CVLG · Covenant Logistics Group, Inc.

Period Performance

Period Performance

For the third quarter of 2025, Covenant Logistics reported total revenue of $296.9 million, a 3.1% increase from $287.9 million in the prior-year quarter. Freight revenue (excluding fuel surcharges) rose 4.0% to $268.8 million. However, operating income declined sharply to $7.9 million from $16.2 million, driven by higher costs in the Truckload segments and under-utilized equipment. Net income from continuing operations was $6.3 million ($0.24 per diluted share), compared to $12.9 million ($0.46 per diluted share) in Q3 2024. Net income including discontinued operations was $9.1 million ($0.35 per diluted share), down from $13.0 million ($0.47 per diluted share). The equity investment in TEL contributed $3.6 million of pre-tax earnings, slightly below $4.0 million in the prior year.

Key expense headwinds included a $1.9 million charge for abandonment of long-lived software, $1.4 million in employee separation costs, and $0.4 million in lease abandonment and customer exit costs. Insurance and claims expense rose to 20.9 cents per mile from 17.4 cents, and management anticipates an additional $4.0 million to $9.0 million accrual in Q4 2025. Net fuel expense increased to 1.2% of freight revenue from 0.6%, reflecting lower fuel surcharge recovery.

Segment Dynamics

• Expedited: Revenue fell 9.3% to $94.6 million, driven by a 5.0% decline in average freight revenue per tractor per week and a 5.4% drop in average miles per unit. Team-driven tractors averaged 781, down from 823. Segment operating income decreased to $5.1 million from $12.3 million.
• Dedicated: Revenue grew 10.9% to $105.0 million, supported by a 9.7% increase in average tractors (136 more units). Average rate per total mile rose 7.0%, but average miles per unit fell 5.7%. Operating income dropped to $4.1 million from $10.8 million due to higher driver costs, maintenance, and insurance.
• Managed Freight: Revenue increased 13.9% to $72.2 million from new business, but a key customer departed in July 2025, expected to significantly reduce Q4 revenue. Operating income was essentially flat at $3.0 million.
• Warehousing: Revenue was relatively flat at $25.0 million. Operating income declined to $2.5 million from $2.8 million due to facility cost increases and startup inefficiencies.

Forward View

Management expects near-term headwinds including lower profits from TEL due to credit losses, the impact of a U.S. government shutdown on Department of Defense business, an expected increase in claims accruals, and the loss of a large Managed Freight customer. These are expected to outweigh a modest peak season boost for Expedited and Managed Freight. Over the intermediate to long term, capacity exits and potential demand drivers from inventory unwinding and policy changes are seen as positive. The company plans to grow dedicated and warehouse business while downsizing other Truckload capacity until returns improve. Capital allocation remains disciplined, with $36.2 million in stock repurchases year-to-date and $90.1 million available under the Credit Facility.

Notes & Operating Detail

Balance Sheet & Liquidity

Cash and cash equivalents fell sharply from $35.6M (Dec 2024) to $2.7M (Sep 2025), reflecting significant cash used for buybacks and capex. Total debt increased $16.3M to $267.6M, while shareholders' equity decreased $14.6M to $423.7M. Inventory remained modest at $6.1M. The company had $90.1M available under its $110M revolving credit facility as of Sep 2025.

Commitments & Contractual Obligations

Operating lease obligations total $44.0M in future minimum payments, with remaining terms averaging 3.8 years. Finance lease obligations add $4.5M (4.9 year average). Additionally, $19.9M in letters of credit support insurance programs. Contingent consideration liabilities stand at $22.0M (fair value) related to acquisitions, with $12.9M paid during 2025. A $45M draw note expired Sep 23, 2025, with $0.2M remaining contingent liability.

Capital Allocation (buybacks, dividends, debt, capex)

• Buybacks: The Board authorized $50M in April 2025; $36.2M used to repurchase 1.6M shares by Sep 30, 2025, leaving $13.8M remaining.
• Dividends: Quarterly dividend increased 27.3% from $0.055 to $0.07 per share; total dividends of $5.4M paid in nine months.
• Debt: Net debt increased $16.3M from new notes ($86.2M issued, $69.8M repaid). Revolver usage was net zero.
• Capex: Gross capital expenditures of $119.0M (13.7% of revenue), funded partly by $30.7M in equipment sale proceeds.

Segment / Geographic Mix (if disclosed at note level)

Segment results (Q3 2025 vs Q3 2024) showed mixed performance:

• Expedited: Revenue declined 9.3% to $94.6M; operating income fell 58.6% to $5.1M (margin 5.4% vs 11.8%).
• Dedicated: Revenue grew 10.8% to $105.0M; operating income dropped 62.0% to $4.1M (margin 3.9% vs 11.4%).
• Managed Freight: Revenue increased 13.9% to $72.2M; operating income essentially flat at $3.0M (margin 4.1% vs 4.6%).
• Warehousing: Revenue declined 1.9% to $25.0M; operating income fell 9.2% to $2.5M (margin 10.0% vs 10.8%). No geographic breakdown is provided in the notes.