Knight-Swift Reports Q3 Revenue Growth, Sets Q4 EPS Outlook

Knight-Swift (NYSE: KNX ) reported third-quarter financial results on Wednesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Knight-Swift Transportation Holdings Inc reported a strong third quarter with consolidated revenue increasing by 14.2% year-over-year, driven by pricing and network efficiency gains. The company highlighted its strategic initiatives, including leveraging its large one-way truckload fleet amidst market tightening and ongoing improvements in its logistics, intermodal, and LTL segments. Management expressed confidence in future growth, projecting adjusted EPS for Q4 2026 between $0.78 to $0.84, with expectations of continued improvement in truckload operating income driven by rate realization and seasonal project activity.

Operational highlights included the expansion of the driver academy network to mitigate driver shortages and the successful implementation of cost management strategies to combat inflationary pressures. The company is optimistic about 2027, anticipating double-digit rate increases in the upcoming bid season and potential growth opportunities in dedicated and intermodal services. Full Transcript OPERATOR (Moderator) Star 1 to raise your hand. To withdraw your question, press Star 1 again.

If at any time during this call you require immediate assistance, please press Star 0 for the operator. Speakers for today's call will be Adam Miller, Chief Executive Officer; Andrew Hess, Chief Financial Officer; and Brad Stewart, Treasurer and Senior Vice President of Investor Relations. Mr. Stewart, the meeting is now yours.

Brad Stewart (Sr. Vice President — Treasury and Investor Relations) Thank you, Jillian. Good afternoon, everyone. Thank you for joining our third 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. The 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 many questions as time allows. If we are not able to get to your question due to time restrictions, you may call 602606.

And 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, of Part I 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) Thanks, Brad, and good afternoon, everyone. I just want to let you know I'm getting over a cold here, so I might have some lingering coughs that come through, so if there's any noise in the background, that would be me. I apologize for that, but wanted to make sure I was available for the call here. So first I'd like to start by recognizing our team and the progress we've made in each of our distinct brands.

We continue to build out our diversified service model and saw solid performance across each of our segments this quarter. In addition, I was very encouraged to see the improvement in our core truckload margins that are finally approaching recognizable territory after the long and difficult down cycle. We are so grateful for the focus, teamwork, and commitment of our professional drivers and driver support personnel who brought us through the past cycle and whose creativity and collaboration will help us navigate the new one.

There is much work yet to be done to return to normal operating levels, but the good news is we see many opportunities for improvement to get us there and to help our organization chart new heights moving forward. We truly have an amazing team, and I look forward to navigating this next cycle together. Yes, we believe the new cycle still has plenty of gas left in the tank. The truckload freight market continues to remain tight, and while broad measures of industry demand have been largely stable, demand for our capacity has been strong.

We have more peak-season project arrangements in place than at any time since the pandemic, and freight tenders have already started under several of these projects. We believe we are well positioned to generate distinctive results for two main reasons: the differentiation in our service mix and in our business model. So regarding service mix, our single largest service is the one-way truckload market, a space experiencing a supply-driven tightening after three-plus years where artificially low pricing drove unusually weak industry margins.

During the downturn, many carriers either went out of business or partially liquidated fleet assets, or shifted one-way capacity into dedicated services where there was less competition from non-compliant operators. Because we have remained committed to one-way truckload service and operate the largest one-way fleet in the industry, we are now seeing consistent opportunities to deliver valuable capacity solutions to our customers in the space experiencing the most supply contraction. We believe this is contributing to our spot rates and low tender rejection rates trending stronger than broad market indicators on these metrics.

Also, because one-way service is the most flexible, our industry-leading one-way scale and history of responsive problem solving mean we are often the first call large shippers make when they have an acute need for transportation service. The one-way market also has an active spot market where rates that are highly responsive to the supply contraction not only accelerate our rate recovery but also help provide insightful observations on price discovery, particularly as our spot rates are often much stronger than public spot rate data.

Regarding our differentiated business model, there are a few things I would highlight that are already serving us well and which will be the key to delivering industry-leading margins. First would be our market management practices and unique purview on the freight market. We are continually refining our playbook for how we read and respond to signals in the market and how to manage the deployment of capacity in support of service and yield.

We couple this with distinctive competitive intelligence provided by our industry-leading scale and combination of multiple truckload brands in the marketplace, which further enhances our ability to read market signals and respond with agility. Related to this area is our intentional practice of engaging in spot-rated transactions and modulating our spot exposure based on the phase of the cycle. This enhances our signal detection and allows for faster price recovery in upcycles. Next would be our large academy network and driver training program through which we source and develop a significant portion of our professional driver base.

This is helping to somewhat blunt the negative impacts of the tight driver market on our business and will be helping keep more trucks and increase utilization to capture more opportunities. Next would be our large terminal network and decentralized operating model. This has allowed us to construct a dense freight network that is primarily built on regional freight, which allows us to minimize empty miles and maximize revenue per truck relative to cost. Such a network also supports driver recruiting, retention, and development, as well as internalizing maintenance at advantageous cost.

And finally, I would call out our intense cultural focus on cost and execution which allows us to convert opportunities into earnings. Of note, lately our disciplines around fuel procurement, efficiency, and recovery are helping us mitigate the negative impacts of record-high diesel as best we can. To be clear, we're not immune from cost pressures, but we are focused on doing everything we can to mitigate cost impacts and recover inflation through pricing. We remain encouraged by momentum in the market and strong early progress in our core truckload business.

We are pleased with the significant progress the team at U.S. Xpress has made in improving costs, service, safety, business mix, and pricing, and we look forward to making further progress. We have also significantly reduced our floating interest rate exposure through our 1% convertible bond offering in the spring and are making meaningful progress reducing our acquisition-related leverage as free cash flow continues to improve. We anticipate being back to our target leverage range before long and will again have maximum flexibility as we consider opportunities for organic growth, M&A, and share buybacks.

With that, I'll 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 third quarter revenue and earnings results on a year-over-year basis. Consolidated revenue increased 14.2%, and consolidated revenue excluding truckload and LTL fuel surcharge increased 7.7% year over year.

Operating income grew $128 million, or 255.1% year over year. Adjusted operating income grew $93 million, or 87.4% year over year. The improvement in earnings was primarily driven by pricing and network efficiency gains across our asset-based businesses, in addition to gross margin recovery. In our logistics business, GAAP earnings per diluted share for the quarter of 2026 were $0.72 compared to $0.05 in the third quarter of 2025.

Adjusted EPS was $0.83 for the third quarter of 2026 versus $0.32 last year. Our consolidated adjusted operating ratio was 89.3%, a 450 basis point improvement year over year. Slide 4 illustrates the revenue and adjusted operating income from each of our segments for the quarter. Overall, the relative share of our various service offerings remained largely consistent, Intermodal again gaining slightly over the previous quarter, as accrued revenue grew 8.4% sequentially.

Now we'll discuss each of our segments, starting with our truckload segment on Slide 5. Our truckload segment is making meaningful progress restoring margin through disciplined yield management and cost control. After being driven by spot rates in the second quarter, realized revenue per mile accelerated in the third quarter, driven by contract rate changes primarily within our one-way division. This quarter marks the first one in years operating margins for our one-way service exceeded those of our dedicated division.

We continue to see opportunities through many bids, turn-back bids, while peak season projects have started to move, even while conversations on late-developing needs continue to surface. We are leveraging collaboration to support our various brands and service lines while providing greater capacity solutions to our customers. There are many reasons to be encouraged and plenty of levers to drive further improvements. One of the biggest priorities across our operation is seeding more trucks and increasing utilization.

This will allow us to retain more opportunities and grow revenue at compelling incremental margins. We are leveraging our academy and training network to navigate driver sourcing challenges and to manage cost. We have 12 CDL academies across the U.S., with plans to open a few more in the coming months, plus partner schools operating on-site at seven additional terminals. After graduating from CDL school, the next phase is our finishing program, where we have more than 2,000 qualified mentors who train new CDL holders over the road to ensure they're ready to be safe, productive, and successful.

The past two years we have built a training program at U.S. Xpress modeled after our legacy program, and student count continues to climb. Our scale is a distinct advantage in dedicated, where startup costs on new fleets can pressure margins because equipment must be positioned and must be staffed before they're fully productive. When we onboard a new dedicated fleet, we can draw upon equipment and drivers from our national one-way network, along with our academies program.

Only in certain markets are we limited to recruiting experienced drivers at a premium. This helps us manage margin pressure from growth. Recently, we have been having success in growing our dedicated fleet, which has grown approximately 3.5% since mid-Q2. Our dedicated revenue excluding fuel surcharge grew nearly 4% sequentially between Q2 and Q3, operating margins essentially unchanged.

Investments we made in the quarter in recruiting, training, and driver pay have helped us to stabilize our truck count. We are preparing further targeted measures to improve our driver development and enhance utilization. Given that our trucks are progressing according to plan and our load rejection rates continue to run at strong levels, well ahead of the market, we continue to closely monitor driver market conditions as well as our own metrics around seeded tractors, utilization, and pay as a percentage of revenue to gauge appropriate action and invest where it generates a return. We are balancing the need to restore margins with opportunities for growth.

Turning to Slide 6, I'd like to spend a few minutes on truckload costs. Recently, investors seem to be indicating some level of concern that cost inflation could consume too much, or perhaps even all, of the rate gains being made in the industry. However, our model is generating meaningful margin progress through the combination of our significant exposure to the one-way truckload market, which is benefiting the most from capacity reduction, and our distinctive approach to yield management and cost control.

As Adam touched on earlier, the table on the left is the headline: year-over-year gains in revenue per mile excluding fuel surcharge have accelerated from 2.5% in Q1 to 12.2% in Q3. Over the same period, cost per mile stayed in a tight range between 3.3% and 3.8%. The result is that 68% of our third quarter rate improvement flowed through to margin, up from 50% in the second quarter. Note that while we typically cite rate-per-loaded-mile metrics, these rate gains are stated in terms of rate per total mile in order to make it comparable to cost per total mile figures.

It also helps to look at this over the full cycle. From 2019 through 2025, our cost per mile grew at an average annual rate of 4.5%. That period includes the inflation surge of 2021 and 2022. Thereafter, we structurally reduced costs.

That allowed us to hold cost per mile flat from 2023 through 2025 as pricing and volumes declined. A 3.5% cost-per-mile increase this year is below that recent average, and much of it reflects deliberate reinvestment now that the rate opportunity supports it. That's clearest when you separate our two largest businesses. Dedicated rate has largely kept pace with modest cost growth, and margins have stayed in a stable range through the cycle.

In our one-way business, rates fell sharply from 2022 through 2025, and we responded by taking out cost. With one-way rates rising significantly year over year, and our tender rejections remaining strong, it's time to begin investing again in that business, and we're investing primarily in drivers. So to be clear, we're not immune to inflation. Driver pay and fuel are currently the most acute cost pressures.

While insurance and claims may continue to be volatile, equipment costs continue to rise. However, we're offsetting these specific pressures with cost discipline and efficiency. On driver pay, we're not making broad, across-the-board increases. Pay actions are targeted by market, fleet, and tenure where they improve retention and seat trucks.

On fuel, operationally, we're focused on fuel procurement, efficiency, and recovery. We held fixed costs flat year over year despite higher equipment costs, with fewer non-driver roles, real estate rationalization, AI automation, and lower vendor costs. The fleet is also more productive. In the third quarter, miles per seated tractor rose 2.7% and empty miles fell 170 basis points.

To sum up, cost per mile is currently growing at a fairly normal inflationary pace below our recent average while rate is accelerating. That combination is why the majority of our rate improvement is now contributing to margin. Now onto Slide 7 for a discussion of our LTL business. The LTL demand environment was steady, with pockets of improvement.

Third quarter trends generally followed normal seasonal patterns, so our average daily shipments showed a modest sequential outperformance. Our network and freight mix continue to evolve from the regional routes to a national profile, as seen in further year-over-year growth in length of haul and weight per shipment. After slightly decreasing during July and August, weight per shipment rebounded in September to our highest mark in three years, continuing its evolution. Building greater density and longer-haul shipments should facilitate better network efficiencies, fewer touchpoints, better transit, and enhanced service over time.

The pricing environment remains steady to slightly improving, with renewals at a mid-single-digit pace. Our focus continues on optimizing freight mix and network efficiency in efforts to improve margin, protect service, and position us for further growth.