asked for any rate decreases in a market that has just got slaughtered with rate decreases.

Speaker Change: Fuel surcharge minus fuel.

Speaker Change: Expense and it looks like that was about a half million dollars positive impact on the net fuel side. So I would've thought that the cyber attack and UAW impact would have been a little bit more than that can you talk a little bit about how those affected your business and has a a half million dollars bad Guy net of those two events the right way to <unk>.

Speaker Change: And it looks like that was about a half million dollar positive impact on the net fuel side. So I would have thought that the cyber attack and UAW impact would have been a little bit more than that. Can you talk a little bit about how those affected your business and is a half million dollar bad guy net of those two events the right way to think about it if fuel offsets?

Speaker: Thank you, Mike. Our next question comes from Barry Himes. Thank you. Thanks very much. Good year, guys. I had a few.

Speaker: First, quick one. There's a little bit of a discussion on used truck prices. Could you give a feel for how much lower they are now versus, say, a quarter ago? You know, Barry, here's what I'd tell you. It all depends on the mileage band above 500,000 miles.

Speaker Change: Think about it if fuel offset it.

Speaker Change: Yeah.

Speaker Change: One, I would just say, are you talking about year over year? Yeah, I'm looking year over year.

Speaker Change: One I would say are you talking about year over year.

David Ray Parker: So it's showing that, you know, that we're bringing true value on the dedicated side; rates did not go down, very few rates went down; it was virtually more an adjustment of 30 trucks down to 25 trucks, or 50 trucks to 40 trucks, and those kind of things more than there was pressure on the rate side. And, and on the warehousing side, it's done nothing but improved over the last few years, but again since. July 3rd will be my sixth birthday.

Speaker Change: Yes, I'm looking year over year.

Speaker Change: Yeah, yeah. I think if you look sequentially kind of how we look at fuel and the comments of kind of what we're thinking about or how we were thinking about both the impact of the UAW strike as well as a cybersecurity strike or cybersecurity incident, you know, we were talking about sequential, you know, what to expect. We were reporting on Q3 and what to expect in Q4, and we knew that Q4 was going to be a little suppressed to Q3, so it was – those comments were more sequential. And, you know, if you look at our fuel, I do think it's a – I don't want to really put a defined number on it, but I would say it's well over double what – maybe triple what you were kind of – what you were thinking earlier.

Speaker Change: Yeah, Yeah, I think if you look sequentially kind of how we look at fuel and the comments of kind of what we're thinking about how we were thinking about both the impact of the UAW strike as well as a cyber security strike or cyber security incident.

Speaker: It's not good because there's just so much old equipment that, you know, miles got ran up during the pandemic. There's a lot of that equipment coming out, and so those are trading at really big discounts right now. There are a lot of 400,000 to 500,000-mile trucks hitting the market, and I think those are trading, you know, I would say, Thank you for watching, 300 to 400.

Speaker Change: We were talking about sequential.

Speaker Change: What to expect we were reporting on Q3 and what to expect in Q4, and we knew that Q4 was going to be a little suppressed to Q3. So it was those comments were more sequential.

David Ray Parker: It's when we started down this path, and the company has been transformed tremendously. In 22, we get into the DOD and all the things that Paul was talking about, the difficulty of operating that. You do not have everybody and his brother running in to operate in that business, because you've got to be an expert in it, and it's got to be something that's part of your bloodstream, similar to our expedited side. Everybody's brother just doesn't go in and start getting into teams.

Speaker Change: If you look at our fuel I do think it's a I don't want to really put a defined number on it but I would say, it's well over double what.

Speaker Change: Maybe triple what you were kind of what you were thinking earlier.

Speaker: There are still buyers out there, but they're probably shopping them pretty hard. It's more of, "Can you get rid of it?" than, "What can you get for it?", and, um, and but you know they're not totally in the tank unless you're over 500,000 miles. Scott, thanks. That's a good caller.

Speaker Change: Okay, that would make more sense to me, so thank you. That's all I have. Congratulations.

Speaker Change: Okay that would make more sense to me so thank you.

Speaker Change: That's all I have congratulations.

Speaker Change: Thanks, Jeff.

Speaker Change: Thanks, Jeff.

Speaker Change: At this time, we have no further

Speaker Change: At this time, we have no further questions.

Speaker Change: Alright, well, thank you everyone for the.

Speaker Change: All right, well, thank you everyone for the...

David Ray Parker: Right now, they could, but they don't, because it is difficult, and it is hard, and that is okay, and that is good. And then, last year, buying the poultry in the Lou Thompson, and everybody doesn't get into it, because it is hard, and it is tough, and it is something that is not commoditized, and it is something that those birds have got to get to the farms, even if it was last week, and we had ice and snow all over the United States, and how are you reacting into that, and how are you able to deliver those birds to the plants on time, and that's what the value is, and the thing that we've seen for, heard for many years, is that eventually the stock price will follow, just keep doing it, keep doing it, keep doing what you're doing.

Speaker Change: Thank you for attending the call and we certainly appreciate the questions and we look forward to next quarter's call. Have a great week.

Speaker Change: For attending the call and we certainly appreciate the questions and we look forward to it.

Speaker: And then my second question had to do with what you're hearing from customers around D-stock. So we know that there was a lot of D-stocking going on. Last year. And do you have any idea, just anecdotally talking to customers, you know, what innings we're in, you know, a lot of them have inventories in line now, or there's more to go maybe in the first half of this year? We'd love to hear from you.

Speaker Change: Our next quarters call have a great week. Thank you.

Speaker Change: Okay.

Speaker Change: Thanks for watching!

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

Speaker Change: Thank you for listening.

Speaker Change: The host has ended this call. Goodbye.

Speaker Change: The host has ended this call goodbye.

Speaker: And then, again, do you have any feel from customers today? You know, what percent bounce might you get in freight when the destock is over? So assuming the economy just stayed the same, but there's no more destock, any feel for, you know, is it 5%? Love any caller in.

Speaker: A couple things. I'll go back to, you know, last year's, instead of destock, I'll just call it restock, because of coming out of the pandemic folks just didn't have you know they had the wrong stuff in the wrong season and and so that created a major de-stocking you know when you had Christmas trees you know in January and February and patio furniture coming in in in October and so they just created a lot of you know mix issues then Barry they went you know went into the de-stocking I think most customers inventory levels uh between de-stocking and then they're really focused on them with rising interest rates I think they kind of are where they are and and then you know there'll probably be some restocking as we get into the warmer weather you know kind of seasonal upticks in in you know April May um I don't see it being anything super material for us you know again it will a little a little bit though in the one-way market can go a long way to help you know our brokerage freight and other you know other verticals and so I think I don't know if there's going to be a direct impact to us with some of the you know hopefully seasonal uptick when it gets warm um but, But there'll be some indirect benefits for us. Got it.

David Ray Parker: Well, it's been six years of doing this, and I will only say, as the largest shareholder, it's time for the market to respond to what this team is doing, and I couldn't be any more proud of what the team has done in the last couple of years. You know, I went into 23 with our board, saying, you know, this is a great test.

David Ray Parker: It's a great test for our management team. It's a great test for all the new folks that we've had involved in the company since 2018. You know, does anybody want to go through a deep recession? No. Does anybody want to go through what trucking went through last year? No, but at the same time, this team has tested, been tested, and has been proven that they've done great, and I couldn't be any more proud of what they've done.

David Ray Parker: So, you know, we said four or five, again, three or four years ago, as we started buying some of the stock, that somebody's going to love us. Either Wall Street can love us, or we're going to love ourselves, and that has not changed. We haven't bought back any stock in the last, I don't know, six, eight, ten months or so that we haven't. But, you know, with the cash flow that we projected in 24, there's a lot of different options out there that, again, somebody's going to love us, and 11 times out of 12, Wall Street isn't loving us. And, you know, if that means we need to buy back some more stocks, then we will. Or if Wall Street starts loving us, then thank the Lord for that, and we'll cherish that. So, I will say that that starts the internal conversations that will be leading us in 2024. And anyway, I'll shut up and let Paul and them talk a little bit about questions on poultry. Excellent. Thank you.

Speaker: And then my last question, a little more of a strategic one. You talked about managed freight and how competitive it is, and obviously there are some very large competitors in this space. So could you talk a little bit about where you see your competitive advantage there and, or sort of, why you ought to be in that business and some of the other businesses? We're in a situation where maybe the ROIC might be better. Thank you.

Speaker: But think about it, Barry; our managed freight is a lot of us an extension of our asset-based businesses. If I looked at our top customers in that space, we also have asset relationships with them. And so what having that business allows us to do is provide overflow and flex capacity. You know, if we get out of balance in markets, we can use the managed freight business to kind of rebalance the markets. And so it is. That business, we internally call it Solutions, was started back in 2006 to really benefit our customers and augment our asset-based businesses. I would say it is still like that today.

Like I agreed with everything David said, you know, I'll go back specific to your poultry question. I mean, the Lou Thompson business had about 225 trucks when we bought it in April of last year. It'll be over 500 trucks by the end of this year based on contracts already signed. And, you know, we've got line of sight, you know, just based on pipeline and other things to grow it, you know, probably another 250 trucks past that. And, and, you know, and again, it could grow more. So, you know, if you can triple the volume on something in three, four years, that's a win. That's a win in our book, especially stuff that operates well, has good contracts, you know, a good driver base, and, and a really good customer base. So we couldn't be more excited about the prospects for the poultry business. Can you just walk us through what the margins, you know, what the OR could look like, you know?

Speaker: They do have a number of their own customers as well that we've grown over time, but it was started to basically help be an asset overflow and augment asset-based businesses. It still does that to a large degree, and once we capture freight internally, hopefully, we can run it on one of the two segments versus giving it back and letting a competitor run it. And then again, they've done a good job growing some of their own business in that space as well.

Let's say we get to that 750,000 trucks, right, which is, you know, off of our base is a significant portion of our fleet, right, of what we're running. What two, three years down the road, kind of OR, I assume it's a better OR than... overall, the 91.4. Yeah, no, it would.

Speaker: I will tell you, we've got a saying internally in our managed freight, we're here to stay, we're not here to sell. It would be hard to unpack our managed freight business because it is so intertwined. It's intertwined with our asset operations, and so we're not chasing.., business just to add top line volume like a lot of brokerages because a lot of these you know small to mid and even large brokerages they're just trying to chase top line revenue and and you know margin, top line margin, even if they operate, you know, in the red at a loss for the whole goal of selling to somebody and getting bought up. Well, our goal is not to sell it. We probably couldn't sell it.

Yeah, I think the combination you remember; we're still, we're still, probably 80 90% of the way through that weed and feed. I mean, some of what you saw in the fourth quarter, some of what you saw was poultry, some of what you call was, you know, there was a couple of accounts that we did not have good returns on. We had multi-year deals, and one of those ended in August, and one ended in September, so Q4 was addition by subtraction on a couple of those accounts. And so, you know, there's still, you know, there's still a few of those accounts left, so the combination of weed and feed in the dedicated space and the poultry business, we've got a target to, I'll say, get the OR mic down to best-in-class industry margins in dedicated. You know, and that's probably somewhere, you know, between an 87 and an 89 over the long term. And that's not short poultry.

Speaker: It's rolled up within our asset operations, just how tightly they're wired. And so what that does, it allows us to, we try to say yes if we can make money off of it. If we're going to lose money, somebody else can have it. Got it.

Speaker: Thank you very much. I appreciate it. Our next question comes from Jeffrey Kaufman and other partners. Thank you very much, and thanks for squeezing me in here at the end.

I just want to emphasize the fact that that's not just poultry. That's a combination of some of the new, you know, really good businesses that we've acquired and that we've maintained and have improved in our legacy operations, and as well as some of the growth that we've got in poultry as well. It's a combination of a few different things, but I would say meaningful improvement is what we're shooting for. Meaningful continued improvement. I mean, if, and I think it's fair to say, like just continue the chart that we're on or the trajectory we're on today. If I look at Dedicated's OR in 2023, it will be 100. Then you go to 2022, it's 96.2. All this pre-poultry, we get to 93. Or in 2023, it's a 93.

Speaker: A lot of my questions have already been asked, but I wanted to circle back on two items. I'm going to start with the CapEx. I think, David, you mentioned about $40 to $50 million of maintenance capex based on where the fleet is right now, and the budget's kind of $55 to $65 net. Could you give me an idea of kind of where that implies the net fleet is on the tractor side at the end of the year and maybe differentiate the dedicated side of that versus expedited? And then the kind of follow-up to that is, you know, let's say we're wrong about U-shape and let's say some good things happen in the second half, and we start to see freight rebound.

Speaker: With the excess free cash, how much flex is there to go back out and say, okay, well, we may need to add to the fleet? How much wiggle room do we have in terms of where the net fleet might be 12 months? I can answer that, Jeff. So, you know, part of the $55 to $65 million of total CapEx that we disclosed in our expectations for 2024, included about $20 million of growth capex, which, you know, implies just call it $35 to $45 million of.., of maintenance capex and you got to remember so 30 of that was brought into 2023 kind of in the last month of the year uh to take advantage of some tax benefits tax incentives that weren't unveiled weren't or are not available in 2024 so we brought some of those purchases in-house or in earlier strategically which is about 30 million dollars which, That means your maintenance capex for us on just an ongoing basis is somewhere in the neighborhood of $65 to $70 million, I would say, conservatively.

So our goal from a strategic plan standpoint is to continue that path forward. Okay, so the poultry business is possibly, let's say, a mid-80s kind of war when all said and done. We can add all the trucks, I would call it, yeah, it operates more where we're heading, but I agree with Tripp. We started this thing three and a half years ago. Dedicated was over 100 three and a half years ago, then we got it down to 100, then 96, then 93, now 91.

We're just going to keep pushing it, and again, a lot of it. Some of it's weed and feed, some of it's poultry, some of it's customer mix. You know, some of it's cost control, so there are a lot of things that are going to go into continuing to try to improve that margin, and, you know, it's going to take, you know, it's going to be a multi-year effort to get there. And I'd say a couple more things on that, namely that, yes, the poultry operation is a good operation and it should be for what's required

Speaker: I think we are going to generate some free cash flow for sure, and I think that to the second part of your question, if we do need additional capex or additional funds for growth, we'll have plenty of availability. Whether that's on the equipment side or the M&A side or..., you know whatever, and we've done both of those in the last couple of years. And we like our strategy of capital allocation. And just because our debt ticked up towards the end of the year, it wasn't kind of unplanned, if you will. It was just a matter of kind of gating.

We've got great partnerships with our customers out there, but the demand is unbelievable from a standpoint of what you've got to put into the service demand that you've got to perform. So, yes, it is absolutely going to help us. And keep in mind, we didn't buy it until April of last year.

David Ray Parker: And predominantly, what we've done then is just grow it. So there are a lot of startup costs that are involved in that growth since we got into the poultry business. And it's definitely going to help us in the next few years. But what we have seen on the dedicated side and getting it down on those numbers that Paul and Tripp were talking about, from 100 down to 91 ORs, poultry has helped. But it's not been the major reason. It will be in the future because it is operating better than 91 ORs. It does operate in the 80s, and we're very happy, but we think the whole dedicated service will operate in the 80s because that's what's best in class.

Speaker: So we do think, you know, absent significant growth capex and the clunkiness that goes with that and or some other M&A opportunity, we do see some sequential declines in our net debt number going into 2024. Okay, and just one other follow-up, if I can. In the management commentary, you were talking about how the effects of the cyber attack and the UAW impact were net net offset by, you know, fuel surcharge minus fuel. And it looks like that was about a half million dollar positive impact on the net fuel side. So I would have thought that the cyber attack and UAW impact would have been a little bit more than that. Can you talk a little bit about how those affected your business, and is a half million dollar bad guy net of those two events the right way to think about it if fuel offsets? One, I would just say, are you talking about year over year? Yeah, I'm looking year over year.

David Ray Parker: Alright, well, look, for the stability you guys have created in earnings, I would assume you should be trading at the higher end of the peers than the lowest one out. Phenomenal job. Thank you. Our next question comes from Barry Haimes. Thank you very much.

Barry George Haimes: Good year, guys. I had a few. First, quick one. There's a little bit of a discussion on used truck prices. Could you give a feel for how much lower they are now versus, say, a quarter ago? You know, Barry, here's what I'd tell you.

Tripp: It all depends on the mileage band above 500,000 miles. It's not good because there is just so much old equipment that miles got ran up during the pandemic, there's a lot of that equipment coming out, and so those those are trading at really big discounts right now. There are a lot of 400,000 to 500,000-mile trucks hitting the market, and I think those are trading, you know, I would say compared to last quarter, it' You know, pricing is what I would call a pretty weak spot. And then, you know, 300 to 400. There are still buyers out there, but they're probably shopping them pretty hard. It's more of, can you get rid of it, than what can you get for it.

Speaker: Yeah, yeah. I think if you look sequentially kind of how we look at fuel and the comments about kind of what we're thinking about or how we were thinking about both the impact of the UAW strike as well as a cybersecurity strike or cybersecurity incident, you know, we were talking about sequentially what to expect. We were reporting on Q3 and what to expect in Q4, and we knew that Q4 was going to be a little suppressed compared to Q3, so it was – those comments were more sequential. And, you know, if you look at our fuel, I do think it's a – I don't want to really put a defined number on it, but I would say it's well over double what – maybe triple what you were kind of thinking earlier.

Speaker: Okay, that would make more sense to me, so thank you. That's all I have. Congratulations. Thanks, Jeff. At this time, we have no further questions. All right, well, thank you everyone for the... Thank you for attending the call and we certainly appreciate the questions and we look forward to next quarter's call. Have a great week. Thanks for watching! Thank you for listening. The host has ended this call. Goodbye.

Tripp: And, but you know, they're not totally in the tank unless you're over 500,000 miles. Got it. Thanks. That's a good call.

And then my second question had to do with what you're hearing from customers around D-Stock. So we know that there was a lot of D-Stocking going on last year, and do you have any idea, just anecdotally, talking to customers, what innings we're in, you know, are a lot of them have inventories in line now, or there's more to go maybe in the first half of We'd love to hear any, and then, to the extent, again, you have any feel from customers, what percent balance might you get in freight when the de-stock is over? So assuming the economy just stayed the same, but there's no more de-stock, any feel for, you know, is it 5%? So we'll love any color in it.

A couple things. I'll go back to, you know, last year's instead of destocking, I'll just call it restocking. Because of coming out of the pandemic, folks just didn't have, you know, they had the wrong stuff in the wrong season. And, and so that created a major de-stocking problem when you had Christmas trees, you know, in January and February and patio furniture coming in, in, in October. And so they just created a lot of mix issues.

Then Barry, they went, you know, went into de-stocking. I think most customers' inventory levels between de-stocking, and then they're really focused on them with rising interest rates. I think they kind of are where they are. And, and then, you know, there'll probably be some restocking as we get into the warmer weather, kind of seasonal upticks in, you know, April, May. I don't see it being anything super material for us. You know, again, a little bit in the one-way market can go a long way to help our brokerage freight and other, you know, other verticals. And so I don't know that there's going to be a direct impact on us with some of the, you know, hopefully seasonal uptick when it gets warm.

But, But there'll be some indirect benefits for us. Got it.

Barry George Haimes: And then my last question, a little more of a strategic one. You talked about managed freight and how competitive it is. And obviously, there are some very large competitors in this space. So could you talk a little bit about where you see your competitive advantage there and or sort of why you ought to be in that business compared to some of the other businesses?

We're in a situation where maybe the ROIC might be better. Think about it, Barry; our managed freight is, for most of us, an extension of our asset-based businesses. If I've looked at our top customers in that space, we also have asset relationships with them, and so what having that business allows us to do is provide overflow and flex capacity. You know, if we get out of balance in the markets, we can use the managed freight business to kind of rebalance the markets. And so it... That business, which we can currently call Solutions, was started back in 2006 to really benefit our customers and augment our asset-based businesses. I would say it is still like that today.

They do have a number of their own customers as well that we've grown over time. But it was started to basically help be an asset overflow and augment asset-based businesses. And it still does that to a large degree.

And once we capture freight internally, hopefully, we can run it on one of the two segments versus giving it back and letting a competitor run it. And then again, they've done a good job growing some of their own business in that space as well. I will tell you, we've got to say it internally in our managed freight business, we're here to stay, we're not here to sell. It would be hard to unpack our managed freight business because it is so intertwined with our asset operations. And so we're not chasing business just to add top line volume, like a lot of brokerages because a lot of these, you know, small to mid and even large brokerages are just trying to chase top line revenue and, and, you know, margin, top line margin, even if they operate in the red at a loss for the whole goal of selling to somebody and getting bought up.

Well, our goal is not to sell it. We probably couldn't sell it. It's rolled up within our asset operations, just how tightly they're wired. And so what that does, it allows us to say yes, if we can make money off of it. If we're going to lose money, somebody else can have it.

Barry George Haimes: Thank you very much. Our next question comes from Jeffrey Kaufman, partner. Thank you very much.

Jeffrey Kaufman: And thanks for squeezing me here at the end. You know, a lot of my questions have been asked, but I wanted to circle back on two items. I'm going to start with the CapEx. I think, David, you mentioned about $40 to $50 million of maintenance capex based on where the fleet is right now, and the budget's kind of $55 to $65 net. Could you give me an idea of kind of where that implies the net fleet is on the tractor side at the end of the year and maybe differentiate the dedicated side of that versus expedited? And then the kind of follow-up to that is, you know, let's say we're wrong about U-shape and let's say some good things happen in the second half. And we start to see freight rebound with the excess free cash. But how much flex is there to go back out and say, OK, well, we may need to add to the fleet? How much wiggle room do we have in terms of where the net fleet might be?

Tripp: I can answer that, Jeff. So, you know, part of the 55 to $65 million of total CapEx that we disclosed in our expectations for 2024 included about $20 million of growth capex, which, you know, implies just call it 35 to $45 million of maintenance CapEx. And you got to remember, so 30 of that was brought into 2023, kind of in the last month of the year, to take advantage of some tax benefits, tax incentives that weren't or aren't available in 2024. So we brought some of those purchases in house or in earlier strategically, which is about $30 million. Okay, that means your maintenance CapEx for us on a kind of just an ongoing basis is somewhere in the neighborhood of $65 to $70 I think we are going to generate some free cash flow for sure, and I think that, you know, to the second part of your question, if we do need additional, you know, CapEx or additional funds for growth, we'll have plenty of availability, whether that's on the equipment side or the M&A side or..., you know, whatever.

Tripp: And we've done both of those in the last couple of years, and we like our strategy of capital allocation, and just because our debt ticked up towards the end of the year, it wasn't kind of unplanned, if you will, it was just a matter of kind of gating. So we do think, absent significant growth capex and the clunkiness that goes with that and it or some other M&A opportunity, we do Okay, and just one other follow-up question if I can. In the management commentary, you were talking about how the effects of the cyber attack and the UAW impact were net-net offset by, you know, the fuel surcharge minus fuel. Scott Group, Jack Atkins, David Ross, Nick Farwell, David Parker, Joey Hogan, Nick Farwell, Um, one, I would just say, are you talking about year-over-year? Yeah, I'm looking year-over-year.

Tripp: Yeah, yeah, I think if you look sequentially, kind of how we look at fuel and the comments of kind of what we're thinking about, or how we were thinking about both the impact of the UAW strike, as well as a cyber security strike or cyber security incident. You know, we were talking about sequentially what to expect, we were reporting on Q3, and what to expect in Q4. And we knew that Q4 was going to be a little suppressed compared to Q3. So it was, those comments were more sequential. And, you know, if you look at our fuel, I do think it's a, I don't want to really put a defined number on it.

Tripp: But I would say it's well over double, or maybe triple what you were kind of thinking earlier. Okay, that would make more sense to me, so thank you. That's all I have. Thanks, Jeff. At this time, we have no... All right, well, thank you, everyone, for the..., for attending the call, and we certainly appreciate the questions, and we look forward to next quarter's call. Have a great week. Thanks for watching. Bye. The host has ended this call. Goodbye.