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The chief operating decision maker does not receive fuel surcharge revenue and fuel expense individually, but is provided with fuel expense less fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation), which we refer to as net fuel expense. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-42192

COVENANT LOGISTICS GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada	88-0320154
(State or other jurisdiction of incorporation	(I.R.S. Employer Identification No.)
or organization)

400 Birmingham Hwy.
Chattanooga, TN	37419
(Address of principal executive offices)	(Zip Code)

423-821-1212

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
$0.01 Par Value Class A common stock	CVLG	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☒
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (November 5, 2025).

Class A Common Stock, $.01 par value: 20,347,178 shares

Class B Common Stock, $.01 par value: 4,700,000 shares

Page 1

Table of Contents

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
		Page Number
Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (unaudited)	3

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024 (unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2025 and 2024 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	36

PART II OTHER INFORMATION
		Page Number

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

Page 2

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	September 30, 2025			December 31, 2024
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,686		$	35,619
Accounts receivable, net of allowance of $2,001 in 2025 and $2,360 in 2024		150,357			141,635
Drivers' advances and other receivables, net of allowance of $586 in 2025 and $593 in 2024		4,807			3,999
Inventory and supplies		6,145			5,648
Prepaid expenses		20,358			19,975
Assets held for sale		1,169			132
Income taxes receivable		8,752			6,499
Other short-term assets		298			343
Total current assets		194,572			213,850

Property and equipment, at cost		773,638			729,404
Less: accumulated depreciation and amortization		(231,546	)		(204,595	)
Net property and equipment		542,092			524,809

Goodwill		78,941			78,941
Other intangibles, net		93,559			90,126
Other receivables		21,557			3,163
Other assets, net		94,479			86,470
Noncurrent assets of discontinued operations		-			209
Total assets	$	1,025,200		$	997,568
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	32,618		$	31,939
Accrued expenses		59,620			51,328
Current maturities of long-term debt		63,723			64,210
Current portion of finance lease obligations		817			751
Current portion of operating lease obligations		11,266			10,349
Current portion of insurance and claims accrual		24,396			22,700
Total current liabilities		192,440			181,277

Long-term debt		203,911			187,085
Long-term portion of finance lease obligations		2,571			3,192
Long-term portion of operating lease obligations		26,818			31,302
Insurance and claims accrual		39,867			19,134
Deferred income taxes		122,221			117,650
Other long-term liabilities		13,656			19,588
Total liabilities		601,484			559,228
Stockholders' equity:
Class A common stock, $.01 par value; 40,000,000 shares authorized; 21,855,878 shares issued and 20,347,178 outstanding as of September 30, 2025; and 21,774,350 shares issued and outstanding as of December 31, 2024		219			218
Class B common stock, $.01 par value; 5,000,000 shares authorized; 4,700,000 shares issued and outstanding		47			47
Additional paid-in-capital		159,672			158,907
Treasury stock at cost; 1,508,700 and no shares as of September 30, 2025 and December 31, 2024, respectively		(35,047	)		-
Accumulated other comprehensive income		604			1,035
Retained earnings		298,221			278,133
Total stockholders' equity		423,716			438,340
Total liabilities and stockholders' equity	$	1,025,200		$	997,568

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 3

Table of Contents

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE three and nine months ended September 30, 2025 and 2024

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2025			2024			2025			2024
Revenues
Freight revenue	$	268,840		$	258,599		$	788,591		$	762,796
Fuel surcharge revenue		28,049			29,286			80,507			91,349
Total revenue	$	296,889		$	287,885		$	869,098		$	854,145

Operating expenses:
Salaries, wages, and related expenses	$	109,745		$	110,815		$	323,845		$	317,523
Fuel expense		29,506			28,545			85,663			88,590
Operations and maintenance		19,352			17,690			52,168			46,838
Revenue equipment rentals and purchased transportation		72,908			64,434			206,504			193,940
Operating taxes and licenses		3,304			3,227			10,326			8,871
Insurance and claims		14,179			12,241			46,769			44,779
Communications and utilities		1,631			1,330			4,580			4,005
General supplies and expenses		15,872			11,937			44,124			47,244
Depreciation and amortization		22,953			21,222			67,869			64,460
Loss on disposition of property and equipment, net		(487	)		209			134			1,748
Total operating expenses		288,963			271,650			841,982			817,998
Operating income		7,926			16,235			27,116			36,147
Interest expense, net		3,468			3,204			8,795			10,341
Income from equity method investment		(3,578	)		(3,993	)		(11,622	)		(11,763	)
Income before income taxes		8,036			17,024			29,943			37,569
Income tax expense		1,772			4,141			7,276			8,817
Income from continuing operations, net of tax		6,264			12,883			22,667			28,752
Income from discontinued operations, net of tax		2,829			150			2,829			450
Net income	$	9,093		$	13,033		$	25,496		$	29,202

Basic income per share: ⁽¹⁾
Income from continuing operations	$	0.25		$	0.49		$	0.88		$	1.09
Income from discontinued operations		0.11			0.01			0.11			0.02
Net income per share	$	0.36		$	0.49		$	0.99		$	1.11
Diluted income per share: ⁽¹⁾
Income from continuing operations	$	0.24		$	0.46		$	0.83		$	1.04
Income from discontinued operations		0.11			0.01			0.10			0.02
Net income per share	$	0.35		$	0.47		$	0.94		$	1.06
Basic weighted average shares outstanding		25,030			26,354			25,872			26,274
Diluted weighted average shares outstanding		26,301			27,802			27,156			27,654

⁽¹⁾	Total may not sum due to rounding.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 4

Table of Contents

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE three and nine months ended September 30, 2025 and 2024

(Unaudited and in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024

Net income	$	9,093		$	13,033		$	25,496		$	29,202

Other comprehensive income:

Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of ($1) and $88 in 2025 and $152 and ($20) in 2024, respectively		4			(435	)		(253	)		57
Reclassification of cash flow hedge gains into statement of operations, net of tax of $20 and $62 in 2025 and $34 and $103 in 2024, respectively		(58	)		(96	)		(178	)		(294	)
Total other comprehensive loss(1)		(54	)		(531	)		(431	)		(237	)

Comprehensive income	$	9,039		$	12,502		$	25,065		$	28,965

⁽¹⁾	It is the Company’s policy to release income tax effects from accumulated other comprehensive income at such time as the earnings or loss of the related activity are recognized in earnings.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 5

Table of Contents

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE three and nine months ended September 30, 2025 and 2024

(Unaudited and in thousands)

	For the Three and Nine Months Ended September 30, 2025
											Accumulated
					Additional						Other						Total
	Common Stock				Paid-In			Treasury			Comprehensive			Retained			Stockholders'
	Class A		Class B		Capital			Stock			Income			Earnings			Equity
Balances at December 31, 2024	$	218	$	47	$	158,907		$	-		$	1,035		$	278,133		$	438,340
Net income		-		-		-			-			-			6,563			6,563
Cash dividend ($0.07 per common share)		-		-		-			-			-			(1,858	)		(1,858	)
Other comprehensive loss		-		-		-			-			(253	)		-			(253	)
Stock-based employee compensation expense		-		-		1,011			-			-			-			1,011
Exercise of stock options		1		-		399			-			-			-			400
Issuance of restricted shares, net		-		-		(559	)		-			-			-			(559	)
Balances at March 31, 2025	$	219	$	47	$	159,758		$	-		$	782		$	282,838		$	443,644
Net income		-		-		-			-			-			9,840			9,840
Cash dividend ($0.07 per common share)		-		-		-			-			-			(1,797	)		(1,797	)
Share repurchase		-		-		-			(35,561	)		-			-			(35,561	)
Other comprehensive loss		-		-		-			-			(124	)		-			(124	)
Stock-based employee compensation expense		-		-		920			-			-			-			920
Issuance of restricted shares, net		-		-		(865	)		817			-			-			(48	)
Balances at June 30, 2025	$	219	$	47	$	159,813		$	(34,744	)	$	658		$	290,881		$	416,874
Net income		-		-		-			-			-			9,093			9,093
Cash dividend ($0.07 per common share)		-		-		-			-			-			(1,753	)		(1,753	)
Other comprehensive income		-		-		-			-			(54	)		-			(54	)
Share repurchase		-		-		-			(1,017	)		-			-			(1,017	)
Stock-based employee compensation expense		-		-		1,065			-			-			-			1,065
Issuance of restricted shares, net		-		-		(1,206	)		714			-			-			(492	)
Balances at September 30, 2025	$	219	$	47	$	159,672		$	(35,047	)	$	604		$	298,221		$	423,716

	For the Three and Nine Months Ended September 30, 2024
											Accumulated
					Additional						Other						Total
	Common Stock				Paid-In			Treasury			Comprehensive			Retained			Stockholders'
	Class A		Class B		Capital			Stock			Income			Earnings			Equity
Balances at December 31, 2023	$	161	$	24	$	155,846		$	(132,346	)	$	816		$	378,919		$	403,420
Net income		-		-		-			-			-			3,974			3,974
Cash dividend ($0.055 per common share)		-		-		-			-			-			(1,443	)		(1,443	)
Other comprehensive income		-		-		-			-			260			-			260
Exercise of stock options		-		-		150			278			-			-			428
Stock-based employee compensation expense		-		-		947			-			-			-			947
Issuance of restricted shares, net		-		-		(248	)		(91	)		-			-			(339	)
Balances at March 31, 2024	$	161	$	24	$	156,695		$	(132,159	)	$	1,076		$	381,450		$	407,247
Net income		-		-		-			-			-			12,194			12,194
Cash dividend ($0.055 per common share)		-		-		-			-			-			(1,448	)		(1,448	)
Other comprehensive income		-		-		-			-			34			-			34
Exercise of stock options		-		-		195			386			-			-			581
Stock-based employee compensation expense		-		-		765			-			-			-			765
Issuance of restricted shares, net		-		-		(207	)		207			-			-			-
Balances at June 30, 2024	$	161	$	24	$	157,448		$	(131,566	)	$	1,110		$	392,196		$	419,373
Net income		-		-		-			-			-			13,033			13,033
Cash dividend ($0.055 per common share)		-		-		-			-			-			(1,450	)		(1,450	)
Other comprehensive income		-		-		-			-			(531	)		-			(531	)
Stock-based employee compensation expense		-		-		988			-			-			-			988
Issuance of restricted shares, net		-		-		45			94			-			-			139
Balances at September 30, 2024	$	161	$	24	$	158,481		$	(131,472	)	$	579		$	403,779		$	431,552

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 6

Table of Contents

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE nine months ended September 30, 2025 and 2024

(Unaudited and in thousands)

	Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net income	$	25,496		$	29,202
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on accounts receivable		-			(46	)
Reversal of gain on sales to equity method investee		(2	)		(28	)
Depreciation and amortization		67,869			64,460
Deferred income tax expense		5,253			5,426
Income tax expense arising from restricted share vesting and stock options exercised		(322	)		(658	)
Stock-based compensation expense		2,996			2,700
Income from equity method investment		(11,622	)		(11,763	)
Return on investment from equity method investee		5,145			3,675
(Gain) loss on disposition of property and equipment		(3,039	)		1,748
Changes in operating assets and liabilities:
Receivables and advances		(11,453	)		7,704
Prepaid expenses and other assets		(1,659	)		(4,080	)
Inventory and supplies		(497	)		(1,261	)
Insurance and claims accrual		3,705			8,242
Accounts payable and accrued expenses		6,231			(4,360	)
Net cash flows provided by operating activities		88,101			100,961

Cash flows from investing activities:
Acquisition, net of cash acquired		-			(4,556	)
Other investments		(788	)		(488	)
Purchase of property and equipment		(119,044	)		(131,494	)
Proceeds from disposition of property and equipment		30,651			32,332
Net cash flows used in investing activities		(89,181	)		(104,206	)

Cash flows from financing activities:
Cash dividend		(5,408	)		(4,341	)
Proceeds from notes payable		86,174			104,785
Repayments of notes payable		(69,835	)		(45,949	)
Repayments of finance lease obligations		(555	)		(553	)
Proceeds under revolving credit facility		75,214			57,247
Repayments under revolving credit facility		(75,214	)		(68,826	)
Payment of contingent consideration liability		(4,951	)		(7,023	)
Proceeds from exercise of stock options		399			1,147
Payment of minimum tax withholdings on stock compensation		(1,099	)		(339	)
Common stock repurchased		(36,578	)		-
Net cash flows (used in) provided by financing activities		(31,853	)		36,148

Net change in cash and cash equivalents		(32,933	)		32,903

Cash and cash equivalents at beginning of period		35,619			2,294
Cash and cash equivalents at end of period	$	2,686		$	35,197

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.

Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a Nevada holding company, and its wholly owned subsidiaries. References in this report to "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Act of 1933. In preparing financial statements, it is necessary for management to make assumptions and estimates affecting the amounts reported in the condensed consolidated financial statements and related notes. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts. In the opinion of management, the accompanying financial statements include all adjustments that are necessary for a fair presentation of the results for the interim periods presented, such adjustments being of a normal recurring nature.

Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. The December 31, 2024, condensed consolidated balance sheet was derived from our audited balance sheet as of that date. Our operating results are subject to seasonal trends when measured on a quarterly basis; therefore, operating results for the nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2024. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation for book purposes is determined using the straight-line method over the estimated useful lives of the assets. Depreciation of revenue equipment is our largest item of depreciation. We generally depreciate new tractors over five years to salvage values ranging from approximately 0% to 35% of their cost, depending on the utilization profile of the equipment associated with its reportable segment. We generally depreciate new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 20% and 25% of their cost, respectively. We annually, or whenever events or changes in circumstances indicate that a review is warranted, review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets, based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. During the quarter ended June 30, 2024, we performed a review of our estimates and, due to a weak used revenue equipment market, we increased the rate of depreciation on revenue equipment in the period resulting in an additional $1.2 million and $3.8 million of depreciation expense during the three and nine months ended September 30, 2024, respectively.

Recent Accounting Pronouncements

Accounting standards not yet adopted

In September 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes the accounting for costs related to internal-use software. The amendments in the standard remove all previous references to project stages and clarify the threshold entities apply to begin capitalizing costs. The standard becomes effective for us on January 1, 2028, for annual and interim periods and may be adopted on a prospective basis, a modified basis for in-process projects, or a retrospective basis. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company does not expect adoption of this guidance to have a material effect on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements. The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The update may be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid, requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The amendments only impact disclosures and are not expected to have an impact on the Company's financial condition and results of operations.

Reclassification of Previously Issued Financial Statements

Certain amounts in the prior period have been reclassified in the condensed consolidated financial statements to conform to the current year presentation. There has been no impact on previously reported net income or stockholders' equity from such reclassification.

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Note 2.

Income Per Share

Basic income per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. Income per share is the same for both Class A and Class B shares.

The following table sets forth, for the periods indicated, the calculation of net income per share included in the condensed consolidated statements of operations:

(in thousands except per share data)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Numerators:
Income from continuing operations	$	6,264	$	12,883	$	22,667	$	28,752
Income from discontinued operations		2,829		150		2,829		450
Net income	$	9,093	$	13,033	$	25,496	$	29,202
Denominator:
Denominator for basic income per share – weighted-average shares		25,030		26,354		25,872		26,274
Effect of dilutive securities:
Equivalent shares issuable upon conversion of unvested restricted shares		120		150		137		142
Equivalent shares issuable upon conversion of unvested employee stock options		1,151		1,298		1,147		1,238
Denominator for diluted income per share adjusted weighted-average shares and assumed conversions		26,301		27,802		27,156		27,654

Basic income per share⁽¹⁾:
Income from continuing operations	$	0.25	$	0.49	$	0.88	$	1.09
Income from discontinued operations		0.11		0.01		0.11		0.02
Net income per share	$	0.36	$	0.49	$	0.99	$	1.11
Diluted income per share: ⁽¹⁾
Income from continuing operations	$	0.24	$	0.46	$	0.83	$	1.04
Income from discontinued operations		0.11		0.01		0.10		0.02
Net income per share	$	0.35	$	0.47	$	0.94	$	1.06

⁽¹⁾	Total may not sum due to rounding.

There were no unvested shares excluded from the calculation of diluted earnings per share as anti-dilutive for the three and nine months ended September 30, 2025 and 2024. There were no unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three and nine months ended September 30, 2025 and 2024.

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Note 3.

Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The fair value of our interest rate swap agreements is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements.

The fair value of the contingent consideration arrangement is based on inputs that are not observable in the market and is estimated using a probability-weighted method. The significant unobservable inputs used in the fair value of the contingent consideration liability include the financial projections over the earn-out period, the volatility of the underlying financial metrics, and estimated discount rates.

The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.

A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

●	Level 1. Observable inputs such as quoted prices in active markets;
●	Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
●	Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Financial Instruments Measured at Fair Value on a Recurring Basis

(in thousands)
	*September 30, 2025*			*December 31, 2024*			*Input Level*
Interest rate swaps		815			1,397			2
Contingent consideration		(22,001	)		(27,794	)		3
Cash surrender value life insurance policies		4,777			3,370			2

The carrying amount of cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments.

Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes. The fair value of our revenue equipment installment notes approximated the carrying value as of September 30, 2025, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our revolving Credit Facility (as defined herein) approximate fair value due to the variable interest rate on that facility.

Contingent consideration arrangements require us to pay up to $20.0 million of additional consideration to AAT Carriers, Inc.'s ("AAT's") former shareholders based on AAT's results during the first two post-acquisition years, of which the final installment was made during 2024, up to $30.0 million of additional consideration to Lew Thompson & Son Trucking, Inc.'s ("LTST's") former shareholders based on LTST's results during the first three calendar years following closing, up to $12.0 million of additional consideration to Sims Transport Services, LLC's ("Sims") former shareholders based on Sims' results during the first four calendar years following closing, and up to $5.0 million of additional consideration to the seller of the assets of a small, multi-stop distribution carrier we acquired in February 2025 (the "Asset Acquisition").

The fair value of the contingent consideration is adjusted at each reporting period based on changes to the expected cash flows and related assumptions. During the three months ended September 30, 2025, there were contingent payments made of $0.4 million as a result of the Asset Acquisition. During the nine months ended September 30, 2025, there were contingent payments made of $12.5 million based on LTST's results for the first calendar year following closing and $0.4 million as a result of the Asset Acquisition. During the three months ended September 30, 2024, there were no contingent payments made. During the nine months ended September 30, 2024, there were contingent payments made of $10.0 million based on AAT's results for the second post-acquisition year. Of the $12.9 million paid for the contingent consideration liability during 2025, $5.0 million was classified as financing cash flows and $7.9 million was classified as operating cash flows within the condensed consolidated statements of cash flows. Of the $10.0 million paid for the contingent consideration liability during 2024, $7.0 million was classified as financing cash flows and $3.0 million was classified as operating cash flows within the condensed consolidated statements of cash flows. The fair value of the contingent consideration increased $0.7 million and $0.7 million related to a change in the fair value for the LTST contingent consideration for the three months ended September 30, 2025 and 2024, respectively and $2.1 million and $9.5 million related to a change in the fair value for the LTST contingent consideration for the nine months ended September 30, 2025 and 2024, respectively. Additionally, contingent consideration increased $5.0 million for the nine months ended September 30, 2025 as a result of the Asset Acquisition. The adjustment to the fair value of the contingent consideration liability was recorded as a component of general supplies and expenses within the condensed consolidated statements of operations. The contingent consideration liability is included in accounts payable and other long-term liabilities in our condensed consolidated balance sheets.

The following table provides a summary (in thousands) of the activity for the contingent consideration liability for 2025:

		December 31, 2024				Additions				Adjustments to fair market value				Payments				September 30, 2025
Contingent consideration		$	(27,794	)		$	(5,000	)		$	(2,128	)		$	12,921			$	(22,001	)

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Note 4.

Segment Information

We have four reportable segments:

●

Expedited: The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the Company.

●

Dedicated: The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the Company. The Dedicated reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Dedicated customers.

●

Managed Freight: The Managed Freight reportable segment includes our brokerage and transport management services (“TMS”). Brokerage services provide logistics capacity by outsourcing the carriage of customers’ freight to third parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.

●

Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function. The Warehousing reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Warehousing customers.

The Company's chief operating decision maker ("CODM"), the Chief Executive Officer, evaluates the operating results through reportable segment operating income, which includes certain corporate overhead allocations directly attributable to each of the segments. We do not report our intersegment revenues by segment to our CODM and do not believe they are a meaningful metric for evaluating the performance of our reportable segments.

Each segment uses certain shared infrastructure and each segment is presented with its direct costs and an allocation of certain shared overhead costs. Insurance and claims expense is charged to the segments based on their historic claims experience and an allocation of current insurance premiums.

The CODM uses operating income for each segment in the annual budget and strategic planning process. The CODM considers budget-to-actual variances on a quarterly basis as well as month-over-month variances when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment operating income for evaluating pricing strategy, to assess the performance of each segment by comparing the results of each segment with one another, and in determining the compensation of certain employees.

The following table summarizes our total revenue by our four reportable segments, as used by our CODM in making decisions regarding allocation of resources etc., for the three and nine months ended September 30, 2025 and 2024:

(in thousands)
Three Months Ended September 30, 2025	Expedited		Dedicated			Managed Freight		Warehousing		Total
Revenues
Freight revenue	$	80,184	$	91,581		$	72,220	$	24,802	$	268,787
Fuel surcharge revenue⁽¹⁾		14,448		13,439			-		162		28,049
Subtotal operating revenues	$	94,632	$	105,020		$	72,220	$	24,964	$	296,836
Other revenues											53
Total revenue										$	296,889

Operating expenses:
Salaries, wages, and related expenses		30,756		43,760			2,758		12,044
Fuel expense		14,584		14,690			-		167
Operations and maintenance		10,099		12,667			689		1,471
Revenue equipment rentals and purchased transportation		17,742		8,453			62,545		1,052
Operating taxes and licenses		356		667			18		383
Insurance and claims		6,647		5,057			205		220
Communications and utilities		-		196			7		249
General supplies and expenses		235		482			769		4,161
Depreciation and amortization		1		4,369			22		461
Loss on disposition of property and equipment, net		-		(63	)		-		-
Total allocated overhead		9,133		10,643			2,247		2,258
Segment operating expenses		89,553		100,921			69,260		22,466		282,200
Subtotal operating income	$	5,079	$	4,099		$	2,960	$	2,498	$	14,689
Other ⁽²⁾											(6,763	)
Total consolidated operating income											7,926
Interest expense, net											(3,468	)
Income from equity method investment											3,578
Income before income taxes										$	8,036

(in thousands)
Three Months Ended September 30, 2024	Expedited		Dedicated			Managed Freight		Warehousing		Total
Revenues
Freight revenue	$	87,363	$	82,676		$	63,385	$	25,175	$	258,599
Fuel surcharge revenue⁽¹⁾		16,951		12,039			-		296		29,286
Subtotal operating revenues	$	104,314	$	94,715		$	63,385	$	25,471	$	287,885
Other revenues											-
Total revenue										$	287,885

Operating expenses:
Salaries, wages, and related expenses		33,750		36,873			2,756		11,589
Fuel expense		15,469		12,686			-		347
Operations and maintenance		10,182		8,998			968		1,374
Revenue equipment rentals and purchased transportation		16,571		7,361			53,067		1,241
Operating taxes and licenses		358		461			11		506
Insurance and claims		6,638		4,176			428		203
Communications and utilities		-		140			5		224
General supplies and expenses		256		486			766		4,329
Depreciation and amortization		4		3,317			21		455
Gain on disposition of property and equipment, net		-		(132	)		-		-
Total allocated overhead		8,814		9,555			2,417		2,452
Segment operating expenses		92,042		83,921			60,439		22,720		259,122
Segment operating income	$	12,272	$	10,794		$	2,946	$	2,751	$	28,763
Other ⁽²⁾											(12,528	)
Total consolidated operating income											16,235
Interest expense, net											(3,204	)
Income from equity method investment											3,993
Income before income taxes										$	17,024

(in thousands)
Nine Months Ended September 30, 2025	Expedited		Dedicated		Managed Freight		Warehousing		Total
Revenues
Freight revenue	$	243,662	$	263,827	$	206,620	$	74,429	$	788,538
Fuel surcharge revenue⁽¹⁾		42,963		37,079		-		465		80,507
Subtotal operating revenues	$	286,625	$	300,906	$	206,620	$	74,894	$	869,045
Other revenues										53
Total revenue									$	869,098

Operating expenses:
Salaries, wages, and related expenses		94,398		125,160		7,880		35,822
Fuel expense		43,854		41,328		-		498
Operations and maintenance		31,263		34,581		1,195		4,154
Revenue equipment rentals and purchased transportation		51,439		26,027		176,734		3,302
Operating taxes and licenses		1,033		1,927		84		1,732
Insurance and claims		19,964		15,221		361		666
Communications and utilities		1		583		25		716
General supplies and expenses		704		1,616		2,444		13,308
Depreciation and amortization		4		12,658		65		1,419
Loss on disposition of property and equipment, net		-		225		-		-
Total allocated overhead		25,830		29,308		6,870		7,019
Segment operating expenses		268,490		288,634		195,658		68,636		821,418
Segment operating income	$	18,135	$	12,272	$	10,962	$	6,258	$	47,680
Other ⁽²⁾										(20,564	)
Total consolidated operating income										27,116
Interest expense, net										(8,795	)
Income from equity method investment										11,622
Income before income taxes									$	29,943

(in thousands)
Nine Months Ended September 30, 2024	Expedited		Dedicated			Managed Freight		Warehousing		Total
Revenues
Freight revenue	$	262,881	$	237,124		$	186,668	$	76,123	$	762,796
Fuel surcharge revenue⁽¹⁾		54,914		35,538			-		897		91,349
Subtotal operating revenues	$	317,795	$	272,662		$	186,668	$	77,020	$	854,145
Other revenues											-
Total revenue										$	854,145

Operating expenses:
Salaries, wages, and related expenses		103,673		104,485			6,819		35,270
Fuel expense		50,028		37,589			-		1,155
Operations and maintenance		30,050		27,110			1,149		4,092
Revenue equipment rentals and purchased transportation		50,892		22,634			158,638		3,671
Operating taxes and licenses		1,310		1,002			34		1,794
Insurance and claims		19,968		11,830			676		601
Communications and utilities		1		315			16		669
General supplies and expenses		704		1,605			2,267		12,679
Depreciation and amortization		19		8,557			63		1,291
Gain on disposition of property and equipment, net		-		(170	)		-		-
Total allocated overhead		25,177		26,283			7,523		7,262
Segment operating expenses		281,822		241,240			177,185		68,484		768,731
Segment operating income	$	35,973	$	31,422		$	9,483	$	8,536	$	85,414
Other⁽²⁾											(49,267	)
Total consolidated operating income											36,147
Interest expense, net											(10,341	)
Income from equity method investment											11,763
Income before income taxes										$	37,569

(1)

The CODM does not receive fuel surcharge revenue and fuel expense individually, but is provided with fuel expense less fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation), which we refer to as net fuel expense. The CODM uses net fuel expense to measure the effectiveness of our fuel surcharge program.

(2)

Other represents indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, and contingent consideration liability adjustments to match the information our CODM uses to evaluate the operating results of our reportable segments.

Balance sheet data by reportable segment is not maintained by the Company.

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Note 5.

Income Taxes

Income tax expense in both 2025 and 2024 varies from the amount computed by applying the federal corporate income tax rates of 21% to income before income taxes, primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences the most significant of which is the effect of the per diem pay structure for drivers, executive compensation disallowance, and excess tax benefits on share-based compensation. Drivers who meet the requirements to receive per diem receive non-taxable per-diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and related expenses are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven the impact of the per diem program on our effective tax rate is significant. Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings.

Our liability recorded for uncertain tax positions as of September 30, 2025 is unchanged since December 31, 2024.

The net deferred tax liability of $122.2 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating loss carryovers and insurance claims that have been reserved but not paid. The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. The Company has determined that a valuation allowance was not necessary at September 30, 2025 for its deferred tax assets since it is more likely than not they will be realized from the future reversals of temporary differences. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

The American Rescue Plan extended the reach of IRC Section 162(m) to include compensation paid to the eight highest-paid individuals other than the chief executive officer and the chief financial officers (rather than the three highest), however, this change is not effective until 2027. There is no material impact to the financial statements at this time.

We do not anticipate the Inflation Reduction Act (the "IRA") will have a significant impact on income tax expense or on other taxes. One of the most impactful provisions of the IRA includes the establishment of a Corporate Alternative Minimum Tax ("CAMT"). However, this tax only applies to corporations with three-year average earnings in excess of $1.0 billion. We will continue to monitor the CAMT each year to determine if we will become an applicable corporation. Additionally, the IRA enacted an excise tax on stock buybacks, which imposes a 1% tax on stock buybacks, subject to netting provisions regarding stock awarded to employees as part of their compensation. We do not believe this will have a material impact on our active repurchase program.

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA") into law. The OBBBA, among other things, includes provisions for accelerated tax depreciation, modifications to the net interest deduction limitations, and the rollback of certain alternative energy provisions. Based on preliminary analysis, we anticipate our deferred tax liability for fixed assets to increase by approximately $31.0 million related to bonus depreciation. We are continuing to model the effects of the OBBBA, such as Section 163(j) and Section 174, with no other adjustments expected as of September 30, 2025.

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Note 6.

Debt

Current and long-term debt and lease obligations consisted of the following as of September 30, 2025 and December 31, 2024:

(in thousands)	September 30, 2025				December 31, 2024
	Current		Long-Term		Current		Long-Term
Borrowings under Credit Facility	$	-	$	-	$	-	$	-
Borrowings under the Draw Note		-		-		-		-
Revenue equipment installment notes; weighted average interest rate of 5.2% at September 30, 2025, and 5.4% at December 31, 2024, due in monthly installments with final maturities at various dates ranging from February 2028 to September 2031, secured by related revenue equipment		62,330		188,505		62,860		170,629
Real estate notes; interest rate of 6.1% at September 30, 2025 and 6.3% at December 31, 2024 due in monthly installments with a fixed maturity at August 2035, secured by related real estate		1,393		15,406		1,350		16,456
Total debt		63,723		203,911		64,210		187,085
Principal portion of finance lease obligations, secured by related revenue equipment		817		2,571		751		3,192
Principal portion of operating lease obligations, secured by related real estate and revenue equipment		11,266		26,818		10,349		31,302
Total debt and lease obligations	$	75,806	$	233,300	$	75,310	$	221,579

We and substantially all of our subsidiaries are parties to the Third Amended and Restated Credit Agreement (the "Credit Facility") with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A. (together with the Agent, the "Lenders"). The Credit Facility is a $110.0 million revolving credit facility, with an uncommitted accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $75.0 million subject to Lender acceptance of the additional funding commitment. The Credit Facility includes a letter of credit sub facility in an aggregate amount of $105.0 million and a swing line sub facility in an aggregate amount equal to the greater of $10.0 million or 10% of the Lenders' aggregate commitments under the Credit Facility from time-to-time. The Credit Facility matures in May 2027.

Borrowings under the Credit Facility are classified as either "base rate loans" or "SOFR loans." Base rate loans accrue interest at a base rate equal to the greater of the Agent’s prime rate, the federal funds rate plus 0.5%, or SOFR for a one month period as of such day, plus an applicable margin ranging from 0.25% to 0.75%; while SOFR loans accrued interest at SOFR, plus an applicable margin ranging from 1.25% to 1.75%. The applicable rates are adjusted quarterly based on average pricing availability. The unused line fee is the product of 0.25% times the average daily amount by which the Lenders' aggregate revolving commitments under the Credit Facility exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The obligations under the Credit Facility are guaranteed by us and secured by a pledge of substantially all of our assets, with the notable exclusion of any real estate, revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases, and revenue equipment that we do not designate as being included in the borrowing base.

Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $110.0 million, minus the sum of the stated amount of all outstanding letters of credit; or (B) the sum of (i) 87.5% of eligible accounts receivable, plus (ii) the least of (a) 85% of the appraised net orderly liquidation value of eligible revenue equipment, (b) 100% of the net book value of eligible revenue equipment, (c) 60.0% of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) $65.0 million.

We had no borrowings outstanding under the Credit Facility as of September 30, 2025, undrawn letters of credit outstanding of approximately $19.9 million, and available borrowing capacity of $90.1 million. As of September 30, 2025, there were no base rate or SOFR loans. Based on availability as of September 30, 2025 and 2024, there was no fixed charge coverage requirement.

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The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may be accelerated, and the Lenders' commitments may be terminated. If an event of default occurs under the Credit Facility and the Lenders cause, or have the ability to cause, all of the outstanding debt obligations under the Credit Facility to become due and payable, this could result in a default under other debt instruments that contain acceleration or cross-default provisions. The Credit Facility contains certain restrictions and covenants relating to, among other things, debt, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and affiliate transactions. Failure to comply with the covenants and restrictions set forth in the Credit Facility could result in an event of default.

Pricing for the revenue equipment installment notes is quoted by the respective financial affiliates of our primary revenue equipment suppliers and other lenders at the funding of each group of equipment acquired and include fixed annual rates for new equipment under retail installment contracts. The notes included in the funding are due in monthly installments with final maturities at various dates ranging from February 2028 to September 2031. The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but do not have any financial or other material covenants or events of default except certain notes totaling $21.4 million are cross-defaulted with the Credit Facility. Additional borrowings from the financial affiliates of our primary revenue equipment suppliers and other lenders are expected to be available to fund new tractors expected to be delivered in 2025, while any other property and equipment purchases, including trailers, are expected to be funded with a combination of available cash, notes, operating leases, finance leases, and/or from the Credit Facility.

In August 2015, we financed a portion of the purchase of our corporate headquarters, a maintenance facility, and certain surrounding property in Chattanooga, Tennessee by entering into a $28.0 million variable rate note with a third-party lender. The note contains certain restrictions and covenants that are usual and customary for a note of this nature. Failure to comply with the covenants and restrictions set forth in the note could result in an event of default. Concurrently with entering into the note, we entered into an interest rate swap to effectively fix the related interest rate to 4.2%. We expect to be in compliance with our debt covenants for the next 12 months.

In connection with the settlement of a dispute related to the sale of Transport Financial Services (the "TFS Settlement"), in September 2020, TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided the Company with a $45 million line of credit (the “Draw Note”), the proceeds of which were to be used solely to satisfy our indemnification obligations under the TFS Settlement. The Draw Note expired September 23, 2025.

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Note 7.

Lease Obligations

The finance leases in effect at September 30, 2025 terminate from June 2028 through November 2033 and contain guarantees of the residual value of the related equipment by us.

A summary of our lease obligations at September 30, 2025 and 2024 are as follows:

(dollars in thousands)	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2025			September 30, 2024			September 30, 2025			September 30, 2024
Finance lease cost:
Amortization of right-of-use assets	$	218		$	122		$	655		$	368
Interest on lease liabilities		112			215			355			636
Operating lease cost		3,390			3,648			11,219			10,607
Variable lease cost		(3	)		50			(71	)		199
Short-term lease cost		1,652			802			4,336			2,776
Total lease cost	$	5,369		$	4,837		$	16,494		$	14,586

Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases		112			215			355			636
Operating cash flows from operating leases		2,534			2,851			8,578			8,286
Financing cash flows from finance leases		190			188			555			553
Right-of-use assets obtained in exchange for new finance lease liabilities		-			-			-			815
Right-of-use assets obtained in exchange for new operating lease liabilities		702			4,783			4,991			13,753
Weighted-average remaining lease term—finance leases (in years)		4.9			3.5
Weighted-average remaining lease term—operating leases (in years)		3.8			4.6
Weighted-average discount rate—finance leases		6.1	%		13.5	%
Weighted-average discount rate—operating leases		8.8	%		8.6	%

As of September 30, 2025 and December 31, 2024, right-of-use assets of $36.0 million and $40.0 million for operating leases and $3.0 million and $4.6 million for finance leases, respectively, are included in net property and equipment in our condensed consolidated balance sheets. Operating lease right-of-use asset amortization is included in revenue equipment rentals and purchased transportation and general supplies and expenses, depending on the underlying asset, in the condensed consolidated statement of operations. Amortization of finance leased assets is included in depreciation and amortization expense in the condensed consolidated statement of operations.

Our future minimum lease payments as of September 30, 2025, are summarized as follows by lease category:

(in thousands)	*Operating*			*Finance*
2025 ⁽¹⁾		3,473		$	303
2026		13,695			1,212
2027		12,148			1,212
2028		6,450			930
2029		3,703			340
Thereafter		4,563			529
Total minimum lease payments	$	44,032		$	4,526
Less: amount representing interest		(5,948	)		(1,138	)
Present value of minimum lease payments	$	38,084		$	3,388
Less: current portion		(11,266	)		(817	)
Lease obligations, long-term	$	26,818		$	2,571

⁽¹⁾ Excludes the nine months ended September 30, 2025.

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Note 8.

Stock-Based Compensation

Our Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (the "Incentive Plan") governs the issuance of equity awards and other incentive compensation to management and members of the Board of Directors (the "Board"). The Incentive Plan includes (i) a fungible share reserve feature, under which shares subject to stock options and stock appreciation rights will be counted as one share for every share granted and shares subject to all other awards will be counted as 1.80 shares for every share granted, (ii) a double-trigger vesting requirement upon a change in control, and (iii) a maximum award granted or payable to any one participant under the Incentive Plan for a calendar year of 1,000,000 shares of Class A common stock or $4,000,000, in the event the award is paid in cash.

The Incentive Plan permits annual awards of shares of our Class A common stock to executives, other key employees, consultants, non-employee directors, and eligible participants under various types of options, restricted stock, or other equity instruments. As of September 30, 2025, there were 1,814,712 shares available for award under the Incentive Plan. No awards may be made under the Incentive Plan after May 1, 2033. To the extent available, we have issued treasury stock to satisfy all share-based incentive plans.

Included in salaries, wages, and related expenses within the condensed consolidated statements of operations is stock-based compensation expense of $0.9 million and $0.8 million for the three months ended September 30, 2025 and 2024, respectively, and expense of $2.4 million and $2.1 million for the nine months ended September 30, 2025 and 2024, respectively. Included in general supplies and expenses within the condensed consolidated statements of operations is stock-based compensation expense for non-employee directors of $0.2 million for each of the three months ended September 30, 2025 and 2024 and $0.6 million for each of the nine months ended September 30, 2025 and 2024. Of the stock compensation expense recorded for the three months ended September 30, 2025 and 2024, $0.9 million and $0.8 million relates to restricted shares, respectively, and, for the nine months ended September 30, 2025 and 2024, $2.4 million and $1.5 million relates to restricted shares, respectively. There were no unvested employee stock options or related stock compensation expense for the nine months ended September 30, 2025. For the nine months ended September 30, 2024, $0.6 million of the stock compensation expense recorded related to unvested employee stock options.

The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows participants to deliver to us shares of Class A common stock having a fair market value equal to the minimum amount of such required withholding taxes. To satisfy withholding requirements for shares that vested through September 30, 2025, certain participants elected to forfeit receipt of an aggregate of 42,593 shares of Class A common stock at a weighted average per share price of $25.81 based on the closing price of our Class A common stock on the dates the shares vested in 2025, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted $1.1 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

Note 9.

Commitments and Contingencies

Legal Proceedings

From time-to-time, we are a party to litigation arising in the ordinary course of business, most of which involves claims for personal injury, workers’ compensation, and/or property damage incurred in connection with the transportation of freight. We record a liability for the estimated cost of the uninsured portion of pending claims and the estimated allocated loss adjustment expenses, including legal and other direct costs associated with a claim, when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated.

There are inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult to predict. Moreover, management's views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop. The Company’s business, results of operations, financial condition, or liquidity could be materially and adversely affected by the resolution of one or more of these contingencies.

In 2025, a third-party trucking company hauling a load brokered by the Company and using a trailer owned by the Company was involved in an accident that resulted in five fatalities and injuries to at least one other person. There are several possible defendants in the case, facts are still being developed, alleged damages have not been specified, and there are significant factual and legal issues to be resolved. The Company has concluded that a loss is probable in the case, but given the preliminary nature of the proceedings, the Company cannot reasonably estimate a range of possible losses at this time in excess of the amount accrued for legal costs. As of September 30, 2025, the Company accrued $0.5 million for legal costs associated with the accident, but it has not recorded any other liability related to the accident. To the extent the Company is found to have liability related to the accident, and the damages awarded against the Company exceed the Company’s coverage limits, involve significant aggregate use of the Company’s self-insured retention amounts, or cause increases in the Company’s insurance premiums, the Company’s insurance and claims expense would be volatile and increase. Any resulting increases in such expenses could have a materially adverse effect on the Company’s business, results of operations, financial condition, or liquidity.

Other Commitments and Contingencies

We had $19.9 million and $19.8 million of outstanding and undrawn letters of credit as of September 30, 2025 and December 31, 2024. The letters of credit are maintained primarily to support our insurance programs. Additionally, we had $45.0 million of availability on a line of credit from Triumph solely to fund any indemnification owed to Triumph in relation to the TFS Settlement which expired September 23. 2025. As of September 30, 2025 the remaining contingent liability was $0.2 million.

Note 10.

Equity Method Investment

We own a 49.0% interest in Transport Enterprise Leasing, LLC ("TEL"), a tractor and trailer equipment leasing company and used equipment reseller. There is no loss limitation on our 49.0% interest in TEL. We have not guaranteed any of TEL's debt and have no obligation to provide funding, services, or assets. There are no current put rights to purchase or sell with any owners. TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent. There are no third-party liquidity arrangements, guarantees, and/or other commitments that may affect the fair value or risk of our interest in TEL.

As of September 30, 2025, we had a revenue equipment operating lease liability to TEL of $8.4 million. During the quarter ended March 31, 2024, we sold revenue equipment to TEL in exchange for the assumption of the related notes payable of $26.2 million and $0.5 million of cash. No other transactions with TEL were material for the three or nine months ended September 30, 2025 and 2024.

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We have accounted for our investment in TEL using the equity method of accounting, and thus our financial results include our proportionate share of TEL's 2025 net income through September 30, 2025, or $11.6 million.

Our accounts receivable from TEL, accounts payable to TEL, and investment in TEL as of September 30, 2025 and December 31, 2024 are as follows (in thousands):

Description:	Balance Sheet Line Item:	September 30, 2025		December 31, 2024
Accounts receivable from TEL	Driver advances and other receivables	$	4	$	-
Accounts payable to TEL	Accrued expenses	$	373	$	275
Investment in TEL	Other assets	$	83,885	$	77,405
Operating lease obligations	Current and long-term portion of operating lease obligations	$	8,393	$	10,092

Our accounts receivable from TEL related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf and our accounts payable to TEL primarily related to leased revenue equipment payment accruals.

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Note 11.

Goodwill, Intangibles, and Other Assets

During the nine months ended September 30, 2025 we acquired an $11.2 million customer relationship for the Dedicated reportable segment through the Asset Acquisition.

The Landair Holdings, Inc. ("Landair") trade name has a residual value of $0.5 million.

Amortization expense of $7.8 million and $7.1 million for the nine months ended September 30, 2025 and 2024, respectively, was included in depreciation and amortization in the condensed consolidated statements of operations.

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A summary of other intangible assets as of September 30, 2025 and December 31, 2024 is as follows:

(in thousands)	September 30, 2025
	Gross intangible assets		Accumulated amortization			Net intangible assets		Remaining life (months)
Trade name:
Dedicated	$	4,502	$	(2,637	)	$	1,865
Managed Freight		1,089		(923	)		166
Warehousing		999		(885	)		114
Total trade name		6,590		(4,445	)		2,145		89
Non-compete agreement:
Dedicated		4,670		(2,821	)		1,849
Managed Freight		380		(198	)		182
Total non-compete agreement		5,050		(3,019	)		2,031		19
Customer relationships:
Dedicated		71,374		(15,708	)		55,666
Managed Freight		7,312		(2,695	)		4,617
Warehousing		12,436		(7,514	)		4,922
Total customer relationships:		91,122		(25,917	)		65,205		138
Credentialing:
Expedited		32,000		(7,822	)		24,178
Total credentialing		32,000		(7,822	)		24,178		136
Total other intangible assets	$	134,762	$	(41,203	)	$	93,559		133

(in thousands)	December 31, 2024
	Gross intangible assets		Accumulated amortization			Net intangible assets		Remaining life (months)
Trade name:
Dedicated	$	4,502	$	(2,479	)	$	2,023
Managed Freight		1,089		(910	)		179
Warehousing		999		(885	)		114
Total trade name		6,590		(4,274	)		2,316		98
Non-compete agreement:
Dedicated		4,670		(1,946	)		2,724
Managed Freight		380		(127	)		253
Total non-compete agreement		5,050		(2,073	)		2,977		28
Customer relationships:
Dedicated		60,172		(12,142	)		48,030
Managed Freight		7,312		(1,987	)		5,325
Warehousing		12,436		(6,736	)		5,700
Total customer relationships:		79,920		(20,865	)		59,055		149
Credentialing:
Expedited		32,000		(6,222	)		25,778
Total credentialing		32,000		(6,222	)		25,778		145
Total other intangible assets	$	123,560	$	(33,434	)	$	90,126		142

The expected amortization of these assets for the next five successive years is as follows:

	(in thousands)
2025 ⁽¹⁾		2,652
2026		10,609
2027		9,799
2028		9,340
2029		9,328
Thereafter		51,331

⁽¹⁾ Excludes the nine months ended September 30, 2025.

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There were no changes to the carrying amount of goodwill from $78.9 million at December 31, 2024. A summary of the carrying amount of goodwill is as follows:

(in thousands)
	Expedited		Dedicated		Managed Freight		Warehousing
Balance at September 30, 2025	$	15,699	$	32,575	$	8,917	$	21,750

At September 30, 2025, our insurance program involves self-insurance to certain risk retention levels. We accrue claims above our self-insured retention and record a corresponding receivable for the amounts we expect to collect from insurers upon settlement of such claims. We have $19.4 million and $0.6 million as other long-term receivables and as a corresponding accrual in the long-term portion of insurance and claims accruals on our condensed consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will pay their portion of such claims at September 30, 2025 and December 31, 2024, respectively.

Note 12.

Equity

On December 31, 2024, after market close, the Company effected a 2 for 1 forward split on its Class A common stock and Class B common stock outstanding in the form of a stock dividend, under which each stockholder of the Company’s Class A common stock on that date received one additional share of the Company’s $0.01 par value Class A common stock for every one share owned and each stockholder of the Company’s Class B common stock on that date received one additional share of the Company’s $0.01 par value Class B common stock for every one share owned. All share and per share amounts presented in this Quarterly Report on Form 10-Q, including with respect to dividends and in the financial statement and notes hereto have been adjusted for the stock split.

On February 13, 2024, our Board declared a cash dividend of $0.055 per share which was paid on March 29, 2024, to stockholders of record on March 1, 2024. On May 15, 2024, our Board declared a cash dividend of $0.055 per share which was paid on June 28, 2024, to stockholders of record on June 7, 2024. On August 14, 2024, our Board declared a cash dividend of $0.055 per share which was paid on September 27, 2024, to stockholders of record on September 6, 2024. On November 21, 2024, our Board declared a cash dividend of $0.055 per share which was paid on December 27, 2024, to stockholders of record on December 6, 2024.

On February 10, 2025, our Board declared a cash dividend of $0.07 per share which was paid on March 28, 2025, to stockholders of record on March 7, 2025. On May 14, 2025, our Board declared a cash dividend of $0.07 per share which was paid on June 27, 2025, to stockholders of record on June 6, 2025. On August 12, 2025, our Board declared a cash dividend of $0.07 per share which was paid on September 26, 2025, to stockholders of record on September 5, 2025.

On April 23, 2025, our Board approved a stock repurchase authorization of up to $50.0 million of our Class A common stock. Under such authorization, we repurchased approximately 1.6 million shares of our Class A common stock for $36.2 million during the nine months ended September 30, 2025.

Note 13.

Subsequent Events

In October 2025, we acquired certain assets of a small logistics and brokerage company. The Asset Purchase Agreement includes an earnout component based on the average adjusted earnings before interest, taxes, depreciation, and amortization reported for operations associated with the purchased assets for the three years ending December 31, 2028 with advance payments being made for incremental targets at each of the years ending December 31, 2026 and 2027. The total purchase price, excluding any earnout achieved, was approximately $30.0 million. The purchase accounting, including the valuation of the earnout, has not yet been completed.

Based on adverse claims development after September 30, 2025, through the date of this report, management anticipates the insurance and claims accrual rate experienced for each of the first three quarters of 2025 will be increased an additional $4.0 million and $9.0 million in the fourth quarter of 2025.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The condensed consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a Nevada holding company, and its wholly owned subsidiaries. References in this report to "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

This report contains certain statements that may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, including driver satisfaction, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, utilization, upgrades, and age, availability and usage of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our business model, service standards, strategic plan and other strategic initiatives, changes to and deviations from our business model, strategic plan, and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies and insurance and claims accruals, contingent consideration related to our prior acquisitions, and the future impact of our prior acquisitions, among others, are forward-looking statements. Forward-looking statements may be identified by the use of terms or phrases such as "believe," "may," "could," "would," "will," "expects," "estimates," "projects," "appears," "mission," "anticipates," "plans," " outlook," "focus," "seek," "potential," "continue," "goal," "target," "objective," "optimistic," "intends," derivations thereof, and similar terms and phrases. Such statements are based on currently available operating, financial, and competitive information. Forward-looking statements 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. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A. Risk Factors," set forth in our Form 10-Q for the quarter ended June 30, 2025 and our Form 10-K for the year ended December 31, 2024. Readers should review and consider the factors discussed in "Item 1A. Risk Factors," set forth in our Form 10-Q for the quarter ended June 30, 2025 and our Form 10-K for the year ended December 31, 2024, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

All such forward-looking statements speak only as of the date of this Form 10-Q. You are cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

Executive Overview

Our third quarter earnings were $0.35 per diluted share, reflecting essentially flat year-over-year performance in our asset-light business units and lower performance in our Truckload business units, mainly attributable to higher costs and under-utilized equipment. We continued to invest in and grow within certain industries that our dedicated fleet services with new start-up contracts, which weighed on third quarter margins but are expected to improve over time. Meanwhile, we continue to evaluate contracts in the rest of our Truckload business for improvement or exit. Overall, we expect modest contraction in our combined Truckload fleet and growth in our asset light segments as we allocate capital toward better returning business units. This process may impact quarterly financial results as we grow and shrink certain segments, adjust staffing needs, and dispose of equipment in potentially volatile used equipment markets.

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Additional items of note for the third quarter of 2025 include the following:

	●	Total revenue of $296.9 million, an increase of 3.1% compared with the third quarter of 2024, and freight revenue (which excludes revenue from fuel surcharges) of $268.8 million, an increase of 4.0% compared with the third quarter of 2024;

	●	Operating income of $7.9 million, compared with $16.2 million in the third quarter of 2024;

	●	Net income of $9.1 million, or $0.35 per diluted share, compared with $13.0 million, or $0.47 per diluted share, in the third quarter of 2024. Net income from continuing operations of $6.3 million, or $0.24 per diluted share, compared to $12.9 million or $0.46 per diluted share, in the third quarter of 2024. Net income from discontinued operations of $2.8 million, or $0.11 per diluted share, compared to $0.2 million, or $0.01 per diluted share, in the third quarter of 2024;

	●	Our equity investment in TEL provided $3.6 million of pre-tax earnings in the third quarter of 2025 compared to $4.0 million in the third quarter of 2024;

	●	We distributed a total of $1.8 million to stockholders through cash dividends;

	●	Since December 31, 2024, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $48.7 million to $268.3 million, primarily due to repurchasing approximately $36.2 million of common stock outstanding and acquisition related payments of $19.2 million. With available borrowing capacity of $90.1 million under our Credit Facility at September 30, 2025 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

	●	Leverage ratio (ending total indebtedness, comprised of debt and finance leases, net of cash, divided by the sum of operating income, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) as of September 30, 2025 was 2.14;

	●	Stockholders' equity at September 30, 2025, was $423.7 million; and

	●	Tangible book value at September 30, 2025, was $251.2 million.

Outlook

Our outlook is impacted by both short-term and long-term factors. The reasons include expected lower profits from our minority investment in TEL attributable to credit losses in their small-carrier customer base, the impact of the U.S. government shutdown on our Department of Defense business, an expected increase in claims accruals, and loss of a large Managed Freight customer rolling off faster than the ramp up of a brokerage opportunity. These negative factors are expected to more than outweigh our current expectation of a modest peak season boost to Expedited and Managed Freight. Over the intermediate to long term, capacity exits seem to be accelerating based on publicly announced bankruptcies of small carriers and our observation of TEL’s customer base, as well as increased enforcement of government policies. In addition, there are potential demand drivers from unwinding excess inventories from import pull-forwards, tax and monetary policies, and clarification of trade policy. We have internal plans and opportunities to continue to grow certain dedicated and warehouse business that has the potential to yield acceptable margins and hold or downsize our other Truckload capacity until returns improve. To the extent we downsize capacity, we may experience severance, equipment disposal, and other costs that create uneven results in a given quarter but are expected to lead to stronger and more sustained results over time.

In sum, we expect improving market conditions and our internal plan to produce operating leverage and higher earnings and return on capital over time, although individual quarters may be volatile. With an experienced team, an attractive business mix, and a disciplined approach to capital allocation, we believe Covenant is well-positioned for the future.

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Non-GAAP Reconciliation

In addition to operating ratio, we use "adjusted operating ratio" as a key measure of profitability. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. We believe the use of adjusted operating ratio allows us to more effectively compare periods, while excluding the potentially volatile effect of changes in fuel prices, amortization of intangibles, and significant unusual items. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define adjusted operating ratio differently. Because of these limitations, adjusted operating ratio should not be considered a measure 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.

Operating Ratio

	Three Months Ended September 30,												Nine Months Ended September 30,
GAAP Operating Ratio:	2025			OR %			2024			OR %			2025			OR %			2024			OR %
Total revenue	$	296,889					$	287,885					$	869,098					$	854,145
Total operating expenses		288,963			97.3	%		271,650			94.4	%		841,982			96.9	%		817,998			95.8	%
Operating income	$	7,926					$	16,235					$	27,116					$	36,147

Adjusted Operating Ratio:	2025			Adj. OR %			2024			Adj. OR %			2025			Adj. OR %			2024			Adj. OR %
Total revenue	$	296,889					$	287,885					$	869,098					$	854,145
Fuel surcharge revenue		(28,049	)					(29,286	)					(80,507	)					(91,349	)
Freight revenue (total revenue, excluding fuel surcharge)		268,840						258,599						788,591						762,796

Total operating income		7,926						16,235						27,116						36,147
Adjusted for:
Amortization of intangibles		2,653						2,372						7,770						7,116
Contingent consideration liability adjustment		710						720						2,130						9,534
Transaction costs		-						-						149						-
Employee separation costs		1,375						-						1,375						-
Lease abandonment and customer exit costs		429						-						429						-
Abandonment of long-lived software		1,884						-						1,884						-
Adjusted operating income	$	14,977			94.4	%	$	19,327			92.5	%	$	40,853			94.8	%	$	52,797			93.1	%

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Revenue and Expenses

We focus on targeted markets throughout the United States where we believe our service standards can provide a competitive advantage. We are a major carrier for transportation companies such as parcel freight forwarders, less-than-truckload carriers, and third-party logistics providers that require a high level of service to support their businesses, as well as for traditional truckload customers such as manufacturers, retailers, and food and beverage shippers. Additionally, we provide poultry feed and live haul transportation, as well as highly regulated, time sensitive loads for the U.S. government.

We have four reportable segments, which include:

●

Expedited: The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the Company.

●

Dedicated: The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the Company. The Dedicated reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Dedicated customers.

●

Managed Freight: The Managed Freight reportable segment includes our brokerage and transport management services (“TMS”). Brokerage services provide logistics capacity by outsourcing the carriage of customers’ freight to third parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.

●

In our Expedited and Dedicated reportable segments, we primarily generate revenue by transporting freight for our customers. Generally, we are paid a predetermined rate per mile for our truckload services. We enhance our truckload revenue by charging for tractor and trailer detention, loading and unloading activities, and other specialized services, as well as through the collection of fuel surcharges to mitigate the impact of increases in the cost of fuel. The main factors that could affect our Expedited and Dedicated revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, and the number of shipments and miles we generate. These factors relate, among other things, to the general level of economic activity in the United States, inventory levels, specific customer demand, the level of capacity in the trucking industry, and driver availability.

The main expenses that impact the profitability of our Expedited and Dedicated reportable segments are the variable costs of transporting freight for our customers. These costs include fuel expenses, driver-related expenses, such as wages, benefits, training, and recruitment, and purchased transportation expenses, which primarily include compensating independent contractors. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, self-insured retention versus insurance premiums, fleet age, efficiency, and other factors. Historically, our main fixed costs include rentals and depreciation of long-term assets, such as revenue equipment and terminal facilities, and the compensation of non-driver personnel.

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Within our Expedited and Dedicated reportable segments, we operate tractors driven by a single driver and also tractors assigned to two-person driver teams. Our single driver tractors generally operate in shorter lengths of haul, generate fewer miles per tractor, and experience more non-revenue miles, but the lower productive miles are expected to be offset by generally higher revenue per loaded mile and the reduced employee expense of compensating only one driver. In contrast, our two-person driver tractors generally operate in longer lengths of haul, generate greater miles per tractor, and experience fewer non-revenue miles, but we typically receive lower revenue per loaded mile and incur higher employee expenses of compensating both drivers. We expect operating statistics and expenses to shift with the mix of single and team operations.

Within our Managed Freight reportable segment, we derive revenue from Brokerage and TMS services, particularly, for arranging transportation services for customers, directly and through relationships with thousands of third-party carriers and integration with our Expedited reportable segment. Additionally, utilizing technology and process management we provide detailed visibility into a customer’s movement of freight – inbound and outbound – throughout the customer’s network and focused customer support through multiyear contracts. We provide Brokerage services directly and through agents, who are paid a commission for the freight they provide. The main factors that impact profitability in terms of expenses are the variable costs of outsourcing the transportation freight for our customers and managing fixed costs, including purchased transportation, facility warehousing costs, salaries, and selling, general, and administrative expenses.

Within our Warehousing reportable segment, we empower customers to outsource warehousing management, including moving containers and trailers in or around freight yards. The main factors that impact profitability in terms of expenses are managing fixed costs, including salaries, facility warehousing costs, and selling, general, and administrative expenses.

In May 2011, we acquired a 49.0% interest in TEL. TEL is a tractor and trailer equipment leasing company and used equipment reseller. We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income since May 2011.

Our main measures of profitability are operating ratio and adjusted operating ratio. We define adjusted operating ratio as operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. See page 23 for the uses and limitations associated with adjusted operating ratio.

Revenue Equipment

At September 30, 2025, we operated 2,434 tractors and 6,851 trailers. Of such tractors, 2,317 were owned, 10 were financed under finance or operating leases, and 107 tractors were provided by independent contractors, who own and drive their own tractors. Of such trailers, 6,070 were owned and 781 were held under finance or operating leases. At September 30, 2025, our fleet had an average tractor age of 1.9 years and an average trailer age of 5.8 years. Due to an administrative error in the third quarter earnings release, the number of tractors at September 30, 2025, was reported as 1,487 tractors, instead of 2,434 tractors. The weighted average tractors for the period ended September 30, 2025 was correctly reported in the earnings release as 2,400 tractors.

Independent contractors provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per mile, such that we do not have the capital outlay of purchasing or leasing the tractor. The payments to independent contractors and the financing of equipment under operating leases are recorded in revenue equipment rentals and purchased transportation. Expenses associated with company owned equipment, such as interest and depreciation, and expenses associated with employee drivers, including driver compensation, fuel, and other expenses, are not incurred with respect to independent contractors. Obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses, and as such, we evaluate our efficiency using net income margin, as well as operating ratio.

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RESULTS OF CONSOLIDATED OPERATIONS

COMPARISON OF three and nine months ended September 30, 2025 TO three and nine months ended September 30, 2024

The following tables set forth the percentage relationship of certain items to total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated, where applicable (dollars in thousands):

Revenue

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Revenue:
Freight revenue	$	268,840	$	258,599	$	788,591	$	762,796
Fuel surcharge revenue		28,049		29,286		80,507		91,349
Total revenue	$	296,889	$	287,885	$	869,098	$	854,145

The increase in total revenue for the three months ended September 30, 2025 compared to 2024 primarily resulted from an $8.9 million and $8.8 million increase in freight revenue for Dedicated and Managed Freight, respectively, partially offset by a $7.2 million and $0.4 million decrease in freight revenue for Expedited and Warehousing, respectively, as well as a $1.2 million decrease in fuel surcharge revenue. The increase in total revenue for the nine months ended September 30, 2025 compared to the 2024 period primarily resulted from a $26.7 million and $20.0 million increase in freight revenue for Dedicated and Managed Freight, respectively, partially offset by a $19.2 million and $1.7 million decrease in freight revenue for Expedited and Warehousing, respectively, as well as a $10.8 million decrease in fuel surcharge revenue.

See results of reportable segment operations section for discussion of fluctuations.

For comparison purposes in the discussion below, we use total revenue and freight revenue (total revenue less fuel surcharge revenue) when discussing changes as a percentage of revenue.

For each expense item discussed below, we have provided a table setting forth the relevant expense first as a percentage of total revenue, and then as a percentage of freight revenue.

Salaries, wages, and related expenses

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Salaries, wages, and related expenses	$	109,745		$	110,815		$	323,845		$	317,523
% of total revenue		37.0	%		38.5	%		37.3	%		37.2	%
% of freight revenue		40.8	%		42.9	%		41.1	%		41.6	%

Salaries, wages, and related expenses decreased for the three months ended September 30, 2025 compared to the same 2024 period primarily as a result of decreased workers' compensation and group health expenses partially offset by an increase in the use of third party contractors. For the nine months ended September 30, 2025 compared to the same 2024 period this category increased due to pay increases since the prior period as well as averaging more drivers and tractors due to growth in our Dedicated reportable segment, resulting in higher driver salaries, wages, and benefits. As a percentage of freight revenue for the nine months ended September 30, 2025, salaries, wages, and related expenses decreased as the foregoing factors increasing these expenses were offset by a lower percentage of revenue from Expedited, where we have driver pay, and a higher percentage of revenue from Managed Freight, where we don't have driver pay.

We believe driver and non-driver, including shop technicians, pay and benefits will continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance. Driver pay may also fluctuate based on the number of miles driven. While driver pay remains stable at the present time, we have historically put driver pay increases in place as necessary to address driver market pressure and will continue to do so in the future as necessary. If freight market rates increase, we would expect to, as we have historically, pass a portion of those rate increases on to our professional drivers. Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight reportable segment, for which payments are reflected in the purchased transportation line item.

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Fuel expense

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Fuel expense	$	29,506		$	28,545		$	85,663		$	88,590
% of total revenue		9.9	%		9.9	%		9.9	%		10.4	%
% of freight revenue		11.0	%		11.0	%		10.9	%		11.6	%

The increase in total fuel expense for the three months ended September 30, 2025 is primarily related to higher fuel prices partially offset by a 1.6% decrease in total miles compared to the 2024 period. The decrease in total fuel expense for the nine months ended September 30, 2025 is primarily related to a 3.6% decrease in total miles compared to the 2024 period, partially offset by higher fuel prices.

We receive a fuel surcharge on our loaded miles from most shippers; however, this does not cover the entire cost of fuel for several reasons, including the following: surcharges cover only loaded miles we operate; surcharges do not cover miles driven out-of-route by our drivers; and surcharges typically do not cover refrigeration unit fuel usage or fuel burned by tractors while idling. Moreover, most of our business relating to shipments obtained from freight brokers does not carry a fuel surcharge. Finally, fuel surcharges vary in the percentage of reimbursement offered, and not all surcharges fully compensate for fuel price increases even on loaded miles.

The rate of fuel price changes also can have an impact on results. Most fuel surcharges are based on the average fuel price as published by the Department of Energy ("DOE") for the week prior to the shipment, meaning we typically bill customers in the current week based on the previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true. Fuel prices as measured by the DOE were $0.19 per gallon, or 5.3%, higher for the quarter ended September 30, 2025 compared with the same quarter in 2024.

To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation) from our fuel expense. The result is referred to as net fuel expense. Our net fuel expense as a percentage of freight revenue is affected by the cost of diesel fuel net of fuel surcharge revenue, the percentage of miles driven by company tractors, our fuel economy, and our percentage of deadhead miles, for which we do not receive material fuel surcharge revenues.

Net fuel expense is shown below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Total fuel surcharge	$	28,049		$	29,286		$	80,507		$	91,349
Less: Fuel surcharge revenue reimbursed to independent contractors and other third parties		1,877			2,225			5,261			7,426
Company fuel surcharge revenue	$	26,172		$	27,061		$	75,246		$	83,923
Total fuel expense	$	29,506		$	28,545		$	85,663		$	88,590
Less: Company fuel surcharge revenue		26,172			27,061			75,246			83,923
Net fuel expense	$	3,334		$	1,484		$	10,417		$	4,667
% of freight revenue		1.2	%		0.6	%		1.3	%		0.6	%

For the periods presented, net fuel expense increased as a percentage of freight revenue primarily due to lower fuel surcharge recovery.

We expect to continue managing our idle time and tractor speeds, investing in more fuel-efficient tractors and auxiliary power units to improve our miles per gallon, locking in fuel hedges when deemed appropriate, partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs, and testing the latest technologies that reduce fuel consumption. Going forward, our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, percentage of uncompensated miles, percentage of revenue generated by team-driven tractors (which tend to generate higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue), percentage of revenue generated from independent contractors, and the success of fuel efficiency initiatives.

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Operations and maintenance

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Operations and maintenance	$	19,352		$	17,690		$	52,168		$	46,838
% of total revenue		6.5	%		6.1	%		6.0	%		5.5	%
% of freight revenue		7.2	%		6.8	%		6.6	%		6.1	%

The increases in operations and maintenance for the three and nine months ended September 30, 2025 were primarily the result of high demands on equipment as we grow our fleet into niche service areas, including more equipment damage than was experienced in the prior year periods.

Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, and the global disruption of the supply chain. Additionally, operations and maintenance costs may increase if we experience wage and parts inflation.

Revenue equipment rentals and purchased transportation

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Revenue equipment rentals and purchased transportation	$	72,908		$	64,434		$	206,504		$	193,940
% of total revenue		24.6	%		22.4	%		23.8	%		22.7	%
% of freight revenue		27.1	%		24.9	%		26.2	%		25.4	%

The increases in revenue equipment rentals and purchased transportation for the three and nine months ended September 30, 2025 were primarily the result of an increase in purchased transportation costs related to new business awarded to the Managed Freight reportable segment during the year. The increases for the nine months ended September 30, 2025 were partially offset by a first quarter $7.6 million decrease in purchased transportation costs due to the decline in the spot market that primarily affected the Managed Freight reportable segment. Additionally, total miles run by independent contractors decreased from 7.9% and 8.2% for the three and nine months ended September 30, 2025, respectively, to 7.7% and 7.2% for the same 2025 periods, respectively.

We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile. In addition, if fuel prices increase, it would result in a further increase in what we pay third party carriers and independent contractors. However, this expense category will fluctuate with the number and percentage of loads hauled by independent contractors, loads handled by Managed Freight, and tractors, trailers, and other assets financed with operating leases. In addition, factors such as the cost to obtain third party transportation services and the amount of fuel surcharge revenue passed through to the third party carriers and independent contractors will affect this expense category. If industry-wide trucking capacity tightens in relation to freight demand, we may need to increase the amounts we pay to third-party transportation providers and independent contractors, which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue. If we were to recruit more independent contractors, we would expect this line item to increase as a percentage of revenue.

Operating taxes and licenses

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Operating taxes and licenses	$	3,304		$	3,227		$	10,326		$	8,871
% of total revenue		1.1	%		1.1	%		1.2	%

COVENANT LOGISTICS GROUP, INC. 10-Q