Welcome to today's Covenant Logistics Group fourth-quarter earnings release conference call. Our host for today's call is Tripp Grant. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I will now like to turn the call to your host. Tripp, you may begin. Thank you, Ross. Good morning, everyone, and welcome to the Covenant Logistics Group fourth quarter, 2022 conference call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act, which are subject to risks and uncertainties that could cause actual results to differ materially. Please review our SEC Filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements. A copy of the prepared comments and additional financial information is available on our website at www.covenantlogistics.com/investors. I'm joined on the call today by David Parker, Joey Hogan, and Paul Bunn. Before jumping into the quarter, I'd like to first take a moment to reflect on 2022 as a whole, as it's a remarkable year for us in many ways. It marked the second consecutive year of record earnings, record revenue, capital returns, and safety results. We repurchased approximately 20% of the outstanding stock of the company and acquired a small but highly profitable specialized truckload carrier, all while maintaining moderately low debt leverage. We also made progress on our operating model through improved contracts in our dedicated segment and grew the core business in our asset light segments comprised of managed freight and warehousing. Although the tailwinds of a strong freight cycle may well be behind us, we believe the combination of our improved operating model and our strong balance sheet has us well positioned for the future. Our company today is much improved, and we are grateful to all of our team members whose dedication and commitment made this possible. Focusing now on the fourth quarter. On an adjusted basis, we believe our team performed well during a market of transition. Consolidated revenue was essentially flat compared with the fourth quarter of 2021, while improved revenue per tractor and brokerage margin more than overcame the significant inflationary cost to generate a better adjusted operating ratio and higher adjusted net income. Through acquiring and successfully growing AAT, working with long-term customers to improve the stability of contracted capacity in our expedited fleet and selectively downsizing our least efficient dedicated operations, we did more with less. On an adjusted EPS basis, the impact of our capital allocation towards share repurchase was considerable, with adjusted EPS growing 28%. These results were earned in a difficult environment. Freight rates were up year-over-year, but are under sequential pressure. Freight volumes turned negative prior to the fourth quarter and are continuing to feel soft. In addition, cost inflation and availability of equipment and parts continue to provide headwinds. Looking ahead, we expect difficult year-over-year revenue and income comparisons for the first time in many quarters. In this environment, our playbook remains consistent and our urgency is high. The primary adjustments to our reported results resolve around our tractor fleet, particularly a group of underperforming leased units that needed to be removed from operations due to negative driver, customer, and cost considerations. Several factors transpired in the quarter, including receiving over half of our 2022 new tractor order in the period, delaying re-lease turn ins due to parts availability for trade prep on used tractors whose lease terms have expired, and parking additional lease tractors with future lease maturity dates, which have been the source of significant operational cost headwinds throughout the year. The abandonment of these units in the period before the expiration of the lease has caused us to write down the right-of-use asset in the period and accrue any estimated future disposal costs on these units, resulting in a lease impairment charge. Although costly in the quarter, we believe this is our best opportunity to start the new year in the most cost efficient manner possible. Key highlights for the quarter include adjusted net income increasing 8% to $19.5 million and adjusted earnings per share, increasing 28% to $1.37 per share compared to the year ago quarter. As a percentage, earnings per share growth outpaced net income growth due to the shares acquired throughout the year under our share repurchase program. During the quarter, we repurchased approximately 450,000 shares, bringing the total to 3.4 million for the year. Total freight revenue declined by 4.4%– $255 million compared to the 2021 quarter. Our asset-based truckloads freight revenue grew 11% with 76 fewer trucks. Our asset light managed freight and warehousing segments combined freight revenue declined by 22%, primarily because of the combination of a muted peak season and reduced volumes of overflow brokerage freight compared to the prior year. Truckload related cost headwinds continued to play a major role in our results for the quarter, increasing $0.20 per total mile on an adjusted basis compared to the prior quarter. Salaries and wages, maintenance, and insurance all contributed to this increase. Gain on sale of equipment was $1 million in the quarter compared to $0.1 million in the prior year. On the safety side, we are proud to report that our DOT accident rate per million miles for the year was a new company record, beating last year's previous record by approximately 6%. Despite two consecutive years of favorable safety results, unfavorable development from a small number of prior period claims contributed to almost a $0.06 per total mile increase in insurance expense compared to the prior year quarter. The average age of our fleet at December 31st was 26 months, a three-month reduction from September 30th. For 2023, we have been able to increase our original tractor order. We anticipate sequential improvement to the average age of our equipment throughout the year. Our TEL investment produced $0.21 per diluted share compared to $0.23 per diluted share versus a year ago period. Our net indebtedness at December 31st was $46.4 million, yielding a leverage ratio of 0.34 times and debt-to-equity ratio of 10.9%. Return on invested capital for 2022 was 15.3% versus 12.8% in the prior year. Paul will provide a little more color on the items affecting the individual business segments. Thanks, Tripp. Taking a moment to dive deeper into what drove the consolidated results for the quarter, our expedited segment's freight revenue grew 26% compared to the prior year quarter as a result of the combination of a 16% rate improvement and operating 67 additional tractors. The increases are related to the AAT acquisition we had and the loosening driver market, allowing us to seat more tractors. We are pleased with expedited rate and utilization in the quarter, which was improved by FEMA freight in October that resulted from Hurricane Ian. Cost headwinds from increased salaries and wages, maintenance, and insurance continued to play a major impact in the quarter and condensed our margins. We believe the combination of our work to resolve a significant number of prior period claims and the impact of the equipment replacement plan will help improve costs in this segment going forward. Driver pay remains stable at the present time. Our dedicated segment had a 5% reduction in freight revenue compared to the 2021 quarter as a result of 143 or a 10% reduction in the average number of total trucks in the period, offset by a 5% increase in revenue per truck. Although we are pleased with both the year-over-year and sequential improvement to the margin, we fell short of our profitability target, primarily because of the same cost increases which were impacting our expedited segment. The fleet reduction we've experienced in this segment is a product of two factors, intentionally exiting unprofitable business and reducing fleet counts with existing customers based on reduced volumes. We continue to work diligently to improve margins in this segment by improving our customer mix, contractual terms, and operating a younger, more efficient fleet. Managed freight experienced a 30% reduction of total freight revenue and a 20% reduction in operating profit. The significant reduction in revenue was the product of less overflow freight from our asset-based truckload segments, a reduction in peak revenue offset by FEMA freight in the quarter compared to the prior year. We are pleased with the fact that managed freight was able to hold margins for the quarter, we are now experiencing a much more aggressive environment with competitors aggressively competing for volumes at the expense of margin. We anticipate significant margin compression in this softening environment. Our warehouse segment, although the smallest of all of our business segments, saw a 31% increase in revenue compared to the prior year, resulting from the startup of four new customers in the year, the largest of which became operational in December. We're pleased with the top-line revenue growth we've achieved in this segment, and the team has done a phenomenal job in executing these startups, which are both intense and time-consuming. Despite the top-line growth in this segment, we've seen sequential deterioration in margins throughout the year. Our focus in 2023 will be to continue to grow this segment and restore profitability to the mid to high single digits through improved labor utilization and rate increases with existing customers. Our minority investment in Tail produced pre-tax net income of $3.9 million for the quarter compared to $5.2 million in the prior year period. Although the fourth quarter is typically soft for Tail, it was especially soft due to an adjustment to accelerate depreciation on a specific group of equipment that is expected to be sold in the near term. The adjustment negatively impacted the quarter's results by approximately $1.5 million. Tail has a strong track record of producing gains on sale of equipment throughout good and bad cycles, and we believe this adjustment is isolated to a specific quantity of similar make and model equipment. Tail's revenue in the quarter grew 47%, and pre-tax operating profit decreased by 22% versus the fourth quarter of 2021. Tail increased its truck fleet in the quarter versus a year ago by 243 trucks to 2,237 and grew its trailer fleet by 654 to 7,149. After receiving more than a $7 million distribution during the quarter, our investment in Tail, which is included in other assets in our consolidated balance sheet, was approximately $55 million. As a reminder, Tail focuses on managing lease purchase programs for clients, leasing trucks and trailers to small fleets and shippers, and aiding clients in the procurement and disposition of their equipment through a robust equipment buy/sell program. Due to the business model, gains and losses on the sale of equipment are a normal part of the business and can cause earnings to fluctuate from quarter to quarter. Regarding our outlook for the future, there is no doubt that 2023 will be a challenging year, but it's also a year our team has been anticipating and working hard to prepare for. We view it as a test of the resiliency of our operating model and opportunity to identify areas where we can continue to improve. As such, our primary focus remains the continued progress on our long-term strategic plan. We are also focused on aggressively improving our operating cost profile. With our equipment replacement plan, and strong safety results, we see opportunities to improve costs in the short term to improve fuel economy, reduced operations, maintenance, and insurance costs in an environment that will be pressured from both rates, a rate and margin perspective. We expect market headwinds from a softer market during the contract renewals as well as continued inflationary pressures. However, based on company-specific factors, including investments we have made in our sales team, the AAT acquisition, share repurchase program, and the equipment upgrade plan and reduced insurance casualty costs resulting from our improved safety results, we expect less earnings volatility than in prior periods of economic weakness. Over the past five years, our customer base has been strategically shifted to less cyclical industries through our full service logistics focus. Even with a heavy equipment investment year, we expect our cash generation, low leverage, and available liquidity to provide a full range of capital allocation opportunities to benefit our shareholders. Thank you for your time. I want to open up the call for any questions. If you would like to ask a question, please press star one on your telephone keypad now. You will be placed into the queue when you are to receive. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Jason Seidl from Cowen. Please go ahead, Jason. Hey, thank you, operator. Hey, Paul. Hey, Tripp. wanted to kick things off and talk a little bit about managed freight first, then jump in the truckload. On the managed freight side, you said that basically prepare for significant margin compression. I guess maybe can you give us a range of what you consider significant? Then maybe walk us through, you know, maybe some of the puts and takes to just how bad it is out there, because it seems like all of this is coming from competitive pressures out in the marketplace. Yeah, Jason, here's what I'd say on the managed freight side. The market is crazy competitive out there right now. I would say it's going to return to historical truckload brokerage margins. You know, I think not just us, but a number of our competitors have been running margins in these brokerage businesses that are, you know, multiple times more than the historic margins that truckload brokerages operate. You know, I've seen several others out there. Everybody's kind of returning back to, you know, pre-pandemic, pre-Supply Chain issue, brokerage margins levels. You know, those are mid-single digit kind of numbers. We're seeing it, you know, just like our peers return to those numbers. There's no doubt there are folks out there trying to buy volume in this space right now, and a lot of logistics departments, traffic departments are, you know, trying to go back and recoup costs from the last few years. That said, a lot of these rates we're seeing are just unsustainable where, you know, they're 10%, 20%, 30% below what a small carrier can run at. You know, it's just kind of a purge, I think, the whole industry on the brokerage and the truckload side is going to have to go through. You know, some of these small carriers stacked up some money running the spot market the last couple of years and they're making it, but you can't run 10% or 20% below what your costs are forever. No, no, that's clear. What's your percent of business between contract and transactional right now? Probably 65%, 70% contract, about 30% spot in that business right now. And, and- In the managed freight business. Is that just more from the spot market drying up in terms of loads? Yes. Yeah, contract rates through the brokers are, you know, those are... Folks keep doing mini bid, you know, you get a number, and then they do another bid and that kind of stuff, so. Okay. Well, that's a good color. Want to jump over to the asset-based side now and maybe talk a little bit about some of the deterioration you're seeing. You know, we held a call with a bunch of private companies earlier this month, they basically said that the market has deteriorated a lot in the last 60 days. What are your expectations for sort of the pricing gains that you're going to get out of the contracts that you sign here during this bid season? You know, here's what I would say. A lot of ours just right now, quite frankly, is coming from volume reductions because a lot of our customers just don't have the freight they had. Our reduced margins are coming from having to take more broker freight to fill the trucks as opposed to straight up customer price reductions. I mean, I will tell you on the expedited side. I mean, we're somewhere between, you know, low single digits to flat, to up a little on customers. I mean, on the expedited side, there's not a lot of margin pressure. You know, when customer XYZ is giving you 10% less loads than they were giving you five months ago, You're replacing or broker freight right now, and the freight you're going and getting to refill the bucket is, you know, is not as profitable as what you got out of. That's what's pushing on truckload margins. Okay. fair enough on that. wanted to talk a little bit about the, you know, the changes in the fleet. Obviously, a far newer fleet than you had before, probably newer than you thought it was going to be. Talk a little bit about the savings that can maybe help offset some of the market pressures we're seeing. Yeah. I may be able to help with that. Yeah, there's no doubt about it that new equipment is more costly than, you know, from a price perspective, than some of the older equipment that we're taking out of the fleet. We've been pretty vocal on the last couple of calls on, you know, really looking at our ops and maintenance spend, the cost of running that older equipment. Just to frame this up for you, if you look just on a cents per mile basis, our ops and maintenance costs in our truckload division ran $0.21 a mile in 2021. When we look at 2022, it ran up $0.29 a mile, and sequentially it got worse and worse and worse. you know, it was pretty early in the year where we decided we've got to get in front of this, and we got in front of it through being more aggressive on new acquisition or acquiring incremental tractors beyond our 2022 trade plan. Those incremental tractors, which were about 250 units, landed in the quarter, in the fourth quarter on top of what we were scheduled to already receive. We've also bumped up our trade plan for 2023. I think our original order was somewhere in the neighborhood of 600 tractors, and anticipating to get closer to 900 now. You know, what this did in the short term, you know, compounded with the fact we went out and identified the, you know, most expensive tractors in the fleet, which were these leased units that we talk about in the earnings release, just call them 600 units. We went ahead and proactively parked those units. You know, all of that being said and done, it created a little bit of a log jam of excess equipment. We had new, newer equipment we had received and deployed that were sitting out, you know, that were being operated. We had, you know, all of these leased assets that were generating costs, and we weren't able to turn them in. You know, I don't want to get into specific numbers, but I do think that you're going to see meaningful improvement in both ops and maintenance costs. I think you'll also see even though the cost of equipment is going up, you know, if you think about the little gain on sale that we had this year, which, you know, was just over $2.2 million or about $3 million adjusted when you exclude out, you know, the terminal sale, you're going to see, I think, meaningful improvement because what we're going to be selling next year, we're not going to be trading in leased vehicles. We're going to be selling, used vehicles that we own, and so you'll see some meaningful improvement in gain on sale next year. We think the, you know, fixed cost of equipment could be flattish even though the price for that equipment is going up. We believe meaningful improvement in ops and maintenance and also meaningful improvement in fuel economy with that newer equipment. Hey, Tripp, just two clarifications. One, when you say next year, are you referring to 2024 or 2023? I'm stuck in the past. I'm a Vols fan. I've gotta live in the past. I just want to make sure- I'm talking about 2023. I'm sorry, you're right. I was referring to 2023 and the improvement we're going to see. You should get a pass. It's still January, man. Okay. The other thing I wanted to say, you went from $0.21 a mile to $0.29 a mile worsening as you went throughout the year. What is the maintenance cost on these new trucks that you're bringing in so you can put it into perspective for us per mile? Exponentially better. I think that, you know, there have been costs, and I don't know if it's realistic to get back to what we consider all in, you know, ops and maintenance costs of a 2021 number of $0.21 per mile. You know, the cost of tires, the parts of labor, the cost of parts all have, you know, had significant cost inflation. I think that, you know, I think you could see that, you know, number laying somewhere between the $0.21 and $0.29 per mile. You know, it's a little bit hard to say because the other key component to this is uptime and utilization. you know, we had to Throughout 2022, we had to keep a considerable number of excess units, particularly in our dedicated fleet, in the fleet, just because we would have a customer that would require 15 trucks, and we were putting 20 trucks in there because 5 of them were down. you know, it'll help us with uptime and utilization too. It gets a little bit muddy when trying to do some sort of cost reconciliation by just looking at ops and maintenance. I think you're going to see an overall improvement in efficiency of that in the truckload, you know, larger truckload segment, which both includes expedited and dedicated. That's a great explanation. Last, I'll turn it over to somebody else, expectations for share repurchases. Obviously, you guys were very aggressive last year, repurchasing your own shares and supporting them. This year is going to be a down year by anybody's estimates in terms of just your overall financials. Are we going to see you still be the same aggressive way as you did in 2021? I don't want to comment on what we're going to do in the future, but it is public information on what we have out there and what we've repurchased today. We still have about $20 million of availability on, you know, what we on the plans that have been approved and are in the market today. We'll evaluate that. Obviously, we have the strength in our balance sheet to do that if we so choose, but there's a number of different options that we may choose not to do that. It's certainly in the, you know, in the arsenal of things that we could act on, but there's been no decision or no public disclosure of us committing to something additional beyond what's out there today. Okay. Sounds good. Gentlemen, I really appreciate the time as always. Thanks, Jason. Our next question comes from Jack Atkins from Stephens. Please go ahead, Jack. Okay, great. Good morning, guys. Thanks for taking my questions. Morning. I guess maybe I'd like to ask you about sort of the trends into the first quarter here. Maybe we could take a step back and kind of think about, you know, Paul, going back to the last couple of quarters. You guys have sort of commented on the cyclicality in the business and sort of how you think you've been able to mute that a bit, given all the work you've done in the last few years. You do sound a bit more bearish about the trends in the business that you're seeing over the last, you know, few months. I guess as you sort of think about the run rate for the business today, based on sort of, you know, your outlook for the managed transportation, managed freight business thing with single-digit margins, do you think down 25%-30% peak-to-trough earnings is still how to think about it, or has that changed any over the last few months? You know, Jack, I would say it's probably. That's still our goal, that's still what we're shooting for each and every day, is down that 25%-30% range. We haven't given up on that goal internally for 2023. We had a big meeting on that yesterday, and we talk about it frequently. You know, to your point, you've taken a step back. I'll take a long step back. I mean, historically, peak to trough, we might have been down you know, 50% or 60%, 70% some years, you know. You can go back to the years we'd made $286 and the next year made $61 or something. You know, 75% type reductions. Is it going to be 25? Is it going to be 30? Is it going to be 35%? I don't know. A lot of that's just going to be what is the market de-deal up for us. It's not going to be anywhere like you saw in the, you know, 10 years ago. We're still very confident in the changes in the model reducing volatility compared to, you know, I'm going to call it the last 10 or 15 years. We're still shooting every day for that, you know, 25%-30% reduction. I think it's, you know, how achievable that is probably is a function of how much further the market in general falls, and does it bounce off the bottom, or does it stay on the bottom for a little while? You know, we're still in that whole kind of big vein of becoming less volatile. There's no doubt, compared to the prior years, we're materially less volatile. Yeah. Yeah. No, no doubt about that. No doubt about that. I think that's helpful, and I appreciate the way you've kind of framed that up. I guess, as you think about the first quarter, you know, I know a lot of people are kind of looking at this 4Q to 1Q trend and, you know, should we see better or worse than normal seasonality given all the factors that are at play out there. It sounds like you guys had a really strong October, you know, which may have been kind of boosting the fourth quarter, but you didn't have much peak season in November and December. As you think about, you know, the way the business is trending into the first quarter, consensus is about $0.90 or so. Do you feel like that, I mean, do you feel like that's in the right ballpark based on the trends that you're seeing in the business today, the run rate there? I know January is a tough one to. Yeah, it's tough to peg it off January, but that's in the range of reasonableness. I mean, here's what we do. You said October was a stout month. No peak. November and December definitely pulled back. I mean, you know, Tripp talked about the insurance. We had $0.23 a mile insurance. We're hopeful we don't run $0.23 a mile insurance. You know, I would tell you that, again, no doubt things are soft out there, but we are... Our cost structure for the 1st quarter is going to look better than our cost structure in the 4th quarter. Revenue won't be as robust, but our cost structure will be better. Okay. Okay. Thank you for that. That's helpful. I guess maybe kind of, be curious to get your take on what, you know, your customers are telling you about, you know, maybe the trends within their business and sort of how they're thinking about their inventory levels. I mean, do you think that we can get back to maybe, normal levels of replenishment, normal ordering levels in the second quarter? Do you think that's maybe something that we'll need to see in the second half of the year? Just sort of what are your customers telling you about the direction of their business? Hey, hey, Jack, this is David. Hey, David. Yeah. You know, three or four bullet points that I would say is that. I really believe that first thing, quarters from economic standpoint are going to be negative GDP. That's what I believe. I believe that as it relates to transportation, I think that we hit the bottom around Thanksgiving, and I think that we've just been there. It's worth being. We've not seen a second downward trough, you know, of going down below kind of Thanksgiving. We have since then, all in the month of January as well. I'm optimistic that the industry and us are down on the bottom level there. As I think look at in the second quarter, you know, if even if first and second quarter are negative GDP, when they start buying more Coca-Cola and it gets warm in May, and it gets warm in the end of April, and hot dogs and all those kind of things, freight is going to pick up even if it's a negative GDP growth. I believe that that will be a tailwind for the industry. I also believe that it'll be about a second quarter event when the inventory levels are corrected. As soon as that happens, that in itself will be, you know, a tailwind for the industry, because right now that's what a lot of our customers are doing or correcting their inventory levels. We're just having to muddle through it. I'm optimistic that the pipeline is good. I mean, better than you would think it would be in the month of January. I'm optimistic about that. I think that we've got. I'm optimistic about what I've seen from the rate levels thus far. The pressure of reduction that it's only been three or four accounts. We're not talking about across the board, everybody and his brother beating us up. If we were to eliminate what's happened on the broker side of us having to go to the outside brokerage and get it, I would be very happy of where our pricing is at at the present time. You know, I take. I look at this and, you know, brokerage has gone from 1% to 5% kind of usage, and the rates on that 5% are 1990 rates. I mean, it's the most horrible thing I've ever seen. The rates are pathetic, especially coming off the West Coast. I think a lot of that's because everything that's happening in China and the boats aren't coming in and Chinese New Year lasting longer and. California, the West Coast has been very difficult. The rates out of there are just horrific rates. That said, the take that out of the picture, I'm very pleased with the rates. Again, we probably got two or three more accounts that we gotta, you know, hold our nose and hold our breath and hope and pray that we're able to get there because as Paul started off, you know, some little bit down, some flat, a little up. That's what we're seeing. It's not everything is down because it's not down. If we can replace, I really believe in the next 30 days, I hope I'm right, 'cause of the pipeline, I really believe in the next 30 days that we're going to have a bunch of the brokerage freight that's going to be replaced, and the rates are almost double what we're hauling. If I can get 6% of that doubled on rates, it's going to help what I'm seeing so far in January with the market being down but just floating on that downward. Just it's there. I haven't seen it go down again. Hopefully that'll help. You know, Jack, I'm going to add one thing to what David said, is that you asked early in your questions about the changes and volatility and peak to trough and all that. You know, here's what I would say. I used the word niche on last quarter's call. I would tell you, everywhere where we are niche and people really need our teams, or they really need hazmat heavy haul dedicated, or they really need... Where we're providing value, things are holding in there just incredibly well in this market. Yep. We do have... You know, there's still a little bit of business that's commoditized here and there, but, you know, every day, we're trying to find where we can be more value-add niche. That's right. If the commoditized people are going to do what the commoditized people are going to do. I feel like we're probably 70% down that path. Mm-hmm. We're going to keep working on that path every day, good market or bad market, and eventually that 70 is going to become 80 or 90. We're, you know, that niche stuff where we add value for our customer and they add value to us, we want to get that to 100%. That's part of what, to David's point, is protecting us thus far in this market. It's really, it's the pressure points are in two places where we're, you know, still have a little bit of commoditized business and then where we, you know, don't have enough freight in certain geographies and we're having to haul broker freight. We keep working on those two things, it'll be good. Okay. No, all that makes sense. I really appreciate all the commentary. You know, David, thank you for chiming in on that too. I guess maybe just last question, David, I'll hand it over. I'd love to get your take on this because you've seen a lot of cycles over your career, you know, for such a young man. I guess as you sort of think about, you know, just because as capacity attrition in the market, you talked about rates being at 1990 levels in certain markets. You know, it doesn't really feel like we've really seen a lot of capacity come out yet, at least from what we can tell. I guess, how do you see the capacity situation playing out over the next six months or so? What do you think needs to happen to really trigger that sort of attrition that we would normally expect to see with rates at these levels? Yeah, I think going forward that we will see, quote, the reduction in capacity, because I think that what has happened thus far. I mean, if you look at new DOT Numbers, it's negative. There is not new trucking entries coming into the marketplace. That's number one. I do think what's happened, Jack, is that, you know, the, the folks that just grew, I mean, not grew, but came into the market in the spot and hauling $450 a mile, you know, those were onesie, twosie trucks. Those are somebody's got three trucks and not many. Those trucks have left, but you and I have not felt it yet because they became truck drivers for me or truck drivers for Werner or truck drivers for you. They just started driving company trucks, we still got the same amount of capacity. I think that's where the market is today. Two plus two does equal four. You can't haul 1990 rates with cost in 2022, 2023 costs and think you're going to stay in business. I think in the next couple of months, we will see a rush of capacity that is going because all of us truckload guys, our trucks are full virtually. They're virtually full. That's what I think you'll start seeing capacity leaving in the next couple of quarters. Jack, it's going to. The ones that made a lot of money had some capital to hold on for a little while. Again, you can't run at some of these rates forever. And I won't mention the vendors, but I've talked to a couple vendors in the last few weeks that deal with, you know, big truckers and small truckers, and their small trucker delinquency rates or people hitting their credit limits is getting there to a spot where eventually, you know. I don't think we're going to wake up one day and say, "Oh, well, capacity left yesterday." Over a 6-9 month period, you're going to see it trend down. Again, that's some of that's just talking from vendors that deal with big truckers and little truckers and, you know, their credit departments are pretty worried right now. Okay. Well, gentlemen, thank you for the time. Really appreciate it. Thanks, Jack. Our next question comes from Bert Subin from Stifel. Please go ahead, Bert. Hey, good morning. Thank you for the time. Hey, Bert. Morning, Bert. Hey, guys. David, you know, maybe just to follow up to some of the comments there. I think, you know, if I go back a few quarters, you've been communicating a more bearish position toward future freight market fundamentals. Your comments, I think there maybe indicate you're starting to become more optimistic, at least about where things are trending, even if we go through a little bit of dip here in the first half. Does that make you, from the Covenant perspective, want to be more aggressive during the downturn? In terms of, you know, trying to put your, you know, your finger to the wind in terms of what when the market's starting to turn, you know, is it as simple as you know, what your customers are saying or looking at the spot market, you know? When do you think it really becomes more risk on the trucking side? Yeah. Number one, I am more bullish than, you know, us reporting some of the freight management being down and tail, you know, the equipment and those kind of things. From a business, from a freight standpoint, during a time that we hit the bottom, so, you know, things are not great, but I am becoming more and more bullish. There are more opportunities that are presenting theirselves, and I do think it's some of that is because of what Paul talked about, is that we've worked hard since 2018 and in 2020, we have worked hard on two things: getting deeper in the Supply Chain, whatever that means, getting deeper in the Supply Chain. Number two, bringing value to our customer, but that customer bringing value to us. We have those kind of conversations with our customer because I don't care if it's '21 or '20 or '21 or '23, when you need some freight, if I'm not bringing value to that customer, and if they're not bringing value to me, one or the other is going to leave. We are going to get to the point where, when we've started down the road of being, quote, a you call. We're not going to be a you call, we haul carrier and just hope we get enough phone calls. We're going to have commitments from our customers, not that dedicated is running 20 trucks and they need to go to 15 because they have no freight. I understand that. That's just business. Not, "Okay, we're going to do a bid because at the end of the day, we used you and abused you in 2021 and we don't like your pricing." Let them go do that. I don't care. We will go do other things. If it means reduce our trucks, whether it means go do acquisitions, whether it means repurchase stock, whatever that means, we will do whatever the market tells us to do. I am bullish during a very bleak time out there that there's going to be a lot of opportunities going forward. How do I watch that? It is through some of the things you're talking about. It is through, you know, looking at certain things that, you know, that we're involved in. I mean High security loads right now are popping up a lot for us, and that's good 'cause we're one of the few that do high security. I would say in the last couple of weeks, we got four or five accounts, some good volume accounts that could quote, "replace all the brokers anyway." Some good volume accounts on high security. That's a great opportunity for us. Another one would be that, as the brokerage number goes down, it's telling me a little bit about where the market is going to be for us. I do think that, there's opportunities out there, that can overcome what we're seeing in industrial production and what we're seeing in housing. I think there's some things that are happening. I also, Bert, again, we've been working for years to be that carrier that's bringing value. Why? One of the reasons why our rates have not been slammed so far, minus the brokerage, and you can do the math on what I told you and, you know, that'll get you to a, to a number that's negative, it's not positive. As I look at that, I've gone brain dead. I'm 65, Bert. I forgot what I was going to say. It'll come back in a minute. David, this is Joey. Yeah. We've worked. Thank you. Thank you, Joey Hogan. We're a different company that's worked very hard the last four or five years to bring value. The reason why our rates have not dropped like the market has dropped is because our customers recognize it. I mean, They're verbalizing this to us, and that is, "Our business is down, but you do such a great job and you've given us the teams when we needed it. You've given us the dedicated trucks when we needed it, and we're not asking for a rate reduction. We were really fair for the last 24 months. We have been. I think, Bert, that's another piece of it. You know, we didn't. We were pretty fair with a lot of these folks over the last 24 months when we could have taken advantage of some situations, and we didn't. In turn, what we're finding is 70% of our customers are being really fair to us back right now. The 30% that aren't, well, as David said, we'll figure that out. Yeah. Yeah, that's obviously great color. Maybe just, you know, all the things you guys talked about on the reduction of volatility, you know, I think a lot of that has been some things you've done on the expedited side and then obviously, you know, improvement in dedicated. You know, if we think about the two things that likely going to determine whether you end up at 25% down or 35%+ down in 2023, you know, it's going to be, I think, your ability to maintain that 92 or better OR in expedited. I think it's going to be your ability to keep managed freight, you know, at least the sales side of that, you know, at a reasonable range, not going back to where it was pre-pandemic. Can you just provide some color on those two items and maybe why you have confidence that, you know, both of those segments are going to hold up better? 'Cause, you know, expedited historically a lot more cyclical, and managed freight, obviously very cyclical in a backdrop like this. Yeah. I would say managed freight from a confidence standpoint. Remember, other cycles, Bert, we didn't have a lot of these, long-term agreements. we're 60%-ish of expedited freight is tied up in long-term agreements. plus the addition of AAT, which rolls up into expedited, I mean, that's just not your, it's not your average expedited carrier and what they do and just the structure. we have a lot of confidence in how expedited is going to hold up in 2023. On the managed freight side, I mean, we said it, margins are going to be compressed, but we're still feeling really good about top-line revenue. Our team there has got a... As David said, they've still got a really robust pipeline, and expedited has a robust pipeline. I think on the dedicated side, you're going to continue to see... You know, over the last 24 months, you've seen incremental improvement in dedicated, and I think you're going to see incremental improvement in dedicated this next year. You know, It's going to be a little harder, but dedicated is going to continue to incrementally improve. You got long-term agreements in AAT and expedited. managed trans margins are going to go way down, but they've been way high. I think the revenue base will be there. Then on the warehousing side, I think margins will start to rightsize as we continue to grow that business. That pipeline is the best we've had since we entered that business in 2018. Paul, maybe just as a follow-up to that. You only saw a modest quarter-over-quarter impact on the sales side in managed freight. Are we getting closer to the bottom? Do you think it can remain that elevated? Or does that step down in the first quarter and off of, you know, increase off of the new base? Yeah, I think managed freight will step down in the first quarter, and that'll kind of be your new base going forward versus Q4 from a margin standpoint. Okay. Well, thanks so much for the color. Gentlemen, at this time, there appears to be no further questions. All right, everyone. Thank you for joining us, and we look forward to talking to you next quarter. Thank you. This concludes today's conference call. Thank you for attending.