Covenant Logistics (CVLG) 26 Jul 222022 Q2 Earnings call transcript

Welcome to today’s Covenant Logistics Group Q2 2022 Earnings Release and Investor Conference call.

Our host for today’s call is Joey Hogan. [Operator Instructions] I’ll now turn the call over to your host. Mr. Hogan, you may begin.

Erica. Thanks, welcome quarter and Call. our to morning conference second Good

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

actual risks at by including contemplated forward-looking without undertake the disclosures year statements. no to our most morning Investors to I'm uncertainties, teammates To to comments recent XX-K and to additional for David per financial for in by from Form start you the the the subject asked history. limitation, XX-Qs. review record are revise differ Factors current We materially grateful statements or circumstances. or past they producing information to and Forward-looking website, for leadership section, and in update SEC, could our in joined with, continues that section. of five www.covenantlogistics.com is on our the A please confidence results our We our Risk transformation Tripp to this statements our Paul those years The with and direction copy reflect our again to our available share Bunn have obligation events Parker, working and publicly Form are Grant. we team. and forward-looking our of our any prepared company build earnings subsequent filings the we been in any quarter on

in the costs, the insurance combined sale, lead affected in a operating the second operations less headwind XX% truckload a by charge and $.XX has cost gain claims significant primarily improving asset-based operating share us quarter despite quarter. Our increased income expense in on its

pursuit quarter. year we quarter. Adjusted key $X.XX in plus from the Despite revenue $XXX small on XX% of increased versus compared the earnings freight XXXX undervalued to economic results stock the to the year made grew the quarter, per quarter per company ago. are first highlights we bullish in million the acquisition nicely summary, ago to contributed investing In murky outlook, to XX% the improved our the share Covenant. of Additionally, share were; our the continued

truckload’s versus second with the grew trucks. XX XXXX freight asset-based fewer Our quarter revenue XX% of

freight or compared grew combined intensive to of asset the quarter asset segments light XXXX. managed less and second warehouse Our XX%

On ago the was safety was period X% than small number development rate prior only a quarter. last side, strong in year, in to higher our million on claims $.XX quarter almost DOT contributed insurance year sale $X.X of a $XXX,XXX the Gain mile expense. to increase of per but compared

quarter, ago We TEL investment leasing diluted Due another on share repurchases. finished and on the company increased of only quarter, versus per or produced quarter utilizing additional X.XXx, period. the ratio million record Our equity a invested share, indebtedness $XX.X $XX cash cash strong XX.X%. share leverage year of flow in the contributing after an the our of net of XX.X%, to return capital $X.XX to with per $X.XX debt million ratio

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

Thanks Joey.

comprised XX% businesses warehouse of revenue freight adjusted freight light total of of were our For and the managed profit. Asset quarter, operating and consolidated XX%

market discussed freight year to managed the few demand versus the ago As we softens growth as is the have in revenue cool quarters, beginning surge the past recedes. and

for second up the primarily be stood have revenue quarter. warehouse team third end new in and an the our business. strong we startups However, for quarter, continues have of By to the margin pipeline the net the three active year, will

ago grew and revenue of focusing a freight The its talent XX priority due of for quarter the strong on It profit remainder to of on operating the and truck growth maximizing the quarter. trucks. of group acquisition focus year improvements adjusted XX% in technology opportunities per margin and the revenue versus will XX% and consolidated The the revenue asset light year revenue was XX% to Expedited income. growth, enhancements. We grow division remains

basis The quarter adjusted last first over quarter XXX XX acquisition the improvement contributed to revenue point of growth a year. produced nicely. second a OR, Expedited record

is costs but a overbooked the remains sale present Our in is freight quarter, we balanced. not and network gain less shape insurance at driver pay the but time. Maintenance, feel headwind major good on were in

ago per XXX XX% year ago adjusted expedited we and/or also of with what job revenue on Based increases in of XXX operating quarter. basis profit was weed another grew per of improvements. planned a in and transition. while we about with feed quarter. our continue. a sale pipeline Our insurance improvement pricing of on truck robust, OR quarter freight the continued division consumed gain of margin third margin versus replacement first trucks The this point quarter revenue great from either remainder per leadership OR Dedicated remains improvements. truck and year some steady our through basis be will improvement see doing supporting its The lower sequential The the today, XX% division XXX cost that continues year for goal economic the the process team feel upgraded quarter. in quarter This in good and and the managing through points third week of to improving consolidated expectation is improvements XX% the and Revenue maintenance versus slightly the adjusted

and produce to the to grew by Our positive minority operating trailer TEL investment results. by increased XX decreased pretax revenue in grew its profit TEL quarter XX% XXX of versus fleet in its X,XXX. quarter both and TEL’s XXXX. continues truck XXX% second trucks fleet the strong, X,XXX to by

our TEL, in million. $XX.X million in balance in included sheet, to consolidated other assets grew investment Our $X.X

results $X.XX purchase of for total in and of or As equipment focuses losses is on on is and our and quarter-to- TEL gains equipment TEL’s the leasing equipment business trailers additional trucks clients of TEL’s to a quarter. through lease business robust bright. maintenance disposition managing normal year contributed and to of cause earnings their very part overall programs reminder, from procurement to sale shippers to can a clients, buy, share fleets the fluctuate TEL future a the and or quarter. a aiding versus model, small $X.XX program. a and sell Due an per ago

more As of continued will we XXXX there the second exceed half the year press expect share market we XXXX our release, adjusted of in said do bringing headwinds minimum per We to full the XXXX share. to from of inflationary a believe $X freight be factors, per earnings very we and in softening insurance are levels, returning investments half and company the share confident on second demand in the acquisition, normalized the to for have XXXX. small and made based the pressures planning team, we the repurchases sales but specific costs

industries customer last years, for Covenant, and through we the moved Over our We that our five has full focus. last to logistics service XXXX will breakout quarter less remain been cyclical said intentionally be year will up firm base that will we any to to opportunities that call the confident questions. statement cash and time. on maximize And [Operator shareholders. now for our we continue for Instructions] produce for open you your a Thank

Our from first Jason Cowen. question Seidl comes from

tailwind seeing year thank of of might talk for quarter. And second on of takes the in the the of puts terms operator. some versus of the congrats Hey, headwinds. Good some the you the some guys. and about Wanted half to you, morning

side gains sale you should expectations insurance least how great the to things? XH XQ. On on and we for for be would XH the then compared down tailwind I the look not coming insurance a side, at on we at imagine how a quarter had the of look should since at things

strong Hope doing Tripp. particularly in is some equipment pretty so you're this going in Jason, Yes. you're today. of side. well I on tractor half the the on second gains sale think to the of see Yes, year,

been very back, light. I quarters four has think if very, last you look the

see you'll some tailwinds So there.

the quarter, quarter, perspective, On insurance you'll was that the, We're start normalize during going run to bit. to insurance but I think see see not exceptionally that strong start $X.XX to from a I soften. an think you'll third each

mile. I to little see for think about between $X.XX insurance in it'll QX. $X.XX landed a not it per somewhere the year, you'll in mile the per QX mile our or third it saying year, was for Just average on and I'm but quarter, last perspective, per last $X.XX where go cost

And of in early seeing the talk contract about Can helpful, the marketplace headwinds? a bit what you That's how how of it sort trended Tripp. you're about and some Okay. XQ? through pricing little very quarter the

can half we we from well, the we're get year, Yes, about to the cost the working over a contract? bit, help a that equipment part turn Also want a of get be start which age average bit to as us see you'll perspective. talk perspective, maintenance headwind see a a strong that do to haunted have little as of beginning as new new this the that continue to then to think year in I coming I'll but costs of front that on possible, perspective. see about majority and ops next to And and Paul, as and cost you of pretty back Paul. of decline in from should for continuing equipment headwinds much cost costs we're an year, But equipment

things, business would of lot on of the come asked yes, couple flattish. side rate. customers of call We're the for contract I business, the on a not Jason, contract having Sure, back it

and were minute far, on times than no to last that ago a they with less the And I XX a the think, year. think just earlier script it top think customers, doubt us our paying XX folks I lot moved really didn't dividends that that's overstep in said a are sticking cyclical reminder I to bounds, months. through softer in thus we in we the

I getting I lot of So rate a pricing, lot either. on but would getting contract increases, straight pressure we're up we're mean not a flattish. not of say pressure, the

of managed that's worse. the and dedicated half see are margins exposure on and is, to year. sides seeing little maybe we've market so On margin business, I going you'll the the soften think we said hold see in expedited get side freight of the before, a of managed freight that's, in where up as spot And margins the things improve, you're second deterioration to the our

that's a say would headwind. I So

helped of bunch we back. the be No, the plan -- of but looking able back obviously that a just assuming a reaction positive in half given sort a quarter, repurchase at do of you get in a think activity to makes here Obviously, So stock? marketplace, were I'm that the should just perspective. the share year? thing, to modeling of the just but less second how a from I the I'm lot much it's Obviously How And, it good you to out buy you can if stock less, program. of that's about to sort Tripp, your sense.

But longer-term directly. into help. moderate to shares. is, say a we say. question would And just, a so it's, me low leverage I program We to large designed from if program and which a this a continue place, purchased as in I I long place consider debt put going a, trading place can your what in specifically control let once duration, in I place. is for book some we're million perspective, know the have, would at repurchase here's to parameters build plan will Yes, in it we what May. what $XX what But and don't answer multiple lower we're can't fairly we call program, We what's tangible to goes as I'll

to last go the few and price your tangible the up. that over to soften will see uptick because start multiple point Now, start to the where weeks, our you'll stock book just

had to numbers I tried, not soften I if stock that a a the what I'm purchasing good as bit. clip, see but we've do, I going price from So predict July could nor a we were think, perspective. been out strong. that even And think to to we've start there pretty disclosed going you'll I historical at really don't But is some

just go and keep if opportunistic we second year. in play plan be buying the So in mean obsolete plan to it down and shares off. we doesn't continue of the that repurchasing future, about slow half or the slowdown purchase, the the the in We'll doesn't turn

Group from Research. come Wolfe Scott from question next Our

on Hey, the quarter. seeing environment, pricing far XQ but perspective thanks, environment Nice you're the good some July? and talked in morning, I know demand maybe so played guys. can out you what you about share how just throughout

not vacations mean, in were mean, of generally it's our Yes, QX probably We as get good top three, I for holiday folks as good fall it lot two and about wasn't definitely before as was months as one and the QX, back-to-school. kind season and Scott, ramping up the last far environment, of as with a start whatnot. of I demand say QX. and kind And as of earlier, talking to I second would in July lag year. but July's good times worst two the

is it. there's month second in so to any quarter. seasonality fallen off And the saw hadn't No cliff. it we But softer doubt, July a than

talking I And were see how we'll and and he so well, Dave August said, goes. just

think we'll of weeks make we August. able really see where kind call be is into a two I going is to three or demand. when August

but So July is than July June. worse than always June, is worse

All right. about to matters less know you peak But any I thoughts season. now. it guys early

and two those your item talked less to them it that for customers do And us. continued has three we've and do again. we'll couple point, commitments year. got peak with Pretty an every muted. or impact be about we And we That's of make are a that a we've for customers to peak less

bit And anywhere yes, little be as in saw for materials, probably peak, near nothing a last so there'll an yes, like dramatic a what but years of year. or uptick bit you little past,

lower Okay. OR my And then which spot remarkable. last is question, did expedited a a XXs pretty we're environment softer in so and still pretty maybe

range profitable. this cycle we've acquisition, right a the it's thinking of you small, throughout How that but about are expedited very now? margins Now sort got of

our Joey. This more other going have than is Scott. It's Hey, to still services.

old back best So you expedited of structure. not as look I through think was today, which looks an there. as see X at kind like was out to can look in as as presented to it expedited, swing trough. XX But we back of history, today, would and point show it peak we've internal if if It's the what is kind gone from back it you OR company

with So other what things. we've hard to been working some do

of X longer-term kind to throughout trying down, talked is of year with solidify some the that narrow of range to if XX, some relationship So will And about that been X to there. we've we take the I time think last year, that. customers to X tell successful

where And today, at I low stands in we've XXs. probably It's with is working it peak look hard expedited if is ever where's XX to you get the I an will. have, will opportunities say best, would As think be the best today and as the you probably trough you done. expedite we

kind range. XXs. And keep XXs. XX that to of So in leadership play debate And customers think but keep be customers. holds. team working in down. I'd I probably But actually hard But would a XX I we're on we the again, we to hard don’t acquisition with to I done work we low And expedited XX to think to and need the base say the out I cycle legacy that that the XX, if got as made some the we're, this a has of see think to shot total

I good now. think right things looking really are

Stephens. from comes Atkins question from next Our Jack

congratulations, guys And these Good on Okay, morning. Great. great results.

for a guessing if to the moment, able the year. be show to think, through as you more Covenant wanted XXXX the for We've in breakout fully business $X more that's to go guess, kind market comments you of Paul, a of that going being your challenging this So talked earnings freight to or about to materializes. degree resiliency and referenced prepared because a back I'm I year I you

power trough trough proactive, can earnings Some kind help have if And companies helping about about us for Covenant. power just earnings guys been like. you of of us maybe I'm think kind kind of look think curious what could

expand stock. the raising on help trough multiple the would think the floor on I really

curious. of just So kind

could you If –

probably those reduction confident of hold to a our as hold. similar of think out to still I them modelled were last XX% trough we're a where to numbers. still we quarter kind XX% lot peak peers, sticking those on is with Jack, we've We numbers,

be. wherever XX% off So will that, XX% is peak where probably you that's to trough in about think think of we

that as year TEL into of are this grow of guess investments they a back the about is are I Are you've there this that versus maybe some kind How cycle, that can and we bottom coming you line that last contributor. into additional there half ‘XX? bigger -- contribution And go Okay. in playing which cycle got they thinking

They market kind use trucks is equipment. you And to percentage that of folks trailers Jack, can continue And kind the it's it, that it what been think the word limited of and four all allocated, or grown getting five dramatically. these years just buy about TEL equipment have your four a have of last three, allocated providers, you last limited, if grow. in of been over years, five or are

they of they and -- get a portion trucks they So that to don't only trailers service need replacement. the

so demand it's whether executing it's trucking is not lease there's just basically the maintenance for incredibly trucks, high lease companies, it's programs growth, I trucking shippers, what other companies, and and large it's they're and private And They're it's a built trailers, fleets, small doing. is it well, doing. they're in mean, just

we cliff think see. on on. And we going similar don't see what if to mean, We is I TEL backwards so don't TEL going been think a I a be any. lot, they've to

of on model, little the quarters some I last to It's say always equipment. would I bit sale a they they and them as And a have sale strong Paul not add that's truth, I of they're equipment, with all have, sales say just But that, that's mentioned, worried probably to cliff. a of of you'll equipment people falling point, TEL on gain see their business of talked are we last which market. to other for equipment, of what having gain areas two part Paul's other just their of mean, because help that quarter, and reductions the of may is been is true. about equipment exceptionally the market business, about pickup bit, or just their which to And start other higher, and from as recently a pieces offset some would off growing business. softens to

Okay. as and nice to you sort question acquisition some That's great. paying maybe quarters. strategic of just coming out into three, last acquire four guess, is I'm what And over sense? you businesses other the think the market or five maybe be at you deploying allocation, ATT guess buyback ATT capital clearly like I could think next dividends. there that could make would maybe I market, versus look through maybe that to that the trying M&A. Are

integration think, mean, we niche margin business, I Are Yes, here's we strategic one that I what just chase strategic of going going I has with solidly a niche a has just something was then it's is something that if look growing minimal at. would the it's something absolutely, business to something play No, that's has that sake and it's accretive, to for that's high doing, think other fit need risk. revenue? a be units, something the of to we're else

point, that what our side. combined And the in other that blender at with probably stocks put and we'll out the that comes see so where trading

question comes Bert Stifel. Subin from from next Our

guys. morning, probably it’s Hey, as Good Hey. maybe well. for Joey but Paul

give down merchandise as Are addition would weaker and you that eating back-to-school out color categories and called you're guys just hearing are being on to recent that, that around they into pressures inflationary from sales. And general you So any there perhaps holiday stronger the Walmart season? night last you call freight then initially what some took today your out can in in have its been months expected? guidance said customers than that some

David. – is still Hi, I this Bert, would

Thank say, even Hey, Dave. didn’t I you. hello.

Oh, that's okay.

go So their say identify Walmart really business continues owned concentrate mean really our off with that we very really the can't, the Coast. side as segment June. know, as, and Walmart you we well. comes through produce on I West I can't to to far this

has And been side so well. quite is their done store –

to well. was it so hiccups? our get or of itself And warehouses. freight eight as But business Has been months the has employment, ago. Yes, Walmart been as the everybody ago, with strong extremely has six been just because can't months there

weeks over there ago. continue. We were a of to a expect months, We just couple couple that of

we see anything So there. don't

in we expedited, great last for all extremely one Our that is retail the year mind And a have so got or inventories here's business, has ours of keep expedited, retail, been we expedited. got, that risen, expedited we've customer decent and know. as example, size,

okay to So have be slow, not with they this XX that, be et does doesn't we to; made the have have don't expedited. decision cetera. hey, It to hours, there we're in

into And where so with of our we solo side, instead expedited. it can were that able freight a go operation transition to managed

bucket we other the we one took put from So into it just the the and margins, bucket. we business, kept kept it

out so all Paul was And I July, know. last July years is of looked we only been week, filled as that them. as I've XX saying of

August, expect going July, school has thereafter. season start is get the rebound. Christmas into July then get So I and that it a shortly slowed. And we're to

every But been So far, I say lost, Business it let's there's we've business. there'll that replaced so with we do not that have think Business we've lost, or then uptick. new this. of downtick be ups an and seen a bit we've downs.

us kind that that's August not we're we I I of to we so trucks a trucks years, that start One think there's is two with market. their of tale thing leaving market, lived two the get market And that in? July July, are What's that But of through the July, will at do the telling dissatisfied we're so last for thousands hundreds tape this through the that And There's of shutting all. as and the going we know, recession the and think one lot it far. get as or trucking? of coming out doors. this spot to on do exiting are of trucks

nice a a standpoint. tailwind be to capacity going that's layoff little are that us so And from

going interest. it's be to So

next all expect. or idea to of in August an weeks, the what think four though, give will us three I of

and that's revenue profit that for sort expedited on side, side. of Thanks that's couple both been David. very up brought just of on strong times, and obviously, the the Maybe dovetailing that, the on been a

industrial a that's there. in to wane of to held you see -- the fair you we clients? Do hearing of amount you demand, And sounds that do any sort your demand do have expectation bit? it business colors well. have if there like quite from start haul persist line Are that can guys what just LTL LTL start you're You durables a little

Yes.

to the I of of that the is there's decreased. have, already, we've LTL there. pressure going And business, think seen on last we customers the have our be industrial side days, and in some that XX

We two so know these really in And answer the there's a need team? or whole Because customers ago, been ago, that the spread all fortunate two the of because expedited is at and and a have just do to out teams we expedited, enough a the forced to question lot truly took where we need of we model I when -- and this end day, that XXX to not out years a we in of when marketplace. really not? XXXX, a trucks said, years that do half went solo we us you are them

customers of a customers, business so standpoint. we And be we've a of with agreements even last person got with there lot lot not if got standing from our the but we a agreements of lot down their our slows them, obligation that will of all

far. And earth has feel though reduced, that even shattering been us comfortable I to so it's so very some not

the people speculating, positive are think revenue just Paul. truck be then you pressure much, a expect Thanks one would week being think probably most on there? to for still weaker some dedicated question ends side, If could up David. ‘XX per And year, there be whereas final Great. you or do per I so

I So thank Flat backwards positive. don't it'll think next you. to go year.

At further this time, questions. no have we

quarter this we appreciate look Erica. have great morning. time sharing Everybody in how did day. the to third forward a Okay, And everybody's We later.

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