COVENANT LOGISTICS GROUP, INC. (CVLG)

CIK: 0000928658. SIC: 4213 Trucking (No Local). Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Transportation, Communications, Electric, Gas, And Sanitary Services > Motor Freight Transportation And Warehousing > SIC 4213 Trucking (No Local)

SEC company page: https://www.sec.gov/edgar/browse/?CIK=928658. Latest filing source: 0001437749-26-006086.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000928658.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000928658.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-015445.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The condensed consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a Nevada holding company, and its wholly owned subsidiaries. References in this report to "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

This report contains certain statements that may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential defaults and results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, including driver satisfaction, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, utilization, upgrades, and age, availability and usage of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our business model, service standards, strategic plan and other strategic initiatives, changes to and deviations from our business model, strategic plan, and other strategic initiatives, claims and litigation, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies and insurance and claims accruals, contingent consideration related to our prior acquisitions, and the future impact of our prior acquisitions, among others, are forward-looking statements. Forward-looking statements may be identified by the use of terms or phrases such as "believe," "may," "could," "would," "will," "expects," "estimates," "projects," "appears," "mission," "anticipates," "plans," " outlook," "focus," "seek," "potential," "continue," "goal," "target," "objective," "optimistic," "intends," "improve," "remain," derivations thereof, and similar terms and phrases. Such statements are based on currently available operating, financial, and competitive information. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A. Risk Factors," set forth in our Form 10-K for the year ended December 31, 2025. Readers should review and consider the factors discussed in "Item 1A. Risk Factors," set forth in our Form 10-K for the year ended December 31, 2025, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

All such forward-looking statements speak only as of the date of this Form 10-Q. You are cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

Executive Overview

Our first quarter earnings were $0.17 per diluted share, falling short of our expectations, largely as a result of severe weather shutdowns and fuel cost headwinds in January and February. However, freight volumes and rates improved in March, and we are encouraged by our positive operating performance and the momentum we are carrying into the second quarter, such as an expanding pipeline of new customers seeking committed capacity, rate increases with select existing customers, and the traditional seasonal improvement in freight volumes.

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Additional items of note for the first quarter of 2026 include the following:

●

Total revenue of $307.2 million, an increase of 14.0% compared with the first quarter of 2025, and freight revenue (which excludes revenue from fuel surcharges) of $281.9 million, an increase of 15.9% compared with the first quarter of 2025;

●

Operating income of $6.3 million, compared with $7.6 million in the first quarter of 2025;

●

Net income of $4.4 million, or $0.17 per diluted share, compared with $6.6 million, or $0.24 per diluted share, in the first quarter of 2025;

●

Our equity investment in TEL provided $3.7 million of pre-tax earnings in the first quarter of 2026 compared to $3.8 million in the first quarter of 2025;

●

We distributed a total of $1.8 million to stockholders through cash dividends;

●

Since December 31, 2025, total indebtedness, comprised of total debt and finance leases, net of cash, decreased by $51.0 million to $245.3 million, primarily due to selling a large amount of unproductive used equipment and buying very little new equipment. With available borrowing capacity of $57.5 million under our Credit Facility at March 31, 2026 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

●

Leverage ratio (ending total indebtedness, comprised of debt and finance leases, net of cash, divided by the sum of operating income, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) as of March 31, 2026 was 2.37;

●

Stockholders' equity at March 31, 2026, was $407.6 million; and

●

Tangible book value at March 31, 2026, was $224.6 million.

Outlook

Solid economic demand and shrinking industry-wide driver capacity are creating a favorable environment for building project pipelines and improving yield and revenue per tractor. With most of our revenue under contracts ranging from one to three years in duration, we expect to see gradual improvement beginning with the second quarter of 2026 and extending for several quarters to come. As contracts become available, we intend to be nimble in allocating our equipment and people toward the relationships that produce long-term value through adequate margin and returns. Our momentum continues to build this year, and our team who are running the business have palpable energy and enthusiasm.

Our plan for the remainder of 2026 is to improve yields and reallocate assets to operations that improve our margins and returns. Based on a rapidly growing pipeline of customer demand, we expect to make significant progress assuming the current market momentum continues.

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Non-GAAP Reconciliation

In addition to operating ratio, we use "adjusted operating ratio" as a key measure of profitability. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. We believe the use of adjusted operating ratio allows us to more effectively compare periods, while excluding the potentially volatile effect of changes in fuel prices, amortization of intangibles, and significant unusual items. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define adjusted operating ratio differently. Because of these limitations, adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

Operating Ratio

Three Months Ended March 31,

GAAP Operating Ratio:

2026

OR %

2025

OR %

Total revenue

$

307,161

$

269,355

Total operating expenses

300,879

98.0

%

261,728

97.2

%

Operating income

$

6,282

$

7,627

Adjusted Operating Ratio:

2026

Adj. OR %

2025

Adj. OR %

Total revenue

$

307,161

$

269,355

Fuel surcharge revenue

(25,236

)

(26,136

)

Freight revenue (total revenue, excluding fuel surcharge)

281,925

243,219

Total operating income

6,282

7,627

Adjusted for:

Amortization of intangibles

3,000

2,371

Contingent consideration liability adjustment

328

710

Transaction costs

-

149

Adjusted operating income

$

9,610

96.6

%

$

10,857

95.5

%

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Revenue and Expenses

We focus on targeted markets throughout the United States where we believe our service standards can provide a competitive advantage. We are a major carrier for transportation companies such as parcel freight forwarders, less-than-truckload carriers, and third-party logistics providers that require a high level of service to support their businesses, as well as for traditional truckload customers such as manufacturers, retailers, and food and beverage shippers. Additionally, we provide poultry feed and live haul transportation, as well as highly regulated, time sensitive loads for the U.S. government.

We have four reportable segments, which include:

●

Expedited: The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery win

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-02-27. Report date: 2025-12-31.

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with “Business” in Part I, Item 1 of this Annual Report on Form 10-K, as well as the consolidated financial statements and notes thereto in Part II, Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements as a result of many factors, including those set forth under Part I, Item 1A. “Risk Factors” and Part I “Cautionary Note Regarding Forward-Looking Statements” of this Annual Report on Form 10-K, and elsewhere in this report. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those discussed.

EXECUTIVE OVERVIEW

We are a leading provider of high-service truckload transportation and logistics services. Our strategy is to focus on value-added, less commoditized portions of our customers’ supply chains and thereby become embedded in their business processes. We believe disciplined planning and execution of our strategy will continue to reduce the cyclicality and seasonality of our financial results through growth in higher margin, less volatile services, which in turn will enhance sustainable long-term earnings power and return on invested capital for our stockholders.

Our four reportable segments are Expedited, Dedicated, Managed Freight, and Warehousing, each as described under “Reportable Segments and Service Offerings” in Part I, Item 1 of this Annual Report on Form 10-K. During 2025, the Company operated in a challenging freight and logistics environment characterized by prolonged industry overcapacity, muted demand, episodic weather-related disruptions, and elevated cost pressures, including elevated insurance expense, impairment of goodwill, and additional equipment related expenses. Within our Expedited reportable segment, both total revenue and margins declined year over year primarily as a result of an approximately 4.7% reduction in average total tractors and a 3.7% increase in utilization year over year. Within our Dedicated reportable segment, total revenue increased while margins declined year over year primarily as a result of an approximately 11.5% increase in average total tractors along with a 8.0% decrease in utilization year over year. Managed Freight experienced increased revenue with the fourth quarter integration of assets acquired that are now operating as Star (the "Star Acquisition") helping to offset the July 2025 loss of a key customer, but heightened costs associated with securing capacity during peak season compressed margins. Warehousing operating income declined compared to 2024 primarily as the result of onboarding a significant new customer during the fourth quarter of 2025 resulting in associated startup expenses and operational inefficiencies that more than offset the incremental revenue.

The table below reflects the total revenue trends in each of these reportable segments:

Year ended December 31,

(in thousands)

2025

2024

Revenues:

Expedited

$

373,294

$

416,461

Dedicated

403,180

364,414

Managed Freight

286,806

248,939

Warehousing

100,555

101,662

Other

637

-

Total revenues

$

1,164,472

$

1,131,476

Our consolidated financial results are summarized as follows:

●

Total revenue was $1,164.5 million, compared with $1,131.5 million for 2024, and freight revenue (which excludes revenue from fuel surcharges) was $1,059.2 million, compared with $1,013.9 million for 2024;

●

Operating income from continuing operations was $2.9 million, compared with operating income from continuing operations of $44.8 million for 2024;

●

Net income was $7.2 million, or $0.27 per diluted share, compared with net income of $35.9 million, or $1.30 per diluted share, for 2024; Net income from continuing operations was $4.4 million, or $0.16 per diluted share, for 2025, compared to $35.3 million or $1.28 per diluted share in 2024. Net income from discontinued operations of $2.8 million, or $0.11 per diluted share, for 2025, compared to $0.6 million, or $0.02 per diluted share in 2024;

●

With available borrowing capacity of $53.3 million under our Credit Facility as of December 31, 2025, we do not expect to be required to test our fixed charge covenant in the foreseeable future;

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●

Our equity investment in TEL provided $14.7 million of pre-tax earnings in each 2025 and 2024;

●

Since December 31, 2024, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $76.7 million to $296.3 million;

●

Leverage ratio (average total indebtedness, net of cash, divided by the sum of operating income (loss, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) was 2.89 at December 31, 2025, compared to 1.65 at December 31, 2024;

●

Stockholders' equity at December 31, 2025 was $404.0 million, compared to $438.3 million at December 31, 2024; and

●

Tangible book value at December 31, 2025 was $217.9 million, compared to $269.3 million at December 31, 2024. 

Outlook

Our plan for 2026 includes continued reallocation of capital to better returning operations while positioning for an expected improvement in freight fundamentals. During the first half of the year, we expect to exit unprofitable business relationships, moderately reduce our total truckload fleet (while growing the most profitable components), improve free cash flow and deleverage our balance sheet.  We will be opportunistic in investing in areas that differentiate us from other carriers, focusing on high value and high service requirement freight. Our truckload business requires substantial capital and carries significant risks, and we need to seek and execute on business where the returns justify continued reinvestment.

We remain optimistic about improving freight fundamentals, as well as our ability to be more efficient with our equipment and capture operating leverage and improve financial results in 2026. The improvements are likely to come later in the year, with the first quarter being impacted by seasonality, extreme weather, a still-developing freight market situation, and a potential margin squeeze in Managed Freight.

The last few years have been characterized by acquisitions, dispositions, and share buybacks as we have revamped the Company. We believe we have a stronger, more stable business with greater upside leverage in a future market recovery. We believe 2026 is all about execution, and we are hard at work to get that done.

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RESULTS OF CONSOLIDATED OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The following table sets forth total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated:

Revenue

Year ended December 31,

(in thousands)

2025

2024

Revenue:

Freight revenue

$

1,059,235

$

1,013,941

Fuel surcharge revenue

105,237

117,535

Total revenue

$

1,164,472

$

1,131,476

The increase in total revenue resulted from a $37.9 million and $36.8 million increase in Managed Freight and Dedicated freight revenue, respectively, partially offset by a $29.5 million and $0.5 million decrease in freight revenue from our Expedited and Warehousing reportable segments, respectively.

See results of reportable segment operations section for discussion of fluctuations.

For comparison purposes in the discussion below, we use total revenue and freight revenue (total revenue less fuel surcharge revenue) when discussing changes as a percentage of revenue.

For each expense item discussed below, we have provided a table setting forth the relevant expense first as a percentage of total revenue, and then as a percentage of freight revenue.

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Salaries, wages, and related expenses

Year ended December 31,

(dollars in thousands)

2025

2024

Salaries, wages, and related expenses

$

433,238

$

423,319

% of total revenue

37.2

%

37.4

%

% of freight revenue

40.9

%

41.7

%

The increase in salaries, wages, and related expenses on a dollars basis is primarily the result of pay increases due to the expanded scale of our Dedicated agriculture supply chain operations and the strategic reduction in commoditized freight across the Expedited and Dedicated fleets since the prior period, as well as averaging more drivers and tractors resulting in higher driver salaries, wages, and benefits as a result of growth in Dedicated. As a percentage of freight revenue salaries, wages, and related expenses decreased as the foregoing factors increasing these expenses were offset by a lower percentage of revenue from Expedited, where we have driver pay, and a higher percentage of revenue from Managed Freight, where we don't have driver pay.

We believe driver and non-driver, including shop technicians, pay and benefits will continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance. Driver pay may also fluctuate based on the number of miles driven. While driver pay remains stable at the present time, we have historically put driver pay increases in place as necessary to address driver market pressure and will continue to do so in the future as necessary. If freight market rates increase, we would expect to, as we have historically, pass a portion of those rate increases on to our professional drivers. Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight reportable segment, for which payments are reflected in the purchased transportation line item, as well as the mix of specialized freight (which requires higher driver pay) and commoditized freight.

Fuel expense

Year ended December 31,

(dollars in thousands)

2025

2024

Fuel expense

$

112,292

$

115,981

% of total revenue

9.6

%

10.3

%

% of freight revenue

10.6

%

11.4

%

The decreases in total fuel expense are primarily related to lower fuel prices in 2025, as well as a 4.4% decrease in total miles.

We receive a fuel surcharge on our loaded miles from most shippers; however, in times of increasing fuel prices, this does not cover the entire increase in fuel prices for several reasons, including the following: surcharges cover only loaded miles we operate; surcharges do not cover miles driven out-of-route by our drivers; and surcharges typically do not cover refrigeration unit fuel usage or fuel burned by tractors while idling. Moreover, most of our business relating to shipments obtained from freight brokers does not carry a fuel surcharge. Finally, fuel surcharges vary in the percentage of reimbursement offered, and not all surcharges fully compensate for fuel price increases even on loaded miles.

The rate of fuel price changes also can have an impact on results. Most fuel surcharges are based on the average fuel price as published by the DOE for the week prior to the shipment, meaning we typically bill customers in the current week based on the previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true. Fuel prices as measured by the DOE averaged approximately $0.11 per gallon, or 3.0%, lower in 2025 than 2024.

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To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third-parties, which is included in purchased transportation) from our fuel expense. The result is referred to as net fuel expense. Our net fuel expense as a percentage of freight revenue is affected by the cost of diesel fuel net of fuel surcharge revenue, the percentage of miles driven by company tractors, our fuel economy, and our percentage of deadhead miles, for which we do not receive material fuel surcharge revenues. Net fuel expense is shown below:

Year ended December 31,

(dollars in thousands)

2025

2024

Total fuel surcharge

$

105,237

$

117,535

Less: Fuel surcharge revenue reimbursed to independent contractors and other third-parties

6,950

9,032

Company fuel surcharge revenue

$

98,287

$

108,503

Total fuel expense

$

112,292

$

115,981

Less: Company fuel surcharge revenue

98,287

108,503

Net fuel expense

$

14,005

$

7,478

% of freight revenue

1.3

%

0.7

%

Net fuel expense increased $6.5 million, or 87.3%, for the year ended December 31, 2025, compared to 2024. As a percentage of freight revenue, net fuel expense increased 0.6% for the year ended December 31, 2025, compared to 2024, primarily due to decreased fuel surcharge recovery partially offset by lower fuel prices.

We expect to continue managing our idle time and tractor speeds, investing in more fuel-efficient tractors and auxiliary power units to improve our miles per gallon, locking in fuel hedges when deemed appropriate, partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs, and testing the latest technologies that reduce fuel consumption. Going forward, our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, percentage of uncompensated miles, percentage of revenue generated by team-driven tractors (which tend to generate higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue), percentage of revenue generated from independent contractors, and the success of fuel efficiency initiatives.

Operations and maintenance

Year ended December 31,

(dollars in thousands)

2025

2024

Operations and maintenance

$

69,573

$

61,696

% of total revenue

6.0

%

5.5

%

% of freight revenue

6.6

%

6.1

%

The increase in operations and maintenance expense was primarily the result of high demands on equipment as we grow our fleet into specialty freight areas, as well as more equipment damage than was experienced in the prior year. 

Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, our mix of specialty and commoditized freight, and any disruption of the supply chain. Additionally, operations and maintenance costs may increase if we experience wage and parts inflation.

Revenue equipment rentals and purchased transportation

Year ended December 31,

(dollars in thousands)

2025

2024

Revenue equipment rentals and purchased transportation

$

286,711

$

254,302

% of total revenue

24.6

%

22.5

%

% of freight revenue

27.1

%

25.1

%

The increase in revenue equipment rentals and purchased transportation was primarily the result of an increase in purchased transportation costs related to new business awarded to the Managed Freight reportable segment during the year, partially offset by a slight decrease in the percentage of the total miles run by independent contractors from 7.8% for 2024 to 7.3% for 2025 and a first quarter $7.6 million decrease in purchased transportation costs due to the decline in the spot market that primarily affected the Managed Freight reportable segment.

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We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile. In addition, if fuel prices increase, it would result in a further increase in what we pay third-party providers and independent contractors. However, this expense category will fluctuate with the number and percentage of loads hauled by independent contractors, loads handled by Managed Freight, and tractors, trailers, and other assets financed with operating leases. In addition, factors such as the cost to obtain third-party transportation services and the amount of fuel surcharge revenue passed through to the third-party providers and independent contractors will affect this expense category. If industry-wide trucking capacity tightens in relation to freight demand, we may need to increase the amounts we pay to third-party providers and independent contractors, which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue. If we were to recruit more independent contractors we would expect this line item to increase as a percentage of revenue.

Operating taxes and licenses

Year ended December 31,

(dollars in thousands)

2025

2024

Operating taxes and licenses

$

13,776

$

11,954

% of total revenue

1.2

%

1.1

%

% of freight revenue

1.3

%

1.2

%

For the period presented, the change in operating taxes and licenses is insignificant both as a percentage of total revenue and freight revenue.

Insurance and claims

Year ended December 31,

(dollars in thousands)

2025

2024

Insurance and claims

$

70,125

$

59,845

% of total revenue

6.0

%

5.3

%

% of freight revenue

6.6

%

5.9

%

Insurance and claims per mile cost increased to 26.6 cents per mile for 2025 from 21.7 cents per mile in 2024. The increase is primarily the result of an increase in claims and premium expense, including the settlement of a large auto liability claim during 2025, being spread over decreased miles compared to the prior year. 

Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term. If that occurs, we will be operating with less liability insurance coverage at various levels of our insurance tower and may incur additional premiums. For the policy period that ran from April 1, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded based on claims expense. We replaced our $9.0 million in excess of $1.0 million layer with a new $7.0 million in excess of $3.0 million policy that we continue to maintain. Due to the erosion of the $9.0 million in excess of $1.0 million layer, any adverse developments in claims filed between April 1, 2018 and March 31, 2021, could result in additional expense accruals. As of December 31, 2025, there were no outstanding claims in this layer. We have maintained our retention and limits set in place during the prior renewal cycle. Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

We expect insurance and claims expense to continue to be volatile over the long-term. To the extent damages awarded against us for any claims exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in our insurance premiums, our insurance and claims expense would be volatile and increase. Any resulting increases in such expenses could have a materially adverse effect on our business, results of operations, financial condition, or liquidity. For additional details regarding our claims accruals, see Note 16, "Commitment and Contingencies" of the accompanying consolidated financial statements.

Communications and utilities

Year ended December 31,

(dollars in thousands)

2025

2024

Communications and utilities

$

6,379

$

5,407

% of total revenue

0.5

%

0.5

%

% of freight revenue

0.6

%

0.5

%

For the period presented, the change in communications and utilities is insignificant both as a percentage of total revenue and freight revenue.

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Table of Contents

General supplies and expenses

Year ended December 31,

(dollars in thousands)

2025

2024

General supplies and expenses

$

59,185

$

66,053

% of total revenue

5.1

%

5.8

%

% of freight revenue

5.6

%

6.5

%

The decrease in general supplies and expenses was primarily the result of a $2.8 million increase in the contingent consideration liability recognized in 2025 compared to a $16.0 million increase recognized in 2024, partially offset by additional costs related to investments in technology and the Star Acquisition.

Depreciation and amortization

Year ended December 31,

(dollars in thousands)

2025

2024

Depreciation and amortization

$

92,726

$

86,529

% of total revenue

8.0

%

7.6

%

% of freight revenue

8.8

%

8.5

%

Depreciation and amortization consists primarily of depreciation of tractors, trailers and other capital assets (including those under finance leases), as well as amortization of intangible assets. 

Depreciation increased $4.9 million in 2025 to $81.9 million compared to 2024, primarily as a result of the increased cost of new equipment and an additional $2.2 million of depreciation expense as a result of an increased rate of depreciation during the quarter ended December 31, 2025. Amortization of intangible assets increased $1.3 million in 2025 to $10.8 million compared to 2024, primarily due to the amortization of the intangible assets related to the 2025 acquisitions. Subsequent to our January 29, 2026 earnings release, we reclassified $6.5 million of depreciation for 2025 from depreciation and amortization to write-down of held-for-sale assets. This reclassification did not change our total operating expenses for 2025.

We expect depreciation and amortization to increase going forward as the cost of new equipment increases. Additionally, changes in the used tractor market have caused us to adjust residual values and increase depreciation, and further adjustments may be necessary in the future. These changes may also cause us to hold assets longer than planned, or experience increased losses on sale. If we were to grow our Expedited or Dedicated reportable segments we may face additional increases in depreciation and amortization.

Write-down of held-for-sale assets

Year ended December 31,

(dollars in thousands)

2025

2024

Write-down of held-for-sale assets

$

6,495

$

-

% of total revenue

0.6

%

0.0

%

% of freight revenue

0.6

%

0.0

%

Write-down of held-for-sale assets represents the expense recognized to adjust the assets moved to held-for-sale to their current fair market value less costs to sell during 2025.

Loss on disposition of property and equipment, net

Year ended December 31,

(dollars in thousands)

2025

2024

Loss on disposition of property and equipment, net

$

337

$

1,630

% of total revenue

0.0

%

0.1

%

% of freight revenue

0.0

%

0.2

%

For the period presented, the change in disposition of property and equipment, net is insignificant both as a percentage of total revenue and freight revenue. 

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Table of Contents

Impairment of goodwill

Year ended December 31,

(dollars in thousands)

2025

2024

Impairment of goodwill

$

10,698

$

-

% of total revenue

0.9

%

0.0

%

% of freight revenue

1.0

%

0.0

%

Impairment of goodwill represents the goodwill impairment recognized on the Dedicated reportable segment during 2025, primarily related to a reduction of projected future cash flows within our legacy dedicated reporting unit.

Interest expense, net

Year ended December 31,

(dollars in thousands)

2025

2024

Interest expense, net

$

12,055

$

13,576

% of total revenue

1.0

%

1.2

%

% of freight revenue

1.1

%

1.3

%

For the period presented, the change in interest expense, net is insignificant both as a percentage of total revenue and freight revenue.

This line item will fluctuate based on our decision with respect to purchasing revenue equipment with balance sheet debt versus operating leases, our revenue equipment replacement plan, and changing interest rates.

Income from equity method investment

Year ended December 31,

(in thousands)

2025

2024

Income from equity method investment

$

14,709

$

14,713

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income. Our earnings resulting from our investment in TEL were $14.7 million for both 2025 and 2024. Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate. We currently expect TEL's results for 2026 to remain similar to those of 2025.

Income tax expense

Year ended December 31,

(dollars in thousands)

2025

2024

Income tax expense

$

1,181

$

10,576

% of total revenue

0.1

%

0.9

%

% of freight revenue

0.1

%

1.0

%

The decrease in tax expense primarily relates to the decrease in operating income as described above.

The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences. The rate impact of these items will fluctuate in future periods as income fluctuates.

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Table of Contents

RESULTS OF SEGMENT OPERATIONS

We have four reportable segments, Expedited, Dedicated, Managed Freight, and Warehousing each as described under "Reportable Segments and Service Offerings" in Part I, Item 1 of this Annual Report on Form 10-K.

The following table summarizes revenue and operating income data by reportable segment and service offering:

Year ended December 31,

(in thousands)

2025

2024

Revenues:

Expedited

$

373,294

$

416,461

Dedicated

403,180

364,414

Managed Freight

286,806

248,939

Warehousing

100,555

101,662

Other

637

-

Total revenues

$

1,164,472

$

1,131,476

Segment Operating Income(1):

Expedited

$

21,126

$

47,940

Dedicated

19,986

38,580

Managed Freight

12,166

14,905

Warehousing

7,699

11,403

(1)

Segment operating income excludes indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, impairment of goodwill, and contingent consideration liability adjustments to match the information our chief operating decision maker ("CODM") uses to evaluate the operating results of our reportable segments.

Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024

Our Expedited total revenue decreased $43.2 million, as fuel surcharge revenue decreased $13.7 million and freight revenue decreased $29.5 million. The decrease in Expedited freight revenue relates to a 42 (or 4.7%) average tractor decrease compared to 2024, and a decrease in average freight revenue per tractor per week of 3.7%. The decrease in average freight revenue per tractor per week is the result of an approximately 4.4% decrease in average miles per tractor partially offset by a  0.5%, or 1.1 cents per mile, increase in average rate per total mile when compared to 2024. Seated team driven tractors decreased approximately 4.9% to an average of 788 teams in 2025 from 829 teams in 2024. 

Our Dedicated total revenue increased $38.8 million, as freight revenue increased $36.8 million and fuel surcharge revenue increased $1.9 million. The increase in Dedicated freight revenue relates to a 157 (or 11.5%) average tractor increase and an increase in average freight revenue per tractor per week of 0.4%, compared to 2024. The increase in average freight revenue per tractor per week is the result of a 8.9%, or 25.5 cents per mile, increase in average rate per total mile, partially offset by 8.0% fewer miles per tractor.

Managed Freight total revenue increased $37.9 million in 2025, compared to 2024 as a result of new business awarded during 2025, the October 2025 Star Acquisition, and the team's effort to identify and execute on overflow capacity from our Expedited reportable segment. During the fourth quarter of 2025, some new business awarded during 2025 was discontinued. Revenue in this reportable segment is expected to fluctuate with changes in the freight market and our percentage of contracted versus non-contracted freight.

The Warehousing total revenue remained relatively even compared to 2024.

Other includes support services provided to our customers and third party carriers primarily including equipment maintenance and equipment leasing.

The decrease in Expedited operating income was the result of the aforementioned decrease in total revenue partially offset by a decrease in Expedited operating expenses. The decrease in Expedited operating expenses was primarily due to decreases in salaries, wages, and benefits for our professional drivers and fuel expense as compared to 2024 as a result of fewer average miles per unit and a decrease in the average number of Expedited team-driven tractors. Going forward, our focus in Expedited will be on improving margins through rate increases, exiting less profitable business, and adding more profitable business.

The decrease in Dedicated operating income was the result of an increase in Dedicated operating expenses partially offset by the aforementioned increase in total revenue. The increase in Dedicated operating expenses was primarily the result of increased salaries, wages, and benefits for our professional drivers, operations and maintenance costs, purchase transportation, insurance costs, and depreciation expense as a result of growth and increased equipment costs, since 2024. Going forward, we remain focused on our strategy of growing our dedicated fleet, specifically in areas that provide value-added services for customers. We believe that if we are successful in providing best in class service and controlling our costs, growth and improved profitability will result.

The decrease in Managed Freight operating income is the result of an increase in Managed Freight operating expenses, partially offset by an increase in total revenue. The increase in Managed Freight operating expenses is the result of the increase in revenue driving increases in variable expenses, primarily heightened purchased transportation, particularly during the fourth quarter peak season. Going forward, we seek to grow Managed Freight with profitable revenue from new customers from organic initiatives and the Star Acquisition, work closely with our asset-based segments to capitalize on overflow opportunities when available, and optimize costs to yield longer-term margin goals in the mid-single digits, which would generate an acceptable return on capital given the asset light nature of the business.

The decrease in Warehousing operating income is primarily the result of an increase in Warehousing operating expenses. The increase in Warehousing operating expenses is the combination of facility related cost increases for which we have not yet negotiated rate increases with our customers and startup-related costs and inefficiencies related to new business, including the onboarding of a significant new customer during the fourth quarter of 2025 whereby the associated startup expenses and operational inefficiencies more than offset the additional revenue. Going forward, we intend to improve upon the margin within this segment through a combination of rate increases and cost reductions.  

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Table of Contents

Liquidity and Capital Resources

Our business requires significant capital investments over the short-term and the long-term. Historically, we have financed our capital requirements with borrowings under our Credit Facility, cash flows from operations, long-term operating leases, finance leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment. Going forward, we expect revenue equipment acquisitions to primarily be through purchases and finance leases. Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs. We had working capital (total current assets less total current liabilities) of $22.8 million and $32.6 million at December 31, 2025 and 2024, respectively. Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements. Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs and we do not expect to experience material liquidity constraints in the foreseeable future.

With an average tractor fleet age of 2.0 years, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options. If we were to grow our independent contractor fleet, our capital requirements would be reduced.

As of December 31, 2025 and December 31, 2024 we had $338.7 million and $296.9 million in debt and lease obligations, respectively, consisting of the following:

●

$30.0 million and no outstanding borrowings under the Credit Facility;

●

$251.7 million and $233.5 million in revenue equipment installment notes, respectively;

●

$16.3 million and $17.8 million in real estate notes, respectively;

●

$3.2 million and $3.9 million of the principal portion of financing lease obligations, respectively; and

●

$37.5 million and $41.7 million of the operating lease obligations, respectively.

The increase in our revenue equipment installment notes was primarily due to additional borrowings related to our trade cycle. The decrease in operating and finance lease obligations was primarily due to amortization of the respective lease liability. 

As of December 31, 2025, we had $30.0 million borrowings outstanding, undrawn letters of credit outstanding of approximately $19.9 million, and available borrowing capacity of $53.3 million under the Credit Facility. Fluctuations in the outstanding balance and related availability under our Credit Facility were driven primarily by the Star Acquisition, cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable and leases, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment. Refer to Note 10, “Debt” of the accompanying consolidated financial statements for further information about material debt agreements.

Our net capital expenditures for the year ended December 31, 2025 totaled $112.1 million of expenditures as compared to $80.8 million of expenditures for the prior year. Our baseline expectation for 2026 fleet net capital expenditures is a range of $40 million to $50 million which is a significant reduction compared to 2025 due to purchasing fewer new tractors in the year than we are selling. These assumptions are subject to risk. For example, global supply chain disruptions similar to 2021 and 2022 could impact the availability of tractors and trailers and lead to increased pricing on new and used equipment. Net losses on disposal of equipment and real estate in 2025 were $0.3 million compared to $1.6 million in 2024.

We had commitments outstanding at December 31, 2025, to acquire revenue equipment totaling approximately $100.8 million in 2025 versus commitments at December 31, 2024 of approximately $114.0 million. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits.

We distributed a total of $7.2 million and $5.8 million to stockholders through dividends during the years ended December 31, 2025 and 2024, respectively.

We believe we have sufficient liquidity to satisfy our cash needs and will continue to evaluate the nature and extent of the potential short-term and long-term impacts to our business.

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Table of Contents

Cash Flows

Net cash flows provided by operating activities decreased to $113.7 million in 2025, compared with $122.9 million in 2024, primarily due a $28.7 million decrease in net income partially offset by increases in non-cash expenses such as the impairment of goodwill, write-down of held-for-sale assets, and depreciation and amortization compared to 2024.

Net cash flows used by investing activities were $140.1 million in 2025, compared with $107.6 million used in 2024. The increase in net cash flows used by investing activities was primarily due to the October 2025 Star Acquisition for $27.1 million, compared to the $4.6 million payment related to the acquisition of LTST and our Section 338(h)(10) election during the 2024 period, and the timing of our trade cycle whereby we took delivery of approximately 511 new tractors and 1012 new trailers, while disposing of approximately 465 used tractors and 310 used trailers during 2025 compared to delivery of 747 new tractors and 791 new trailers, while disposing of approximately 1,051 used tractors and 444 used trailers in 2024.

Net cash flows used by financing activities were approximately $4.3 million in 2025, compared to $18.1 million provided by financing activities in 2024. The change in net cash flows from financing activities was primarily the result of the repurchase of $36.6 million of shares of our Class A common stock during 2025 compared to none during 2024, partially offset by net proceeds relating to notes payable and our Credit Facility of $45.8 million during 2025, compared to net proceeds of $30 million in 2024.

Net cash flows provided by operating activities and used by financing activities in the 2025 period also included payment of $8.0 million and $5.3 million, respectively, of contingent consideration liabilities related to the acquisition of LTST. Net cash flows provided by operating activities and provided by financing activities in the 2024 period also included payment of $3.0 million and $7.0 million, respectively, of contingent consideration liabilities related to the acquisition of AAT.

On April 23, 2025, the Board approved a stock repurchase program authorizing the purchase of up to $50 million of the Company's Class A common stock from time-to-time based upon market conditions and other factors. The stock may be repurchased on the open market, in privately negotiated transactions, or other legally permissible means, including pursuant to Rule 10b5-1 trading plans. The Company did not place a limit on the duration of the repurchase program. The stock repurchase program does not obligate the Company to repurchase any specific number of shares, and the Company may suspend or terminate the program at any time without prior notice. During the year ended December 31, 2025, we repurchased approximately 1.6 million shares of our Class A common stock for $36.2 million (excluding excise tax).

Our cash flows may fluctuate depending on capital expenditures, future stock repurchases, dividends, strategic investments or divestitures, and the extent of future income tax obligations and refunds.

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Table of Contents

Non-GAAP Financial Measures

Operating Ratio

Operating Ratio (“OR”) For 2025 and 2024:

(Dollars in thousands)

Year Ended December 31,

GAAP Presentation

2025

2024

Total revenue

$

1,164,472

$

1,131,476

Total operating expenses

1,161,535

1,086,716

Operating income

$

2,937

$

44,760

Operating ratio

99.7

%

96.0

%

Non-GAAP Presentation

2025

2024

Total revenue

$

1,164,472

$

1,131,476

Fuel surcharge revenue

(105,237

)

(117,535

)

Freight revenue (total revenue, excluding fuel surcharge)

$

1,059,235

$

1,013,941

Total operating income

2,937

44,760

Amortization of intangibles (1)

10,770

9,488

Contingent consideration liability adjustment

2,838

16,492

Transaction costs

567

-

Employee separation costs

1,375

-

Lease abandonment and customer exit costs

429

-

Abandonment of long-lived software

1,884

-

Impairment of goodwill

10,698

-

One-time insurance expenses

11,585

-

Impairment of revenue equipment and related charges

8,652

-

Adjustments to operating income

$

48,798

$

25,980

Adjusted operating income

$

51,735

$

70,740

Adjusted operating ratio

95.1

%

93.0

%

(1) "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets.

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Table of Contents

(dollars in thousands)

Year Ended December 31,

GAAP Presentation

2025

2024

Expedited

Dedicated

Managed Freight

Warehousing

Expedited

Dedicated

Managed Freight

Warehousing

Total revenue

$

373,294

$

403,180

$

286,806

$

100,555

$

416,461

$

364,414

$

248,939

$

101,662

Total segment operating expenses (1)

352,168

383,194

274,640

92,856

368,521

325,834

234,034

90,259

Segment operating income (1)

$

21,126

$

19,986

$

12,166

$

7,699

$

47,940

$

38,580

$

14,905

$

11,403

Segment operating ratio (1)

94.3

%

95.0

%

95.8

%

92.3

%

88.5

%

89.4

%

94.0

%

88.8

%

Non-GAAP Presentation

Total revenue

$

373,294

$

403,180

$

286,806

$

100,555

$

416,461

$

364,414

$

248,939

$

101,662

Fuel surcharge revenue

(56,076

)

(48,554

)

-

(607

)

(69,764

)

(46,627

)

-

(1,144

)

Freight revenue (total revenue, excluding fuel surcharge)

317,218

354,626

286,806

99,948

346,697

317,787

248,939

100,518

Total segment operating income (1)

$

21,126

$

19,986

$

12,166

$

7,699

$

47,940

$

38,580

$

14,905

$

11,403

Other (2)

(5,801

)

(3,918

)

(890

)

(2,470

)

(23,645

)

(15,061

)

(909

)

(2,469

)

Transaction costs

-

149

-

-

-

-

-

-

Employee separation costs

680

622

73

-

-

-

-

-

Lease abandonment and customer exit costs

49

166

214

-

-

-

-

-

Abandonment of long-lived software

880

1,004

-

-

-

-

-

-

Adjusted segment operating income

$

16,934

$

18,009

$

11,563

$

5,229

$

24,295

$

23,519

$

13,996

$

8,934

Adjusted segment operating ratio

94.7

%

94.9

%

96.0

%

94.8

%

93.0

%

92.6

%

94.4

%

91.1

%

(1) Segment operating expenses, segment operating income, and segment operating ratio exclude indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, impairment of goodwill, and contingent consideration liability adjustments to match the information our Chief Operating Decision Maker uses to evaluate the operating results of our reportable segments. The prior year periods have been conformed to this presentation.

(2) Represents indirect costs not directly attributable to any one reportable segment.

In addition to operating ratio, we use "adjusted operating ratio" as a key measure of profitability. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, intangibles amortization, and certain other costs and expenses specified in the tables above, expressed as a percentage of revenue, excluding fuel surcharge revenue. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. We believe the use of adjusted operating ratio allows us to more effectively compare periods, while excluding the potentially volatile effect of changes in fuel prices. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define adjusted operating ratio differently. Because of these limitations, adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated. A summary of the significant accounting policies followed in preparation of the financial statements is contained in Note 1, "Summary of Significant Accounting Policies," of the consolidated financial statements attached hereto. The following discussion addresses our most critical accounting policies, which are those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.

Revenue Equipment

Management estimates the useful lives and salvage value of revenue equipment based upon, among other things, the expected use, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. We generally depreciate new tractors over five years to salvage values that range from 0% to 35% of cost, depending on the reportable segment profile of the equipment. We generally depreciate new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 20% and 25% of their cost, respectively. During the quarter ended December 31, 2025, we made the decision to sell certain subsets of our revenue equipment and classified such equipment as available for sale. As such, we recognized an asset held-for-sale write-down of $6.5 million, which is included in write-down of held-for-sale assets in the consolidated statements of operations reducing assets to their current fair market value less costs to sell.  We also increased the rate of depreciation on certain units during the quarter ended December 31, 2025, in anticipation of exiting unprofitable business relationships and moderately reducing our total truckload fleet (while growing the most profitable components) which resulted in an additional $2.2 million of depreciation expense. We performed a review of our estimates for certain subsets of revenue equipment during the quarter ended June 30, 2024 and, due to a weak used revenue equipment market, we increased the rate of depreciation on these units in the period. This change resulted in an additional $6.4 million of depreciation expense during the year ended December 31, 2024. Historically, changes in estimated useful life or salvage values have typically resulted from us transferring tractors to different reportable segments with different operating profiles. Significant fluctuations in the used equipment market could have a material effect on our results of operations.

A portion of our tractors are protected by binding trade-back agreements with the manufacturers. The remainder of our tractors and substantially all of our owned trailers are subject to fluctuations in market prices for used revenue equipment. Moreover, our trade-back agreements are contingent upon reaching acceptable terms for the purchase of new equipment. Declines in the price of used revenue equipment or failure to reach agreement for the purchase of new tractors with the manufacturers issuing trade-back agreements could result in impairment of, or losses on the sale of, revenue equipment.

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Business Combination Estimates

Acquisitions are accounted for using the purchase method. Consideration is typically paid in the form of cash paid at closing while contingent consideration is paid upon the satisfaction of a future obligation. If contingent consideration is included in the purchase price, then the consideration is valued as of the acquisition date. The purchase price of an acquired businesses is allocated to the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition. The assets acquired and liabilities assumed are determined by understanding the operations, interviewing management and reviewing the financial and contractual information of the acquired business.  The calculations used to determine the fair value of the long-lived assets acquired, including intangible assets, revenue equipment and properties can be complex and require significant judgment. For the valuation of long-lived assets we weigh many factors when completing these estimates. We may also engage independent valuation specialists to assist in the fair value calculations. During 2025 we engaged valuation specialists to assist us in determining the fair value of intangible assets and revenue equipment acquired through the Star Acquisition. Goodwill is not amortized, but is subject to impairment testing on at least an annual basis and its valuation is directly impacted by the valuation estimates of the other acquired long-lived assets. We are also required to determine if an intangible asset has a finite or indefinite life. For intangible assets determined to have a finite life, we estimate the useful lives of the acquired intangible assets, which determines the amount of acquisition-related amortization expense we will record in future periods. While we use our best estimates and assumptions, our fair value estimates are inherently uncertain. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the one year measurement period would be recorded in the consolidated statements of operations. The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets can significantly affect net income.

Goodwill and Other Intangible Assets

We classify intangible assets into two categories: (i) goodwill and (ii) intangible assets with finite lives subject to amortization. 

We test goodwill for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We may elect to perform an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, including goodwill. When performing the qualitative assessment, the Company considers the impact of factors including, but not limited to, macroeconomic and industry conditions, overall financial performance of each reporting unit, litigation and new legislation. If, based on the qualitative assessments, the Company believes it more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, or periodically as deemed appropriate by management, we will prepare an estimation of the respective reporting unit's fair value utilizing a quantitative approach. When using a quantitative approach, the fair value of our reporting units is based on a blend of estimated discounted cash flows and publicly traded company multiples. The results of these models are then weighted and combined into a single estimate of fair value for our reporting units. Estimated discounted cash flows are based on projected sales and related cost of sales. Publicly traded company multiples and acquisitions are derived from information on traded shares and analysis of recent acquisitions in the marketplace, respectively, for companies with operations similar to ours. The primary assumptions used in these various models include earnings multiples of acquisitions in a comparable industry, future cash flow estimates of each of the reporting units, weighted average cost of capital, working capital and capital expenditure requirements. 

We completed our annual goodwill impairment test, using the quantitative test, as of October 1, 2025, for each of our reporting units. As a result of the goodwill impairment analysis performed, the Company determined that there was no goodwill impairment. However, subsequent to such quantitative test, we experienced changes to market conditions and capital expenditure expectations that contributed to a reduction in projected future cash flows within our legacy Dedicated reporting unit. As a result of these factors, we performed an interim quantitative goodwill impairment test which resulted in a partial impairment of goodwill of $10.7 million within the Dedicated reportable segment for the legacy Dedicated reporting unit.

We test intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. We record an impairment charge when the cost exceeds the fair value of the finite lived intangible asset. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement, the history of the asset, our long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have finite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from 3 to 17 years. 

Self-Insurance Accruals

We record a liability for the estimated cost of the uninsured portion of pending claims and the estimated allocated loss adjustment expenses, including legal and other direct costs associated with a claim, when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. Estimates require, among other things, judgments concerning the nature and severity of the claim, historical trends, advice from third-party administrators and insurers, the size of any potential damage award based on factors such as the specific facts of individual cases, the jurisdictions involved, the prospect of punitive damages, future medical costs, and inflation estimates of future claims development, and the legal and other costs to settle or defend the claims. 

Self-insured liabilities represent management's best estimate of our ultimate obligations.

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INFLATION, NEW EMISSIONS CONTROL REGULATIONS, AND FUEL COSTS

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. In recent years, the most significant effects of inflation have been on revenue equipment prices and the related depreciation, litigation and claims, and driver and non-driver wages. New emissions control regulations and increases in wages of manufacturing workers and other items have resulted in higher tractor prices, while the market value of used equipment fluctuated significantly. The cost of fuel has historically been volatile. Health care prices have increased faster than general inflation, primarily due to the rapid increase in prescription drug costs and more people on our health plan. The nationwide shortage of qualified drivers has caused us to raise driver wages per mile at a rate faster than general inflation for the past four years, and this trend may continue as additional government regulations constrain industry capacity. Additionally, competition and the related cost to employ non-drivers have increased, especially for the more skilled or technical positions, including mechanics, those with information technology related skills, and degreed professionals.

Geographic Areas

We operate throughout the U.S. and all of our tractors are domiciled in the U.S. All of our revenue generated was generated within the U.S. in 2024 and 2025. We do not separately track domestic and foreign revenue from customers, and providing such information would not be meaningful. Excluding a de minimis number of trailers, all of our long-lived assets are, and have been for the last two fiscal years, located within the United States.

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SEASONALITY

Our tractor productivity decreases during the winter season because inclement weather impedes operations, and some shippers reduce their shipments after the winter holiday season. Our Expedited reportable segment, has historically experienced a greater reduction in first quarter demand than our other operations, however, this trend has lessened following the growth of AAT, which is part of the Expedited reportable segment, and our work with long-term customers to improve the stability of contracted capacity in our Expedited fleet. Revenue also can be affected by bad weather, holidays and the number of business days that occur during a given period, since revenue is directly related to available working days of shippers. At the same time, operating expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims, and more equipment repairs. In addition, many of our customers, particularly those in the retail industry where we have a large presence, demand additional capacity during the fourth quarter, which limits our ability to take advantage of more attractive spot market rates that generally exist during such periods. Further, despite our efforts to meet such demands, we may fail to do so, which may result in lost future business opportunities with such customers, which could have a materially adverse effect on our operations. Recently, the duration of this increased period of demand in the fourth quarter has shortened, with certain customers requiring the same volume of shipments over a more condensed timeframe, resulting in increased stress and demand on our network, people, and systems. If this trend continues, it could make satisfying our customers and maintaining the quality of our service during the fourth quarter increasingly difficult. We may also suffer from natural disasters and weather-related events, such as tornadoes, hurricanes, blizzards, ice storms, floods, and fires, which may increase in frequency and severity due to climate change, as well as other man-made disasters. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy our assets, or adversely affect the business or financial condition of our customers, any of which could have a materially adverse effect on our results of operations or make our results of operations more volatile. In addition to such potential disruptions, any such disasters may present opportunities for additional business in our Managed Freight reportable segment as Star operates in the disaster recovery market. Weather and other seasonal events could adversely affect our operating results.