Covenant Logistics Group, Inc. Q2 FY2024 Earnings Call

Welcome to today's Covenant Logistics Group Second Quarter Earnings Release and Investor Conference Call. Our host for today's call is Tripp Grant. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host, Tripp Grant. You may begin.

Thank you. Good morning, everyone, and welcome to the Covenant Logistics Group second quarter 2024 conference call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act, which are subject to risks and uncertainties that could cause actual results to differ materially. Please review our SEC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements. A copy of the prepared comments and additional financial information is available on our website at www.covenantlogistics.com/investors. I am joined on the call today by David Parker and Paul Bunn. Our core business performed well in the second quarter, overcoming lingering weakness in the overall freight environment. Compared to a year ago, consolidated freight revenue increased by approximately $12.8 million, or 5.3%, to $256.5 million, and adjusted operating income increased by $2.4 million, or 15%, to $18.7 million. The year-over-year increase in freight revenue was primarily derived from growth in average tractor counts within our asset-based truckload segments, consisting of Expedited and Dedicated. The growth in adjusted operating income was principally derived from our asset-based Dedicated segment and both of our asset-light segments, consisting of Managed Freight and Warehousing. Adjusted net income of $14.5 million for the quarter was essentially flat with the second quarter of 2023 primarily because higher adjusted operating income was offset by a $1.7 million increase in pre-tax interest expense and a $1.3 million reduction in pre-tax earnings from our equipment leasing company investment, TEL. Key highlights for the quarter include: Our combined truckload segments grew the average total tractor count by 191 units, or 9.1%, and improved freight revenue per tractor by approximately 0.8% compared to a year ago. Our Dedicated fleet achieved the lowest adjusted operating ratio in company history with a 90.9 and grew its average tractor count by 136 units or 10.9% compared to the prior year. Within our combined truckload segments, compared to the prior year, operations and maintenance-related expenses declined by $0.02 per total mile or 10%. Fixed equipment related costs, including leased revenue equipment expenses, depreciation, and net gain/loss on sale increased $0.03 per total mile, or 8%, as a result of operating newer, more costly equipment in a soft used equipment market. Insurance and claims expense increased $0.08 per total mile, or 56%, compared to the prior year as a result of increases in new current period claims expense and the development and settlement of one large prior period claim. Our net capital investment for revenue producing equipment was approximately $43 million for the quarter, consisting of both specialized equipment CapEx for growth and maintenance CapEx. The average age of our fleet at June 30th improved to 21 months compared to 26 months a year ago. The sale of revenue equipment resulted in a $0.9 million loss in the quarter, compared to a $2 million gain in the prior year. TEL produced $0.23 per diluted share, compared to $0.29 per diluted share versus the year-ago period. TEL's contribution to pretax net earnings declined primarily as a result of the year-over-year softening in the used equipment market, suppressing gains on sale and increased interest expense. Our net indebtedness as of June 30th was $273.3 million, yielding an adjusted leverage ratio of approximately 2 times and debt-to-capital ratio of 39.5%. On an adjusted basis, return on average invested capital was 8% for the current quarter versus 13% in the prior year. The decline is attributable to reduced year-over-year trailing 12-month operating income particularly from our asset-light Managed Freight segment and the increase in the average invested capital base associated with acquisitions, growth CapEx, and reducing the average age of our fleet. Now, Paul will provide a little more color on the items affecting the individual business segments.

Thanks, Tripp. Expedited was successful in growing freight revenue by approximately $3 million, or 3.4%, but experienced a 330-basis-point deterioration in profitability compared to the prior year with an adjusted operating ratio of 94. Although our average tractor count grew 6.4%, profitability fell short of our expectations primarily as a result of cost headwinds from significant casualty claims and year-over-year declines in both rate and utilization. Dedicated was successful in growing both freight revenue and operating income, while yielding the best adjusted operating ratio in company history with a 90.9, representing a 170-basis-point improvement compared to the prior year. During the quarter, the team successfully executed a second large startup for the year, increasing the fleet's average tractor count by 10.9% year-over-year. Managed Freight experienced a 4.6% reduction in freight revenue and a 73.6% increase in adjusted operating profit compared to the prior year, reporting an adjusted operating ratio of 94. The significant improvement to adjusted operating profit was primarily the result of the combination of improved purchased transportation costs, the year-over-year impact of the Sims Transport acquisition, and reduced cargo-related claims compared to the prior-year quarter. Our Warehouse segment saw a 0.7% increase in freight revenue and a 104.7% increase in adjusted operating profit compared to the prior year, reporting an adjusted operating ratio of 91. We are pleased with the improvement in profitability within this segment, which struggled to produce adequate returns during the historical periods of rapid growth and significant labor inflation. Our minority investment in TEL contributed pre-tax net income of $4.1 million for the quarter, compared to $5.4 million in the prior-year period. The decrease was largely due to continued deterioration in the equipment market, suppressing gains on sale of used equipment. TEL's revenue in the quarter declined by 4.1% and pre-tax income decreased by approximately 24% versus the second quarter of '23. TEL decreased its truck fleet in the quarter versus year ago by 77 trucks to 2,206 and reduced its trailer fleet by 17 to 7,014. Regarding our outlook for the future, as we enter the third quarter of the year, we believe freight fundamentals are continuing to improve with excess carrier capacity slowly exiting a market with unsustainable conditions. Absent an outside catalyst to facilitate improved demand, we remain uncertain about the pace at which general freight conditions will meaningfully improve. Despite these challenges, we remain optimistic about our business model as evidenced by the durability and growth of our core operations over the last 12 months. In the third quarter, we believe that we have the momentum necessary to produce sequential operating income growth throughout the year. Although much of this growth will be offset by higher interest costs and reduced earnings contributions from TEL, we are excited about the direction of our company. Lastly, it is with sad news that we recognize the passing of Doug Carmichael, Founder and CEO of TEL. Doug was a true partner with Covenant and friend to all who worked with him. Known for his entrepreneurial spirit, quick wit, and deep generosity, Doug will be missed dearly by all who were fortunate enough to know him. Although we will miss Doug, he leaves behind the most talented management team TEL has ever had. We look forward to working with them more closely to honor Doug's legacy and ensure the continued success of the business. Thank you for your time, and we will now open up the call for questions.

And our first question will come from Scott Group with Wolfe Research.

Hey, thanks. Good morning, guys. Appreciate the time. So just maybe start with, if we can, your perspectives of the market. Knight talked last night about their own spot rates starting to move above contract rates, increasingly confident that things have bottomed. Sounds like you're seeing some of the same things, but just your broader perspective on where we are and how quickly things can recover from here?

Hey, Scott. This is David. I definitely believe that we've reached the bottom, and I noticed the change beginning around mid-May. Around that time, things started to improve significantly, with freight becoming more accessible. June continued in the same positive direction, and that trend has continued into the first part of July. So, it was really mid-May when we began to see these improvements. I think things have stabilized due to the capacity adjustments we've been managing over the last two years. However, I believe that we'll need to see more stability in capacity to fully understand the environment. I'm happy with the trend we're witnessing. For context, we've implemented three rate increases in the past 45 days, which we haven't done in two years. This indicates that customers are at least open to discussions about our pricing. These are developments that haven't occurred in the last two years, but they're starting to take shape now. While we don’t yet have the momentum to enforce rate increases across our customer base, we're actively considering it. Those who aren't performing well will be the focus of our discussions.

That's helpful. Well, do you have any perspective? You said, like, three rate increases. Like, is that three out of five? Three out of 100? I don't know.

Three out of approximately 75 that are genuinely significant to the business. This has all occurred in the last couple of weeks, Scott. It's just the beginning. The question for our third-quarter conference call will be whether that three will grow to 23. This is definitely worth noting. However, I am pleased with three after two years.

That's three more than we've got in the past two.

It's three more than I've had in two years.

And yeah, no, totally. And then, your margins have obviously held up just so much better than anybody else's. Does that preclude you from seeing a lot of margin improvement whenever the cycle turns?

I think the only thing that won't be there for us, and this is exactly what you know, Scott, from following us during this turnaround for the last four or five years, but the lows are not going to be as low, as evident from what you're seeing. And you could say the highs are not going to be as high either, from a standpoint that the spot market is about 2% or 3% of our business. We just do not participate much in the spot market. So, if it goes back up to $4 a mile and it's 20% of your business, we're not going to experience that big uplift like that, but we will have our uplift. If rates in the market go up 5%, 6%, or 7%, we're going to get our 5% or 6%, but we won't get 20% of the spot rate if that's what somebody's at. You understand what I'm saying?

I want to add to what David mentioned. When spot rates fluctuate significantly and some carriers drop to 70s Operating Ratios, our model isn't equipped to handle that. However, we did buy back a substantial percentage of our shares during 2021 and 2022, which means we have considerable earnings leverage with just a slight increase in rates. A small uptick in rates can make a significant difference. As David indicated, we haven't reached that point yet. We shouldn't expect to suddenly see a 77 Operating Ratio in a single quarter as that's not how our model works. Similarly, we won't see a 97 Operating Ratio in one quarter either. Given our reduced share count, we should benefit from potential rate increases.

That all makes sense. If I could just ask one last one. You talked about sequential improvement in Q3. Any way to just put some color around sort of how you're thinking about margins, earnings, whatever, in the third quarter?

What I'd say is the third quarter has got a lot of workdays. Weather's generally pretty good. And so, I think I'll let Tripp give any color he wants to give, but we're pretty confident about sequential improvement. I don't know that we want to put a number out there.

Scott, this is Tripp. With our model change, I typically look at our third quarter as our strongest quarter of the year, barring any unusual events. This is primarily because much of our business is based on contracts, and we experience shutdowns and holidays that adversely affect the fourth quarter. We also don't engage much in the peak market anymore, making Q3 operationally strong for us. The poultry sector tends to heat up as we prepare for Thanksgiving and the holidays, resulting in significant volume growth in the third quarter. To Paul's point, there are many workdays in the legacy portion of the Dedicated business, and you might observe similar trends to last year with slight improvements in Q3. I'm hesitant to provide specific numbers, but compared to Q2, I anticipate better volumes and, hopefully, improved costs. We highlighted our insurance costs, and I'm optimistic we can see some improvement there. However, the challenges related to depreciation will persist, as we've absorbed many costs without seeing any reductions. I believe we can improve on insurance, so there might be some margin increase from cost adjustments.

Thanks, guys. Appreciate the time.

Thanks, Scott.

Our next question will come from Jason Seidl with TD Cowen.

Thank you, operator. David, Paul, Tripp, good morning here, and my condolences to Doug and the family. Wanted to drill down a little bit on how we should look at some of your segments. I think Dedicated sort of surprised us a little bit, was stronger than we expected, Expedited, maybe a little bit weaker. How should we think about the Dedicated tractor count as we move forward through this year, then maybe if you can give us a little insight into next year? And then, how should we look at sort of how the claims impacted Expedited and then maybe how the claims positively impacted the Managed Freight division as we move forward from 2Q to 3Q?

I believe I can offer some insights. Regarding Dedicated, I expect the truck count to remain relatively stable for the remainder of the year. We have some new contracts starting and a few ending, so I don't anticipate any significant changes—probably only a fluctuation of around 25 trucks. Our goal is to have a slight increase in the truck count by 2025. I've noticed that Dedicated shippers are more open to discussions in the past couple of months compared to the last two years, suggesting a strong pipeline, though it may be more active in the first half of next year rather than the rest of this year. We've experienced significant growth in Dedicated already. As noted, the insurance challenges impacting Expedited should improve next quarter, and I expect Expedited to recover to the numbers you anticipate seeing this quarter in Q3 and Q4. Managed Freight and Warehousing, while smaller segments, are performing well. Although claims were beneficial compared to the previous year, we didn’t earn much last year. I estimate that the Managed Freight division will operate within a 95 to 97 Operating Ratio. Our strategy won’t involve operating a brokerage at a 103 Operating Ratio; we prefer to pursue less revenue with reduced risk to ensure profitability every month. Thus, I expect to see consistent results in that range. The Warehousing business faced some cost challenges in 2023 due to doubling our operations in 2024, which required time to resolve. However, we've seen two consecutive quarters of strong performance, and I don't foresee any changes in that trend moving forward.

Well, that's great color. Let me shift gears a little bit. I mean, obviously, you guys have been very successful with your M&A strategy over the last few years, adding some really, I think, strong components to your network. How should we think about M&A going forward and how does the pipeline look for you guys?

I want to emphasize that we are always on the lookout for opportunities. One of the most significant developments, Jason, is that many truckload carriers in the U.S. are available for sale, but we haven't encountered many of those opportunities recently. However, as others recognize our purchasing patterns and interests, we are starting to see certain acquisition opportunities come to us. Out of every five potential targets, one typically captures our interest, and we may engage in discussions about that one. We remain open to acquisitions when the right timing and opportunity arise. While we are not actively pursuing anything at the moment, we are definitely interested in the possibilities.

I want to build on David's comments, Jason. Reflecting on our past mergers and acquisitions, we've had some excellent opportunities that we've successfully executed on, adding great partners to the Covenant family. Currently, considering our debt level and our business growth during this challenging environment, I believe we may be nearing an upswing. Whether that happens next quarter or in the third quarter of 2025 remains uncertain, but I feel we are closer to the end of this situation than the beginning. Additionally, with Dustin joining as our new Chief Operating Officer and other leadership promotions within the company, we have plenty of positive developments to focus on. While we are always open to acquisitions, should an ideal opportunity arise, we would likely pursue it. However, at this moment, we are in a position to be very selective about any potential M&A deals, and we intend to maintain that discipline for a while.

Sounds good, gentlemen. I appreciate the time, as always.

Thanks, Jason.

Thanks, Jason.

Our next question will come from Daniel Imbro with Stephens.

Hey. Good morning, guys. Thanks for taking our questions.

Hey, Daniel.

Maybe I'll start on the Dedicated side. I think you guys talked about some startups in the quarter. Can you talk about just what kind of businesses those are? Are those on the more specialized side, like live haul? And then broadly, can you expound, as you've grown into that and continued to win more business, if that is what it is, what are the competitive advantages you have? Why aren't others growing here? Can you just talk about maybe what's given you guys the advantage to keep winning this business?

So, a couple of things, Daniel. I mean, the larger startup in Q2 was on the more specialty side of the business. That said, we had startups in the legacy side as well. And so, we continue to tackle both what I call our legacy-dedicated and poultry or specialized businesses. I think the team in that space has got a really good reputation, and I think there's some really good things we do operationally that the customers like. And so, we're going to keep trying to grow all kinds of Dedicated business, especially those that have specialized trailers, specialized drivers, and time-sensitive requirements. I mean, that's our focus.

And then, maybe because the data is harder to determine, when we think about seeing capacity leave the market, this is a more specialized subsector. Have we seen capacity similarly exit this part of the market that gives you pricing power across that as well?

I don't believe it's in the specialized area. Currently, the dedicated deals we are competing against involve a few significant players, and they are generally well-funded carriers. Most of the dedicated contracts in that specialized sector are not the smaller operations that are failing.

That makes sense. And then maybe stepping back a little bit, David, you mentioned some more seasonally normal demand beginning in May, I guess, as you speak with your customers, are you getting a sense this is a pull forward? Is this inventory building ahead of the peak season? Like, what do you think is driving this more seasonally normal shape of the curve?

That's a great question, and it's one we're considering internally as well. We do have a small retail component, around 1%, but I have noticed some analysts discussing whether there's a pre-buy or pre-peak happening, which has made me think about it. Most of our port business seems to be doing well, which could suggest a trend. However, I’m not entirely sure. I don’t see any signs of a pre-peak in our non-retail business, and with our limited retail presence, it's hard to speculate. I am noticing preparations for the upcoming Apple launch, which typically happens in September and brings a significant volume. However, that's an annual occurrence. For us, the pre-peak indicators would primarily be our freight out of Los Angeles and Savannah, and to a lesser extent, Houston. Both are showing increases, but I'm hesitant to conclude it’s a pre-peak season. There might be some early signs, but overall, we’re seeing favorable trends, and I just hope that continues.

I appreciate all the color. And best of luck to you all.

Thanks, Daniel.

Thank you.

Thank you.

And our next question will come from Jeff Kaufman with Vertical Research Partners.

Just terrific results in a very tough environment this quarter. I'm kind of curious, I've heard the commentary about things that we hope are changing or behaviors that are changing that could lead to positive events, but in terms of what you're seeing within the industry itself, there are things you can't control, and then there are the things you can button down and control yourselves. How has your view of both of those things changed over the last three months?

Those are excellent questions. Over the last five or six years, as we've progressed, we have focused on the factors within our control and tried to engage with those that are beyond our influence. This has been a dedicated effort on our part. However, in the past two years, the trucking industry has been affected by 20% inflation, as well as price increases from tire suppliers and various segments such as truck and trailer manufacturers, reinsurance, and payroll. We aim to minimize the impact of the uncontrollable aspects as much as possible. In many ways, we have succeeded by finding ways to reduce costs, even though many expenses have risen significantly. For instance, we continuously analyze our financials to determine if we can reduce our purchasing costs from $0.10 to $0.01, and we have managed to cut expenses by $1. This focus on cost management over the last two years has contributed to our strong earnings, which are not primarily due to rate increases. I am proud of our team for effectively managing what they can and mitigating the impact of what they cannot control. This has been our guiding philosophy during the past couple of years.

Yeah. And I would add to that, just expanding on what David had said, talking about the income statement, but I think this team has done really well by looking at capital, the balance sheet, and trying to make sure we're optimizing that as much as possible. A big part of our story over the last few years has been capital allocation, which started in 2020 with the downsizing of a lot of the freight that we were moving or a lot of the assets tied to the freight we were moving, disposal and sale of a lot of terminals, and the factoring business went away. That has provided us with opportunities leading to the benefits of becoming a more focused logistics provider. It allows us to be more nimble, a little more flexible, but whatever it is we decide to do, we've got to be really good at it. Our approach to capital allocation has served us well, and it's something we continue to do.

Here are a couple more examples, Jeff. Even though we’re not showing it, I’ve heard Tripp say that he’s hoping to see some positive movement in the insurance line item going forward. For the last two years, our accidents have reached historical lows. Looking at DOT per million-mile accidents and critical accidents, Tripp also internally noted that he has been expecting this for the last two years. If we can continue to prevent accidents, which we are doing, we should see benefits. For instance, something we recorded for $1 million could suddenly become $1.5 million, and if that happens with several cases, our insurance cost could report at $0.25 a mile because we’re reducing accidents. If we keep accident rates low, we will start to see the advantages. Though we may not influence settlements or court cases, we can manage accidents effectively, which will be beneficial. This won't reflect in the second quarter, but we believe the effects will appear in time. Looking at the Expedited side, while utilization was slightly down in the second quarter, for the year-to-date, it has increased by 12% to 13%. For the first six months, we've definitely seen double-digit growth. In a challenging environment, we are ensuring we go to the right places and make informed decisions about freight, even if that means turning down freight when we need it. The increase in utilization indicates we are making wise choices. Once insurance plays a supportive role, we expect to see positive numbers in Expedited. These examples illustrate our ability to manage the factors within our control and how we are continuously improving in areas where we have less influence.

Thank you for those answers. This leads me to the next part of the question, which is that every downturn impacts things in various ways. Although we haven't completely finished with this downturn, I believe your comments suggest that there is light at the end of the tunnel. What do you think will be different about the market as a consequence of this downturn and its progression? How do you see this as an opportunity for you once the markets eventually stabilize?

I have been excited about a few things over the past couple of years. As we've distanced ourselves from the OTR, we still regard Expedited as part of it, though it is also specialized. We operate the largest team fleet in the United States, which sets us apart because not everyone runs as many team drivers. While we are classified as OTR, it's specialized OTR. We currently have fewer than 100 trucks running solo OTR, which makes it less of a concern for me to find loads in places like Chicago or New Jersey. The specialized nature of our service has been beneficial, especially because we secured long-term agreements in 2022 and early 2023 when trucks were hard to come by for our customers. We approached them and proposed a partnership, ensuring we would provide trucks at a fair rate—around a 7 or 8 on a scale of 1 to 10, rather than the excessively high rates some might have sought. This approach has resulted in about 55% of Expedited's revenue coming from these long-term agreements, most of which have been renewed for an additional two to three years. Our customers have supported us, and we have reciprocated. It's been a fantastic partnership that has shifted the landscape for us. We will continue to support our customers during good times and challenging times, as they have shown a willingness to give us freight even at the expense of competitors. Over the past year, they have proven their loyalty to us. Regarding our Dedicated side of the business, I believe that 70% to 80% of it is specialized, is that accurate?

Yeah, I'd say. Yeah, 50%, 60%, for sure. 50% to 70% specialized.

And I would say that we're 95% out of commoditized.

Out of the commoditized segment.

This has been a blessing that now on the Dedicated side we’re really engaged with customers that need us and we want them. These aren’t ones that we're worried about what the spot market does, and we've already gotten rid of all those. So that's on the Dedicated. I just told you about the Expedited. I couldn't be more pleased with our Warehouse. I mean, those guys have excelled operationally, growing it, doubling it, had to take a couple of steps back, the team did, reshaped it, and you can see what the Warehouse side has decided to do. And then, so that they won't feel left out, I am thrilled with our Managed Freight. I mean, I went back there about a month ago and gave them a hug. I mean, those guys are doing great. Yeah, they are. They're achieving profitability against the odds. They're not in the red like most of the industry. Our results speak for themselves, and we're not going to be in the red.

No, that was awesome. Thank you very much.

And our next question will come from Michael Vermut with Newland Capital.

Hi everyone. I hope you're doing well. Congratulations on a fantastic year and quarter. As a long-time shareholder, I've seen us emerge from this downturn in a stronger position than anyone else. There is no comparison to the progress you've made with this company. Fifteen years ago, we would have been losing money in these quarters without a doubt. This is a completely different company now. I believe we are still trading at about a 10-point discount compared to the average of our peers. After coming through one of the toughest downturns in years and achieving such success, it's hard to predict how we will transform as the market shifts. With the next downturn on the horizon, I'm curious about the leverage in our model. This question has been posed before, and while I know things have changed, I believe that leverage is still present. We're looking at around $4 this year, which could rise to $6 at its peak. It seems that some people may not grasp that leverage remains in the model and will be visible in our contract side. Is there anything we might be missing? Because it seems there is something the market does not fully understand regarding what has transpired at Covenant thus far.

No, and I can start on this, Mike. This is Tripp, and let Paul kind of finish it off. I think that there's plenty of opportunities for operating leverage. The timing of that may be a little bit different from the timing of some of the other public carriers out there because of the - I mean, we're 99% contractual and almost all of our truckload operations. You may start seeing it in the brokerage world a little bit quicker than some of the truckload customers. But what I would say is we've got to be very intentional about how we go about this. And I think going back to '21 and '22, and one of the best things we did, and David mentioned this, we really took the opportunity to improve our customer mix and be fair to the customers who were fair to us during downturns. We were fair to them when things got tight when we absolutely could have gone to them with 10%, 12% raises. We asked for fairness, and we provide a good-valued service for a good value return. So, it is on a customer-by-customer basis, and we're in the process of going through and understanding who we need to get in front of. I think the key is for us is to be very fair to the customers who've been fair to us, and we're making adequate returns on and being urgent in front of people and the customers that we need quick rate increases. But all that said and done, I think that there's a ton of opportunities for us to improve margins and get this thing up to kind of numbers that you had mentioned earlier.

I agree with what Tripp said, Mike. I like to keep things simple sometimes. To your point, we're aiming for at least $4 a share this year, even in a climate of no rate increases and rising costs. Our leverage will come when we can implement some rate increases, and ideally, we've managed to absorb many of those costs. This should positively impact our bottom line. Additionally, as I mentioned to another caller, having a lower share count than in the past should enhance our earnings leverage, allowing us to drive those numbers up. People can project what a 3%, 5%, or 6% increase in rates could mean, and I'm confident they will be pleased with the outcome.

Excellent. Yeah. And can you look at it with the way we've performed in this downturn, you would think we'd be trading at a premium, not at a discount that we are, so...

I agree 100%.

No one has accomplished what your team has during this downturn. Regarding mergers and acquisitions, following up on Jason's question, are we focusing on more specialized carriers when we eventually pursue them?

Yeah, I'd say specialized is something. I mean, it's...

Something hard. Something that is a great niche, something that everybody's brother, something that's difficult, something that, all that, yes.

Excellent. Yeah. Right. Well, look, you guys, it's amazing to see what you've done to Covenant. So keep on going, and one day we'll be really rewarded.

We will, I believe that. Thank you, Michael.

All right. Thank you, Michael.

And it appears there are no further questions at this time. Mr. Grant, I'll turn the conference back to you.

Yeah. Thank you, Jen. I just want to thank everybody for participating in their interest in Covenant Logistics this quarter. We look forward to next quarter's conference call. Thank you.

And this concludes today's conference call. Thank you for attending.