Covenant Logistics Group, Inc.

Consolidated freight revenue increased 6.6% year over year, or about $18.2 million, to $294.7 million. Adjusted operating income declined 19% to $12.2 million, and adjusted net income fell 9.8%. Net indebtedness at June 30 was $289.7 million, down about $6.6 million from December 31, 2025, with adjusted leverage of about 2.2x and debt-to-capital of 41.2%. Adjusted ROIC was 5.2% for the trailing four quarters versus 7% a year ago. By segment, Expedited had a 94.6% adjusted operating ratio, Dedicated was 95%, Managed Freight revenue rose 28.4%, and TEL contributed pretax net income of $5.3 million versus $4.3 million last year. For the second half, management expects net capital equipment investment of $50 million to $60 million, operational cash flow to improve, and net indebtedness to reduce modestly.

David Parker framed the quarter as evidence that Covenant's long-term shift toward embedded, contract-backed freight is working and that the industry is entering a multi-year super cycle. He said rate increases are moving higher as capacity leaves the market, but he expects progress to be steady rather than abrupt. His tone was upbeat and highly confident, especially on long-term profitability and the growing opportunity in dedicated and specialized freight.

James Grant highlighted the quarter's hard numbers and the main financial pressures: higher costs offset improving rates, adjusted operating income fell to $12.2 million, and net indebtedness decreased to $289.7 million. He said cash from operations was affected by acquisition-related earn-outs, insurance renewals, and claim settlements, while second-half net CapEx should run $50 million to $60 million. He also noted the tractor fleet average age was 26 months, up from 22 months a year ago, and said the company wants to keep capital spending disciplined and spread it through the year.

Analysts pressed management on whether maintenance and insurance costs were one-time and how to model Q3 and beyond. Management said insurance was unusually elevated in Q2, driven by a high volume of mediations and self-insurance development, and estimated the impact at roughly 1.5 to 2 OR points above run rate in Expedited and Dedicated; they also suggested some maintenance costs were non-recurring. On the outlook, management said it feels comfortable with sequential earnings improvement in Q3 and Q4, expects Dedicated to improve more slowly than Expedited, and said its Dedicated pipeline is the best it has ever seen. They also said TEL’s Q2 contribution was unusually strong because of equipment sale gains, but they expect a solid trend going forward.