管理層發言
Good afternoon. My name is Jillian 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. Speakers from today's call will be Adam Miller, Chief Executive Officer; Andrew Hess, Chief Financial Officer; Brad Stewart, Treasurer and Senior Vice President of Investor Relations. Mr. Stewart, the meeting is now yours.
Thank you, Jillian. 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 1 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 1 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, 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'll hand the call over to Adam for some opening remarks.
Thank you, Brad, and good afternoon, everyone. So the truckload freight market has rapidly progressed over the past few months, with spot rates trading 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, excellence, and 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 turn-back 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 invalidly issued CDLs, prevent cabotage, shut down noncompliant CDL schools and address out-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, that Montgomery ruling should not add cost to our asset-based business, but should rather bring some future opportunities to it. As for brokers, which we operate 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 capacity with less regard for carriers' safety and quality. 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 step up 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 market working towards a 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 this 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 we'll 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 purchased 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, 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 have 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 city 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, and we have scale entering any up cycle. With that, I'll turn the call over to Andrew Hess to review the results and our guidance.
Apologies for the interruptions. Ladies and gentlemen, we are experiencing technical difficulties. Please pause while we figure things out on the back end.
Okay. Looks like we're back on.
We will now continue the call. Go ahead, Adam.
All right. Sorry about the disconnect there. We'll try to pick up where we left off. I think I figured out where the call got disrupted. So I apologize for that. I was touching on the recent Montgomery ruling. As I mentioned, given our long-standing commitment to safety and our significant investments made in support of it over many years, that Montgomery ruling should not add cost to our asset-based business, but should rather bring some future opportunities to it. And so as for brokers, which 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 capacity with less regard for carriers' safety and quality. 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 step up 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 market working towards a 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 this 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 we'll 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 purchased 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, 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 have 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 city 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, and we have scale entering any up cycle. With that, I'll turn the call over to Andrew Hess to review the results and our guidance.
Thanks, Adam. The charts on Slide 3 compare our consolidated second quarter revenue and earnings results on a year-over-year basis. Consolidated revenue, excluding truckload and LTL fuel surcharge, increased 5.5%, and operating income grew $32.2 million or 44.4% year-over-year. Adjusted operating income grew $47.2 million or 45.5% year-over-year. The improvement in earnings was primarily driven by pricing and network efficiency gains across our asset-based businesses. GAAP earnings per diluted share for the second quarter of 2026 were $0.26, a 23.8% increase year-over-year. Adjusted EPS was $0.63 for the second quarter of 2026, an 80% increase year-over-year. Our consolidated adjusted operating ratio was 91.4%, a 240 basis point improvement year-over-year. The effective tax rate on our GAAP results was 34.1%, and our non-GAAP effective tax rate was 24.4% for the second quarter. Slide 4 illustrates the revenue and adjusted operating income for each of our segments for the quarter. Mix of our various service offerings remained largely consistent quarter-over-quarter, with intermodal gaining slightly over the first quarter as it grew revenue 21.2% sequentially. All reportable segments other than Logistics improved our operating margins and income contribution year-over-year. Now we will discuss each of our segments, starting with our Truckload segment on Slide 5. Our Truckload segment grew revenue excluding fuel surcharge by 2.8% and grew adjusted operating income by 69.4% year-over-year through disciplined network management and strategic deployment of capacity. Revenue per loaded mile, excluding fuel surcharge and intersegment transactions increased 5.5% year-over-year for the quarter. Network efficiency gains amplified the margin opportunity as a 140 basis point reduction in deadhead miles and 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. As Adam noted, rate improvement accelerated in June as more recent bids started taking effect with Truckload revenue per loaded mile, excluding fuel surcharge, increasing 8.4% and revenue excluding fuel surcharge per tractor increasing 10.1% year-over-year. Results for the over-the-road service were even stronger as this is the most capacity-constrained part of the market. U.S. Express 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 act fully to reset rates, which is what we had called out as the biggest synergy opportunity. This rate progress helped bring the U.S. Express 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 and volume headwind, we are taking targeted actions in Q3 on driver pay with the goal of improving seated-truck count and opportunity capture. We remain focused on margin restoration alongside these efforts and are calibrating investments based on sustainable rate gains. Now on to Slide 6 for a discussion of our LTL business. While the LTL sector has not seen the same sharp tightening as truckload demand, 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. LTL revenue, excluding fuel surcharge, declined 1.4% year-over-year, driven by a 3.7% decrease in shipments per day as we metered certain volumes as part of our initiatives around freight mix and network efficiency. Improvements in freight mix drove 4% growth in our daily tonnage, 7.9% growth in our weight per shipment and a 5.3% increase in our length of haul year-over-year. Additionally, both daily shipments and tonnage trends showed momentum as the quarter progressed. Revenue per hundredweight, excluding fuel surcharge fell 4.2%, driven by the strong increase in weight per shipment, while revenue per shipment, excluding fuel surcharge increased 3.4% year-over-year. The adjusted operating ratio improved 100 basis points year-over-year to 92.1% and adjusted operating income grew 13.3%. 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.
Thanks, Andrew. The Logistics segment grew revenue 8.9% year-over-year, driven by a 29.6% increase in revenue per load, partially offset by a 16.4% decline in load count as we maintain a disciplined approach to profitability and carrier quality. Tightness in third-party carrier capacity continued through the second quarter as gross margin of 15.4% for the second quarter declined 350 basis points year-over-year and 120 basis points from first quarter levels. The adjusted operating ratio was 96.4%, 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 a discussion of our Intermodal business. The Intermodal segment grew revenue 34.9% and improved its operating ratio 470 basis points year-over-year through a 19.6% increase in load count, a 12.8% increase in revenue per load and improvements in costs and network efficiency. On a sequential basis, load count grew 9.7% and revenue per load grew 10.4% over the first quarter levels. Load count improved progressively throughout the quarter, and core pricing also improved throughout the quarter as revenue per load increased 2.4% year-over-year before factoring in fuel surcharge revenue fluctuations. In addition, mix was a headwind to pricing as we've increased our backhaul volumes to improve network balance. While outside drayage service is affected by the constrained driver market, we outsource only a low single-digit percentage of our drayage needs, which should provide some insulation from the tightening in drayage capacity. Though the intermodal pricing environment remains more competitive than truckload, we are encouraged by ongoing opportunities to leverage our strong service performance and our truckload relationships to continue growing our volumes at improving rates. Our pipeline is strong and sorted by mini-bid and turn-back bid activities as well as modal conversion opportunities. We remain focused on delivering excellent service and driving appropriate returns through growing our load count with disciplined pricing through cost control, network balance and equipment utilization. Slide 9 illustrates our all other segments. This category includes warehousing activities and support services provided to our customers, independent contractors and third-party carriers, such as equipment sales and rentals, insurance and maintenance. Additionally, beginning January 1, 2026, all other segments also includes the cost of our accounts receivable securitization program that was reported below the line in interest expense in prior years. For the quarter, revenue increased 41.8% year-over-year, reaching the highest mark in over three years, driven by growth in warehousing and trailer leasing services. While the operating businesses in this category grew their income contribution year-over-year, operating results overall declined to an operating loss due to the inclusion of $5.8 million of costs for the accounts receivable securitization program as well as an $18.2 million severance charge, primarily related to the retirement of our former Executive Chairman. On Slide 10, we highlight our convertible bond issuance during the second quarter and the benefits to our company. We've been monitoring the convert market for a long time and view this as an attractive opportunity to provide immediate need for earnings accretion, increase our flexibility and support our ongoing deleveraging efforts. This instrument allowed us to monetize our combination of strong credit and stock volatility while our stock was trading near all-time highs. By issuing bonds at 1% to pay off floating around 5%, we expect to generate annual savings of approximately $44 million pretax after accounting for deal costs. Beyond the immediate interest savings, the convert also helped us to extend maturities, reduce lending rate exposure, and reduce the outstanding capital among our banking relationships. Additionally, as we are bullish on the opportunities ahead for our company, we used $107 million of the proceeds to purchase a cost spread that increased the effective conversion price from roughly $80 per share to $105 per share. As a result, shareholders received the benefit of the interest savings today, while dilution remains limited until the stock appreciates substantially. And as illustrated on the slide, if the stock were to appreciate 87% from issuance to a hypothetical share price of $115, dilution will be approximately 1% of our current shares outstanding. 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 third quarter of 2026 to be in the range of $0.71 to $0.77. Our projections reflect recent trends in volumes, spot rates, rate activity and driver hiring as well as expectations for continued seasonal patterns for both truckload and LTL services. The key assumptions underpinning this guidance are listed on this slide. Now this concludes our prepared remarks. And before I turn it over for questions, I just want to remind everyone to keep it to one question per participant. Thank you. Julian, we will now open the line for questions.
分析師問答
Maybe just delve into the utilization or miles per tractor, the deadhead impact, right? So how do you adjust that? And then the timing of rolling in the out-of-date contracts with the new pricing? Maybe just talk scale or speed with which we could see that both of those ends, utilization and pricing start to really roll in.
Yes, I do appreciate that, Ken. Well, any time you go through bid season, you're going to have some level of churn where you're losing some of the incumbent business and picking up new lanes. And so when we have maybe a greater amount of freight being awarded to us, we really have an opportunity to kind of pick and choose the lanes that create some additional efficiency in our network. We've been going through that process as we've been getting awards from our customers. And even on the spot market, there's more opportunities there to fill in empty lanes that we've had historically. Every business has just been going through and trying to build some efficiency into their network. That will be something that we'll be continually doing as we find more opportunities and get awards for our customers. In terms of the pace of how the rates are playing out, as we touched on in the prepared remarks, we saw that really accelerate in June. We had a lot of the bid activity get implemented in June, and we'll have some additional activity get implemented in July. But quite honestly, this is going to be an ongoing process. We are constantly getting these mini bids or even churn bids where a customer has gone and awarded business, and you've had carriers who've had to reject a certain amount of awards because of the lack of available capacity or just a lack of fit in their network, and then they have to go source some additional capacity to not be in the spot market. We're seeing a lot of those. Obviously, the spot market is robust. And so we are creating a greater amount of exposure to the spot market. I think this year, we started the year probably around 10%. We're now kind of mid-teens in terms of our spot market exposure. And then you also have projects that will build and sometimes those can come without notice, sometimes they're planned. We had a good amount of projects that built into the back half of June as customers were needing capacity going into the Fourth of July holiday. That slows a little bit as you come out of the holiday, but I would expect that to pick up probably in September, and then that really leads to what we believe would be a strong peak season. So I expect some normal seasonality to play out, but also I do think there's just the robust spot market and many bid activity that allows us to continually improve rate. Once you get through what we believe will be a strong fourth quarter peak season, you get right back into bid season where you're able to address rates that may be outside of the market.
And just on your point on deadhead and empty miles, there are factors that are enabling us to drive this improvement. First, we've been in profit improvement and have been implementing in the last months some enhanced planning tools that are significant in our ability to reduce our empty mile percent. We've seen that really take traction. The momentum on our empty miles has been building over the last few quarters. In an environment like this, in a good market, we have an opportunity to really build a more efficient network. So when we're taking the fundamental changes we've made in our structural processes on how we plan along with the market where you have an opportunity, those are sustainable changes for the foreseeable future that we think are going to enable us to do that. That's obviously creating some noise on our total miles per truck. But when you look at our loaded miles per truck, we are in a healthy trend that continues just to build. So our biggest opportunity is going to be seeding trucks that are not active, so our unseated trucks where we do have a lot of opportunity there. Honestly, we put a lot of that cost into the system, so it's going to lever really well as we are able to put those trucks to work.
So Adam, you talked about ELD and hours-of-service enforcement. It feels like we haven't really seen that yet. So maybe talk about what could be coming because I think that could be a next big opportunity on the supply side. And then I guess just along those lines, listening to you, it sounds like with Montgomery and all these regulations, it sounds like you think large asset carriers should be the beneficiaries here. It's been a really long time, but do you see opportunity to start growing your fleet organically?
Yes. So let me hit that, Scott. First, on hours-of-service enforcement: I think this administration has a lot of things on the agenda that they plan to push to clean up the environment. There have been a lot of ELDs that have been self-certified in our industry that we don't believe can stand the rigors of compliance. We've seen this administration go through and validate some of these devices and be much more strict on roadside inspections. I think that's just going to be part of the equation of managing noncompliant carriers out there, and I think they're in the early innings of really pushing that. There are a lot of ELD providers out there to work through, just like there were many CDL schools that were self-certified. Those are areas they are cracking down on, and I know that's important to this administration. So I think those will be areas that push noncompliant carriers out of the market, which typically are those that are much cheaper in terms of how they price their capacity. In terms of Montgomery, I do believe that quality asset-based carriers would benefit from this ruling. We've had customers reach out to divert some volume that was with brokers to asset-based carriers. We've also had customers who use our brokerage want to understand how we vet carriers and what the things are that we look at to ensure that we're putting a safe carrier, and more importantly, a safe driver behind the wheel that's hauling their freight. We've done a lot on that front even before the Montgomery ruling that I think has put us in a good position relative to many in the space. We continue to look through that to ensure that we're mitigating risk as best as possible while being balanced with having capacity available for our customers. In transportation and trucking, you either have freight or you have drivers. It's rare that you have them at the same time. Clearly, we're focused on maximizing the opportunities in the market today with the freight that's available. We are looking toward how we maximize the utilization of our existing equipment. Once we feel like we're in a good position there, we would like to grow the fleet. Driver availability and quality driver availability will be the one limiting factor. We're trying to put together thoughtful approaches to how we incentivize drivers in our company and how we recruit drivers for our different companies. A big question is what happens with driver pay rate as the rate market improves and we're committed to preserving rate best we can to enhance margins because there's a lot of margin that we have to get back into our business. I know many of our peers are in the same place on that front. The good news is the last up cycle we had, we were competing against government incentives and a very high labor market. I think this market is very different. We don't have to spend as much to incentivize drivers to come to our company. We've already done some things that are very tactical and strategic: where we're going to put dollars around production incentives, maybe some sign-on bonuses in key markets, not broad-based, not near the expense we would have done during the last up cycle. We're taking different approaches business by business and learning from them, then at some point we'll harmonize them to what got the best results and the greatest return based on the investment. Ultimately, we want to be able to grow organically in this market. We have utilization to improve before we get to that point, but I like to think we'll be able to achieve that and begin to grow.
Maybe a quick follow-up for Adam. Do you think that some of these seated tractors can be filled here in the near term? It sounds like there are some approaches already in flight. Do you feel like you'll get some progress there? I know it's a sensitive number, but any relative percentage you can give us in terms of historically unseated tractors might be helpful to figure out where that trend is going. And then maybe for Andrew, can you give a little more on the LTL trends? How was that progressing month-to-month? Were there any capacity constraints that you ran into that we're hearing across different parts of the industry? And lastly, the fuel headwind comment got a lot of attention. Maybe you can just walk through what you expect on that.
I'd say from a seated tractor standpoint, we'll make incremental progress in the near term. Overall for our company, it's been relatively stable. We have some businesses that have seen good progress and others that have seen a little pressure. Overall it's been relatively stable and not very different from where we've been over the last year or two. But it's definitely a focus of ours, given the amount of freight opportunities that we have. We're injecting twice as much as the industry, so those are freight opportunities we could leverage in our markets if we had more seated trucks. Now that we have the ability to do a little bit on the driver pay front that can help support bringing more drivers in and enhancing our recruiting, I think it's a good opportunity for us. So we're highly focused on that.
Brian, on LTL intra-quarter trends: let me give you some of the numbers so you have them, and then I'll give context. If you look at our shipments per day, which we described are down year-over-year as we've had a freight mix change with higher weight shipments, April we were down 6.5% year-over-year. May, we were down 3.2%. And in June, we were down 1.3%. So we saw our shipments per day improve from April to May to June. Early in the quarter, we metered some of our demand to protect service as we wanted to make sure we were balanced on our inbound and outbound freight. We restricted for a period of time early in the quarter to maintain service and were able to open that up as we got into the middle of the quarter. We see a good environment in LTL and hope to build off the volumes that we experienced in Q2 and grow into Q3. On fuel, it's an unpredictable line of our P&L. It helped us in Q2. Early in Q3 it may not, but fuel is a line we can't really foresee — there is a high degree of variability. So it's something we'll watch carefully; it could provide benefit or cost into Q3.
Adam, you mentioned driver pay in the prior answer, though it wasn't asked directly. I want to simplify: can you compare and contrast the driver wage inflation potential today versus what it was in late 2020 / early 2021? And then, how do you see industry or Knight upside margin potential given the similarities and differences on wage inflation versus price?
Again, it's a very different labor market this time compared to 2021, when we were competing with government incentives and broader stimulus and an overall very tight labor market with many alternatives for vocational labor. Drivers have always been tight, but we did a lot on pay in 2020 and 2021, catching up quite a bit. We haven't taken that pay back even though rates came down 20%, so driver pay has held on a per-mile basis and put pressure on margin. There's a lot of rate to get back, and there's some room on driver pay, but not anywhere near the extent of 2020–2021. I think we'll see margins improve faster in this cycle because of that, but we're starting at a much lower level. I wouldn't predict a specific peak margin change versus historical patterns because of that starting point. We're in the early innings of this shift; what's unique is it's largely supply-driven. Because it's supply-driven, it feels like it could be more durable, but perhaps more linear in improvement compared to a demand-driven spike like COVID when rates jumped quickly. Today, we're moving the same goods for the same sales with fewer trucks, so you have to negotiate and push to get the rates you need to support your fleet and returns. I do feel we'll have an opportunity to flow through rate increases to improve margins while doing targeted actions for drivers where it makes sense in the markets where we need it.
Jonathan, I'll point to our approach as five-pronged in addition to driver pay. First, we put money to work in marketing. Second, we've built up our recruiter base this year and put money ahead in those areas. Third, we are leveraging tools we haven't had in the past, including AI tools, to help be more efficient in recruiting, training, retaining and rehiring. Fourth, we are leveraging our Academy network more effectively across brands to help all brands benefit. And fifth, we've deployed better tools around driver pay and market-based pay for owner-operators and improved market intelligence. Decisions around driver pay will be tactical, database-driven and market-specific. Our approach will be more precise than blunt, which should help us deploy resources and driver pay to both grow our fleet and capture margin recovery.
Adam, how are your shipper customers talking about truckload versus intermodal right now? Are you seeing a switch to intermodal? Do you think this is opportunistic given the gap in rates? Do you think it switches back to truckload when demand tightens up? And how agnostic are you to that switch?
For us it's more anecdotal than widespread. Some customers with longer length of haul or where freight is close to ramp pairs have shifted to intermodal if the rate gap grows enough and they can accept some transit time or service trade-offs. We're seeing some of that, but it's not material to the truckload opportunities. It has helped growth in our intermodal business. Much of that freight would not have been hauled by our truckload fleet because of how regional our fleet is, so we're open to modal conversion where it makes sense. But again, it's relatively small compared to the freight moving by truck today.
Shorter term: can you hone in on the third quarter truckload guidance — revenue up mid-single digits year-over-year, and you talked about exit rate on revenue per truck being in the 10% range. Curious about moving parts: do we assume more slippage sequentially in total fleet count? How should we think about squaring revenue per tractor relative to total revenue, and any updates to the June number as we transition into July or Q3?
Let me give you a couple dynamics. We expect the rate momentum we saw coming out of Q2 to continue. At the end of Q2 we saw a lot of project activity and seasonal activity with very healthy spot rates. As you move into Q3, some of those will decline; that's typical in July and August. We think there's some indication those will be strong as we enter the back period of Q3, but we'll have to see. We're seeing building contract volume — many of the rates we've negotiated go into effect in July and August, and we'll continue to see that rate build. That is what's driving incremental EPS contribution. On the headwind side, fuel could act as a quarter-over-quarter headwind; we're watching where fuel rates go because of timing impact. Q2 had large gains in equipment sales; we expect some variability on inventory and timing into Q3. Driver pay may provide a little cost pressure, although we think it's relatively small at this point because of our approach. For other parts of the portfolio — dedicated, LTL, intermodal, logistics — Q2 to Q3 is more steady in contribution and won't move sequential EPS materially. Those are the dynamics for the sequential quarter view.
Chris, on truck count, we feel truck count will be stable sequentially, with miles picking up a little on seasonality. We expect the truckload business in the aggregate, including our dedicated business, to operate in the high 80s utilization. That's been quite a few quarters since we've been there, so we feel encouraged and expect to build from there into Q4.
Adam, maybe similar to Chris' question. Truckload revenue ex-fuel was up about 3% year-over-year in Q2 and the guide for mid-single-digit growth in Q3. Compare that against spot rates, which are up significantly more. I understand the difference between spot and contract, but in the last cycle you saw double-digit increases on revenue per mile. What's the cadence or expectation on when that can flow through? Given severe tightening in capacity, I'm surprised the number isn't higher or accelerating faster. You mentioned acceleration through the quarter — should we expect revenue per mile to get to double digits beyond Q3?
Ariel, to clarify on revenue per mile specifically: coming out of the quarter we mentioned in June we were over 10% on revenue per total mile on a loaded basis and over 8% year-over-year on loaded mile. We did have some projects in June that drive premium freight, and we're still a mix of contract and spot. Our goal is to have sustainable contract rates and flexibility to do projects and take advantage of spot where it makes sense. Seasonally you may see a step back past the Fourth of July; July is still strong, but you may not have premium projects. We believe projects will build into the back half of the quarter, particularly into September. Rates could start to trend into the double-digit range as you get into September, and if things play out, Q4 could see a ramp-up with a good amount of projects and spot opportunities.
Ariel, we are securing, for the most part, double-digit rates in our bids and negotiations. Remember, one-third of our fleet is dedicated and that follows a different cadence. We think the benefit will come to dedicated over time, but it doesn't happen in a short period. Those are factors to include in short-term projections.
Maybe take a step back on cycle comparisons. Looking across past cycles — 2013–14, 2017–18, the COVID cycle — does this cycle feel more like COVID? If so, would it be reasonable to think rates can go up high-single-digits this year and mid-teens next year? I'm trying to get a sense of how this cycle plays out relative to prior cycles.
Tom, I want to avoid giving guidance beyond Q3. What I will say is this cycle feels different because it's more supply-driven than demand-driven. In demand-driven cycles rates can spike faster but can be more fleeting. This feels like it could be more durable but possibly a bit slower in progression. If we get demand improvement layered on top of continued supply constraints, then rates could move rapidly. But there are many factors to play out. I feel bullish about the potential, but it's early innings and I wouldn't put a specific multi-quarter number to it yet. Compared to COVID, that was demand-driven with customers trying to avoid lost sales, so rates happened very fast. This cycle has parallels to 2018 with ELD effects, but I think it's potentially more durable given the current regulatory push and cleanup of noncompliant actors. Since we got disconnected earlier, we'll take one more question and then follow for any additional requests.
Just a clarification set of questions. On guidance: Q3 revenue up only mid-single digits year-over-year ex-fuel but rate would be up more than that. So is utilization going to be down year-over-year? Is that leading to muted top line? You still have OR improving 700 basis points — without as much utilization, what's driving that strong operating leverage? Is it just rate or are there big cost-out actions embedded? Lastly, on driver pay: you said historically something like 30% of rate is typically shared with drivers in an up cycle. Is that a good rule of thumb for this cycle, or given the targeted approaches Andrew described might it be less?
That's a lot in one question, Richa, but let me address it. On driver pay: historically we saw 25%–30% of rate flow to drivers in past up cycles. I don't feel we're going to see that level this cycle. We're starting from a different baseline; driver pay as a percentage of revenue has crept up over the years and we haven't rolled back pay while rates declined. We're going to get some of that back; so I would not model 25%–30% flowing through to drivers based on the rate pickup. We're going to be more targeted and tactical. On miles per tractor, we think that's pretty flat sequentially. Rates will continue to build, particularly in over-the-road. The dedicated piece takes more time to build as contracts renew. Overall, our expectation is to balance margin restoration while selectively investing where necessary to capture incremental opportunities. The operating ratio improvement is driven by the rate progress and network efficiency gains; there are ongoing cost and structural improvements embedded in our playbook that also contribute.
To be clear, we guided truck count to be relatively stable sequentially but lower than last year. That contributes to the year-over-year revenue comparison. Utilization will be relatively in line sequentially, and the operating leverage is largely from rate improvement and network efficiencies.
We appreciate you hanging with us. I know we had some disruption on the call, but I appreciate you staying with us. Jillian, I don't know if you have anything else to close out.
No, that concludes today's call, everyone. Thank you so much for attending. You may now disconnect.