Covenant Logistics Group, Inc. (NASDAQ:CVLG) Q1 2023 Earnings Conference Call April 28, 2023 10:00 AM ET

Company Participants

James Grant - EVP & CFO

Paul Bunn - President & COO

David Parker - Chairman & CEO

Conference Call Participants

Jack Atkins - Stephens Inc.

Bert Subin - Stifel, Nicolaus & Company

Scott Group - Wolfe Research

Elliot Alper - TD Cowen

Operator

Welcome to today's Covenant Logistics Group Q1 '23 Earnings Release Conference Call. Our host for today's call is Tripp Grant. [Operator Instructions].

I would now like to turn the call over to your host. Tripp, you may begin.

James Grant

Yes. Thank you, Ross. Good morning, everyone, and welcome to the Covenant Logistics Group First Quarter 2023 Conference Call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act, which are subject to risks and uncertainties that could cause actual results to differ materially. Please to review our SEC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements. A copy of the prepared comments and additional financial information is available on our website at www.covenantlogistics.com/investors.

I'm joined on the call today by David Parker, Joey Hogan and Paul Bunn. First, I'd like to start by welcoming the Lew Thompson & Son Trucking team to the Covenant family. We pursued this acquisition because it aligns with our strategic plan of becoming a niche year, well-diversified service provider in a market that is less sensitive to typical freight cycles.

Lew Thompson & Son Trucking's reputation of providing first-class service to their customers in the poultry industry, combined with opportunities for future growth added to the attractiveness. Our goal is to maintain their service standard and to provide the financial support required to allow our combined team to grow in their home territory and in territories that they do not currently operate. Their results will be included in our Dedicated segment's operations.

Consistent with our focus on profits and returns on capital, through the first quarter, we had reduced the Dedicated fleet by 200 trucks since the first quarter of 2022 by exiting low-return contracts. With today's action, we are regrowing our fleet with Lew Thompson's approximately 225 trucks, which are expected to generate a double-digit return on invested capital and immediate accretion to our earnings per share.

Now focusing on the first quarter's results. Given the softness in the freight market, we are pleased with our results and how our team responded in a market that quickly transition. Compared to a year ago, consolidated freight revenue was down 9%. This decline was expected and related primarily to less overflow freight handled by our Managed Freight segment due to lower overall demand. The Dedicated segment also experienced reductions in freight revenue, primarily as a result of our efforts to carve out underperforming contractual business.