Knight-Swift Transportation Holdings Inc (KNX) Q4 2025 Earnings Call Transcript

Knight-Swift Transportation Holdings Inc (NYSE: KNX) Q4 2025 Earnings Call dated Jan. 21, 2026

Corporate Participants:

Brad Stewart — Treasurer and Senior Vice President of Investor Relations

Adam Miller — Chief Executive Officer

Andrew Hess — Chief Financial Officer

Analysts:

Richa Harnain — Analyst

Jonathan Chappell — Analyst

Brian Ossenbeck — Analyst

Ravi Shankar — Analyst

Dan Moore — Analyst

Christian Wetherbee — Analyst

Ken Hoexter — Analyst

Scott Group — Analyst

Presentation:

operator

Good afternoon. My name is Constantine and I’ll be your conference operator today. At this time, I would like to welcome everyone to the night Swift Transportation fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. If at any time during this call you require immediate assistance, please press Tor 0 for the operator. Speakers from today’s call will be Adam Miller, Chief Executive Officer, Andrew Haas, Chief Financial Officer, and Brad Stewart, treasurer and senior VP of investor relations. Mr. Stewart, the meeting is now yours.

Brad Stewart — Treasurer and Senior Vice President of Investor Relations

Thank you, Constantine. Good afternoon everyone and thank you for joining our fourth quarter 2025 earnings call. Today we plan to discuss topics related to the results of the quarter, current market conditions and our earnings guidance. We have slides to accompany this call which are posted on our investor website. Our call is scheduled to last one hour. Following our commentary, we will answer questions related to these topics. In order to get to as many participants as possible. We limit the questions to one per participant. If you have a second question, please feel free to get back in the queue and we will answer as many questions as time allows.

If we are not able to get to your question due to time restrictions, you may call 602-606-6349 to begin. I will first refer you to the disclosures on slide 2 of the presentation and note the following. This conference call and presentation may contain forward looking statements made by the company that involve risks, assumptions and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors or Part 1 of the Company’s Annual Report on Form 10K filed with the United States SEC for a discussion of the risks that may affect the Company’s future operating results.

Actual results may differ. Now please turn to slide three and I’ll hand the call over to Adam for some opening remarks.

Adam Miller — Chief Executive Officer

Thank you, Brad and good afternoon everyone. During the fourth quarter, the truckload market saw demand that was generally stable but lacking the typical broad based seasonal lift in demand until late in the quarter. Seasonal project activity occurred in October, but wound down quickly in early November. As a result, truckload volumes were lower than we expected. While we did see some improvement in overall demand and a tightening spot market in December, it was a reduction in available capacity that seemed to be the primary driver of the tightening market. The pressure on capacity also may be affecting the secondary equipment market as we experience slowing equipment sales trends and falling average prices during the quarter.

Developments such as these are often a precursor to a more healthy market. Thus far, in January Network balance is running better than typical seasonality as capacity continues to be under pressure. We are pleased that our people were able to deliver meaningful sequential operating margin improvement in our truckload segment even while demand was short of our expectation for much of the quarter. For the full year, our progress on structurally cutting costs out of the business helped us overcome $125 million decline in truckload revenue excluding fuel surcharge, but grew adjusted operating income 28 million in this segment.

At the same time, the truckload business overcame inflation pressures to hold its 2025 cost per mile flat with 2024. Despite miles declining 3.6%, our LTL team was able to produce year over year shipment growth for the fourth quarter in a lower demand environment even after lapping the DHE acquisition in the prior quarter. As our expanding network continues to help us create new opportunities, this team also responded quickly to the changing environment, stepping up the intensity of our cost initiatives to deliver operating margin within 60 basis points of the prior year levels even while shipment count growth fell well below that of the growth in facilities and door count year over year.

As we move into a new year and with anticipation building for a turn in market conditions, we felt it would be helpful to review our company’s profile and to highlight some of the things we are focused on to better position ourselves for earnings growth moving forward. I won’t touch on every part of our business here, but I wanted to share a few thoughts. First, we operate the largest fleet in the truckload industry and roughly 70% of our fleet is deployed in one way or over the road service. It is true that the one way market has been the most difficult place to be over the past three plus years as this market has felt the brunt of the influx of capacity since the pandemic.

But one way service is what typically improves first and most in a tightening market. Our unique ability to deliver responsiveness at scale and with industry leading trailer pool flexibility are competitive differentiators that attract opportunities, especially in a tightening market. Second, the significant progress we have made cutting costs out of our truckload business has driven year over year earnings growth despite lower revenue. Further, while the deleveraging effect of lower miles has masked some of our progress in reducing cost per mile, we believe most of the fixed cost reductions are permanent and position us for better incremental margins as volumed and pricing recover.

The incremental margin opportunity is further enhanced by the room to improve utilization on the existing fleet. While we have made meaningful progress on cost to date, there are still a number of opportunities to further improve and to scale our business efficiently, we have been investing in internal development and external products to facilitate tech enabled efficiency gains as well as better revenue capture including through AI and other methods. We expect the benefits to begin to be realized in 2026 as we more fully roll out these technologies and as an improving marketplace provides us opportunity to scale more efficiently.

Finally, our entry into the LTL industry and subsequent expansion over the past few years is just the beginning of what we believe will be a multi year journey with an attractive Runway for reinvesting free cash flow towards improving revenues, margin and earnings stability. As we have grown our facility count faster than our shipment count over the past two years, this is weighed down margins, but we expect a more deliberate pace of network expansion in the near term will allow us to restore margins. As we continue to grow into these investments, we believe the existing infrastructure has capacity to support annualized revenue of $2 billion.

As we continue growing into these investments, the operating leverage will be further enhanced by building density and optimizing our cost structure to help us reach our goals of steady margin improvement. Then, when we look externally, there are a number of factors that increasingly indicate the truckload market could begin to grow stronger in 2026. Capacity reduction is clearly underway. Regulatory enforcement of qualifications and safety standards was arguably the most welcome development in 2025 for our industry. The influx of capacity from 2021 to 2024, much of which was playing by a different set of rules and operating with different cost structures, has distorted pricing behaviors and cyclical patterns.

The ongoing efforts of the FMCSA and DOT to prevent and revoke invalidly issued cdls, shut down non compliant CDL schools and address hour of service abuses should in our view have an outsized impact on the lowest price capacity in the one way truckload market. Aside from the regulatory cleanup, capacity continues to erode, especially in the one way truckload market where struggling carriers are running out of liquidity and large players continue to shift towards dedicated services. Second, market data trends have improved of late despite muted demand, rejection rates climbed in recent months and are hanging in above year ago levels in early January.

Similarly, market spot rates and the spot burst contract spread improved exiting 2025 to the best level seen since early 2022. These market trends align with those seen within our own businesses and finally, the inventory pull forward appears largely worked off as a result of solid holiday sales and there is a potential for cumulative support for demand from the tax bill and Fed rate cuts. It appears the market has progressed to a point where even small increases in demand can cause disruption and our industry leading over the road capacity is uniquely positioned to create value for our customers and capture opportunities for our business.

The market and regulatory developments in the back half of 2025 give us increased confidence in the path to return our truckload segment back to mid cycle margins. We are not here to call the turn by any means, but we are closely monitoring market trends, bid developments and signals from our multiple nationwide truckload networks and are prepared to execute our playbook for deploying capacity towards the most valuable opportunities as the landscape shifts. We remain committed to thoughtfully deploying capital, intentionally leveraging our strengths and creatively unlocking synergy opportunities across our business. And with that, I will turn the call over to Andrew and Brad to review the results, the quarter and our guidance.

Andrew Hess — Chief Financial Officer

Thanks Adam the charts on Slide 4 compare our consolidated fourth quarter revenue and earnings results on a year over year basis. Before getting into the comparisons, it’s important to note that our GAAP results for the current quarter include 52.9 million of non cash impairment charges primarily related to our decision during the quarter to combine our Abilene truckload brand into our swift business. Impairments have been adjusted out of our non GAAP results as shown in the reconciliation schedules following this presentation. Revenue excluding fuel surcharge decreased slightly by 40 basis points and operating income declined by 51.5 million year over year largely due to the 52.9 million of impairment noted above.

Adjusted operating income declined 5.3% over year as a result of lighter truckload and appeal demand environments compared to the fourth quarter of 2024. GAAP earnings per diluted share for the fourth quarter of 2025 were a loss of $0.04 primarily related to the impairments noted above. GAAP earnings per diluted share in the prior year quarter were 43 cents which included a 36.6 million benefit for a mark to market adjustment of certain purchase price obligations associated with the US Express acquisition. Adjusted EPS was 31 cents for the fourth quarter of 2025 compared to 36 cents for the fourth quarter of 2024.

Our consolidated adjusted operating ratio was 94%, up 30 basis points year over year and 20 basis points sequentially. The effective tax rate of 21.6% on our GAAP results was 800 and 20 basis points higher year with effective tax rate of 23.1% on non GAAP results was 400 and 60 basis points higher year over year. Slide 5 illustrates the revenue and adjusted operating income for each of our segments for the quarter. Overall truckload grew as a share of our consolidated revenue quarter over quarter as the fourth quarter is typically the strongest season for this business. While it is the softest softest for LTO, we would anticipate LTL returning closer to its recent 20% share next quarter as LTL seasonality begins to improve.

We. Have been enhancing our ability to generate revenue synergies across brands and lines of service. The key levers are intentional leadership to drive powerful collaboration and deploying technology to foster seamless connectivity. Leveraging excess capacity in one brand against excess demand in another effectively increases our ability to search and capture a greater share of market opportunities while solving internal network imbalances. To be certain, we have leaned on each other before but for these advances, but these advances make such practices systemic, more responsive and scalable. These are calculated investments designed and prioritized based on their ability to propel our business.

Now we will discuss each of our segments, starting with our truckload segment on Slide 6. As Adam mentioned, volumes in the truckload segment were lower than expected, with generally lower demand than the prior year period until late in the quarter. Additionally, seasonal project activities in October had shorter duration than in the prior year, likely due to some freight having been moved earlier than the normal than normal given trade and tariff disruptions throughout 2025. Additionally, flock aids of the Mexico border during the quarter were a headwind to productivity, especially for our Trans Mex division. While demand did show some improvement late in the quarter which helped support spot rates, this could only partially overcome the muted November results.

The secondary equipment market weakened during the quarter, which appears to be at least partially related to the impact of regulatory enforcement on smaller carriers, which caused gains on sale to come in roughly 4 million below the prior quarter level and our expectations on a year over year basis. Revenue excluding fuel surcharge declined 2.4% and adjusted operating income declined 9.2 million or 10.7% year over year, largely as a result of the 3.3% decline in loaded miles. Revenue per loaded mile excluding fuel surcharge and intersegment transactions increased 0.7% year over year and sequentially improved 1.4% over the fourth quarter.

Combined adjusted operating ratio was 70 basis points higher year over year. Excluding US Express, the legacy truckload brands operated at a 91.6% adjusted operating ratio, while US Express improved its adjusted operating ratio 430430 basis points year over year to the mid-90s as a seasonal project participation was at its highest since the 2023 acquisition. Finally, during the fourth quarter we decided to combine the Abilene trucking operations into our swift business to improve efficiency and enhance the productivity by incorporating these assets and freight flows into a more robust network. With more freight opportunities, we continue to make tangible progress improving our cost structure to position our business to generate meaningful returns as market conditions recover.

Moving on to Slide 7 our LTL business grew revenue excluding fuel surcharge 7% year over year with shipments per day up 2.1%, a lower growth rate than the previous quarters. We lapped the acquisition of DHE on July 30 and as market demand moderated at the beginning of October, revenue per 100 weight excluding fuel surcharge increased 5% year over year. Adjusted operating income decreased 4.8%. Adjusted operating ratio increased slightly by 60 basis points year over year, Saddam noted In response to the moderating demand environment during the quarter, we stepped up the cost initiatives we had announced last summer to mitigate pressure on margin.

We are taking action where prudent in the short term, but without sacrificing our ability to respond to growth opportunities through ongoing bids as discussions around bids currently in process are encouraging. During the fourth quarter we opened one new service center and replaced another with a larger site bringing our growth and door count to 10% year over year. We have opportunities to optimize our operations and cost structure as our network and business mix mature and we have confidence in our plans to achieve this. Our solid service levels growing customer base ground to make up on pricing provides a compelling Runway for the value to be generated by this business.

Now I will turn it over to Brad for a discussion of our logistics segment on slide 8.

Brad Stewart — Treasurer and Senior Vice President of Investor Relations

Thanks Andrew Logistics revenue for the fourth quarter declined 4.8% year over year as volumes were down 1% while revenue per load was 4.1% lower due to mixed change. Third party carrier capacity grew noticeably more difficult to source during the quarter which pressured gross margins. Gross margin of 15.5% for the fourth quarter declined 230 basis points from third quarter levels and 180 basis points year over year. Adjusted operating ratio was 95.8% for the quarter. Another recent trend is the increase in cargo theft in the industry. While fraud and theft in the industry has been on the rise over the past couple of years.

Channel checks indicate a rash of theft in the quarter, some of which appear to be related to operators being forced out of the business through either financial struggles or regulatory enforcement. If these trends continue, it could further encourage shippers to allocate more business to direct asset based carrier relationships. For our part, we have been further tightening our already rigorous carrier qualification standards and narrowing the existing carrier base that we tender loads to. Also, if upward pressure on third party capacity cost continues, this could cause further pressure on gross margin in the near term as capacity continues to erode.

However, given the relationship between our logistics segment and our asset based truckload segment, we believe these dynamics would ultimately benefit both our asset and logistics businesses over time. Our logistics business has demonstrated its agility in navigating a volatile market the past few years by maintaining its operating margin close to target levels through disciplined pricing and cost management. This team is now further leveraging technology to take cost efficiencies to a new level as well as to improve our responsiveness and ability to capture opportunities in the market which we expect will contribute to earnings in 2026. These enhancements combined with its complementary relationship with our asset business position our logistics business to accelerate revenue growth and the return on our trailer assets in an improving market.

Now on to slide 9 for a discussion of our intermodal business. The intermodal segment improved its adjusted operating ratio 140 basis points year over year to 100.1% driven by a 2.8% increase in revenue for loading as well as structural cost reduction and improvement in network balance which led to significant year over year reductions in MT repositioning grade and chassis costs. Revenue declined 3.4% year over year on a 6% decrease in load count, partially offset by the increase in revenue per load on a sequential basis. Revenue grew 1.7% 2.6% increase in load count, with both measures reaching their highest marks for the year.

We look forward to leveraging the new chapter in our rail partnerships in an improving market and in the meantime we remain focused on delivering excellent service, driving appropriate returns through growing our load count with disciplined pricing, cost control, network balance and equipment utilization. Slide 10 illustrates our all other segments. This category includes support services provided to our customers and contractors and third party carriers such as equipment sales and rentals, equipment leasing, warehousing activities, insurance and maintenance. For the quarter, revenue increased 17.7% and the operating loss in the seasonally slow period for this category improved 5.9 million or 37.3% year over year, primarily driven by growth in our warehousing and leasing businesses.

Now on slide 11 we have outlined our guidance and the key assumptions which are also stated in the earnings release. Actual results may differ from our expectations. Based on our assumptions, we project our adjusted eps for the first quarter of 2026 will be in the range of 28 to $0.32. In general, this guidance for the first quarter assumes current conditions remain stable and that we experienced some seasonal slowing in the truckload market and seasonal recovery in the LTL market. The key assumptions underpinning this guidance are listed on this slide. I won’t take time to read through all of our assumptions here, but I do want to touch on a couple of the more significant moves other than the typical seasonality in truckload.

We expect a strong bounce back in our all other segments category after its seasonal slope period in the fourth quarter. And we have significantly reduced the range for expected gain on sale based on the secondary equipment market trends that we noted in our earlier comments. Now, this concludes our prepared remarks, and before I turn it over for questions, I want to remind everyone to please keep it to one question per participant. Thank you, Konstantin. We will now open the line for questions.

Questions and Answers:

operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Rika Harnian from Deutsche Bank. Your line is now open.

Richa Harnain

Hey, gentlemen, thanks for the time. I guess maybe we can start with the outlook. You know, Adam, you walked through some various items to be, you know, look forward to in 2026, some tailwinds. Maybe you can just elaborate on, like, you know, in light of those tailwinds, why we’re not seeing maybe a more robust outlook for Q1. Why? And I understand that there’s some seasonality, but maybe you can just talk about that and then just generally speaking, like any sort of guidance on, you know, how we should think about Q1 relative to the entirety of the year.

Has seasonality shifted at all? And given the incremental margin, should maybe be better given all the good work you did on cost, like, how should we think about, you know, how margins could progress as the year goes on? Thanks.

Adam Miller

Yeah, okay. Thank you, Richard. We’ll count that as one question. So just to go through the outlook here, maybe I’ll start with just maybe walking through Q4 and then how that kind of sets up in Q1 and then maybe how we’re looking out beyond that. I won’t give any guidance in terms of EPS beyond Q1, but I can give you my view of how I think the market may progress. You know, when we came into the fourth quarter, I think on our last earnings call we talked about having some projects in the queue. You know, is some of them we haven’t seen in several years and those did materialize in October.

And typically when you see projects like that materialize, you have other types of projects that just kick off during the Fourth quarter, where you have customers that have acute needs and those typically drive a stronger November and build up through Thanksgiving, and then you have a little bit of a lull coming out of that and then you could finish the quarter strong. Once we got through our projects in October or maybe early November, we did not see the strength continue and it was a bit disappointing, the volumes in November and it was just tough to overcome that even with some of the strength.

We saw the back half of December and we don’t get too wrapped up in the spot market jumping up for a couple of weeks because we’re still largely contractual. But we did see some of the lift, but it wasn’t enough to overcome the slower November and then just the disruption you get in productivity during the holidays. But as we saw that market continue in or bleed into the first couple of weeks of January, I think we became a bit more constructive on, you know, maybe the balance between supply and demand. And so as we sit in early January, you know, we’re feeling a bit better about our ability to, you know, push rates and in the bid season and maybe find some ways to even get some spot, some premium spot opportunities early in the first quarter, which it’s been some time since we’ve been able to do that.

But when I look out to, you know, what, what that means for, for the first quarter, a lot of the work that we do in the bids, we don’t really feel the benefit of that or see the benefit of that until you get into the second quarter, you know, earlier, mid, second quarter and then throughout the back half of the year. So I think the first quarter we may be in a period where we feel better than we look in terms of the results, but, but the confidence in our ability to start to push rates higher and to restore or begin to restore our margins.

And I think we’ve started off the bid season with far more constructive conversations with customers where the discussions are starting around securing incumbent lanes with positive rates. Now I think what we’d be pushing for would be low to middle single digits and improvements in contract rates and maybe closer to mid than low. And, and maybe that may not align with what our customers want to see, you know, in a pre bid. And so some of this stuff is going to go into a bid to see, you know, where the market is from a balance standpoint.

And we’ve already heard from several customers about wanting to shift a bit more volume from brokers to assets because of the, the spot market trends that we’ve been seeing. And then some of the capacity that’s been coming out of the market from a regulatory perspective. So I think that gives us more confidence in where this market’s headed. But I don’t know that we really feel the full benefit or see the full benefit of that in the first quarter. But again, we’re not trying to call the inflection yet. We’ve seen head fakes before. But I think we’re feeling better about where this market is headed and we do feel better about what the DOT and the FMCSA are doing to clean up capacity in our industry.

And I can tell you our knight, our Swift and especially now our US Express business is well positioned and prepared with the tools, even the culture around what we’re going to do to find opportunities to really leverage the scale and the flexibility that we have in our network. And, and so we’re, you know, we’re encouraged about what that could mean here in the, in the back half of this year, Richard.

Andrew Hess

I mean Q1s are always a hard quarter to really flex. Right. Just based on that seasonality, you rarely, and I don’t expect rate will be much of a lift for us year over year in Q1 and so, and, and we’re operating on, you know, smaller fleet than we were last year. So I think all those go together. We do expect continued progress on cost and I think that’s, that’s our expectation here in the first quarter. Improvement in cost per mile year over year. But, and I guess the other side, we talk a lot about truckload but in lpl, I mean I think there’s, we’re, we’re still watching how the, the volumes build back and that’s to some degree going to determine how this quarter plays out.

And we’re encouraged, it’s kind of watching the early build back of volumes here in January. But, but there’s still a lot of kind of Runway ahead of us to see really where volumes build to in the quarter. So our guidance range that we’ve provided is not, does not, we think reflects a reasonable kind of middle lane view of how the quarter plays out. But certainly if market conditions improve or worse and there is a degree of variation around the guidance we’re providing here.

Richa Harnain

Okay, thank you for.

operator

The question comes from the line. Your next question comes from the line of Jonathan Chappell from Evercore isi. The line is now open.

Jonathan Chappell

Thank you. Hey, Adam. As it relates to the priorities and the strategic goals, almost every single segment you highlight cost to serve, technology, automation, optimization, etc. So when we think about your margin progression from 1Q. Do you kind of view this as. All the things you’re doing on the cost side and the efficiency side can. Make margins improve even without a true. Inflection of the market? Or is it more you need price. Price kind of drives an exacerbated move in margins and kind of higher highs and higher lows.

Adam Miller

Yeah, I mean really John, we really want to see both. But hey, the market doesn’t play out on the revenue side like you know, we’re, we’re maybe expecting in the back half of the year. We’re not going to be a victim of that. We’re going to go after as much as we can on the cost side to, to improve margins on the year over year basis. But, but certainly when you have a lift in, in rates and the spot market that means that’s going to help you get to kind of normalized margins. I don’t think you get to normalized margins just on cost alone.

You’ll need some lift in the market. But we look at it as hey, we fight both battles on a regular basis and really the wins we’ve had have been more on the cost side in the last couple years and I think we’re due on the revenue side but our goal is to get to make progress on both.

Andrew Hess

That’s really, it’s really a three pronged approach right to full repair margins. It’s capturing price, it’s bringing the volume back into the business and reducing our cost per mile. We expect each one of those independently to contribute in 2026 to margin improvement. And the price obviously is going to be very much market dependent and to some degree the miles. But we expect cost alone should drive margin expansion in 2026.

Jonathan Chappell

Thank you.

Adam Miller

Thanks John.

operator

Your next question comes from the line of Brian Asenbeck from JP Morgan. Your line is now open.

Brian Ossenbeck

Hey, good afternoon. Thanks for taking the question guys. Maybe if you can expand a little bit more what you’re seeing in the LTL market, it sounded, I mean you guys called out things were softer than I think most others saw last quarter. So that seemed to play out in October but hasn’t really built back the way you might have thought. So I want to see if you. Can elaborate on that if it’s more. Of a market perspective or maybe something with the network as you expand it. And then just some quick color on. You mentioned expanding the length of haul for the network. Like how does that, how long does that take and what does that really mean from a, from a margin perspective as you go throughout this year.

Adam Miller

Thank you. Yeah. So, you know, I think we talked about how we saw, you know, a shift downward of demand starting early in October. And that really progressed throughout the, throughout the quarter. And so we’ve had to make some adjustments on the cost side of the business to adjust for that. But also factoring in that, you know, with our expanded network now, we’re now going to have an opportunity to bid with larger shippers that we just hadn’t had an opportunity with before because we didn’t have the breadth of the network that would support, you know, what they’re looking for in a carrier.

And so a lot of those loads may be, you know, heavier loads, may have a longer length of haul. And this is where we tap into the relationships that we have on the truckload side of the business to provide, you know, opportunities for our LTO business to bid on that, on that volume. So it’s kind of still a little too early to tell. You know, how is volume really? Is it really picking up? Are we seeing a shift from Q4 into Q1? I think the margins were okay to start, but we’re looking for a greater lift.

But we have a lot in the pipeline right now in terms of bids that we think could be impactful to the shipment volume of our LTL business because we just have new customers that we have opportunities to grow with. So we’re kind of working through those. Still early progress on that and I think more to come, but we’re just kind of balancing what you do on the labor front to manage your expense in a market where you have volumes lower than I know we can handle, knowing that we could have an opportunity to see those volumes shift up and we want to be prepared to handle that with a high level of service.

Andrew Hess

Yeah, Brian, maybe one point I’d add to that is, you know, one of the things we identified last year was even though we had integrated from a back end perspective and systems between the three businesses that we have combined, it was creating confusion in our sales efforts and as we took our business to the market. So we announced in the third quarter we’re moving to a unified brand. We’ve already seen that really help us in our sales efforts that we can present a single face to our customers and get them comfortable with our ability to deliver across our network in a way that meets their needs.

So we think that is enhancing our sales efforts. We think that’s going to help in addition to just the design of our network that we’re going through. I mean, it is a process to really put our network as we understand how our freight is flowing with these customers. There’s been a process of doing that network design that we’ve been going through and I think we’re, we’re getting to the point where we’ve managed a lot of those bottlenecks. It’s really put in a position on bid on business that we have not been able to participate on before.

And so, so there’s a lot, there’s a lot of tailwind here in terms of. We think that the strength that’s going to build in our ability to sell and build volume into the business that we built this structure on.

Brian Ossenbeck

Okay, thanks, guys.

operator

Next question is from the line of Ravi Shankar from Morgan Stanley. Your line is now open.

Ravi Shankar

Great, thanks. Maybe as a follow up to that, in the past, I think you’ve said, you know, keeping the brands that you’ve. Acquired. Protecting them so that, you know, you don’t have any customer losses, driver losses, and kind of other negative implications in taking those brands away. So, A, how do you protect against that? B, what does this mean for the other separate brands in your portfolio? And if I can squeeze a really quick one in, kind of. You spoke about LTL bid season going well. Any early comments on TL bid season. Would be great as well. Thank you.

Adam Miller

Yeah, sure. I touched on TL already, but I’ll come back to that. To Ravi. Yeah, so if I look over the last two quarters, we’ve made a couple adjustments to our strategy around some of our brands on the LTL front. I think what we realized going into the strategy we had with buying multiple brands is the outsized benefit you get on the LTL front when you have one distinct network, one pro number, just one voice to the customer. I mean, that is what they long for. They don’t like the interline approach. And even though we had the systems integrated, we had this, you know, the visibility was similar across the different brands.

Regardless of the website, it still didn’t feel like one company and one carrier to them. And so we felt like we needed to shift that strategy around LTL to provide one brand, one voice to the customer in order to really maximize the potential of the network that we’ve built. And so that wasn’t an easy decision. We put a lot of thought into it, but we still think that was the right approach. Now, you may have seen or we did comment on rolling Abilene Motor Express into our Swift Transportation business. Abilene Motor Express was a smaller company that we purchased in 2018 and it had gotten down to around 300 plus trucks and was really struggling.

And what we found was given the size of that company and maybe the lack of brand recognition with some of our customers, it was really tough for them to break through with freight opportunities that was going to support their network. And we had some change in leadership that came from the Swift business to help right to ship at Abilene. And ultimately we made the decision that it would be best for the Abilene employees, the drivers in particular, to run under a more robust network under Swift with trying to convert as many of the Abilene customers that went direct with them to the Swift network.

And we had a lot of overlap of customers. So we’re in that process right now of keeping that freight within Swift, but then supporting Abilene with backhauls and things that allow them to be far more efficient from a network perspective. I would not. We don’t have another brand out there that we own that we believe we would ever need to take this approach with. This was one that really saw margins degradate over the last several years and didn’t have a clear path to profitability. And we felt like this was the fastest way to get that business back to generating a reasonable turn for the assets that we have and then allow us to reduce some overhead and put our drivers in a position to be successful.

So again, it wasn’t. This isn’t something that we would take lightly, but this was the right decision for the situation we were in. And on the TL bid, you know, again, it’s early, but we’ve had constructive conversations with our customers around rates being positive and we’re not having discussions about having to reduce rates to retain volume. And now it’s just a matter of where can we get comfortable where rates need to settle out in the bids. And some may be done in pre bid negotiations, others it’ll probably have to go to the bid so the customers can really vet where the market is.

But I feel more confident going to this bid season that rates are, contract rates are going to be up and I think, you know, that will build as capacity continues to exit. I mean we have some cliff events coming potentially with capacity, Robbie, where we’ve already seen with English Proficiency, you know, nearly 12,000 drivers who’ve been put out of service since June. We have with California, there’s you know, 17,000 non domicile CDLs potentially expiring in March. New York has a similar number that isn’t that far out from there. Really. All states other than I think one are not issuing non domicile cdl.

So you kind of shut off that funnel of capacity coming in. And then there’s several countries where the temporary protective status is ending as well in Somalia, Ethiopia and Haiti where I would believe actually you’re going to have some of those individuals that are, are driving a truck that may not be legal to be able to do that any longer. Then I mentioned just, you know, my opening remarks about all the schools that are being shut down. I think there were 3,000 schools recently removed because of non compliance and another 4,000 schools that are placed on notice for non compliance.

And there are audits out there being being completed. I mean we, you know, two of our schools at Swift were audited and hey, we passed with flying colors as we’d expect. So it is real. It is, it is happening. And so, so I think again constructive on early bid but I think you know, we’ll start to see rate, you know, improve as, as the bid season progresses.

Andrew Hess

And I think maybe one, just one note, Adam, to add to that is we’ve had customers share with us that one of their objectives out of the bid season is to increase their asset coverage. And we’re, I think we’re seeing customers looking at the market, looking at the regulatory changes and realizing that this could be particularly more strategic. Procurement organizations are looking at this as a chance to increase their coverage of asset and I think that’s helpful in our conversations in the bids.

operator

The next question is from the line of dan Moore from BrightBayerNet. Please ask your question.

Dan Moore

Hey guys, appreciate the time and appreciate the opportunity to ask a question. You know, I think everyone realizes that, you know, you’re positioned first of all that you’re under earning along with everybody else in the space and secondly that you’re well positioned here from the standpoint of starting to get some momentum in terms of rate. I guess two questions, I’ll call it one, two things that, that I’d like to get some perspective on is one cost out story. You guys have been very focused on cost lane balance improving, you know, your landed cost. Where are you with that? And then I.

E. How much is left? Or are you at a pivot point there where you really need to be more focused on rate and then to the extent that the rate environment improves over, you know, 26, you know, is there an opportunity to go back to customers in the early innings that try and lock in at, at rates that are non compensatory. That’s it. And appreciate the time again. Thank you.

Adam Miller

Yes. So Dan, maybe I’ll, I’ll hit on Raid and I’ll let Andrew talk about cost. You know, rate is pretty fluid in terms of how it works in our markets because you got to realize, you know, we’re not locking up with guaranteed volumes with a customer on the over the road. Space now dedicated is a little bit different, but the 70% that we do over over the road is pretty fluid. And when the market begins to shift and it becomes tougher to find capacity, even if we’ve done contractual rates, you know, we’re managing commitments, we start to get overflow volumes, which it sometimes can be at a premium.

You get backup rates where in a market like this would typically be higher than, than your contractual rate. You’ll have spot opportunities that are ad hoc on, on, on, you know, our customer load boards that, that sometimes can be a premium. And so we can move pretty quickly to adjust to the market if we see a changing. And so even if you’ve kind of locked up rates early in the bid cycle, there’s still opportunity with that customer. Even if it’s not going back and changing what you’ve already agreed to, it’s just, you know, doing more for them because it’s tough for them to find capacity in a more challenging market.

And that’s where you can at times charge a premium. And so you’ve got to know what your commitments are, be able to adjust those, manage it very closely. And that’s what Night historically has always done. We brought that, that logic to Swift and they’ve employed that extremely well. And that logic is there with US Express now. And so I think we’re well equipped to be able to react to the market. And again, we’re watching this every single day. We have the network maps that are unique to each brand that we see trends before, probably many in our space would see those trends.

And we have API, we have algorithms that we can adjust on the fly if we see the, the market changing. And so I, I feel like we are be. We will be well positioned to get the most value out of the market if it does, if it, you know, and does indeed does change and you want to have the cost.

Andrew Hess

Yeah. Maybe give Dan, give you a little perspective on cost and, you know, kind of how I rate our performance as I look back on 2025 and, and give you a sense for how much more ahead of us is in 2026. When you look at an environment like 2025, when we got less than a percent on rate, you’re not even covering inflation, which probably wants to be 3 to 4%. So you’re not getting a lot of help from the market. And so if you look at our truckload segment where our costs are down something like $150 million, probably 2/3 of that reduction is variable, maybe a third of that’s fixed.

And so you know, you put that all together and you get about a, I think an 80 basis points improvement on or year over year. And so when you think about the variable costs, it probably drove half of that or improvement. So you know, you’ve covered inflation plus some, some margin expansion from these areas. So at the beginning of the year we put initiatives in place to drive cost out of what we viewed as the biggest opportunity. Three variable cost areas of maintenance, fuel and insurance. And those, those, all of those areas improved obviously from a dollar perspective.

But I think even more meaningful is that each one was lower in 2025 as a percentage of revenue than 2024 and on a cost per mile basis. So, so real improvement, not just volume driven reduction. So those projects are continuing. And I just to give you a sense for some of the work we’re doing there is, you know, we’re working with our drivers to create new routing and fuel optimization processes to really get more efficient in our routes and identify lowest cost fueling solutions. We have technology that we are deploying that is largely going to benefit us in 2026.

I would. But also another, another project that we’re really encouraged by is some additional tools to drive advanced auto planning technology to just help us optimize our freight routing and load assignments. I think this has a chance to really help us drive driver and asset utilization and reduce deadhead, just improve our overall network efficiency. So we’re going to continue to deploy these tools to drive variable costs per mile down on fixed costs. Gosh, we made so much progress there. Obviously you lose 3 or 4% miles, it really, it’s hard to show up in your P and L because of the fixed cost leverage.

But as a percentage of revenue, it also declined in 2025 versus 2024 even with that loss in volume. So we view these as structural in nature that they won’t come back and will lever really well. And I think it’s going to come in three areas, equipment and cost and productivity. There you saw that in our utilization improving 2 or 3 percentage points last year over the year before real estate costs. Look, we’ve done some really smart, in my view, facility rationalization. We exited and sold I think 13 locations that we don’t think, you know, we’re looking at this very long term.

These aren’t things that are going to impair our ability to capture opportunities, but are going to drive cost out of our business just in how we manage our facility costs. Our facility mains costs are down about 4% last year. We want to do that again in 2026. Our overhead costs are the other big area we’re focusing, I think in the truckload space. We’re about 5% down on non driver headcount for doing 5% or so the year before. So a lot of the AI initiatives that we’ve made reference to or we’re rolling out in 2026 really going to help us identify opportunities in G and A.

And we talked about Abilene. That’s going to be an area that’s also going to create some opportunity for more efficiency and the costs of our business. So the costs are a huge area of focus for us. We’re attacking it from a lot of different angles and we’re optimistic about the momentum we’re building on our strategy and cost.

Adam Miller

Thanks, Dan.

Dan Moore

Thanks for the color. Yeah, thanks for the color.

operator

Your next question is from the line of Chris, whether it be from Wells Fargo. Your line is now open.

Christian Wetherbee

Hey, thanks. Good afternoon, guys. You know, I guess maybe kind of curious if you could elaborate a little bit on what you’re hearing from shippers as you’re going through the beginning of bid season here, I guess, maybe specifically around capacity reductions, I guess is there any sense of urgency from the shipper community to kind of think about covering some capacity needs as we’re. And maybe doing that on the earlier side? Just kind of thoughts about how they’re thinking about it and then maybe you’re related to that. I know you’re doing a lot of work on the cost side, but as you think about the potential for driver wage increases through the cycle, obviously the enforcement focus is on the driver side and we’re seeing that pool shrink.

Do you think there’s risk to the upside in terms of the traditional relationships that we think about of a point of price, getting a portion of that to the driver? Does that change at all as we go through the cycle, given what this enforcement action looks like?

Adam Miller

Well, so Chris, on the shipper commentary, I mean, look, we’re in early bid season, so everyone’s always negotiating at this point. So I think there are certainly some that acknowledge that there’s potential risk. Some would push that risk out a little bit further into the year and may not feel some of that pain today. There’s Others that recognize that they most likely want to get ahead of it, especially if they have a higher percentage of their freight running through brokers or where their real exposure is. But again, it’s still kind of early on where it’s more of a discussion point rather than then taking real action on it right now.

So I think we’re going to watch that. We continue to have dialogue. And again, they may not always be so upfront with us because were in the process of negotiating rates on the driver front. You know, this is always a question we get, hey, when rates go up, do you have to share that with driver wages? And you know, I think historically we would typically share. It’s probably around 25 to 30% of our revenue per mile would go to drivers. Now in this cycle may feel a little different. There’s a lot of margin to restore given how low that margin has gotten over the last few years.

And so, you know, I think we’ve got to take some of that margin to the bottom line before doing a blanket driver wage increase unless we feel like there’s enough momentum where we’re going to have plenty of revenue per mile to share. But we just watch. Are we able to hire? Are we able to retain? I think our drivers get just a noticeable increase in pay just from running more miles on the truck. And so typically when in an environment that’s improving, you’re going to get better utilization, which we’re already seeing that out of our trucks, which just naturally raises the wages for our drivers.

But, but hey, if we find the driver market gets really tough, kind of given the, you know, where the, you know, with, you know, the tightness of capacity and we have, we are compelled that rates are going to be improving, then yeah, we may, we may share with the drivers so we can ensure that we have enough capacity to meet the needs that our customers have in terms of operating loads. So it’s pretty dynamic. And hey, we would look at it in pockets and we would look at it specific markets rather than historically. We’ve done across the board approaches.

We would be very dynamic based on the region and where we have challenges retaining and hiring. And that’s where we put our resources.

Christian Wetherbee

Got it. Appreciate it. Thank you.

Adam Miller

Thanks. Chris.

operator

Your next question is from the line of Cam Hubster from Bank of America. Your line is now open.

Ken Hoexter

Hey, great. Good afternoon. Adam and team, just want to revisit a couple of your comments. Right. So you said recent trends in truckload have continued into the early part of January, modestly better than typical seasonality. So I just want to understand is that, are you making a comment on anything demand led? Is that just the capacity side? Is that weather? So maybe dig into the, if there’s anything in there on demand side as we go into the first quarter and your thoughts as we go forward And I guess the same for ltl. It seems like you said same thing, modest volume improvement.

Is that just share gains or are you making a demand commentary there too? Thanks.

Adam Miller

Yeah, I think on the truckload side what I’m referring to is every day we’ll come in to the office and we get a look at the market in terms of the relationship of number of loads versus number of trucks that we have available. And in the first quarter a lot of times you’re having to dig out every morning needing additional loads to feed the trucks that are available to operate a load. And so every morning we get these maps. It gives us an idea of the kind of the balance in the network. And so early part of January those maps look far more balanced than we would typically see in a first quarter.

Meaning you’re very close to a relationship of having enough loads for every truck that you have available and you’re not having to book as much same day freight. It’s hard to know if that’s demand or, or capacity. I would lean towards capacity Ken, simply from the third party data that we have that that’s available out there where you know, low tenders have it are still relatively low even if you look at the last three years, yet rejections are higher and that would align with what we’re seeing on our rejections as well now our, our low tenders are still better.

So I do feel like there’s maybe a flight to quality in terms of customers shifting loads to the asset based carriers. But from an industry perspective I think it’s more driven by capacity tightness versus demand, which I think is encouraging because that tells me any uplift in demand is just going to be that much stronger for the market will be that much more disruptive potentially. And then on the LTL side I would say, I think it’s just the, we always see some real softness at the tail end of the fourth quarter, particularly with, with our customer base we’re a bit more retail than maybe some of the larger peers out there.

And so we’re just seeing that, that shipment count restore to kind of more normalized levels. But, but I don’t know that we’ve really seen a big shift in demand that I would call out. And so for us we’re Looking at through the bid season, can we pick up share through the customers that are newer to us, but again, that are larger shippers that now we have an opportunity to participate with?

Ken Hoexter

Thanks, appreciate it.

Adam Miller

All right, thanks.

operator

Your next question comes from the line of Scott Group from Wolf Research. New line is now open.

Scott Group

Hey, thanks, guys. So, Adam, just a bigger picture. You know, if you look back at prior cycles, you’ve gotten a lot of price, but utilization usually goes down. Maybe, you know, see the tractor counts go down or something like that. Driver pay goes up a lot. It sounds like from the. One of the last questions, you don’t think we have to give up maybe as much driver pay this time and then maybe the other piece, like, do you think you can get a. Can we get a pricing cycle where we also get utilization at the same time? And so if we have good price and utilization, maybe we don’t have as much driver pay.

It sounds like you’re doing some stuff on technology productivity. Could that relationship between price and margin be much better? Meaning like if historically 10 points of price is 5 points of margin, do you think it’s a lot better this time around?

Adam Miller

So, Scott, I mean, our goal, what we intend to accomplish, is to get some utilization along with price. So then, yeah, that price goes a lot further because you’ve got that utilization that also helps cover your fixed costs. And so I don’t think we, like, if I look at the last cycle with COVID I mean, the labor market was, was totally disrupted. And so I think that made it very challenging to source drivers. And so I then obviously rates were incredibly high. And even that shifted our network to where we were doing shorter length of haul at higher rates because that’s where the needs were with the customer.

So I think it really distorted the metrics. If you’re trying to look at it historically, I look at this as a, maybe a more typical, you know, cycle and the adjustment up. And, and I would think that we would be able to achieve better utilization with our equipment. The key is going to be what happens in the labor force. But, but, but we believe that with the academies that we have the ability to train drivers at a very high level and reducing competition from other academies that, that I think are not compliant, that we’ll be in a good position to source drivers get volume while rates are improving.

Andrew Hess

Scott, I would just make one point. That one thing we have not had in the prior cycles is we spent most of 2025 developing the capability to match up our demand between our different brands, between our large Truckload brands and even LTL and Truckload to find efficiencies where there’s excess capacity in one place and demand we can match them up. That is not a toolkit we’ve had at scale with the level of sophistication that we’re going to go into this next cycle with. So I think that’s, that’s going to help in fill in some of those gaps to drive utilization up.

Adam Miller

Yeah. So hey, Scott, we appreciate you sticking to one question.

Scott Group

Thanks, guys.

Adam Miller

Okay. So yes. So that will conclude our call. We appreciate all the interest and all the questions. If we didn’t, if we weren’t able to get to your question, you can dial 602-606-6349 and we’ll try to get to get back to you as soon as possible. Thank you, everyone.

operator

Ladies and gentlemen, this concludes today’s CAN’s conference call. Thank you very much for your participation. You may now disconnect.