Knight-Swift Q2 2026 Earnings Call: Complete Transcript

Knight-Swift (NYSE: KNX ) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. This content is powered APIs. 4% rise in operating income year-over-year for Q2 2026, driven by pricing and network efficiencies.

The company highlighted strategic advantages in the truckload market, benefiting from improved demand and regulatory changes affecting supply, leading to double-digit percentage gains in pricing. Knight-Swift aims to increase its driver recruitment and retention efforts due to a tightening driver market and plans targeted investments starting in Q3. 9% revenue growth but faced a decline in gross margin due to tight third-party carrier capacity. 77, reflecting positive trends in volumes and spot rates.

Full Transcript Gillian Robinson, Conference Operator Good afternoon. My name is Gillian Robinson and I'll be your conference operator today. At this time I would like to welcome everyone to the Knight-Swift Transportation second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise.

If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. 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, and Brad Stewart, Treasurer and Senior VP of Investor Relations.

Mr. Stewart, the meeting is now yours. Brad Stewart, Sr. Vice President - Treasury and Investor Relations Thank you, Gillian.

Good afternoon everyone and thank you for joining our second 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 and 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 and assumptions and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors of 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'll hand the call over to Adam for some opening remarks. Adam Miller, Chief Executive Officer Thank you, Brad and good afternoon everyone. So, the truckload freight market has rapidly progressed over the past few months with spot rates trending well ahead of normal seasonality, tender rejection rates reaching levels not seen since 2021, and contractual bid activity growing increasingly supportive. This has continued to be largely supply driven, though signs of improving demand are starting to emerge.

We believe our business is positioned particularly well for environments such as this with our leading over-the-road scale, agility in the market to optimize yield, collaborative cross-brand solutions to meet shippers' needs, an industry-leading academy, network, and training infrastructure to source professional drivers, and an intense cultural focus on cost and excellence in execution to convert opportunities into earnings. Further, we believe demand for our truckload service offering is outpacing the market as evidenced by our tender rejection rates running roughly twice the level of public indications in the second quarter.

Realized revenue per mile was just beginning to recover in the second quarter as contract rate improvement in the period was largely driven by bids priced early in the year. Revenue per mile accelerated in June as the more recent bids reflecting the tighter backdrop started taking effect. These bid outcomes largely brought double-digit percentage gains in pricing in the third quarter. The planned annual bid events typically wind down, though mini-bid and turnback bid activity is persisting, if not increasing, in recent weeks.

Additionally, we continue working on rate reviews on existing business to address rates that are below market where the next scheduled bid is too far out to be sustainable. We believe the efforts of the FMCSA and DOT, including initiatives to prevent and revoke invalidly issued CDLs, prevent cabotage, shut down noncompliant CDL schools, and address hours-of-service abuses, are in the early stages and will continue for some time. This cleanup effort should, in our view, have an outsized impact on the one-way truckload market, particularly on the lowest price capacity.

The service that was under the most pressure over the past few years is now benefiting the most from capacity exiting the system, a dynamic we expect will continue beyond the regulatory-driven pressure on supply. We believe the recent Montgomery ruling by the Supreme Court will add to the tightening in the truckload market as marginal carriers will likely be squeezed out through a combination of higher insurance costs and higher shipper and/or broker selection standards.

Given our long-standing commitment to safety and our significant investments made in support of it over many years, the Montgomery ruling should not add cost to our asset-based business but should rather bring some future opportunities to it. And as for brokers, which, hey, we have a brokerage business as well, the Montgomery ruling could structurally change the economic incentives for a large share of the brokerage space that all too often have pursued the cheapest possible capacity with less regard for carrier safety and quality.

And it will likely take time for cost pressures from insurance and litigation to drive behavior change for many, but shipper behavior could bring that about sooner. To the extent shippers stiffen requirements or allocate freight differently to mitigate risk, some shippers are starting to ask for higher insurance limits from brokers and carriers, ask questions about carrier vetting practices, or even insist on having the right to approve broker carriers before they can be assigned. On the insurance front, our view has been that premiums for broker liability insurance will climb over time as underwriters work through a reevaluation of the risk and as litigation emerges.

Our brokerage insurance actually expired in June and we were in, you know, the market working towards renewal when the Montgomery ruling came out, and that significantly impacted our renewal efforts. We have seen firsthand some of the changes that are just starting to develop in the insurance market. In addition to a significant reduction in insurance capacity, insurers are seeking to introduce exclusions regarding carrier vetting practices into the policies, which, if not strictly followed, would lead to a lack of coverage altogether for an accident. The good news is that feedback from insurers was that our carrier vetting is as rigorous as they've seen.

But despite this, our premium rates increased to multiples of our prior coverage within just a few weeks of the Montgomery decision. So we expect insurance costs in the space will continue to climb. Improvements in carrier vetting will noticeably pressure the carrier base and gross margins for brokers who will need to make meaningful changes to their approach. While we regularly review our vetting approach and will continue to evaluate whether further refinements are feasible and effective, we believe our standards are already more stringent than most and are reflected in the size of our carrier base and our purchase transportation costs.

The situation is very fluid and shippers, carriers, and brokers will navigate their respective risks and decisions as they see fit. But we believe the incremental opportunities for our business are greater than the incremental costs, and especially for our asset division, shippers continue to reduce usage of brokers and align with quality asset-based capacity. Our customers also generally have solid outlooks for their respective businesses in the near term, and discussions about peak season demand support have continued. With the tightening in market conditions, recruiting and retaining quality drivers has become more challenging.

The constrained driver market is affecting over-the-road, dedicated, LTL, and drayage markets to varying degrees. We believe we have an advantage with our terminal network, academies to source and develop drivers, and a diverse service offering. The truckload market is most affected, and we are making thoughtful, targeted investments to aid our efforts starting in the third quarter, generally in the form of hiring and productivity incentives.

We continue to closely monitor the driver market conditions as well as our own metrics around seeded tractors, utilization, and pay as a percentage of revenue to gauge appropriate actions as we balance the need to restore margins with opportunities for growth. We are encouraged by the momentum in the market and strong early progress in our core truckload business. We remain focused on increasing our seeded truck percentage and optimizing yield. We are continually refining our cyclical playbook and have been preparing for this phase, which is typically a pivotal point.

We have worked intentionally towards reducing costs, preparing to scale efficiently, investing in recruiting and training capacity, and driving collaboration and technology towards maximizing opportunities in order to enhance the contributions of our operational and market management strategies. And with the acquisitions over the past five years, we have a larger revenue base to work with than we have entering any prior upcycle. With that, I'll turn the call over to Andrew and Brad to review the results and our guidance. Andrew Hess, CFO Thanks, Adam.

The charts on Slide 3 compare our consolidated second-quarter revenue and earnings results on a year-over-year basis. 4% year over year. 5% year over year. The improvement in earnings was primarily driven by pricing and network efficiency gains across our asset-based businesses.

8% increase year over year. 63 for the second quarter of 2026, an 80% increase year over year. 4%, a 240 basis point improvement year over year. 4% for the second quarter.

Slide 4 illustrates the revenue and adjusted operating income for each of our segments for the quarter. 2% sequentially. All reportable segments other than Logistics improved their operating margins and income contribution earlier. Now we will discuss each of our segments starting with our Truckload segment on Slide 5.

4% year over year through disciplined network management and strategic deployment of capacity. 5% year over year for the quarter. Network efficiency gains amplified the margin opportunity as a 140 basis point reduction in deadhead miles produced even greater improvement in revenue per total mile. The adjusted operating ratio improved 360 basis points year over year to 91%, yielding the best adjusted operating margin for the combined Truckload segment in over three years.

Year over year, rate improvement progressed through the quarter driven by spot and project opportunities that developed within the quarter. 1% year over year. Results for the over-the-road service were even stronger, as this is the most capacity-constrained part of the market. S.

Xpress is making greater rate gains than our legacy brands, which was a key pillar in our thesis with the acquisition. Given the relative starting points on the pricing portfolios, we are excited to finally be in an improving market where we can fully act to reset rates, which is what we had called out as the biggest synergy opportunity. S. Xpress over-the-road division to its first profitable quarter since the acquisition, an important milestone for what was the most challenged part of the business at acquisition.

With the normal bid season winding down at this point in the calendar, we are focused on ongoing opportunities to drive rate recovery as mini-bids, turnback bids, and rate reviews continue. While our total miles per tractor declined year over year for the first time in eight quarters, this was primarily due to the reduction in empty miles as we drove network efficiencies. Q2 loaded miles per tractor improved year over year for the seventh consecutive quarter. Importantly, the strengthening rate backdrop and improving network efficiencies have ongoing implications for our business.

With driver availability becoming a utilization or volume headwind, we are taking targeted actions in Q3 on driver pay with the goal of improving seat-to-truck count and opportunity capture. We remain focused on margin restoration alongside these efforts and are calibrating investments based on sustainable rate gains. Now onto Slide 6 for a discussion of our LTL business. While the LTL sector has not seen the same sharp tightening as Truckload, demand that has been generally stable is seeing pockets of improvement.

In addition to some indirect benefits from Truckload tightness, our freight mix continues to improve and rate renewals have remained steady at a mid-single-digit pace. We are focused on optimizing freight mix and network efficiency in efforts to improve margin while protecting service and positioning us for further growth. 7% decrease in shipments per day as we metered certain volumes as part of our initiatives around freight mix and network efficiency. 3% increase in our length of haul year over year.

Additionally, both daily shipments and tonnage trends showed momentum as the quarter progressed. 4% year over year. 3%. While we anticipate that fuel will be a quarter-over-quarter headwind in Q3 based on recent trends, we aim to offset this margin headwind with further efficiency gains, volume recovery, and pricing progress.

We expect that over time, growing into our network investments, maturing freight mix, improvement in network density, and continuously refining our operational cost execution will allow us to drive sustained, methodical improvement in operating margin. Now I'll turn it over to Brad for a discussion of our Logistics segment on Slide 7. Brad Stewart, Sr. Vice President - Treasury and Investor Relations Thanks, Andrew.

4% decline in load count as we maintain a disciplined approach to profitability and carrier quality. 4% for the second quarter declined 350 basis points year over year and 120 basis points from first-quarter levels. 4%, a 160 basis point degradation year over year. As contractual pricing is reset through bid activity and proactive rate reviews, we expect to grow volumes at appropriate gross margins moving forward.

Also, over time, we expect our Logistics business to benefit from share gains as brokers with less robust safety and compliance infrastructure are pressured out of the market following the Montgomery ruling. As noted earlier, this team continues to leverage technology to take cost efficiencies to a new level, as well as to improve our responsiveness and ability to capture opportunities in the marketplace, which we expect will contribute to earnings in 2026. Now on to Slide 8 for discussion of our Intermodal business.