Covenant Logistics Group Announces Second Quarter Financial and Operating Results
Covenant Logistics Group (NASDAQ: CVLG) reported record second-quarter earnings of $0.91 per share, with adjusted earnings of $0.96. Revenue increased to $256.3 million, up 33.8% year-over-year, driven by robust freight demand despite a national driver shortage. Operating income improved significantly to $18.3 million from a loss of $28.9 million in 2020. The Managed Freight segment saw a 108.5% revenue increase, while the Dedicated segment showed slight improvement. Covenant aims to enhance profitability in its Dedicated segment, amidst ongoing cost pressures and driver availability issues.
- Record earnings of $0.91 per share for Q2, highest in company history.
- 33.8% revenue increase year-over-year to $256.3 million.
- Managed Freight segment revenue surged by 108.5%, showing strong market demand.
- Operating income significantly improved to $18.3 million from a loss in the prior year.
- Dedicated segment still underperforming, operating below expectations.
- Ongoing challenges with driver availability and increased compensation costs due to industry-wide tightness.
CHATTANOOGA, Tenn., July 21, 2021 (GLOBE NEWSWIRE) -- Covenant Logistics Group, Inc. (NASDAQ/GS: CVLG) (“Covenant” or the “Company”) announced today financial and operating results for the second quarter ended June 30, 2021. The Company’s live conference call to discuss the quarter will be held at 10:00 A.M. Eastern Time on Thursday, July 22nd, 2021.
Chairman and Chief Executive Officer, David R. Parker, commented: “We were pleased to report second quarter earnings of
“In the second quarter, we saw freight market demand firing on all cylinders as a result of growing economic activity, low inventories, and supply chain disruptions, accompanied by constrained supply due to an intensifying national driver shortage. These conditions have continued into the third quarter. The full impact of these factors on our operating statistics year-over-year is complicated by changes in business mix due to downsizing our refrigerated fleet and solo tractor count in the Expedited business. We expect year-over-year comparability to be clearer in the second half of 2021.
“From a segment standpoint, for the second quarter, our Expedited and Managed Freight service offerings have continued to exceed our expectations through improvements in equipment utilization, rates and an exceptionally strong spot rate market, while our Warehousing segment continued to operate consistently. Our Dedicated segment improved slightly from the first quarter of the year but continued to operate at a level well below our expectations primarily due to the longer-term nature of these contracts, which lessens the ability to pass on short-term cost increases but also adds stability throughout cycles. We have a robust pipeline of opportunities for our Dedicated service offering and will continue to transition business to new customers in instances where we are unable to come to terms with existing customers. We expect a more positive incremental improvement in our Dedicated service offering’s profitability in the third quarter of 2021.
We are also pleased to report that Transport Enterprise Leasing, our
A summary of our second quarter financial performance:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| ( | 2021 | 2020 | 2021 | 2020 | |||||||||
| Total Revenue | $ | 256,324 | $ | 191,689 | $ | 477,213 | $ | 402,502 | |||||
| Freight Revenue, Excludes Fuel Surcharge | $ | 231,948 | $ | 179,564 | $ | 432,636 | $ | 369,145 | |||||
| Operating Income (Loss) | $ | 18,332 | $ | (28,950 | ) | $ | 28,843 | $ | (30,404 | ) | |||
| Adjusted Operating Income (1) | $ | 19,484 | $ | 945 | $ | 31,147 | $ | 222 | |||||
| Operating Ratio | 92.8 | % | 115.1 | % | 94.0 | % | 107.6 | % | |||||
| Adjusted Operating Ratio (1) | 91.6 | % | 99.5 | % | 92.8 | % | 99.9 | % | |||||
| Net Income (Loss) | $ | 15,417 | $ | (22,343 | ) | $ | 26,559 | $ | (24,146 | ) | |||
| Adjusted Net Income (Loss) (1) | $ | 16,263 | $ | 427 | $ | 25,771 | $ | (839 | ) | ||||
| Earnings (Loss) per Diluted Share | $ | 0.91 | $ | (1.31 | ) | $ | 1.56 | $ | (1.37 | ) | |||
| Adjusted Earnings (Loss) per Diluted Share (1) | $ | 0.96 | $ | 0.02 | $ | 1.52 | $ | (0.04 | ) | ||||
| (1) Represents non-GAAP measures. | |||||||||||||
Truckload Operating Data and Statistics
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| ( | 2021 | 2020 | 2021 | 2020 | |||||||||
| Combined Truckload | |||||||||||||
| Total Revenue | $ | 169,237 | $ | 145,718 | $ | 323,163 | $ | 313,666 | |||||
| Freight Revenue, excludes Fuel Surcharge | $ | 145,025 | $ | 133,708 | $ | 278,885 | $ | 280,558 | |||||
| Operating Income (Loss) | $ | 10,034 | $ | (26,021 | ) | $ | 14,446 | $ | (29,114 | ) | |||
| Adj. Operating Income (Loss) (1) | $ | 10,635 | $ | (6 | ) | $ | 15,648 | $ | (2,720 | ) | |||
| Operating Ratio | 94.1 | % | 117.9 | % | 95.5 | % | 109.3 | % | |||||
| Adj. Operating Ratio (1) | 92.7 | % | 100.0 | % | 94.4 | % | 101.0 | % | |||||
| Average Freight Revenue per Tractor per Week | $ | 4,551 | $ | 3,647 | $ | 4,340 | $ | 3,717 | |||||
| Average Freight Revenue per Total Mile | $ | 2.00 | $ | 1.83 | $ | 1.96 | $ | 1.83 | |||||
| Average Miles per Tractor per Period | 29,571 | 25,970 | 57,367 | 52,787 | |||||||||
| Weighted Average Tractors for Period | 2,451 | 2,820 | 2,485 | 2,903 | |||||||||
| Expedited | |||||||||||||
| Total Revenue | $ | 87,369 | $ | 79,778 | $ | 165,849 | $ | 165,938 | |||||
| Freight Revenue, excludes Fuel Surcharge | $ | 75,338 | $ | 73,330 | $ | 144,609 | $ | 150,308 | |||||
| Operating Income (Loss) | $ | 10,225 | $ | (12,844 | ) | $ | 16,436 | $ | (14,396 | ) | |||
| Adj. Operating Income (Loss) (1) | $ | 10,225 | $ | 767 | $ | 16,436 | $ | (1,100 | ) | ||||
| Operating Ratio | 88.3 | % | 116.1 | % | 90.1 | % | 108.7 | % | |||||
| Adj. Operating Ratio (1) | 86.4 | % | 99.0 | % | 88.6 | % | 100.7 | % | |||||
| Average Freight Revenue per Tractor per Week | $ | 6,692 | $ | 4,670 | $ | 6,384 | $ | 4,592 | |||||
| Average Freight Revenue per Total Mile | $ | 1.93 | $ | 1.76 | $ | 1.90 | $ | 1.82 | |||||
| Average Miles per Tractor per Period | 45,130 | 34,440 | 86,760 | 65,765 | |||||||||
| Weighted Average Tractors for Period | 866 | 1,208 | 876 | 1,259 | |||||||||
| Dedicated | |||||||||||||
| Total Revenue | $ | 81,868 | $ | 65,940 | $ | 157,314 | $ | 147,728 | |||||
| Freight Revenue, excludes Fuel Surcharge | $ | 69,687 | $ | 60,378 | $ | 134,276 | $ | 130,250 | |||||
| Operating Income (Loss) | $ | (191 | ) | $ | (13,177 | ) | $ | (1,990 | ) | $ | (14,718 | ) | |
| Adj. Operating Income (Loss) (1) | $ | 410 | $ | (773 | ) | $ | (788 | ) | $ | (1,620 | ) | ||
| Operating Ratio | 100.2 | % | 120.0 | % | 101.3 | % | 110.0 | % | |||||
| Adj. Operating Ratio (1) | 99.4 | % | 101.3 | % | 100.6 | % | 101.2 | % | |||||
| Average Freight Revenue per Tractor per Week | $ | 3,382 | $ | 2,881 | $ | 3,227 | $ | 3,047 | |||||
| Average Freight Revenue per Total Mile | $ | 2.09 | $ | 1.91 | $ | 2.02 | $ | 1.85 | |||||
| Average Miles per Tractor per Period | 21,070 | 19,622 | 41,364 | 42,849 | |||||||||
| Weighted Average Tractors for Period | 1,585 | 1,612 | 1,609 | 1,644 | |||||||||
| (1) Represents non-GAAP measures. | |||||||||||||
Combined Truckload Revenue
Mr. Parker commented on truckload operations, “For the quarter, total revenue in our truckload operations increased
Expedited Truckload Revenue
Mr. Parker added, “In our Expedited segment, team driven tractors decreased to 866, compared to 873 in the prior year quarter, while solo driven tractors were reduced to 0, compared to 335 in the prior year quarter, which resulted in a net reduction of 342 tractors or
Dedicated Truckload Revenue
“For the quarter, freight revenue in our Dedicated segment increased
Combined Truckload Operating Expenses
Mr. Parker continued, “Our truckload operating cost per total mile improved 15 cents on a GAAP basis, largely due to approximately
“On an adjusted basis our truckload operating cost per total mile increased by 3 cents or
“Salaries, wages and related expense adjusted for employee separation costs increased year-over-year
“Operations and maintenance related expense increased year-over-year by
“Insurance and claims expenses decreased
“Depreciation and amortization, excluding amortization of intangible assets in both periods, decreased
Managed Freight Segment
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| ( | 2021 | 2020 | 2021 | 2020 | |||||||||
| Freight Revenue | $ | 71,635 | $ | 34,362 | $ | 123,032 | $ | 65,099 | |||||
| Operating Income (Loss) | $ | 7,316 | $ | (3,611 | ) | $ | 12,261 | $ | (2,946 | ) | |||
| Adj. Operating Income (Loss) (1) | $ | 7,479 | $ | (349 | ) | $ | 12,587 | $ | 374 | ||||
| Operating Ratio | 89.8 | % | 110.5 | % | 90.0 | % | 104.5 | % | |||||
| Adj. Operating Ratio (1) | 89.6 | % | 101.0 | % | 89.8 | % | 99.4 | % | |||||
| (1) Represents non-GAAP measures. | |||||||||||||
“For the quarter, Managed Freight’s freight revenue increased
Warehousing Segment
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| ( | 2021 | 2020 | 2021 | 2020 | |||||||||
| Freight Revenue | $ | 15,288 | $ | 11,494 | $ | 30,719 | $ | 23,489 | |||||
| Operating Income | $ | 982 | $ | 682 | $ | 2,136 | $ | 1,656 | |||||
| Adj. Operating Income (1) | $ | 1,370 | $ | 1,300 | $ | 2,912 | $ | 2,568 | |||||
| Operating Ratio | 93.6 | % | 94.1 | % | 93.1 | % | 93.0 | % | |||||
| Adj. Operating Ratio (1) | 91.0 | % | 88.7 | % | 90.5 | % | 89.1 | % | |||||
| (1) Represents non-GAAP measures. | |||||||||||||
“For the quarter, Warehousing’s freight revenue increased
Capitalization, Liquidity and Capital Expenditures
Joey Hogan, the Company’s President, added the following comments: “At June 30, 2021, our total indebtedness, net of cash (“net indebtedness”), decreased by
“At June 30, 2021, we had cash and cash equivalents totaling
“Our net capital investment for the quarter provided net proceeds of
“Based on our current capital structure and expected 2021 net capital expenditures, we have substantial flexibility to maintain moderate financial leverage and evaluate the full range of capital allocation alternatives, including internal growth, acquisitions, further debt paydown, and returning capital to our stockholders.”
New Website and Completion of our 2020 Corporate Social Responsibility Report
As part of our transition from our legacy truckload heritage to a full-service logistics organization, we have been working to rebrand the organization to reflect this change. On July 6, 2020, we publicly announced these efforts and are now pleased to announce the launch of our new website. We believe the refreshed website better showcases the full transportation related services that we offer and reinforces our commitment as a service provider that provides value throughout the supply chain. The new website can be found at www.covenantlogistics.com.
Additionally, as our business grows, our responsibility and commitment to others grows with it. We recognize the importance of building, expanding and improving collaborative relationships as part of our long-term commitment to help our customers, the environment, our people and our community. Accordingly, we are pleased to announce the completion of our 2020 Corporate Social Responsibility (CSR) Report, which illustrates the translation of our founding principles into our commitment to our people, communities, and planet. Our 2020 CSR report can be found on our website under the sustainability tab.
Outlook
Mr. Parker concluded, “For the balance of 2021, our short-term focus will be to continue to improve the profitability of our Dedicated segment and continue working to solidify longer term agreements with certain of our key Expedited and Brokerage customers. Thus far, we have been successful. The freight environment and our new business pipeline are both currently robust, which we believe will support our commercial plan. Potential headwinds include inefficiencies from re-engineering or replacing certain contracts, driver availability and cost, accident experience, the cost and volatility of claims, general inflation, and supply and demand factors for our customers and our industry. At present, we expect to continue to make steady, incremental progress on our Dedicated segment’s margins over the remainder of 2021.
“Over time, we expect our Managed Freight segment’s margin to gravitate toward the mid-single digits and Dedicated to gravitate toward the mid to high single digits and ultimately double digits. Directionally the margin changes may offset each other to some extent as the freight and driver markets return to more balanced levels.
“For the longer term, we expect to continue the execution of our strategic plan, which consists of steadily and intentionally growing the percentage of our business generated by Dedicated, Managed Freight, and Warehousing segments, reducing unnecessary overhead, and improving our safety, service, and productivity. This will be a gradual process of diversifying our customer base with less seasonal and cyclical exposure, implementing more consistent contracts, and investing in systems, technology, and people to support the growth of these previously under-invested areas. With diligence and accountability, we expect to make consistent progress and be a stronger, more profitable, and more predictable business with the opportunity for significant and sustained value creation.”
Conference Call Information
The Company will host a live conference call tomorrow, July 22nd, 2021, at 10:00 a.m. Eastern time to discuss the quarter. Individuals may access the call by dialing 877-271-1828 (U.S./Canada) and 800-756-3333 (International), access code 28271059. An audio replay will be available for one week following the call at 877-919-4059, access code 70996679. For additional financial and statistical information regarding the Company that is expected to be discussed during the conference call, please visit our website at www.covenantlogistics.com/investors under the icon “Earnings Info.”
Covenant Logistics Group, Inc., through its subsidiaries, offers a portfolio of transportation and logistics services to customers throughout the United States. Primary services include asset-based expedited and dedicated truckload capacity, as well as asset-light warehousing, transportation management, and freight brokerage capability. In addition, Transport Enterprise Leasing is an affiliated company providing revenue equipment sales and leasing services to the trucking industry. Covenant's Class A common stock is traded on the NASDAQ Global Select market under the symbol, “CVLG.”
(1) See GAAP to Non-GAAP Reconciliation in the schedules included with this release. In addition to operating income (loss), operating ratio, net income (loss), and earnings (loss) per diluted share, we use adjusted operating income (loss), adjusted operating ratio, adjusted net income (loss), and adjusted earnings (loss) per diluted share, non-GAAP measures, as key measures of profitability. Adjusted operating income (loss), adjusted operating ratio, adjusted net income (loss), and adjusted diluted earnings (loss) per share are not substitutes for operating income (loss), operating ratio, net income (loss), and earnings (loss) per diluted share measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. We believe our presentation of these non-GAAP financial measures are useful because it provides investors and securities analysts with supplemental information that we use internally for purposes of assessing profitability. Further, our Board and management use non-GAAP operating income (loss), operating ratio, net income (loss), and earnings (loss) per diluted share measures on a supplemental basis to remove items that may not be an indicator of performance from period-to-period. Although we believe that adjusted operating income (loss), adjusted operating ratio, adjusted net income (loss), and adjusted diluted earnings (loss) per share improves comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry, if those companies define such measures differently. Because of these limitations, adjusted operating income (loss), adjusted operating ratio, adjusted net income (loss), and adjusted earnings (loss) per diluted share should not be considered measures 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.
This press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases such as “expects,” “estimates,” “projects,” “believes,” “anticipates,” “plans,” “could,” “would,” “may,” “will,” "intends," “outlook,” “focus,” “seek,” “potential,” “mission,” “continue,” “goal,” “target,” “objective,” derivations thereof, and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and 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. In this press release, statements relating to improving rates and freight contracts particularly in our Dedicated business, the future freight environment, improving margins particularly in our Dedicated business, changes in our Managed Freight segment’s margins, our ability to execute our strategic plan, comparability of operating metrics, future benefits of our safety programs and driver recruitment and onboarding, future availability under our ABL credit facility, and expected fleet age, net capital expenditures, and capital allocation, as well as the statements under “Outlook” are forward-looking statements. The following factors, among others could cause actual results to differ materially from those in the forward-looking statements: Our business is subject to economic, credit, business, and regulatory factors affecting the truckload industry that are largely beyond our control; We may not be successful in achieving our strategic plan; We operate in a highly competitive and fragmented industry; We may not grow substantially in the future and we may not be successful in improving our profitability; We may not make acquisitions in the future, or if we do, we may not be successful in our acquisition strategy; Increases in driver compensation or difficulties attracting and retaining qualified drivers could have a materially adverse effect on our profitability and the ability to maintain or grow our fleet; Our engagement of independent contractors to provide a portion of our capacity exposes us to different risks than we face with our tractors driven by company drivers; We derive a significant portion of our revenues from our major customers; Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, surcharge collection, and hedging activities may increase our costs of operation; We depend on third-party providers, particularly in our Managed Freight segment; We depend on the proper functioning and availability of our management information and communication systems and other information technology assets (including the data contained therein) and a system failure or unavailability, including those caused by cybersecurity breaches, or an inability to effectively upgrade such systems and assets could cause a significant disruption to our business; If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed; Seasonality and the impact of weather and other catastrophic events affect our operations and profitability; We self-insure for a significant portion of our claims exposure, which could significantly increase the volatility of, and decrease the amount of, our earnings; Our self-insurance for auto liability claims and our use of captive insurance companies could adversely impact our operations; We have experienced, and may experience additional, erosion of available limits in our aggregate insurance policies; We may experience additional expense to reinstate insurance policies due to liability claims; We operate in a highly regulated industry; If our independent contractor drivers are deemed by regulators or judicial process to be employees, our business, financial condition, and results of operations could be adversely affected; Developments in labor and employment law and any unionizing efforts by employees could have a materially adverse effect on our results of operations; The Compliance Safety Accountability program adopted by the Federal Motor Carrier Safety Administration could adversely affect our profitability and operations, our ability to maintain or grow our fleet, and our customer relationships; Receipt of an unfavorable Department of Transportation safety rating could have a materially adverse effect on our operations and profitability; Compliance with various environmental laws and regulations; Changes to trade regulation, quotas, duties, or tariffs; Litigation may adversely affect our business, financial condition, and results of operations; Our ABL credit facility and other financing arrangements contain certain covenants, restrictions, and requirements, and we may be unable to comply with such covenants, restrictions, and requirements; In the future, we may need to obtain additional financing that may not be available or, if it is available, may result in a reduction in the percentage ownership of our stockholders; Our indebtedness and finance and operating lease obligations could adversely affect our ability to respond to changes in our industry or business; Our profitability may be materially adversely impacted if our capital investments do not match customer demand or if there is a decline in the availability of funding sources for these investments; Increased prices for new revenue equipment, design changes of new engines, future uses of autonomous tractors, volatility in the used equipment market, decreased availability of new revenue equipment, and the failure of manufacturers to meet their sale or trade-back obligations to us could have a materially adverse effect on our business, financial condition, results of operations, and profitability; Our
For further information contact:
Joey B. Hogan, President
JHogan@covenantlogistics.com
Tripp Grant, Chief Accounting Officer
TGrant@covenantlogistics.com
For copies of Company information contact:
Brooke McKenzie, Executive Administrative Assistant
BMcKenzie@covenantlogistics.com
FAQ
What were Covenant Logistics Group's Q2 2021 earnings per share (EPS)?
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