Welcome to today's Covenant Logistics Group Q1 2022 earnings release and investor conference call. Our host for today's call is Joey Hogan. 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 our host. Mr. Hogan, you may begin.
Thank you, Ross. Welcome everybody to the Covenant Logistics Group first quarter conference call. As a reminder, this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures with the SEC, including without limitation to risk factors in our most recent Form 10-K and our most recent Form 10-Qs. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. The copy of our prepared comments and additional financial information is available on our website at covenantlogistics.com, the Investor section.
I'm joined this morning by Paul Bunn, our Chief Operating Officer, and Tripp Grant, our Chief Accounting Officer, and David Parker is available via the phone. In summary, we are very proud and pleased with our first quarter results, which represent yet another quarterly earnings record for any quarter in the company history. In addition, it's the first time in our history where our first quarter earnings were greater sequentially than the fourth quarter. This exciting achievement could not have been accomplished without the contribution from each of our business units. All business units improved its OR versus the fourth quarter. The small acquisition we made in February, combined with the purchase of 655,000 shares at an average price of $22.60 under our share repurchase program, produced earnings accretion to the quarter and is expected to continue.
With this strong start to the year and the hard work of our team transforming our business to a less cyclical model, we are confident that we will exceed 2021's full year adjusted earnings per share for the full year of 2022, absent something truly unexpected. The key highlights for the quarter were our freight revenue grew 28% to $258 million compared to the 2021 quarter. Adjusted earnings per share increased 141% to $1.35 per share from the year-ago quarter. Our asset-based truckload freight revenue grew 15% versus the first quarter of 2021, with 218 fewer trucks. Our less asset-intensive or asset-light divisions of Managed Freight and warehouse combined grew 55% compared to the first quarter of 2021.
On the safety side, our chargeable DOT accident rate was the lowest on record and 31% lower than year-ago. Our TEL leasing company investment produced a record quarter, contributing $0.30 per share or an additional $0.17 per share versus the year-ago period. Due to the strong cash flow in the quarter, our net indebtedness increased only $22 million after utilizing a combined $52 million of cash and borrowings under our credit facility on the small acquisition and our share repurchases. We finished the quarter with a leverage ratio of slightly less than 0.4x, a debt-to-equity ratio of 12%, and a return on invested capital of 14%. Now Paul will provide a little color on the items affecting the business.
Thank you, Joey. For the quarter, our asset-light business, which are comprised of our Managed Freight and warehouse, were once again our largest group, both in terms of freight revenue and adjusted operating profit. This group comprised 40% of our total freight revenue and 50% of our consolidated adjusted operating profit. The sheer volume of overflow and special project freight dropped throughout the quarter, but overall revenue margin expanded, covering much of the volume decline. Our warehouse team is doing a great job building a nice pipeline with several startups planned for the remainder of the year. This group remains our top priority for growth, focusing on talent acquisition and technology enhancements. We are very excited about the prospects within this group. The Expedited division was 31% of our consolidated freight revenue and produced 38% of our adjusted operating profit in the quarter.
It grew its revenue 16% versus the year-ago quarter due to a strong rate environment and contribution from the small acquisition. The acquisition contributed to the sequential weighted average growth of 36 tractors in the quarter. Expedited produced a record first quarter with an 88 adjusted operating ratio, 260 basis points better than the fourth quarter, a first for our company. Even in a slowing environment, new business startups continue, and our team count is growing in the second quarter. After multiple increases in 2021, we feel our driver pay is in good shape at present but will continue to watch it closely. The Dedicated division was 29% of our consolidated freight revenue and 12% of our adjusted operating profit in the quarter.
This division continued its steady sequential improvements, with adjusted OR improving 180 basis points from the fourth quarter and 580 basis points from the year-ago quarter. Revenue per truck continues a sequential improvement, up 8% from the fourth quarter, which has been a big key to sustainable gains. Also, the lead and feed plan for accounts continues, with seven startups completed in the first quarter, totaling 61 trucks, and five or six planned in the second quarter for around 80 trucks. The pipeline for the remainder of the year is robust, supporting our expectation that margin improvement will continue. We plan to begin briefly discussing each quarter the performance of our 49% interest in Transport Enterprise Leasing or TEL. TEL is an investment that we've had since 2011.
During that time, TEL has grown to over 2,000 tractors and 6,500 trailers in its portfolio. Our investment in TEL is included in other assets in our consolidated balance sheet and has grown from our initial cash investment of $4.9 million to $51 million, including the cumulative earnings we have recognized. As a reminder, TEL focuses on managing lease purchase programs for its clients, leasing trucks and trailers to smaller fleets and shippers, and aiding clients in the procurement and disposition of their equipment through a robust equipment buying and selling program. TEL contributed a total of $0.30 per share to our overall results, or an additional $0.17 per share versus the year ago quarter. TEL's revenue in the quarter grew 41%, and pre-tax operating profit margin increased 43%.
Due to the business model, gains and losses on sale of equipment are the normal part of TEL's business and can cause earnings to fluctuate from quarter to quarter. We are very happy with the TEL leadership team, its future, and its contribution to Covenant's future. TEL is an untapped value for our shareholders. Joey will now walk us through our outlook.
As we said in the release, we expect to have a good second quarter and delivered record full year adjusted earnings per share in 2022. This expectation takes into consideration our expectation of a more balanced freight environment in the second half of the year. On this point, we think it's important to differentiate between the spot market, which has more volatile rates and volumes and receives a lot of analysts and investor attention, and the contract market, where most of our freight comes from, and which our customers tell us will retain consistent demand for the remainder of the year. Thus, while some of the froth may come out of our rates and volumes, we expect the core to remain solid, at least for the next couple of quarters, absent a major shock to the system.
Even in a moderating freight environment and with increased capital expenditures for the remainder of the year, we expect to generate positive cash flow, giving us resolve to stay focused on good long-term strategic investments. Looking further ahead, we also believe that 2023 will be a breakout year for Covenant, proving that our model is more durable than in the past. We stand firm that the changes we've made to our business model over the last few years will provide more consistent earnings and cash flows compared with our results in the past cycle troughs. We believe time and performance will provide clarity to that. In the meantime, we will continue to produce cash and maximize opportunities for our shareholders. Thank you, Ross, and now we'll open up the call for questions.
If you would like to ask a question, please press star one on your telephone keypad now and you will be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you'd like to ask a question, please press star one on your phone now. Our first question comes from Scott Group from Wolfe Research. Please go ahead, Scott.
Hey, thanks. Good morning, guys.
Morning, Scott.
Scott.
Joey, just wanted to follow -up on your outlook there. We typically see a, you know, pretty nice sequential improvement in earnings from first quarter to second quarter. Any thoughts on how to think about 2Q?
Scott , I think, you know, what we said was intentional. We feel we're gonna have a really good second quarter. I agree. History says that second quarter exceeds the first quarter. History doesn't say that first quarter exceeds the fourth quarter. I think that we feel good about the second quarter. That's probably, Scott, all I should say about that right now.
Okay. Maybe talk about then, like, the individual segments and, you know, where you see the best potential for sequential earnings improvement from first quarter and where you see potential risk from first quarter levels?
Yeah. Hey, Scott, this is Paul. I'll kind of walk you through it. I mean, I think Expedited could be flattish probably with the first quarter. Dedicated, I think you're gonna see some continued improvement, sequential improvement from the first quarter. Warehousing probably flattish with the first quarter. Then as you know, the wild cards Managed Freight and I think you're gonna see that pull back some from the first quarter, just from what's going on in the market. TEL, I think, you know, TEL's also. We start talking about TEL more this time. You know, I think TEL could pull back a little bit. I don't think you'll see quite the acceleration you saw from fourth quarter into the first quarter.
Expedited and Warehousing flattish, Dedicated better, TEL and managed trans are the wild cards. You know, we really think managed trans margins, you'll see those pull back as well as revenue for the second quarter.
Okay. Joey, you're right that there's a lot of focus obsession on the spot market right now. Just curious, your take of what's going on in the market. Is this the beginning of the end for spot rates? Is this temporary? Then what, if any, impacts are you seeing on contractual pricing negotiations? Are you seeing any decel or slowdown in contract pricing?
Well, I just think first thing is, you know, the spot market on the truck side, 1%. I mean, it's very small on the truck side of the business. So it doesn't, quote, "bother us." I think obviously, though, it's a big part of the market, and so it can impact the contract side eventually. We all know spot moves first and then contracts potentially moves after that. I think what we're seeing right now, we're pretty confident that our rates will continue to grow from the first quarter to the second quarter. Thus far, our contract business looks good. Both Expedited and Dedicated have new business starting up in the second quarter.
We feel good about that right now, as well as a lot of the work that our Expedited team has done to, let's call it solidify volumes into the future. We're confident that that's gonna, you know, help us nicely going into the year. I think where we do see it the most is potentially in our brokerages business, and Paul's already kinda commented on that. I think what I'd point to though is, you know, revenue dropped pretty meaningfully from fourth quarter to the first quarter in that group, about almost 20%.
The peak-ish impact, even though peak was small for us, combined with the slowdown in the volume, you know, we did see it there, but then what the results showed was that margins expanded a little bit from fourth to first, which again, we know that as well. In a slowing spot market, brokerage side tends to expand, at least its revenue margin. What happens from this point forward, I think that, our business pipeline looks good, in our brokerage segment right now. The team's doing really good. We just continue to have the pedal down, to continue to grow that business. We'll see. I agree with Paul. Revenue could be down a little. I don't know if it's gonna drop a whole lot from where it was in the first quarter. Margins will be the question.
Right now, margins are holding. So we'll see how the, you know, the rest of the quarter plays out, you know. 1% down in GDP in the first quarter, so there's no question, we talked about that back in January, that, you know, the economy is going to slow. For us, we're really encouraged how the year started out and the results of our work for the last four or five years.
Scott, I'll add one thing to what Joey said. I think we've tried over the last couple years, and you guys know what we've been doing. We've really tried to make sure we're aligning ourselves with customers where we're actually adding value, and that's what gives us confidence that, you know, this isn't a rate shop play, because we didn't maybe take as much advantage of the market as we could have. We've really tried to exit through these weed and feed process where we were just a commoditized player. You know, we still got a few of those accounts we're working on, but for the most part, I think we're in a better shape than we've been because we're more value add, less commoditized.
Yeah.
Maybe just to that point, remind us because Expedited lost a little bit of money, I think, in 2019. What are the changes within Expedited that you guys have made and what is the new sort of peak to trough margin range you think for that business now?
You know, I think it's during the last couple years, as I said, we tried to partner with people who had brought us to the dance. So I would say it's a pretty concentrated business, and we've got some multiyear agreements with a number of those customers. So I think that's what we've done to try to tighten it up. I think the peak to trough is from, you know, high teens to high single digits, probably the peak to trough on the margin standpoint.
Scott, one more point I'd add back to that. If you're looking back at 2019, you remember we had a lot of solo trucks running, including the reefer trucks formerly known as SRT, running in that division, formerly known as Highway Services. In 2020, we kind of changed our segment profile to just purely be a teams-based operation. The fleet count came down quite a bit, but a lot of the volatility that really, you know, caused us to kind of break even, if you will, in 2019 has been pulled out as part of that restructuring we did in 2020.
Okay. Thank you, guys. Appreciate the time.
Thanks, Scott.
Thanks, Scott.
Our next question comes from Jack Atkins from Stephens. Please go ahead, Jack. Hello, Jack, are you on the line? Are you muted?
Yeah, sorry about that. I was muted. Guys, good morning. Thanks for taking my questions.
Morning.
I guess maybe if we could start, I'd love to get you to maybe talk a little bit about the acquisition in the quarter, AAT. You know, from what you're saying, it was already accretive to results in the first quarter. Tell us a little bit about, you know, sort of their business model and maybe how it fits into, you know, your longer term sort of strategy around reducing some cyclicality within the business.
Yes. A, it's a small operation, but profitable. B, it's primarily all teams, which is obviously a complement to what we do. It's a very specialized group of trucks that work for the government, so it hauls government munitions, if you will. It's a high priority special clearance DOT number. All the drivers are cleared. You know, it's an asset that we've looked at for quite some time. I'm very pleased with the performance of the group. I'm very pleased with the Covenant group that's assisting a very, very small operation, but making sure that we understand how to complement our existing team business. That's a very small segment in the marketplace.
There is some volatility to it, but it's consistent, if you will, from a volume standpoint. Not a lot of. There is some pricing volatility, but the volume is pretty stable. Revenue per truck parameters around that group is very high, much higher than our kind of existing Expedited business. The main thing is that it gives us a diversification with the customer base. A. B. It gives our drivers, and that's as much of it as anything, another opportunity in their career path. You have to have a lot of experience, no accidents. It pays very well, but there's high demands for that. You're working with a lot of military bases across the country. I'm excited.
We've got some neat growth opportunities that we're exploring. We're taking it slow to make sure we don't overwhelm, you know, a very specialized team. I'm excited about our Covenant team. You know, we're not required, nor will we kind of disclose results separately. It's just a separate division as part of the overall Expedited group.
Okay. No, that makes sense. It sounds like that's a good acquisition, and it's off to a good start.
Yeah. We're very pleased.
I guess maybe shifting gears to your TEL investment. Obviously, that's becoming a bigger and bigger, you know, piece of the earnings stream here. I guess when you think about maybe what we saw in the first quarter, how do you break that down between maybe what's longer term, maybe sustained improvement in the contribution from TEL relative to, you know, maybe some gains that could be flowing through there? I guess maybe I'm just trying to think bigger picture. You know, is that asset signing, you know, call it three- to four-year type leasing agreements, and maybe you've got some longer term visibility there? Can you help us think about that?
Yeah, a couple things just to kind of paint a quick picture. As we've said, we've had the investment since 2011. It's made a cash distribution to Covenant virtually every year along the way. I think there was one year that we did not make a distribution. Every year, it's made money every single year. Through the 2018, 2019 recession, through COVID, 2020, it's made money. It's a profitable operation. The business is stable, kinda as evidenced by that. It's been on a steady growth rate.
We made a large investment back in 2019, 2018, 2019, I wanna say, that we had to work out of that did kind of stall the growth for a little period of time, but the group did a great job of working our way through that investment. It does, as we said in the comments. There are three distinct segments. What you're referring to is the equipment sales business.
It's a really neat model from a standpoint, you know, if the client base on the lease purchase side or the small fleet leasing side, you know, has some weakness, the equipment sales side is a great complement to that to move that equipment to the extent it needs to be moved, or there's not a new customer to take that equipment. The lease purchase side is very stable. It's medium to large fleets, and you know, not of what I would call a lot of volatility in that segment. The small fleet leasing has just been steadily growing for several years. Credit profile's strong. The team there does a great job on the credit side. As of right now, there's zero. I'll just share this as an anecdotal point.
There's no receivables over 30 days, so very strong credit profile and process. The team does a good job. They're also very, I call it creative, working with the clients. It's more than. It's providing a service that they do as well. It's truly a complementary service. How do we help you do better in your business? Yes, we're here to make some money and produce profit, but it truly is a neat operation working with the clients. Now the equipment sales side, yes, it has gains and losses in the markets. Right now, the market's really good. To the extent it needs to move equipment, they're doing well now. I think the benefit is always being in the market is the key.
We're known as a good-sized buyer and seller, so good markets or bad markets, and I think that's helping the model and has for, you know, a long period of time.
You know, Jack, specific to your question on kind of the waterfall on the leases, I would say most of the portfolio is multiyear leases. There's a piece of the trailer pool that is not multiyear leases, but it's a customer that's a 10+ year customer in leasing those. It's not a... Here's the thing. There's no rental component to it. There's really hardly no short-term component to it. Most everything is, you know, either somebody they've worked with for eight, nine, 10+ years or something that's probably got a, you know, three, four, five-year life kinda attached to it.
As Joey said, they've taken this most recent environment to really upgrade the kinda credit quality of their customer base and, you know. That's kind of where they're at.
Okay. That makes sense. It sounds like that's just another piece of the business that's structurally more profitable this cycle than last cycle.
Yes, yes.
I guess, you know, maybe shifting gears a little bit and going back to a prior question, but when you think about the Expedited piece of the business, and you talked about all the work you've done there to give yourself more visibility, you know, any sort of update on what portion of that business is maybe under longer term commitments that make you kinda feel pretty comfortable that, you know, no matter what kinda may happen with the cycle, you've got some pretty good visibility into sort of how the earnings stream's gonna flow there?
Yeah. 60%-ish.
Okay. That's great. That's great. Last question, I'm gonna take another stab at the second quarter, and I understand the hesitancy to maybe get too granular, but, you know, when you kinda, Paul, take all the different puts and takes that you walk through from a segment perspective and kinda roll it all up, I mean, would you think that you'd be able to hold earnings flat quarter over quarter, or is it just too hard to say at this point given the potential volatility within Expedited?
It's really gonna determine where Managed Freight shakes out, Jack. I mean, as you know, March a lot of times determines where you come out for the first quarter, and a lot of times June determines that. You know, there's so many work days, no holidays in those both of those quarter end months and a lot of customers shipping stuff out, you know, pre-Fourth of July, and beverage season, and produce season, and seeing how those things materialize and how the port situation materializes. You know, to Joey's point, I'd hesitate to give you a number, but it's gonna be a good number. You'll be happy.
Well, that sounds great. Well, guys, congrats again on the great quarter, and I'll pass it over.
Our next question comes from Jason Seidl from Cowen. Please go ahead, Jason.
Yeah. Thank you, operator. Gentlemen, good morning, and congrats on just a great quarter. Wanted to piggyback a little bit on that question as you look sort of on the managed transport side, quarter to date here, what are you seeing in terms of your margins thus far as compared to 1Q?
I would say margins are about the same. Yeah, about the same. Margins are about the same, but the, you know. Margins are about the same. Revenues running a little lower, margins running about the same.
Okay. It really is, what are margins gonna do in June situation in terms of determining the quarter for that section?
Mm-hmm. Yes.
Okay. Perfect. You know, you guys have been aggressive on that buyback. You know, your bucket's almost empty now. Talk about, you know, plans to sort of re-up on the buyback in terms of allocating capital.
Yeah. We've been real pleased with how the buyback has worked. It's a somewhat of a creative program, but nevertheless, it's performing well. You know, we expect to be completed in the program in the second quarter, and we're looking very diligently to what's next. Not ready to say whether we're gonna re-up or not, but we're excited about what our opportunities are, Jason.
Okay. Well, fair enough. Joey, I wanted to sort of go to a comment you made. You talked a little bit about, you know, how sort of spot leads contract. Are you seeing any degradation at all in the amount of increases you're getting in the contract side, or is it still up in the right?
It's still up. I mean, last year was when we had to, right? I mean, we raised driver wages three times.
Yeah
If I recall, we were in a market where we had to move. Yeah, the carriers improved their margin overall last year, but I mean, it was not, I'll call it stupendous improvement, and because our costs were just exploding. Even though driver wages may be moderating now, is probably the word I'd put on it, there's other increases that are still coming. I mean, we had another pass-through increase on equipment last week that just came out of nowhere. The equipment market, the over-the-road repair market, labor availability, parts, all that is still there and still going up. I'm just using that group as a category of cost increases. We need to continue to get some increases.
Is it gonna be as floppy as it was last year? No, it's not. I believe that, you know, we're still happy with what's going on, and, you know, second quarter is a big quarter from a pricing standpoint, but it's not as big as it used to be for us because our Dedicated kinda happens throughout the year, if you will. Expedited's still heavy in the first half of the year, and then brokerage is kind of whenever those contracts come up. We're not as heavily weighted as we used to be in the past because of how the model has changed. You know, our warehouse business is kinda. It comes when it comes with a new business. That renews annually or with those contracts.
Kind of what I'd ask you to think about is the impact of rate movement to the enterprise is going to be less than in the past because our model has changed. The impact of maybe slowing rate market is less of an impact today than it has been in the past for us.
Okay. That makes sense. If I jump to managed transport for a minute here, are your length of your contracts changing in this business, and if so, how?
You're saying basically how much spot versus how much contract are we in the?
And, and-
On the mainstream side.
Even on your contract side, you know, 'cause one of the things, you know, one of the providers said the other day was that they're seeing, you know, more of a shift to sort of the, you know, three to six-month type deals that are out there. I'm just curious if you're seeing that?
I would say we're. You know, we've been trying to shift the business a little more contract than spot. Last year, it was more spot. You know, a lot of brokers were, you know, wanna be 50/50, 60/40, and so I think, you know, we're probably aiming to try to be 60/40 by the end of the second or third quarter on contract versus spot. I would say, Jason, most of our contracts are still 12 months.
They're still 12 months. Okay. Well, that makes sense. Well, gentlemen, again, impressive quarter. I appreciate the time as always, and I'll turn it over to somebody else.
Thanks, Jason.
Our next question comes from Bert Subin from Stifel. Please go ahead, Bert.
Hey, good morning, Joey, Tripp, Paul. Hope you guys are doing well.
Good morning.
Morning, Bert.
I'll keep it pretty brief. I just have two questions for you. On the topic of, I think we're starting to get into this, but could you quantify like the spot exposure differential? Like, where is it today across the entire business, and how does that compare to, let's say, 2018 or, you know, the last cycle? Like, Joey, I know you've talked a lot about the resilience of the business, but I'm just curious how that's affecting things right now.
Let's go back to 2017. This is a little dated. Actually, in 2017, what we called Highway Services had a fair amount of solo trucks in it. It was contractual. A lot of that was contractual, but there was some spot to that. The Expedited piece of the Highway Services has always been heavy contract, much to the market's not understanding. It's just heavy, heavy contract. The spot, if you will, in the past has been what Pete did to Expedited in the fourth quarter. I could call that spot 'cause it doesn't happen every quarter. It's a one-time event a year. That's much less today, as we saw last year. It's almost nothing last year.
What part of Expedited success has been that impact to the fourth quarter and then the cost drain in the first quarter is now gone. They can stay focused on running business 52 weeks of the year. Not 100% gone, but practically gone. In 2017, we didn't have warehouse. It's a very stable cash flow. We didn't have managed trans, which is a very stable cash flow. Brokerage was much less in 2017. When I talk about if you really go back 2017 prior to the ramp up in 2018 and the drop in 2019, I mean, 2017 to, let's call it, today's model is drastically different. Drastically different. The spot impact back then was much greater back then, even though it was small.
It was probably the solo piece and Expedited was a much bigger piece of the pie. Bert, I'm not answering the question with specific numbers, but just gotta look at 2017 and today, and it's just drastically different. Today, what I can say, the spot impact today is inside of the brokerage piece of managed trans. But you have a hedge, if you will, in the sense that as things soften volume-wise, typically your net revenue margins increase. So it offsets some of that volume decrease potentially. It's just a different, just a totally different ballgame.
Just to maybe put some numbers on it, like, just to frame it or ballpark it, if it was, like, 20% in 2017, today it's 10%, something like that?
Yeah. Let me frame it for you, Bert. I just said a minute ago, let's just use for the 50/50 spot versus contract mix in brokerage, 'cause as we said, the rest of the business is pretty much contract. It's contract, you know, contract Dedicated, contract Warehousing, Expedited is pretty much contract. You got 50% of your. Probably, let's just call it with the managed trans, 35%-40% of total managed trans is spot market, spot and surge. That's where your exposure is on that bucket of revenue.
Okay. And just for my follow-up, I mean, it sounds like you have certainly an easier path to beating 2021's EPS. You know, if we were to think of you in sort of like a $4 EPS range this year, like, how do you think about the future? It seems like you have Dedicated is just gonna keep sort of slowly getting better. Expedited maybe, you know, it's you've talked about it being low 90s maybe in a tougher year. That makes just Managed Freight the concern potentially if things roll over. How do you think about that? Are you just thinking that the revenue erodes and margins stay sort of positive?
Is there a situation, if we were to stress it enough, where OR would rise above 100 in that business in a bad year?
I don't see it rising above 100. You know, I mean, a lot of folks have been talking this kind of peak to trough, and so, you know, you just gave us your number on peaks, something with a four in front of it. You know, from a trough standpoint, 25%, 30% pullback in total, and a lot of that would be in the managed trans business or the brokerage side of the managed trans business and softening margins. I think we would ascribe to that 25%-30%, you know, kind of pullback from peak to trough, wherever you define peak as.
We've got, you know, we're hammered down every day trying to grow top line revenue and improve margins in other businesses to offset as much of that as we can. That's kinda your peak to trough numbers.
Yeah. Just to clarify that, just so I understand it, I mean, it feels like to go down more than 25% in earnings, you would need sort of more than Managed Freight headwinds. Like, you would probably need Expedited to be materially worse. Is that sort of how you would frame, like, a bear scenario for you guys?
Yeah. A bear scenario would be, you know, significant drop in brokerage before we're able to kinda add to the base business and Expedited pulling back to mid-90s.
Got it. Okay. Thank you very much, Paul and Joey.
As a reminder, if you would like to ask a question, please press star one on your phone now. Gentlemen, it appears at this time there are no further questions.
Ross, thank you for your help this morning, and appreciate everybody's attention to the call, and I look forward to talking with you in the second quarter. Thank you.
This concludes today's conference call. Thank you for attending.