On Wednesday, Knight-Swift (NYSE:KNX) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Access the full call at https://events.q4inc.com/attendee/587246800
Summary
Knight-Swift reported a challenging first quarter of 2026 with a notable 38 million year-over-year decline in operating income, largely due to unexpected expenses and weather impacts.
The company is optimistic about the market’s future due to regulatory efforts reducing non-compliant capacity, which has started to benefit their truckload market.
Knight-Swift is seeing early signs of improvement in truckload pricing, with expectations for high single to low double-digit rate increases as bid season progresses.
Operational efficiencies and cost management are highlighted as strengths, with ongoing improvements in network efficiency and driver recruitment.
Management is focused on leveraging technology and strategic investments to ensure capacity and quality service, aiming for significant margin improvements as the market recovers.
Full Transcript
OPERATOR
Good afternoon, My name is Sarah and I’ll be your conference operator today. At this time I would like to welcome everyone to the Knight-Swift Transportation first quarter 2026 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 star zero for the operator. Speakers from today’s call will be Adam Miller, Chief Executive Officer Andrew Hess, Chief Financial Officer Brad Stewart, treasurer and senior VP of investor relations. Mr. Stewart, the floor is now yours.
Brad Stewart (Treasurer and Senior VP of Investor Relations)
Thank you, Sarah. Good afternoon everyone and thank you for joining our first quarter 2026 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. 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 10-K 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 I will hand the call over to Adam for some opening remarks.
Adam Miller (Chief Executive Officer)
Thank you Brad and good afternoon everyone. These are certainly interesting times and there are now more reasons to be optimistic about our industry than we have seen in over four years. Now we operate one of the largest fleets in the truckload industry. Roughly 70% of our fleet is deployed in one way or over the road service. It is true the one way market has been the most difficult place to be over the past three years. Plus, as this market has felt the brunt of the influx of capacity over the last several years, much of that capacity may not have been claimed by the rules that we play by. And therefore operating with a different cost structure, with distorted pricing behaviors and cyclical patterns, the ongoing efforts of the FMCSA and the DoT to prevent and revoke invalidly issued CDLs shut down non compliant CDL schools and address hours of service abuses are in the early stages and are already having an impact on the market. This cleanup effort should, in our view, have an outsized impact on not just the one way truckload market, but on the lowest price capacity in this market. The market that was the hardest hit over the past few years is now benefiting the most from the removal of capacity, a dynamic which we expect will continue. As we mentioned last quarter, the market has progressed to a point where even small changes can cause disruption and we saw evidence of that during the first quarter as the severe weather in January led to acute tightness and an elevated spot market. Almost overnight we were able to leverage our one way over the road capacity at scale to provide solutions across multiple brands to help our customers recover from the storm when others in our space were not able following the recovery from the storm, the tightness in the truckload market has continued to build largely due to declining capacity, though some indications of improving demand are beginning to emerge. Broad truckload market indicators show improving trends for load tenders, tender rejections and spot pricing. Our business is experiencing even stronger levels on these metrics as our leading presence in the one way market grows increasingly valuable to shippers. Late in the first quarter we began to see the outcomes from early first quarter bids which showed our volumes generally holding steady or growing while achieving mid single digit percentage rate increases. For reference, that is better than last year at this time when targeting slightly lower price increases often led to lower volumes. Pricing activity is very busy now. In addition to bid season being in full swing, many bid activity has increased indicating incumbent carriers are unable to or perhaps unwilling to service rate at existing rates. In addition, turn back bids are happening more frequently as bid awards are being at least partially rejected by the awarded carriers as networks have shifted or or the market has moved well past rates that were proposed even one or two months ago. Unlike the past few years, shippers are generally not issuing off cycle bid opportunities. They’re not issuing off cycle bids opportunistically to improve service or drive prices lower. These actions are driven by a need to secure capacity. At the same time, previously deep deep discounts in the spot market have evaporated, further encouraging shippers to align with quality asset capacity. This is on top of a trend of shippers favoring asset based relationships that have formed late last year in response to the regulatory enforcement efforts. Whether for these reasons or because of expectations of improving demand, we have already had a number of shippers initiate discussions about peak season demand support which is not typical this early in the year. As we navigate a busy and rapidly evolving bid environment, we have shifted our bid targets to a range of high single to low double digit percentage increases on current pricing activity as compared to our low to mid single digit target one quarter ago. Across our truckload brands, we are reviewing business that is not subject to current or near term bids and and addressing rates that are below market. Aside from the market developments and our position in one way service, we believe our work over the past two years structurally cutting costs out of our business with ongoing opportunities for further progress sets us up for great incremental for greater incremental margin as business conditions improve. As the market improves recruiting and retaining quality drivers and will become more challenging, we believe we have an advantage with our terminal network and academies to source and develop drivers. However, we expect this to be a challenge for the industry in the back half of the year. While the LTL sector is not seeing the same sharp tightening as truckload, we are seeing our freight mix improve and rate renewals continue at a mid single digit pace. Shipment volume trends have been directionally in line with normal seasonal patterns, though somewhat understated until late in the first quarter. However, we saw a notable improvement in weight per shipment for the first time in years with this measure progressively growing throughout the quarter. This is a result of bringing on more industrial customers who can leverage our expanded network footprint to move heavier and longer length of haul shipments. We believe we are in the early stages of our network transition from regional to national. We expect that over time growing into our network investments, a maturing freight mix, improvement in network density and continuously refining our operational and cost execution will allow us to drive sustained methodical improvement in operating margin. We remain committed to thoughtfully deploying capital, intentionally leveraging our strengths and creatively unlocking synergy opportunities across our businesses. And with that I will turn the call over to Andrew and Brad to review the results and our guidance.
Andrew Hess (Chief Financial Officer)
Thanks Adam. The charts on Slide 3 compare our consolidated first quarter revenue and earning results on a year over year basis. Consolidated revenue excluding truckload and LTL fuel surcharge was essentially flat and operating income declined by 38 million year over year largely due to the $18 million of expense for claim development in our LTL segment, primarily related to an adverse arbitration ruling on a 2022 claim, $4 million of expense in our truckload segment for an adverse decision on VAT reimbursement in Mexico for prior tax years warehousing project business deferred to future quarters and an estimated 12 to 14 million dollars net negative impact for volume and cost headwinds from severe winter weather disruptions and sharply rising fuel prices. During the quarter, adjusted operating income declined $37 million year over year, primarily driven by the same items. GAAP earnings per diluted share for the first quarter of 2026 were a loss of $0.01 primarily due to the items noted above. GAAP earnings per diluted share in the prior year quarter were $0.19. Adjusted EPS was $0.09 for the first quarter of 2026 compared to $0.28 for the first quarter of 2025. Our consolidated adjusted operating ratio was 97% up 230 basis points year over year. The effective tax rate on our GAAP results was 7% and our non GAAP effective tax rate was 28%. Slide 4 illustrates the revenue and adjusted operating income for each of our segments for the quarter. Overall, the relative shares of our various services service offerings remains largely consistent quarter over quarter with LTL gains slightly over the fourth quarter as it exits its seasonally weakest period of the year. Now we will discuss each of our segments starting with our truckload segment on slide 5. Aside from the negative impacts to volume and costs from severe winter weather and fuel challenges in the quarter, most operational metrics were improving throughout the quarter. Revenue per loaded mile excluding fuel surcharge and intersegment transactions turned out stronger than we anticipated and even improved sequentially over our end of year peak season result, largely driven by spot opportunities that developed within the quarter. However, volumes and cost per mile for the quarter were both unfavorable as a result of the weather and fuel challenges. On the whole, our truckload adjusted operating ratio of 96.3% only degraded 70 basis points year over year as a reduction in empty miles and the strengthening rate environment largely offset the headwinds to volume and cost. Q1 marks the seventh consecutive quarter of year over year improvement in miles per tractor. Importantly, the strengthening rate backdrop and improving network efficiency have ongoing implications for our business. While the weather issues are not expected to reoccur on a year over year basis, revenue excluding fuel surcharge was essentially flat as a 1.4% improvement in revenue per loaded mile excluding fuel surcharge and inter segment transactions largely offset a 1.8% decrease in loaded miles. Adjusted operating income declined 7.6 million year over year largely as a result of the adverse decision in VAT reimbursement as noted earlier, as well as the cost headwinds from severe winter weather and fuel escalation in the quarter US Express made further progress on operating efficiency and trailed the legacy brands and adjusted operating ratio by approximately 300 basis points for the quarter. The ongoing progress at US Express is encouraging and we expect this business will continue closing the gap in margin performance with our legacy brands. As the market Moving on to Slide 6, our LTL business grew revenue excluding fuel surcharge 2.6% year over year driven by a 5.2% increase in weight per shipment with an 8.5% increase in length of tonnage. Trends showed momentum as the quarter progressed ending with March average daily tonnage up 7% year over year. Our expanded service coverage and presence in new markets is helping us win business with new customers, gradually increase our industrial exposure and transition our network and freight mix from regional to national. Shipments per day were down 1% year over year for the quarter, largely as a result of winter weather disruption in January and the shift in freight mix to a higher weight per shipment. Revenue per 100 weight excluding fuel surcharge fell slightly by 70 basis points year over year driven by the increase in weight per shipment while renewal rates continued their trend of mid single digit increases. We continue to make progress normalizing operational and cost fundamentals following a period of significant change to our network and freight purchased transportation as a percentage of revenue. Equipment rent and variable labor for shipment all showed improvement year over year in the first quarter and we anticipate further improvements in efficiency as we refine our network and freight flows. As mentioned earlier, adjusted operating income and adjusted operating ratio were negatively impacted year over year by the adverse claim development. We are encouraged by emerging seasonal freight patterns, steady progress on rate renewals, accelerating volume trends late in the quarter and an improvement in weight for shipment for the first time in years as freight mix continues to develop into our expanded terminal network. Now I’ll turn it over to Brad for a discussion of our logistics segment on slide 7.
Brad Stewart (Treasurer and Senior VP of Investor Relations)
Thanks Andrew. Logistics revenue for the first quarter declined 9.9% year over year as volumes were down 18.9% while revenue per load grew 10.4. Third party carrier capacity grew more difficult to source during the fourth quarter and this trend continued through the first quarter. Gross margin of 16.6% for the first quarter declined 150 basis points year over year but improved 110 basis points from fourth quarter levels as strengthening spot opportunities helped to offset pressure on contractually priced business. Despite the year over year decline in volumes and gross margin, our logistics segment produced an adjusted operating ratio of 96.2% only a 70 basis point degradation year over year in addition to the increase in third party carrier costs brought on by the regulatory pressures on capacity, our logistics business experienced increased pressure on gross margin as we further enhanced our already rigorous carrier qualification standards in response to a sharp increase in cargo thefts in the industry and the troubling carrier practices exposed by recent regulatory efforts. This affects not only new applicants seeking to join our carrier base, but also resulted in a reduction in the number of existing carriers we are tendering loads to. While such efforts were a headwind to capacity costs and caused us to reject more loads as unprofitable, as we reset contractual pricing through the bid season, we expect that Load count will improve and pressure on gross margin should lessen. Given the complementary relationship between our logistics and asset based truckload segments, we believe the improving market dynamics will 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 cost efficiencies to a new level as well as to improve our responsiveness and our ability to capture opportunities in the marketplace which we expect will contribute to our earnings in 2026. Now on to slide 8 for discussion of our intermodal business. The intermodal segment grew revenue 2.7% and improved its operating ratio of 50 basis points year over year as a 1.6% increase in revenue per load and a 1.2% increase in Load count offset headwinds from winter weather in the quarter. Load count and revenue per load improved progressively throughout the quarter with March Load count up 8.4% year over year. March While the intermodal pricing environment is more competitive than truckload at this point, we are encouraged by ongoing opportunities to leverage our strong service performance and our truckload relationships to continue growing our volumes at improving rates. We remain focused on delivering excellent service and driving appropriate turns through growing our Load count with disciplined pricing, cost control, network balance and equipment utilization. Slide 9 illustrates our all other segments category. This category includes warehousing activities and support services provided to our customers, independent contractors and third party carriers such as equipment sales and rentals, equipment leasing, owner, operator, insurance and maintenance. Additionally, beginning January 1st of 2026, all other segments also includes the cost of our accounts receivable securitization program that was formerly reported below the line in interest expense in prior quarters. For the first quarter, revenue increased 13.5%. Operating results declined to an operating loss partially due to the inclusion of 5 million of costs for the accounts receivable securitization program as well as startup costs on new contract awards in our warehousing business, for which revenue is expected to ramp in the coming months. On slide 10, 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 second quarter of 2026 will be in the range of $0.45 to $0.49. This range represents a larger than normal sequential increase in quarterly results as the first quarter was negatively affected by events that we do not expect to recur and because freight market fundamentals are improving exiting the first quarter. Our projections reflect recent trends in volumes, spot rates and bid activity, as well as expectations for a continued seasonal build in freight demand for both truckload and LTL services. 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 but I do want to highlight the point that the recent strengthening of the truckload pricing environment will generally impact our contractual rates beginning late in the second quarter and into the this concludes our prepared remarks and before I turn it over for questions, everyone to keep it to one question per participant. Thank you Sarah. We will now open the line for questions.
OPERATOR
Thank …
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