CVLG · Covenant Logistics Group, Inc.

Period Performance

Period Performance

For the first quarter of 2026, Covenant Logistics Group reported total revenue of $307.2 million, a 14.0% increase compared to $269.4 million in Q1 2025. Freight revenue (excluding fuel surcharges) rose 15.9% to $281.9 million. Despite the top-line growth, operating income decreased to $6.3 million from $7.6 million, partly due to severe weather shutdowns in January and February and higher fuel prices. Net income fell to $4.4 million ($0.17 per diluted share) from $6.6 million ($0.24 per share) in the prior year period. The operating ratio deteriorated to 98.0% from 97.2%, and adjusted operating ratio (excluding amortization, contingent consideration, and transaction costs) worsened to 96.6% from 95.5%. Key expense lines: salaries and wages increased $4.3 million to $109.3 million but improved as a percentage of freight revenue to 38.8% from 43.2% due to mix shift; fuel expense was flat at $28.3 million as an 8% mile reduction offset higher diesel prices; operations and maintenance rose 13.7% to $17.9 million due to older tractors and higher recruiting costs; revenue equipment rentals and purchased transportation surged 57.0% to $89.2 million, driven by the Star Acquisition in Managed Freight. Insurance and claims decreased 17.2% to $12.6 million, benefiting from lower accident frequency. Depreciation and amortization increased 10.0% to $24.0 million, including $3.0 million of intangible amortization.

Segment Dynamics

• Expedited: Revenue declined 10.6% to $84.7 million as average tractors fell 10.4% to 709 team-driven units. Freight revenue per tractor per week was flat. Segment operating income dropped to $2.8 million (3.3% margin) from $5.6 million, reflecting lower volumes and fixed cost deleverage.
• Dedicated: Revenue grew 10.5% to $103.4 million, driven by a 2.1% increase in tractors and an 8.7% improvement in revenue per tractor per week (rate per mile up 11.3%). Segment operating income more than doubled to $5.6 million (5.4% margin) as prior year results were hurt by avian influenza in the protein fleet.
• Managed Freight: Revenue surged 59.6% to $90.7 million, largely from the Star Acquisition. Segment operating income edged up 4.6% to $3.7 million (4.1% margin) as revenue growth was partly offset by higher purchased transportation.
• Warehousing: Revenue increased 14.5% to $27.7 million from a new customer onboarded in Q4 2025. Operating income slipped 3.5% to $1.8 million (6.4% margin) due to startup inefficiencies.

Forward View

Management expressed optimism about improving demand and driver capacity tightening, noting an expanding pipeline of new customers and rate increases. They expect gradual improvement beginning in Q2 2026, with a focus on reallocating assets to higher-margin operations. No specific numeric guidance was provided. Capital expenditures for the remainder of 2026 are planned at $40-50 million, significantly below prior year, reflecting fleet discipline. The company expects TEL's earnings to remain relatively stable. Liquidity is adequate with $57.5 million available under the credit facility and net debt leverage of 2.37x.

Notes & Operating Detail

Balance Sheet & Liquidity

Cash and cash equivalents increased to $11.2 million at March 31, 2026, from $4.9 million at December 31, 2025. Total assets stood at $1.017 billion, with net property and equipment of $456.7 million. Total debt (including current maturities) was $253.5 million, down from $298.1 million at year-end 2025. Shareholders' equity rose to $407.6 million from $404.0 million. The company had $29.0 million drawn on its $110.0 million revolving credit facility, with $57.5 million of available borrowing capacity after $19.9 million in outstanding letters of credit.

Commitments & Contractual Obligations

The company has contingent consideration liabilities totaling $22.5 million as of March 31, 2026, related to acquisitions of LTST, Sims, a small multi-stop distribution carrier, and Star. Potential maximum payments are $30.0 million for LTST, $12.0 million for Sims, $5.0 million for the Asset Acquisition, and an earnout for Star. Operating lease obligations have a present value of $35.2 million, with future minimum payments of $40.1 million. Finance lease obligations have a present value of $3.0 million. The company also has $19.9 million in outstanding letters of credit primarily supporting insurance programs.

Capital Allocation (buybacks, dividends, debt, capex)

No share repurchases occurred during Q1 2026; a $50.0 million authorization was approved in April 2025. A quarterly dividend of $0.07 per share was declared and paid in March 2026, totaling $1.8 million. Net debt decreased by $44.5 million, with $7.6 million in new borrowings and $51.2 million in repayments. Capital expenditures were $11.4 million, or 3.7% of total revenue. Proceeds from asset dispositions totaled $35.6 million.

Segment / Geographic Mix (if disclosed at note level)

The company reports four segments: Expedited, Dedicated, Managed Freight, and Warehousing. For Q1 2026, total segment operating income was $14.5 million, up from $13.1 million in Q1 2025. Dedicated was the largest segment by revenue ($103.4M) and operating income ($5.6M). Managed Freight revenue surged 59.6% YoY to $90.7M, driven by the Star acquisition. Expedited revenue declined 10.6% to $84.7M. Warehousing revenue grew 14.5% to $27.7M. Segment operating margins ranged from 3.3% (Expedited) to 6.4% (Warehousing).