Knight-Swift Transportation Holdings Inc.

Good afternoon. My name is John, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Night Shift Transportation First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. If at any time during this call you require immediate assistance, please press star zero for the operator. Speakers from today's call will be Adam Miller, Chief Executive Officer, Andrew Hess, Chief Financial Officer, Brad Stewart, Treasurer and Senior Vice President of Investor Relations. Mr. Miller, the meeting is now yours.

Thank you, John. And good afternoon, everyone. And thank you for joining our first quarter 2024 earnings call. Today, we plan to discuss topics related to the results of the quarter, current market conditions, and our earnings guidance. We have slides to accompany this call, which are posted on our investor website. Our call is scheduled to last one hour. Following our commentary, we will answer questions related to these topics. In order to get to as many participants as possible, we limit the questions to one per participant. If you have a second question, please feel free to get back in the queue. We will answer as many questions as time allows. If you're not able to get to your question due to time restrictions, you may call 602-606-6349. Now, before we jump into the slides, I want to introduce the two gentlemen that will be joining me on the call today for the first time, Andrew Hess and Brad Stewart. Andrew Hess is our newly appointed CFO. Andrew has been with our company for the last five years and has served in several financial roles, including the VP of Finance at Knight when he started in 2019, then led our M&A efforts beginning in January of 2021, Andrew played a significant role in closing on the AAA Cooper, MME, and US Express acquisitions. And just prior to becoming the CFO, Andrew was leading the finance efforts at SWIFT, along with continued oversight of M&A. We want to welcome Andrew to the call. And many of you may be familiar with Brad Stewart, as he has been leading our investor relations activity for the past year. Brad is our treasurer and has held various finance leadership roles, in McKnight and Swift businesses over the past several years. And Brad has been with the company for 20 years now. I'm excited to welcome both Brad and Andrew to the call. And with that, I will now turn the call over to Brad. Thank you, Adam.

To begin, I will first refer you to the disclosures on slide two of the presentation and note the following. This conference call and presentation may contain forward-looking statements made by the company that involve risks, assumptions, and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors, or Part 1 of the company's annual report on Form 10-K filed with the United States Securities and Exchange Commission for a discussion of the risks that may affect the company's future operating results. Actual results may differ. Now I will turn to our overview on Slide 3. The charts on Slide 3 compare our consolidated first quarter revenue and earnings results on a year-over-year basis. Market conditions in the LTL business continue to be solid, while soft demand and excess capacity persist in the truckload space. Revenue excluding fuel surcharge increased 11%, while our adjusted operating income declined by 68.5%. Gap earnings per diluted share for the first quarter of 2024 was a loss of 2 cents, and our adjusted EPS was 12 cents. These results include a $19.5 million operating loss in our third-party insurance business, which ceased operations at the end of the quarter. The insurance loss negatively impacted our GAAP and adjusted EPS by $0.08. Excluding the loss on the insurance business, our adjusted EPS would have been $0.20. Our results were also negatively impacted on a year-over-year basis by an $18 million increase in net interest expense, or approximately $0.08 per share. Now on to the next slide. Slide four illustrates the revenue and adjusted operating income for each of our segments. In general, the LTL segment continues to experience a much more supportive market than the truckload, logistics, and intermodal segments do. The first quarter saw greater than average winter weather disruption, which negatively impacted all of our operating segments. In addition, the pricing and demand environment has proven more challenging than we anticipated for all but our LTL business in the first quarter. The combination of the weather disruption, More challenging bid environment and ongoing cost inflation weighed on operating results across our businesses during the quarter. US Express continues to make progress on cost and contractual pricing in the truckload business. And the US Express logistics business continues to close the gap, performing in line with our legacy logistics business on gross margin and operating margin for the quarter. Now onto slide five. For the truckload segment, We did see some recovery following the January weather disruption, as well as some seasonal improvement in March, but neither was enough to overcome the negative impact of volumes and operating costs from the poor start to the quarter. Loose capacity continues to plague the truckload market, preventing the ability to recover ongoing cost inflation or attain appropriate utilization levels on our equipment. Combined truckload revenue per loaded mile was down 2.5% sequentially from though our contract rates are largely stable thus far in 2024. The early part of the bid season led to greater than expected pressure on freight rates, as some shippers are still trying to push rates down further. In some cases, we have lost contractual volumes because we were not willing to commit to further concessions on what we view as unsustainable contractual rates. This resulted in more of our capacity being allocated to the spot market, which creates further pressure on revenue per mile and utilization in the near term, but positions capacity to react to changes in the market when the market does inflect. US Express made further progress on costs and contractual rates through bids, which allowed this business to overcome the weather disruption and some dedicated business losses to stay largely flat on operating ratio from the fourth quarter. On a year-over-year basis, our truckload revenue excluding fuel surcharge increased 26%, reflecting an 11% decline in the legacy truckload business prior to the inclusion of US Express. Revenue per loaded mile fell 10% year-over-year, or 9% before including US Express. Miles per tractor increased 8% overall, or 6% before the inclusion of US Express, largely driven by our earlier decision to reduce the number of unseated tractors in our legacy businesses in order to reduce cost. We have been intentionally trimming our tractor and trailer fleets over the past few quarters in order to improve our cost structure through the down cycle, but without cutting so far as to sacrifice our ability to flex when the market does improve. Now I'll turn the call over to Andrew to discuss our LTL business on slide six.