Q2 2025 Covenant Logistics Group Inc Earnings Call
Welcome to today's Covenant Logistics Group, Q2 2025 earnings release and investor conference call.
Speaker Change: Our host for today's call is trip Grant.
Speaker Change: At this time, all participants will be in a listen-only mode. Later, we will conduct a question and answer session.
Speaker Change: I would now like to turn the call over to your host. Mr. Grant, you may be getting
Mr. Grant: Good morning everyone and welcome to the Covenant Logistics groups, second quarter 2025 conference call.
Mr. Grant: As a reminder, this call will contain forward-looking statements under the private Securities. Litigation Reform Act, which are subject to risk and uncertainties that could cause actual results to differ materially.
Mr. Grant: SEC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements
Mr. Grant: our prepared comments and additional financial information are available on our website at
Speaker Change: Joining me today are CEO, David Parker, president Paul bun and coo Dustin kale.
Speaker Change: Revenue, rebounded, during the second quarter to a new record high. Thanks to Growing our dedicated Fleet, strong, new business Awards and managed Freight a small acquisition and receding impacts of weather and Avian Influenza, however, margins remain. Compressed, particularly in our asset, based truckload segments due to an inflationary cost, environment persistently, High claims expense, a quarter inch, jump in fuel prices, and continued pressure on volume and yields in our expedited and Legacy dedicated segments.
Speaker Change: During the quarter. We repurchased approximately 1.6 million shares or 5.7% of the average diluted shares outstanding for a total cost of 35.2 million.
Speaker Change: The average price per share. Repurchase was $22.69.
Speaker Change: Approximately 13.8 million remains available under our fifty million dollar. Share we purchase authorization
Speaker Change: we retain the full range of capital allocation Alternatives based on our current Financial profile.
Speaker Change: Year-over-year highlights for the quarter include.
Speaker Change: Consolidated, Freight Revenue increased by 7.8% or approximately 20 million to 276.5 million.
Consolidated. Adjusted operating income. Shrank by 19.6% to 15 million primarily as a result of year-over-year cost increases within our truckload segment.
Speaker Change: Our net and debt iness as of.
Speaker Change: June 30th increased by 49 million, to 268.7 million compared to December. 31st 2024 yielding, an adjusted leverage ratio of approximately 2 times and debt to Capital ratio of 39.2%. As a result of executing our share repurchase program and acquisition related earnout payments.
Speaker Change: The average age of our tractors at June 30th increased slightly to 22 months compared to 21 months a year ago.
Speaker Change: On an adjusted basis. Return on average invested Capital, with 7% versus 8% and the prior year.
Speaker Change: Now providing a little more color on the performance of the individual business segments. Our expedited segment yielded a 93.9 adjusted operating ratio, a result only slightly better than the year ago quarter. While this result falls short of our expectations for this segment. We were pleased with the year-over-year consistency compared to the prior year. Expedited average Fleet size shrunk by 50 units. Or 5.5% to 860 average. Tractors in the period. We expect the size of the fleet to flex up and down, modestly, based on various Market factors as market conditions, improve our Focus will be on, improving margins, through rate increases, exiting less profitable business, and adding more profitable business.
Speaker Change: Dedicated to 95 adjusted operating ratio improved sequentially. But fell short of both the prior year and our long-term expectations for this segment. On a positive note, we were successful in growing. The dedicated Fleet by 162 tractors or approximately 11.7% compared to the prior year and grew Freight Revenue by 8.3 million or 10.2% compared with a 2024 quarter. We continue to win new business and specialized in high service niches within our dedicated segment and reduce exposure to more commoditized
Speaker Change: In markets where returns have not justified continued investment going forward. We remain focused on our strategy of growing our dedicated Fleet specifically in areas that provide value added services for customers.
Speaker Change: Manage Freight exceeded both revenue and profitability expectations for the quarter. We were pleased by the team's ability to bring on new Freight handle overflow Freight from an expedited and reduced cost.
Speaker Change: The quarter benefited from non-recurring business that is expected to roll off during the third quarter. And we point out that this segment generally is susceptible to volatility of Revenue gains and losses.
Speaker Change: And to margin expansion and compression related to the cost of sourcing capacity during Market Cycles.
Speaker Change: An acceptable return and capital given the asset like nature of this segment.
Speaker Change: Our warehouse segment experienced Freight Revenue that was effectively flat to the prior year quarter but adjusted operating profit fell by approximately 45%.
Speaker Change: The significant reduction in adjusted operating profit is largely due to facility related costs increases for which we have not yet been able to negotiate rate increases with our customers and startup related costs and inefficiencies related to new business. We anticipate improvements to adjusted margin during the remainder of the year.
Speaker Change: Our minority investment Intel contributed a pre-tax, net, income of 4.3 million, for the quarter compared to 4.1 million in the prior year period.
Speaker Change: Sales revenue in the quarter increased by 34% compared to the prior year, primarily by increasing its truck Fleet by 429 trucks to 2,635 and increasing its trailer. Fleet by 866 to 7,880, the revenue increase was largely offset by lower margins on least revenue and equipment sales due to a soft Market.
Speaker Change: Regarding our outlook for the future.
Speaker Change: Our team is performing well while keeping the pedal down on growth and shifting mix toward more. Contracted specialized in high service, niches Covenant Logistics is 1 of a few companies. In our industry to grow revenue and Fleet count year-over-year while the combination of tepid General, Freight Market and startup costs, and new dedicated accounts along. With inflationary costs has pressured margins more than we'd like
Speaker Change: we see a path to improving fundamentals as a year develops.
Speaker Change: Our Baseline expectations for the second half of the Year includes additional startups and our dedicated segment, a slowly improving General Freight Market and modest peak season, that will benefit expedited and dedicated and a wide range of outcomes and manage Freight.
Speaker Change: If the general Freight Market fails to improve, we still expect mixed change and seasonality to generate better results in the second half of the year and the general Freight Market improves and a typical peak season takes place. We believe leverage exists in our model to capitalize and expedited certain dedicated accounts and manage Freight.
Speaker Change: Regardless of what the remainder of 2025 has in store for us. Our team is aligned and focused on continuing to execute on our strategy and plan, which includes a discipline approach to Capital. Allocation, executing with a high sense of urgency improving operational leverage as conditions, improve growing our dedicated Fleet and improving our cost profile.
Speaker Change: Thank you for your time and we will now open up the call for any questions.
Speaker Change: Thank you.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad now.
Speaker Change: You'll be placed into the queue in the order received.
Speaker Change: Please be prepared to ask your question when prompted.
Speaker Change: Once again, if you have a question, please press star 1 on your phone now.
Speaker Change: And our first question will come from Scott group with Wolfe research.
Speaker Change: Hey thanks uh morning. Um so you just talked about I think improving or optimism about improving fundamentals in the back half of the year. Maybe just
Speaker Change: Give us some sense what you're seeing in the market. Uh, any sort of customer conversations around Peak and the impact from English proficiency enforcement. Just broad broad views about how how the markets developing
Speaker Change: Hey hey Scott. This is David. Uh, yeah, you know, we are definitely seeing uh, I believe some green shoots that are starting to
Show forth. And we, I think we all been looking for it for 3 years and the thing is in 3 years, I think we all will say there's been 2 or 3 times. We felt like there something was happening, uh, that never did quite, you know, have any longevity to it, uh, but I do believe there's some opportunities out there in the marketplace today. As I look at bids as I look at midyear bids that, you know, people that did did 6 months ago, that all a sudden, they're having some issues on capacity that are starting to come back and wanted to ask questions. I'm looking at
Speaker Change: Uh, uh, in a not inability, but pricing. That is not going down, may not be going up as much as I want or, uh, those kind of things. But I don't sense. The pressure on rate decreases uh, across the the book of business. So I do think that some things are happening. I think some things are happening in the capacity side.
Speaker Change: As we know some of the things that are going on from English and, you know, English language and those kind of things that none of us can sit here and say that it that it really taken an effect. But we're sensing some of that, uh, on the solution side of the business is being kind of ups and downs at the very beginning of it. They really sensed it and had to say goodbye to some carriers, that could not guarantee that they were going to have some English speaking people, but that said, uh, overall. I feel pretty good about what I'm starting to see in the market, but I could get real excited if it had not gone down a couple of times in the last 3 years. Scott,
Speaker Change: Understand. Um,
Speaker Change: you've got a lot of LTL exposure on the expedited side, maybe just
Speaker Change: Talk about how how that business is developing any signs, any signs of green shoots there or is that still more challenging? Yeah.
Speaker Change: It is it is it is been challenging and that's 1 of the, to be honest with you. 1 of the surprises that I would, I would say to me in the last few months, the last 5 months. Anyway, as as we've seen our LTL customers uh
Speaker Change: Get softer in the marketplace, trying to figure out.
Speaker Change: Exactly what that is and what is happening there. Uh, you know, we kind of did a
Speaker Change: Study in the last couple of days of all our LTL companies, I'm talking about verbalizing with them and and out of all of them, we've only found a couple of them that will say our business is up the rest of them are saying, we're feeling pressure, on volumes. And so the LTL side of it is, uh, it's concerning
Speaker Change: Of what's going on there. I will tell you also though that surprising good from a good standpoint, is that the air freight side of our business? The consolidation of Air Freight
Speaker Change: I'm seeing some good things happen there, that is, uh, exciting me. And I mean, I think we all see the focus of the government that Trump and Administration has got on A1, you know, Ai. And, uh, and we're sensing that. Uh, I mean, we're hauling a lot of servers right now. Uh, I'm starting to see Transportation wise, what I've been hearing from people verbally about AI. I'm starting to see some of that taking place and some of these data centers that are building out the United States, and the service that that we're starting to haul just in the last 30. 45 days, that we're really starting to sense, uh, some opportunity there. So the LT
Speaker Change: Nails down. But the air freight side of our business is really, I don't want to say really starting to pick up. It's starting to pick up so that's encouraging.
Speaker Change: Yeah, that's interesting about
Speaker Change: the AI stuff and data center, maybe finally starting to show up in Freight a little bit just lasts 1 if I if I can. How does the uh the big Bill impact your thinking about?
Speaker Change: Cat-backs and spending on trucks, does it are you more likely to be buying trucks or buy more trucks now or anything like that?
Speaker Change: Yeah, I don't know that it changes our plan Scott but it sure does have helped helped our cash tax obligations for the remainder of this year. And
Speaker Change: Quite honestly next year. Um and you got to think, I mean just in the a broader sense of um
Speaker Change: Of kind of the economy. There are a lot of Industries, particularly kind of
Speaker Change: heavy capex. I I think it could spur some additional Freight. I think it could be a catalyst for some additional demand. I look at it as kind of a stimulus um that can kind of help with some of that industrial lightness that would, that David was talking to. But, you know, we talked about our our capex for the year was planned a little bit lighter than what we or had announced in the release. And I think what we've seen, fortunately is the ability to grow continue to grow our dedicated. And we, I think we've got some additional dedicated growth opportunities for the tech.
Speaker Change: Tail end of the year and uh so there's some growth capex in our numbers as well for the rest of the year. Um but generally we try to stay pretty disciplined to our capex plan and adjust it for growth opportunities.
Speaker Change: Thank you guys, appreciate the time.
Speaker Change: Thanks Scott Scott.
Speaker Change: Our next question will come from Daniel imbro with Stevens.
Daniel Imbro: Yeah. Hey, good morning guys, thanks again for your questions.
Daniel Imbro: What drove that? Maybe what part of the dedicated business you were able to grow here in the second quarter and then
Daniel Imbro: Just tied into that. You know how are you thinking about poultry for the back half of the year? Is there any Avian Influenza still kind of out there that you're hearing from the field? I just I know the back half is important for that. Poultry business would love an update there on that as well.
Daniel Imbro: Hey, Daniels, Paul. Um, yeah, the the Avian Influenza is, um, it's all about gone. Uh, you know, that that season is generally more, you know, mid mid fall to to Mid Winter, you know, and so that that's gone, uh, fingers crossed. We don't experience anything like we did last year, uh, on that front. Um, yeah, the, the, the growth in the dedicated account, um, was a function of of really 2 things, a small kind of tuck in acquisition. Um, really small, you know, 60 70 truck kind of deal on some specialized business and um, as well as growth and culture. Yeah. Um, and then I would say the the Legacy dedicated business was was flattish. You know, we saw a little bit of decline in that in q1 and uh, in that business was flattish for Q2, hence the the truck growth in the quarter.
Daniel Imbro: Got it. That's all as far as maybe you ask them. Yeah, you asked about balance of the year, um, I I would say um,
Daniel Imbro: I'd probably say flat to incrementally up. Um, you know, I, I think there we do have some startups that are that are signed and planned, um, also know of, you know, a few, you know, small reductions and and so on the balance, I think it'll be flat to slightly up for for the balance of the year.
Speaker Change: That's helpful, appreciate that Paul and and maybe trip a financial kind of follow-up question. Just looking at the model you know Revenue per mile step down a little bit 1 Q to 2 but if I marry that with David's comments earlier it sounds like things are actually getting better and pricing is to locate. Can you maybe just walk through kind of what happened in the quarter there optically. And then how we should think about that trajectory into the back half of the year.
Yeah, I I think what you're seeing and revenue per mile, whether you're looking at it or sequentially or whether you're looking at it on a year-over-year basis. We, I mean if you go on from a year-over-year basis, we have had some rate increases particularly on our expedited segment, but I think what you're seeing is a significant change in business, mix. And if you're looking at our total truckload operations, and you're reducing, uh, 50 trucks out of our expedited Fleet, and I'll just use round numbers that are putting 200,000 miles on a truck per year and and inherently have a lower rate per total Mi if you will.
And then you're adding in these low short haul mile mileage trucks in our dedicated and significantly growing that you're going to see some distortion on the rate per mile. Um, and not to add chaos to confusion. But, um, you know, the dedicated business is, isn't just pure line, haul stuff. It, it has fixed and variable costs. It's it's billed per load and there's some weight, uh, pieces to it. And so you just can't really look at the number of miles. They ran and, and look, when you have a changing mix in the fleet, I would say, uh, the other thing I would say, if you're looking at, it sequentially, all of the shutdowns and the it created, in the weather, created a little bit of a bump in dead head and it created some just noise in the first quarter. So it's hard to follow from a 1 Q to 2 Q. Um, you know, when, when we were out here, talking about some rate increases, particularly, it'll be particularly in expedited. Um,
Speaker Change: There was some out of Route miles and and it kind of creates some issues where you're kind of it. It makes a rate per total Mi look a little wonky but I think for the rest of the year we're probably going to be looking at flat absence some sort of like short-term Catalyst which
Speaker Change: I I think this thing is turning. I just don't know how quick it's turning and I'd be hesitant to
Uh, make a call when it does turn it's going up. Yeah, we've got some leverage when it does turn. We just
Speaker Change: We're just waiting on that that day to happen.
Daniel Imbro: No, all makes sense. See last time I could squeeze it in you mentioned, you did a small tuck in this quarter and dedicated side. Just curious how the m&a backdrop is, is evolving. As we navigate this prolonged downturn, but we're coming off the bottom. Like, are you seeing the frequency of deals coming across your desk? Picking up at all trip?
Daniel Imbro: Freight or non-ag related Freight. Um,
Daniel Imbro: Yeah, I I think it's it's interesting you know the the deal Market es and flows and I think you know we're in kind of a situation over the last couple months where a couple of interesting things have um crossed our desk or crossed our paths that have made it to um a level where we're we're talking about um that fit what we do. I I think the key to us is is sticking to what we've done historically and and just being disciplined in our, you know, working our plan and being disciplined with our capital and and making sure that, you know, we're allocating it appropriately. Um, but it definitely has it. It feels like it has picked up with some interesting opportunities. There's always things floating out there but the last 2 or 3 months. I've noticed some things that have have been uh particularly interesting I'd say.
Speaker Change: Great, appreciate all the color and best luck guys.
Mr. Grant: All right. Thanks Danielle.
Speaker Change: We'll move next to Jeff Kaufmann with vertical research partners.
Jeff Kaufmann: Hey, good morning everybody. How are you?
Speaker Change: Hey, Jeff.
Speaker Change: Hey well, uh there's a lot of questions been asked already here. So I'll uh I got 1 detail question and 1 big picture question here. Um,
Speaker Change: Question for trip. You bought back 1.5 million shares. The shares sequentially Changed by only half a million. Um, what's a good number to think of in terms of third quarter shares outstanding?
Speaker Change: Well, we we purchase, I mean remember, our average. Um,
Speaker Change: here's what I would say, the shares.
Speaker Change: That are presented in our financial information are an average. Um so right I think you can the 1.5 or 1.6 million that we repurchased over the course of the quarter, you'll see them be completely out of the um of the Q3 results. So you could basically take where we landed and
Speaker Change: Q1 or at the end of q1, reduce it by a million 5 or a million 6 and then that's probably going to be a closed run rate. There's not a lot of vesting or anything like that that or diluted share issuances, that are going to kind of materially impact that number or that math if you will um, on your reconciliation.
Speaker Change: Okay. So so an overly simple way to think about it is, is you had 27.2 million shares average?
For the second quarter with something in the 26th to 26.2% of a fair uh Target in terms of where that third quarter average is likely to be and and that's borrowing any other activity. Yeah I think that's pretty spot on. It, may move up and down up and down a little bit but not
Speaker Change: 262 is a is probably a a good number.
Speaker Change: Okay. Thanks and then question for for David and Paul if I take a couple steps back and and look at the bigger picture of the freight environment and where we think we're probably going over the next year or 2. Um, you know, right now we're looking at kind of a 950 and expedited, uh, we're kind of around a 966 o r in dedicated. Um, where do you think these should be in the longer run when the markets stabilized? And, and when I think about the dedicated business, you mentioned the avian flu is gone but that that impact to the franchise still kind of lingers around kind of, you know, as these businesses heal and the Market's normalized where should those margins go?
David Parker: Yeah, at this is David jail, a great great questions. And I I would, I would sum up a couple of things uh, on this
David Parker: Uh 1 that particular question then overall summary that from a big picture standpoint. Uh, I really think that expedited is a depend upon the market. It's a 83 to 93 operation. It's 83 to 93 depend upon the market. I think it's, uh, when when it is stinking like it has been the last couple of years. Now keep in mind some of us on this call. Will remember that that 10 points that I'm saying there. They used to be 93 to 103. It used to be a 92 to 102 kind of number back, in 2015. 14, those kind of days. So we've we have probably dropped it by a a strong 56 points, uh, but I do believe that expedited is
David Parker: need that our dedicated is going to
David Parker: The first goal that we've got there is to get back down into the low 90s and I think that that is very, very possible. Uh I think as I as I think about dedicated as as we all know, I mean our our poultry division is is in the 80s to give you an idea. We all know that it's in the 80s. Uh,
David Parker: A the the flu heard it into the low 90s but it's a, it's a solid. It's a solid uh mid to high 80s, kind of number, we want to we want to improve that and it will improve. Uh, we have grown that segment so fast and so rapidly and I still see continued growth in that, then it costs money to, to go out here and, and grow these things, even if it's repositioning, the equipment all over the country in order to do that. So, uh, you know, internally, I would tell you that, give me, give me 84 to 86 on on poultry and I'm a happy guy. Uh, and I think that that's where it's going to be as long as we're going to be growing by. I mean, we have tripled that business. Uh, so we all so it's a big, it's a big operation that we've got there and we continue to make good Headway on the Legacy, uh, dedicated side of our business. Uh, no doubt and
Speaker Change: Operating to equal 95, its operating the high 90s in order to, to, to operate there. But what it's happened on that and it's getting closer, I believe to maybe it gets to 94, kind of numbers. Uh,
David Parker: That.
David Parker: A lot of toothpaste happen, a lot of commoditized business has left. I still think out of on that Legacy out of 8 8 900 trucks in there. I think we still got a couple of hundred trucks that are commoditized, that have to be dealt with eventually. Uh, but I also think that
uh, that the business that we lost in that bill in, in, in that, over the last couple of years, in the, in the Legacy, dedicated, as we all know, 2 things happen commoditize, ruins your rates,
David Parker: And that's not what any of us want to be in, is the commoditized, any kind of any kind of commoditized business. It's what We've ran from for so long. Uh, but another 1 is that the ones that are operating extremely well in the last couple of years, the pressure, when that contract's up that pressure gets there, let's just say Those comp. Those businesses are operating the low 80s and they were and they are those kind of things an acceptable return, uh, all of a sudden, the contract expires, and you either lose it or
David Parker: It goes to a 95 1. And I'm so, so you got Legacy commoditized as well as a good ones. And so, that's the thing on the Legacy side that we've been dealing with for the last 3 years. I think it starts healing itself, uh, as we go forward, especially when the market gets a little bit tighter. Uh, so that's what's going on. The expedited, I think expedited is
David Parker: We, we still believe a tie 80s to low 90s.
David Parker: Together, everything together and I think that that's where we will end up at. We just may need some help from a strengthening of economy or less capacity. So hopefully that gave you a big picture on those 2 jail.
Speaker Change: No, that was that was really, really helpful. Um and then uh Scott group kind of hinted at this but let me come back.
Speaker Change: To it. Um, you know, look, the 1 great, I think this industry's had for 2 to 3 years is, where's the volume, right? Um, we've been waiting for that. Volume Catalyst, tighten up the market, you know, because capacity is just not coming out as fast as it needs to do. Do, do you believe that between the consumer, uh, benefits to disposable income and some of the industrial incentives that are out there on on capital investment and and Manufacturing could the could the 1
Speaker Change: 1, big, beautiful, Bill. Be that volume Catalyst. The industry's waited for, or, or do you think it's something else?
Speaker Change: Believe, I think that we're going to start seeing 3 to 4%, GDP kind of numbers. I was with housing folks. Yesterday, you know, in, you know, in the in the Floor Covering business and, you know, they're they're just basically waiting for housing for interest rates to drop on the housing. They think the backlog is gigantic, as soon as people can afford the payments and we we see the battle going on in Washington with the Federal Reserve on the interest rates. And I think there's a lot of catalyst because he will win. Whether that's Trump, whether that's in November October or next march, he's going to win that battle. And those interest rates are going to go down and housing is going to improve. So I think that those are some of some of the catalysts that are there, as well as capacity is leaving. Its it has not left as fast as what all of us would like to see capacity. Leaving for it's been very stubborn
Speaker Change: And those kind of things, uh, but capacity is leaving, you can see it in the class 8 truck orders. Nobody is buying a bunch of trucks and so, it's just a matter of time. I think that whatever number you want to use, 3 to 3 and a half percent, GDP with Class 8 truck, orders, being down and, and exits being up, even though maybe not the number of I want, that is going to
Speaker Change: to show up in tightness of business, and
You know, whether that's 3 months from now, I believe my my guests as good as anybody in yours as good as mine. I think it's the October kind of time frame that we will start seeing capacity to really start to tie because we're starting to sense it as we speak right now,
Speaker Change: That was a a terrific broad answer. Thank you very much. Those are my questions.
Speaker Change: as a reminder, if you would like to ask a question, you may signal by pressing star 1 at this time,
And our next question will come from Elliot Alper with Covenant Logistics.
Elliot Alper: Calling. But yes, thanks. This is Elliot on for, uh, for Jason Seidel. Uh maybe maybe coming back to Dedicated margins. Um, improving in the back half of the year. Um, you spoke about some additional startups is that margin drag quantifiable at all? I guess, trying to think about core dedicated trends
Speaker Change: Maybe some of the expectations into what a modest peak season looks like um especially given some trade policy that might swing what a normalized peak might look like.
Speaker Change: Yeah, let me break it down for you a little bit Elliott. I think that um, yeah, dedicated margin got better from q1 to Q2 and and I think dedicated margin um, could get slightly better from
Q2 to Q3 uh and then wherever it gets in, Q3 it that'll probably be where it'll be because Q4 with the holidays, you know, Thanksgiving and Christmas. It, it actually always pressures dedicated margins and so, um, I think you'll see dedicated get a little better Q2 to Q3 and then and then, you know, it could be flat at the back a little bit in Q4. Um, and then on the expedited side, um, you know, you're talking about the, the peak season. Um, if if, if some of the things David talks about come to pass and and you know, October things start tightening, you know, we did see a little bit of peak last year and you could see an uptick in in, um, you know, our rates and and tightness in that kind of in that fourth quarter on the expedited side, uh, if we experienced that and, and we, nothing tells us that it's going to be looser than it was last year, um, especially with the tax policy and, um,
Speaker Change: And and maybe what GDP might do. You think it'd be better than it was last year? Um then I think you could see expedited, you actually get a little better in the fourth quarter.
Speaker Change: Okay very helpful and then maybe just following up on that within dedicated. You spoke some value added services for customers um curious to get your thoughts on. Maybe what that could look like.
Been improved as we worked that plan, but that's going to kind of be a slow steady plan. Not a, not a flip of a switch, kind of deal.
Thank you guys. Yeah, Elliott just to add to that. I mean, you know, all of this, this prolonged, you know, down cycle. If you will, has, if it's done 1 thing. It it it's created a lot of, um,
Competition within, you know, traditional dedicated, Drive-In dedicated. And, and there is a lot of capacity flooding into that and adding to Paul's, you know, comments and and part of our strategy is to figure out how figure out ways, basically, how to differentiate ourselves. Whether it's hauling different things, like live haul or feed, or using different equipment or doing different things that require driver credentials or that are just difficult, High service, requirement type things. Those are the type of areas that we're trying to penetrate and the more commoditized stuff is the stuff that we're going to have as we think about Capital allocation long term. Those are the types of things that are going to be. We're going to have to leave those behind because they may have been considered nichy or or kind of dedicated and and high margin at 1 time, but I I do think it's becoming more and more competitive and I don't know if it'll ever come back to to where it was so you know, we're having to adjust our plan.
Speaker Change: And adjust our sights on. Um, you know, some of that more specialized stuff to help us stay ahead of the game.
Speaker Change: Thanks trap. Thanks trap.
Speaker Change: Our next question will come from David Floyd with Chattanooga Times.
David Floyd: Hey, thanks for taking my questions. Um,
David Floyd: I was hoping you could elaborate on. Uh, the factors that led to so the record record revenues, you guys saw in the second quarter this year.
David Floyd: Yeah. Uh, you know it we've been really blessed. I mean,
David Floyd: David. I this Freight economy has been terrible for 3 years and uh, we've had the benefit of being able to grow our dedicated Fleet and our total trucks. And, you know, unlike any time in company history, we we've been able to kind of sustain our margin and sustain our expedited business. Our managed Freight, which is an asset light business, has continued to grow organically. We did have some surge, uh, some surge Freight in the quarter that, you know, helped. Um, whether you're looking at it on a year-over-year or sequential basis, um, but, you know, that happens in that segment, and I think it'll be up again year-over-year in the third quarter and, um, who knows, you know, it can be impacted by peak in the fourth quarter and uh, additional business ads. We're seeing a lot of opportunity.
David Floyd: There. Um and then you know organic growth and and warehousing has helped and so you know the combination of the 2 big you know drivers of the growth year-over-year are going to be the dedicated segment and that growth I would say of 162 units um net in that segment and then you know basically your your managed Freight which you know grew almost 18 million dollars a year over year. So um we're excited about it and you know we like the direction of the company especially of where we're going especially in an environment that is really really tough to grow.
Gotcha. And I was curious about just like what the effects of the English proficiency requirements are. I'm just like recruitment of drivers. I mean, industry-wide, but also at covenant.
David Floyd: That that's not been a problem, David because they had to pass it. We've never been there, where we would not allow it, uh, them to come to work. So we've always had to have English, speaking abilities, and so drivers. So that's not a problem with us. And so, really from from our standpoint and for the carriers that do not have that issue or do not employ those drivers that can't speak English. Uh, anything that comes out is something that we've been talking about on a reduction of capacity that will help the industry.
Speaker Change: Gotcha. Uh, last thing I had was just, I mean, you were talking about how, um, you know there's anticipation that interest rates will come down, which will, um,
I guess encourage more people to start, you know, buying homes and that could be good for the industry. I was hoping you could just kind of elaborate on just like the outlook for the Freight Market going forward under under Trump's economy.
In the flat beds and those kind of things probably more than that, but it's just a big nucleus of freight for the Housing Industry. So the better the economy, the more freight that's going to be available for all of us. So that that's really the 2 things that we look at.
Speaker Change: Gotcha, thank you. Appreciate it.
Thank you.
And once again,
Speaker Change: To ask a question, please signal by pressing star 1 at this time.
Speaker Change: And we'll pause for just a moment to allow everyone an opportunity to signal.
Speaker Change: And it appears, there are no further questions at this time. Mr. Grant. I'll turn the conference back to you.
Mr. Grant: you know, I want to, I want to
Mr. Grant: say, add on a little bit about the big picture that, that, that we were talking about a little while ago and I want to make sure that I look at our company and what we've done this team, I am so thrilled and so proud of what this team has done. They've done an excellent job especially when you look at the last 3 years environment, that the whole Trucking industry has been in. We've excelled much better than virtually, any peer that we've got out there during the most difficult environment in trucking history, uh, that this team has done great. And I look at that and I look at
Mr. Grant: Things that I believe are going to get better. And the thing that I love about this because this has been since 2018, we're on a 7-year Journey. Now of taking our company and transforming our company, uh, tremendously since 2018 and the model that we're standing here talking about and raising all the various questions around expedited and dedicated and freight management and warehousing, Etc. That's exactly what we wanted. And what we are seeing, uh, is is taking place, it's what we've been working on for the last since, 2018. So, the last 8 years and it's exciting to me because I look, and I say, you know, when, when something is up,
1 of the other ones are coming stronger. When 1 is when 1 is down, the other ones are pulling us up and that is something that is happening. Our model tremendously expedited. I I take the freight management but we're all happy about the second quarter on freight management. They did a great job. Well let me tell you a lot of that some of that or a percentage of that is because of the Overflow from expedited. I look at expedited we had a discussion about it 93 or and expedited. I think it's 83 to 93 is where expedited can go at but because the something that 93 the high end of a number that I want, but managed Freight did extreme
Mr. Grant: Well, they had to give them a lot. I mean, it was, it was a lot of freight because of the network because expedited is working a network in this economy that could be up. It can be down the the the network it can be sluggish in 1 area, strong in another area and they may not have the trucks available when that when the in those areas that are strong in. And so they give it over to the managed Freight and that has helped manage Freight tremendously in the second quarter. So what ends up happening is that expedited, as they as Frank continues to get stronger, we talked about LTL, as LTL gets stronger, the network for expedited will get better. It will get stricter and rates on their dead head will go down rates. Will go up. Utilization will go up now and expedite will perform better. Now, the worst part of that is that they won't be throwing over as much Freight over to
Mr. Grant: to manage Freight and so, therefore manage Freight will go down a little bit. And so that's what I love about what I'm seeing, uh, in our model. And I just want to make sure that everybody sees recognizes that because that's powerful and it's this team that has done this throughout our company. Another thing I tell you that does drive me crazy,
Speak with God in about 700 trucks today. So we're continuously looking and working and the results are there on safety. But I look at our cost on insurance, it has almost doubled since Co
Mr. Grant: It's telling you that something's not, right? We've got to, we've got to get tort reform. We got a couple of accidents. I'm concerned about, I don't know where it's going to go. We'll figure out where it's going to go, but to reform has got to happen. The American Trucking Association is working, extremely hard on tort reform, but it's got to happen in our industry and so I don't know. As I as I look at the big picture, I think that we have done a great job. I will question whether we've been rewarded for that. Great job from Wall Street and all but that's that's your question and your answers but uh I'm proud of the team. So anyway, I hope that we gave you all a big overall big picture of how I feel.
Mr. Grant: So I think that's it. All right well thanks everyone for joining us today and uh we look forward to uh speaking with you again in the third quarter, thank you.
Mr. Grant: and this concludes today's conference call, thank you for attending