Proficient Auto Logistics Stock

Good day, and thank you for standing by. Welcome to the Proficient Auto Logistics Second Quarter Financial Information Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Logistics. Thank you for joining us for Proficient Second Quarter 2026 Earnings Call. Earlier this afternoon, we issued 2 press releases, one detailing our second quarter 2026 financial results and a second, announcing our definitive agreement to acquire Hansen and Atom as well as some financing transactions. We have also posted on our website an investor presentation that accompanies today's discussion. Press releases and the presentation materials can be found under the Investor Relations section of our website at profitelogistics.com.

Our 10-Q and filed can also be found under the Investor Relations section of our website. During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in two press releases describing factors that could cause actual results to differ from those expressed by the forward-looking statements.

Further information can be found in our SEC filings. During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide an explanation of how we compute these non-GAAP financial measures and reconciliations of those profitability measures to the most comparable GAAP measures. Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer.

We will provide a company update as well as an overview of the company's combined results for the second quarter of 2026 and an overview of the strategic rationale for the acquisition. After our prepared remarks, we will open the call to questions. During Q&A, please limit yourself to one question plus one follow-up. You can get back into the queue if you have additional questions.

Now I would like to introduce Rick O'Dell for opening comments.

Thank you, Brad, and good afternoon, everyone. Before discussing our second quarter results, I want to begin with the acquisition announcement we shared today. We're excited to announce our agreement to acquire Hansen & Adkins, a founder-built business with more than 30 years of history, a strong reputation for service, deep relationships with leading OEM customers and broad talent throughout the organization. I'd like to recognize Steve Hansen and Louis Adkins for building one of the most respected operators in our industry and also welcome the Hansen & Adkins employees and our carrier partners. Their collective commitment to safety, customer service and operational excellence has been central to the company's success and is a key reason we're so enthusiastic about this transaction. .

We believe this acquisition represents a compelling strategic and financial opportunity. Upon closing, the combined organization will benefit from greater scale, expanded geographic coverage enhanced network density and broader capabilities to support our customers across North America. We also see opportunities to improve asset utilization great operating efficiencies and strengthen the earnings power of the business over time. Importantly, both companies share a similar culture and a commitment to safe, reliable execution which we believe will support successful integration over the coming months and long-term value creation.

Turning to the second quarter. Industry saw trends improved sequentially from the challenging conditions experienced in the first quarter and volume trends became more stable. However, the impact of several subseasonal quarters and depressed rates became increasingly evident in the form of industry-wide driver shortages and constrained carrier capacity. Rising operating costs, including fuel and maintenance, pressured the market and our quarterly results. As market conditions continue to strengthen, we believe we are well positioned to benefit from seasonal favorable tailwinds across the trucking and auto hauling markets. Recovering automotive production, normalized dealer inventories and improving inventory turnover are supporting higher finished vehicle shipment volumes.

At the same time, regulatory actions and driver recertification requirements are contributing to tighter capacity following a multiyear freight recession, supporting improving spot rates and carrier pricing dynamics. Hansen & Adkins greater brokerage exposure relative to Proficient provides increased participation in the recovering spot market. Additionally, recent court rulings, including the Montgomery case, could further benefit Proficient as heightened carrier qualification standards and liability exposure may reduce reliance on marginal capacity and shift demand toward larger, established safety-focused providers such as Proficient.

Our customer discussions have been constructive in response to the evolving market conditions and as we're able to improve fuel surcharge coverage and secure certain rate adjustments during the quarter, our margins improved sequentially each month fishing with June's operating ratio of 95.7%, which is the best month thus far this calendar year. These trends give us increasing confidence that the industry is moving toward a more balanced and sustainable operating environment.

Looking ahead, we believe scale, dependable asset-based capacity and operational excellence matter more than ever for the automotive industry. The acquisition of Hansen & Adkins once completed, will strengthen our ability to support customers, create new opportunities for our employees and carrier partners enhance our long-term financial profile and drive meaningful value for shareholders. Importantly, we believe the transaction comes at an inflection point for the industry, positioning us to capitalize on tightening capacity, improving market fundamentals and more favorable pricing environment as conditions normalize.

With that, I turn it back to Brad to review our financial results and key performance highlights for the quarter.

Thank you, Rick. In general, financial metrics have improved sequentially in the second quarter of 2026 versus Q1. However, not to the levels achieved in what was a record quarter for the company in Q2 of 2025. And an improving cost profile during each sequential month of the second quarter gives us reason for optimism that financial ratios entered Q3, more in line with investor and company expectations.

Summarizing year-over-year comparisons. Total operating revenue for the second quarter of 2026 was $109.4 million, a decrease of 5.3% versus the same quarter of 2025. Total units filter during the second quarter totaled 580,962, which was a decrease of 8% compared to the same quarter of 2025. However, revenue per unit was higher than Q2 of 2025 by 2.9%. Adjusted EBITDA for the second quarter was $7.6 million versus $11.3 million in the second quarter of last year. As already mentioned, we experienced increased fuel costs and driver payments, both company and sub all in response to seasonally inflated demand. These costs were incurred in advance of the customer payment cycle catching up to higher fuel and sequentially rising volumes.

The result was higher accounts receivable and corresponding lower cash balances at quarter end. This balance imbalance, however, self-corrected during July. Net debt was $62.3 million at the end of the second quarter for a net debt leverage ratio of 2.1x on a trailing 12-month adjusted EBITDA of $30.3 million. Our equipment CapEx has remained light during 2026, less than $5 million year-to-date. Following the acquisition that we will be further detailing in a moment, we will assess the available fleet assets on a combined basis and make a determination of CapEx through year-end that is based on needs of the entire company and takes into consideration forthcoming asset deliveries that were already scheduled.

Total common shares outstanding on June 30 were $28.1 million, an increase of approximately 218,000 shares since year-end 2025 or less than 1% as a result of vesting RSU grants. There were no additional share buybacks during the second quarter as we positioned our capital and debt resources in preparation for a significant acquisition. Finally, as we look ahead to the second half of 2026, we are forecasting volumes that reflect typical seasonal fluctuation of a relative pullback in July and August, followed by rising volume through the fall. That said, revenue yield of similar volumes is expected to improve as supply constraints, incentive pricing and the transportation market moving away from unsustainable low rates becomes more evident over time.

Taking into account the acquisition that closed in mid-Q3, we believe that reported second half revenue will total between $350 million and $370 million with operating ratios approximating 97% and EBITDA margins between 8% and 9%. This outlook assumes that the synergies expected from the combination will start to be realized as we're entering 2027.

I'd now like to turn the call over to Amy Rice for a fuller overview of the Hansen & Adkins.

Thank you, Brad. Rick has expressed some of the broad strategic rationale that we believe make this combination so compelling. I would like to expand on that with some details about Hansen & Adkins, and the complementary nature of their business with Proficient Auto Logistics. At over $400 million in revenue and greater than $27 million in EBITDA on a trailing 12-month basis through March, the combination of HNA's U.S. and Canadian businesses are only modestly smaller than Proficient. The Canadian business comprises roughly 13% of their overall revenue, and at that level, positions them as one of the largest in the Canadian market.

This will represent a new market for Proficient and one that we believe has meaningful upside potential over the long term. With a meaningful fleet of company assets, which mirrors our target age profile as one of the youngest in the industry, particularly for the U.S. market. We will be well positioned to meet the evolving market in which asset-based capacity with high-quality drivers is crucial. The combined enterprise post closing will be the largest auto hauler in the North American market and one of only a very few with a fully national footprint in the U.S. as well as comprehensive Canadian coverage.

At over $800 million in revenue and $60 million in adjusted EBITDA on a trailing 12-month basis, we expect to participate in roughly 1/4 of the addressable new vehicle transportation market. enabling network efficiencies for both the company and customers. Hansen & Adkins has employed a company fleet focus and derives approximately 60% of their revenue from company deliveries versus 40% from the subhaulers segment, which, when combined with Proficient, we'll bring the overall mix to very nearly half and half. Many of the locations served for auto transport are rail and port facilities. And with more of the infrastructure footprint covered by the combined enterprise, we have a stronger value proposition for OEMs, as they have needs for nimbleness in their transportation supply chains.

Notably, we are excited to welcome the experienced and talented workforce across the HNA entities as well as the enhanced network of partners in the owner-operator and third-party carrier space. As we have discussed with investors throughout our relatively short history, density in key markets matter and the combined footprint will allow us to strategically deploy our fleets, exhibit flexibility to address customer needs and coordinate routes to enhance capacity, improve utilization and reduce empty miles. While both Proficient, and Hansen & Adkins, have existing business across the spectrum of OEM clients, our respective customer bases are complementary, providing natural diversification, both in the context of geographies served and in customer concentration.

Our businesses are not built around terminal network, the way that other trucking and LTL companies might be. However, we do have points of service where there is overlap, and we expect to realize synergies from the integration of our operations over time. Of particular note, the combined companies will have a repair and maintenance network that is strategically placed in high-traffic zones, allowing us to achieve the cost synergies of in-sourcing a higher percentage of our maintenance costs versus paying third-party providers.

These synergies in the areas of network optimization, maintenance efficiencies, improved backhaul opportunities and procurement advantages are in addition to the identified cost savings from optimizing our combined G&A functions. The upfront purchase price in the transaction reflects an enterprise value of $130 million, which includes the assumption of approximately $75 million in outstanding equipment financing and $55 million paid to sellers. Payment at closing will include $3 million in Proficient common shares with the remaining $52 million in cash. The amount of debt assumed versus value paid to sellers will be adjusted to reflect the actual debt outstanding and assumed by Proficient at closing.

In addition, there is potential for an earn-out payment in the first quarter of 2027 based on achievement of forecasted EBITDA for the full year ending December 31, 2026. Any earnout payment will be made at multiples consistent with the base purchase price. Concurrent to the completion of the acquisition transaction, Proficient is restructuring its overall debt portfolio. Equipment financing for both the Proficient and Hansen & Adkins fleets will be brought under one syndicated facility with a capacity of up to $120 million. The balance at closing will be approximately $100 million.

A 7-year convertible bond has been placed for $75 million in base value, a capped call in an equal amount has been obtained to synthetically increase the conversion premium on convertible bonds by up to 75% over the premium set in the convertible indenture, which mitigates equity dilution for current shareholders. Final terms on the convertible will be established when the market closes tomorrow on August 11, and we will separately disclose the final terms at that time. Finally, the separate line of credit arrangements employed by the two companies are expected to be combined into an expanded syndicated line of credit facility after closing and the amount in terms of this new structure will be disclosed upon completion.

In summary, we believe this combination is transformative for the auto haul industry and brings meaningful benefits to our customers in addition to enabling us to further lean into scale and efficiency to achieve improving financial results, consistent with the investment thesis that underscored Pal's creation. Hansen & Adkins meets all of our strategic criteria for growth through acquisition and its magnitude differentiates this transaction from what we've done in the past.

With all preexisting PAL entities fully integrated, bringing HNA into the PAL environment will be a coordinated and methodical process over the next 6 months. We already share many of the same enterprise systems and a similar values and organizational mindset, and we are excited to meet the challenges of the industry in a more compelling fashion as we move forward.

I'll now turn the call back to Rick for closing comments.

Thank you, Amy. In closing, we believe this transaction comes at exactly the right time for our industry, scale, reliability and operational excellence have never been more important. The acquisition of Hansen & Adkins will create a stronger platform built on proven leadership, disciplined execution and industry-leading capabilities. This transaction also reinforces Proficient's position as the acquirer of choice, providing a scalable foundation to continue consolidating a highly fragmented market and creating long-term value for all stakeholders.

Looking ahead, we're well positioned to benefit from improving pricing dynamics and increasing demand for asset-based capacity with the financial strength to continue investing in our fleet, service offerings and customer relationships -- we're confident this combination strengthens our competitive position and accelerates our path for sustainable growth. Thank you for your time and interest. We're excited about the opportunities ahead and look forward to delivering on the significant potential of this partnership.

Operator, we'll now open it up for questions.

[Operator Instructions] Our first question comes from the line of Bruce Chan with Stifel.

Maybe I want to start out by following up on some of your comments about the market. Certainly understand the margin pressure from the tightening capacity, typically a good indication of the early cycle inflection to your point, -- but I know that you typically have a longer duration pricing recovery just given the average contract tenure here. So I want to get your sense for when you expect pricing to sort of outpace the cost inflation is our time line of that? And then whether or not you have an opportunity to maybe take any out-of-cycle price increases and address some of that margin squeeze?

Yes, Bruce, the market has sort of forced some short-term adjustments in particularly strained geographies, so we've been working with customers, most recently in many cases, on short-term incentives to support capacity enhancement and given trophies. And what we're finding is with additional rate support, we can be more successful in bringing additional capacity to the market. So we're getting some positive proof points that enhance rate supports enhanced service. And we're using that as a platform for a broader conversation with our customers where we are seeing service challenges or we do see greater demand need for our customers that's currently unmet.

So what I would say to your question is, I think we have certainly come off of the bottom of the market in terms of low rate pressure. There has been some failures in the ability to start the traffic at very low rates. And that's that's helpful to reestablishing sustainable rates going forward. And now, as you mentioned, off-cycle price increases, to the extent that there is a supply-demand imbalance is incumbent on on both us and our partner customers to figure out how we close that gap. And we are finding that supporting drivers and third-party capacity with a more compensable rate structure is an enabler. So I use the opportunity there.

So I guess, given those comments and given the recent acquisition, is it -- is it fair to say that we will be looking at price to sort of outpace the cost inflation by end of the year? Is that more of a 2027 event?

Well, part of the story there is what happens on the cost side of the profile. Again, we've seen a very volatile fuel environment due to the macro backdrop. And it's unclear at this point when fuel normalizes back to what has been more typical for the last several years. I think that's a key component. Maintenance costs and supply costs, insurance costs, there has been increased pressure there as well. I do think our scale in the combination helps us to combat some of that. We have greater purchasing power, and we have a greater maintenance footprint to be able to be more efficient in our maintenance spend. So I'm optimistic in terms of what that represents as we bring the two networks together.

To hit your question on timing head on, yes, I think we come into 2027 with a good table set for the year on a combined basis.

Okay. And then just one more for me on the deal. I don't know if I missed it, but do you have a sense for what the margin profile looks like for the combined entity pro forma any thoughts on whether this deal is accretive at the get-go and any synergy targets or guidance that you can provide there?

Yes. Bruce, definitely accretive from the get-go. I mean, their financial their financial profile looks a lot like ours. The company generates a lot of cash, and they do have good margins, but nonetheless, subject to the same challenges that we've got in the current environment. I'm conservatively projecting for the rest of the year that we would run at 97% and an 8% to 9% EBITDA margin. But I think that there's plenty of room for upside to that as we get into '27 and start realizing the synergies that have come along with this combination.

So that 97% includes the synergies or that's exclusive of the synergies?

I think that's -- I mean, we haven't baked in a lot of synergies there because, frankly, we've identified some places that we will attack, but that still needs to be cost out between now and implemented between now and the beginning of the year. So there's not a lot of synergy built into that number.

[Operator Instructions] Our next question comes from the line of Tyler Brown with Raymond James.

Rick, Amy, obviously, one of the big developments this quarter was the Supreme Court's ruling on Montgomery and I guess the potential risk on brokered loads. So obviously, you guys have a very large mix of subcontractor capacity. I'm just kind of curious about what the implication of Montgomery is for you. And frankly, the broader industry? I mean is it going to lead to some forced purging of some of the subcontractors that maybe can't meet some of the stringent safety thresholds? Or are you expecting to see outside inflation on the liability side? I'm just curious what you guys are thinking about that case for you and frankly, for the industry more broadly?

Yes. So one thing I would remind the group, though our sub hole segment is roughly 60% of our current portfolio. That's comprised of both owner operators who run under our Transportation Authority as well as third-party carriers who run under independent transportation authority. I bring that up to say the owner operators are already under our liability. So the incremental risk with Montgomery is really pertaining to third-party carriers. And we've got a more stringent third-party screening set of criteria and set of insurance and safety requirements of our network of parties than what we've seen in a lot of the industry.

And I think a lot of the regulatory enforcement that's taking place is starting to purge some of the less scrupulous players in that space, and it is also contributory to some of the supply shortage that we're all feeling across the industry. That said, both from a risk mitigation standpoint and a capacity reliability standpoint, having a large asset base to rely upon to deliver and then having a strong, safe reputable set of third-party carriers is the best way to protect ourselves from broker reliability. To your question, yes, broker liability insurance is becoming more expensive, though within our insurance portfolio, that's a very small piece of our overall coverage portfolio.

Okay. So of the 60% with just Power legacy, is there -- is it mostly under your DOT authority? Or is it a rough mix? I'm just curious what that mix is?

I'd say we're at least 20% within the owner-operator space.

Okay. Okay. And then just, Amy, just any color on the spot market, what was that mix in the quarter? Maybe you mentioned it, I may miss it. And then -- what are you kind of seeing here into July and August? And on that, is the reduction in the subhaul volumes, is that kind of a function of those routing guides starting to break down because there's just an inability to move those wins at those prices. Is that the right way to think about it?

There are several questions in there. I'll take them 1 by one. The spot market is reemerging for sure. What we are experiencing in the spot market is we've shared consistently that our bread and butter is contract business for customers. And so given the limited number of customers in this industry, it would be unwise to abandon contract rate and chase spot freight. There's too few customers to do that. without endangering our reputation and just sending a really bad message.

And so what we've done is where we see that demand is in excess of the capacity we have against our contract business. We've been discussing with customers rather than putting the access to the spot market, is there an opportunity for short-term incentives or surge rates that we could use to essentially participate in the spot market to move the broader contract traffic. And we've done a lot more of that. So maybe not traditional spot traffic, but the opportunity to enhance and augment our capacity and movement in a particular area when the demand is acute for a given customer.

In terms of what we're seeing in July and August, we're seeing the typical seasonal period where -- there are some plant shutdowns in early July, which is followed by a bit of a languishing in the rail pipelines in the latter part of July and into August. So we have seen a pullback from where we were in the second quarter. And candidly, it was needed -- there was a backlog of demand that across the industry, carriers have benefited from some time work off that backlog.

At this point, I would say inventories have normalized. And when I say inventories, I mean inventories available to us to move. Inventories have normalized. Our service metrics have IMRs recovered, and we're ready to move into the fall season that tends to ramp up through the end of the year. And then your question -- your last question about reduced share -- excuse me, sub hauler volume and what's driving that in this higher fuel environment -- it is very expensive as an independent third-party carrier to cover your operating costs and particularly higher cost of fuel. And so what we've seen in that whole segment of the industry is third-party carrier who have historically chosen to run in our portfolio consistently have had to chase the highest dollar.

And so some of that capacity has moved into opportunistic freight on a short-term basis to try and recoup some of the outsized costs that they've had to bear over the last several quarters. And it's resulted in reduced subhauler capacity on our network. Some of it also has been due to exits in that space.

Our next question comes from the line of Alex Paris with Barrington Research.

Congratulations on the -- reaching the inflection point and maybe more significantly the acquisition of HNA. Listening to your prepared comments, it sounds like it will be accretive from the get-go, and there will be synergy opportunities in 2027 to improve its contribution. I heard Brad, your guidance on second half expectations for the combined company. I think you said in the press release that the deal would close in August at some point. So you're not going to get the July and most of the August revenue. I wonder if you could give guidance on the current quarter like you usually do, pre-acquisition?

Yes. Look, on a stand-alone basis, we're looking for revenue in Q3 this probably at or right around the Q2 level, maybe up just slightly. But given seasonality, I would expect it to be kind of flattish. And yet, because of some of the pricing dynamics and the better cost control that we experienced in June. I think we can continue to see better OR, better profitability on that same level of revenue.

Okay. And then again, listening to your second half guidance, post acquisition, it sounds like this is going to be a $900 million company or so on a run rate basis on an annual basis and EBITDA of $90 million or so. Is that talking about right?

Seems a little high. I think one of the slides that we have, I mean, if you just look on a trailing 12 basis, it's probably maybe like.

In about $50 million.

$50 million to $65 million of EBITDA.

Our next question is a follow-up from Bruce Chan with Stifel.

Thanks for the follow-up here. Brad, I just want to maybe pull at that margin thread a little bit and what the combined entity looks like, especially as we get into '27. You'd previously talked about -- I know this is maybe a couple of years ago, but seeing enable low 90s OR-type organization maybe being able to whittle that down into the high 80s -- is that still the idea here? Is that something that you think you can achieve towards the end of '27? Or is there a new level that we should sort of be thinking about.

Well, Bruce, we still think that there's a lot of room to push OR down. I don't know that I would be thinking 90% or below in 2027. And I think we're still in an environment where, again, with June like 95%, I think when we start putting the 2 companies together and realizing those synergies, we should be able to get below that level. But that's going to take a little time. And so I don't want to be to abulent without having the chance to really dig in and see what level of synergies are available to us. But we still believe that getting there, whether that's in '27 or '28 to that more reasonable 95% and below is certainly in the cards.

Okay. Yes, that's helpful. And then, Amy, maybe 1 from your side, you talked about the sub hauler mix. I don't know if that looks similar for Hansen & Adkins. What does that do to the overall sub-power mix -- and if you think about a now much larger fleet, maybe close to double the size before, is there an opportunity to move a lot of the volume even more company.

So Hansen & Adkins mix is about the inverse of ours. So they are about 60% move in the company segment and about 40% in the subhaul segment. But I would say more of their revenue in the subhaul segment is on owner operators relative to Shales. And much of what they do in the third-party carrier space is a more traditional brokerage model. So we should have a diversified mix of channel tools in our toolkit here. But to your question, yes, I mean on a combined basis, I think our mix on company assets should be roughly 50%, and that's powerful in terms of being able to provide a more reliable service product on company assets supplemented by ow operators.

And I would just comment on margins. I mean, it's just math, but -- at this point, with the combined organization, a 94.8% is about $1 per share in earnings per share and 92%about $1.50. So in terms of needing to necessarily get to an 88% OR to have meaningful EPS and return for shareholders as we step along the way, we'll be generating some meaningful EPS and good returns for shareholders.

I would now like to hand the call back over to Rick O'Dell for closing remarks.

Well, thank you for your interest in Proficient Auto Logistics. We're really excited about the Hansen & Adkins addition to our organization, and we look forward to capitalizing on this opportunity for all the stakeholders, being our customers, our employees and our shareholders. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Hello, and thank you so much for standing by. My name is Ethian, I will be your conference operator today.

At this time, I would like to welcome everyone to the Proficient Auto Logistics' first quarter financial information. [Operator Instructions] Thank you.

And I would like now to turn the call over to Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thank you for joining us for Proficient's First Quarter 2026 Earnings Call.

Earlier this afternoon, we issued our earnings release, which provides comparative financial information for the first quarter of 2026 to the first quarter of 2025 for the company. It can be found under the Investor Relations section of our website at proficientautologistics.com. Our 10-Q when filed will also be found under the Investor Relations section of our website.

During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by the forward-looking statements. Further information can be found in our SEC filings.

During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer.

We will provide a company update as well as an overview of the company's combined results for the first quarter of 2026.

After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question and one follow-up, and you can get back into the queue if you have additional questions.

Now I'll turn the call over to Rick O'Dell, who will provide the company update.

Thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the first quarter and some trends that provide insight into our expectations for future quarters.

As we announced in early March, the first 2 months of the quarter were affected by extended automotive plant shutdowns, weaker-than-expected industry SAAR, severe winter weather and a slow recovery of the rail and sea transportation pipelines that feed our network. These factors constrained volumes and resulted in revenue levels below the comparable periods of 2025 and below comparably higher fixed cost coverage levels with the Brothers acquisition reflected in our 2026 expense base.

While revenue and volume trends improved in March, the revenue gap for the full quarter finished less than 2% below Q1 of 2025. Meaningfully higher diesel fuel prices and the timing lag to associated higher fuel surcharge recoveries created a material unplanned cost and margin headwind in the month of March versus our expectations. Combination of these factors materially impacted our reported bottom line results and profitability, and muted underlying cost control and efficiency improvements in the quarter. We're clearly not satisfied with the outcome, and our focus remains on execution and resilience in challenging market conditions.

Looking to the second quarter, recent trends indicate more stable volume levels, supported by seasonal strengthening, improved weather, dealer inventory and strong tax refunds. While automotive SAAR comparisons year-over-year are challenged by peak levels seen last year with tariff demand pull forward, April SAAR is expected to finish at 16.1 million units, marking 2 consecutive months above 16 million following March's 16.3 million result.

The rebound in volumes in March and April made capacity tightening more evident, exposing underlying supply loss that had previously been less visible. Supply losses appear to be driven by a combination of factors, including financial pressure from low volume, compounded by relatively weaker rates, increased relative scrutiny or regulatory scrutiny and driver migration towards other forms of trucking as the broader trucking rates have improved.

At the same time, supply conditions have increased spot market opportunities. When spot opportunities increase, but supply is constrained, third-party capacity is drawn away from participation in contracted freight, particularly with the Subhauler population, which shifts towards higher paying rates. As a result, we are observing contracts having been awarded at below market rates over the last 6 to 12 months, that have struggled to secure consistent capacity when seasonal volume return and in several instances leading to a redistribution at market level economics. So this is clearly a turning point in the auto haul market.

Equally important, automotive OEM financial performance is improving as tariff impacts are cycling or in some cases, reversed, which should help ease some of the cost pressures the OEMs have been managing. When combined with the capacity dynamics, this should contribute to a more balanced pricing market environment and OEMs attempting to hold rates below prevailing market levels may experience reduced fulfillment or need to rebid lanes at the higher market levels.

We continue to show discipline in our pursuit of new business and retention of incumbent business to ensure that our portfolio allows for sustainable profitability and reinvestment. While we're not immune to the driver supply challenges, we're hiring aggressively to fill open trucks and are confident that we can be successful in achieving growth over time despite the complexities in the market.

The company has a strong balance sheet position. We will advance our strategic objectives for continued margin expansion, market share gains and acquisitions.

I'll now turn it back to Brad to cover some key financial highlights.

Thank you, Rick. To reiterate a few high-level financial statistics. Total operating revenue for the first quarter of 2026 of $93.7 million was a decrease of 1.6% versus Q1 of 2025.

Total units delivered during the first quarter totaled 501,850, which was an increase of 1.5% compared to the same quarter of 2025.

With SAAR down approximately 5% versus the first quarter of '25, this implies continued market share gains during the quarter.

Adjusted EBITDA for the first quarter was $4.5 million versus $7.8 million in the first quarter of 2025.

As mentioned in our earnings press release, we continue to pay down our debt balances during the quarter, reducing total debt by $5.3 million. The combination of higher fuel costs and rising purchase transportation costs in advance of related customer payments near the end of the quarter, reduced ending cash balances, however, resulting in a net debt leverage ratio of 1.6x compared to 1.5x at the end of 2025. As fuel surcharge index adjustments and customer payment cycles normalize to reflect rising Q2 volumes, we expect cash and receivables to return to historical ranges, while leverage will continue to decline.

Regarding the second quarter of 2026, we are now forecasting total operating revenue between $105 million and $110 million, which reflects a meaningful sequential increase, however, it reflects a decline versus the second quarter of 2025, ranging from 4% to 9%.

The second quarter of last year included our highest revenue month to date as PAL, reflecting last April's elevated sales volume as consumers pulled forward purchases in anticipation of rising prices from announced tariffs.

Adjusted operating ratio is expected to be similar to last year's second quarter despite a lower revenue base.

Adjusted EBITDA margin for Q2 of this year should be similar to last year's reported results between 8% and 10%.

Given the year-over-year softness in market conditions and available capacity within our existing fleet, we expect equipment CapEx spending for 2026 to be less than $10 million compared to $10.2 million for the full year 2025. This evaluation will be ongoing as the year progresses and the revenue opportunity becomes better defined and compared against our available capacity.

Total common shares outstanding on March 31 were 27.8 million, down less than 1% from year-end 2025. As previously disclosed, we repurchased 82,877 shares at an average price of $6.25 during the first quarter, under a buyback program authorized by our Board of Directors on March 2, 2026.

Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Bruce Chan with Stifel.

I want to focus in first on some of what you mentioned in the opening remarks around the supply pressure. Certainly welcome news. But wanted to see how you're thinking about that in terms of spot, what you're seeing in terms of spot pricing pressure in the market right now? And then maybe also how that's affecting the population in auto hauling? I mean is this more driver attrition? Is this regulatory impact? Any ideas on how much direct regulatory impact there might be? So I would love to hear any color on any of that.

Sure. Hi Bruce. In terms of the spot environment in Q1, it was an absolute flat line during the month of January and February, as you would expect. And in March, when volume levels returned and the supply exit became more visible, there was a market increase in spot opportunity, but there was lack of availability to participate in those spot opportunities on a widespread basis.

So what we experienced was a couple of percentage point increase in our participation in the spot market at rate levels of premiums that were frankly better than what we've seen in the last couple of quarters, but still immaterial on an overall sort of revenue basis compared to the overall portfolio.

So for [ next ] question -- [indiscernible] what's driving the supply components, I think a lot of it initially was financial pressure. The low level of volume in January and February was really such that a number of smaller carriers, in particular, could not afford to continue participation in the market and exited. And then even in March, while the volume opportunity improved, a lot of third-party carriers do not have the opportunity to recover fuel surcharge and the increase in fuel cost for that carrier base at market rates where they currently are, again, pushed a lot of those carriers out of the market.

So I think some of it is attrition based in the third-party carrier space. We are seeing attrition in the Company Drivers space. Again, the volume levels of January and February made it very challenging for drivers to make a good living. And as pricing has recovered very quickly in the general trucking market, it has compressed the premium of rates in auto haul to rates in general trucking in a way that causes some drivers to trade down or trade into other segments of transportation.

Lastly, from a regulatory perspective, just last comment, the non-domiciled CDL final rule just went into effect and was not stayed in the appeals process this week. So we do expect that to be an ongoing pressure point for supply in the driver space broadly and in the automotive market as well.

Great. Yes, super helpful, Amy. Just to follow up-quickly, as you think about all of that, maybe where is your spot mix today? And then as you move into second quarter and second half, how are you thinking about those spot opportunities and spot pricing trends for the rest of the year?

Spot in the first quarter was less than 5% of the portfolio across new car traffic and secondary market. So it continues to be a very small portion of the portfolio. In terms of how we think about it for the future, as we've said consistently, we've made long-term commitments in the contract business, and we expect to service that volume through our best capability where we have opportunity to participate in the spot market and we can put capacity up against it. We will certainly be opportunistic and seek to increase the amount that we participate there, but not to the exclusion of serving our contract customers well.

Your next question comes from the line of Ryan Merkel with William Blair.

First topic is the fuel impact. Can you talk about how much fuel hurt your profit in 1Q? And then how should we think about 2Q?

So in Q1, fuel started to increase markedly in March. And because the indexes that set the fuel surcharge don't reset until the beginning of April, we were paying out real-time fuel costs during the month of March that didn't have a comparable increase in the reimbursement. We think that, that had about $1 million impact on profitability in Q1. In Q2, the index will catch up to the rate that we're paying. And so it should be less of an impact in that quarter than it was at the end of Q1.

Got it. Okay. Good to hear.

And then I just wanted to ask about volume trends. So in the first quarter, volume was down about 4%. How did it look in March and April in terms of volumes? I'm just trying to understand if underlying demand is stabilizing at this point?

Yes, I'll take that one. So we have to keep in mind some of the pieces of business that are cycling as well. So you'll recall mid-quarter in the first quarter of 2025, we had a sizable market share gain. So we cycled that in early to mid-February this year, half quarter benefit in the first quarter, but the benefit of that on a year-over-year basis was gone for March and for April.

The Brothers acquisition closed on April 1 last year. So we had the full year-over-year benefit of Brothers in the quarter in March and not in the comparable prior quarter or prior period. Again, in April, we've cycled that. So what we now see is truly kind of what the underlying year-over-year market looks like, and we are consistently seeing the underlying market is down, which tracks with SAAR. Again, we are down less than the SAAR level, which seems to indicate that from a relative share perspective, we are holding in or gaining, but in a weak market.

Your next question comes from the line of David Hicks with Raymond James.

Can you just talk about kind of the sharp kind of divergence in your company deliveries in the quarter versus last quarter and a kind of flattish unit environment? Is that something that we should kind of extrapolate out in the future or more just kind of a 1Q issue?

Can you repeat that? I'm not sure I followed the first part.

David, did you ask about the company -- the increase in company delivery relative to Subhaulers question?

Yes. Yes, especially because you pretty much printed flattish volumes overall, but the company really shot up relative to Subhaulers. I'm just wondering if that you can continue to expect that going forward?

Yes. So there's a lot going on there, actually. But I mean, the fact is as -- when volumes are down in general, we're looking to keep our company drivers active in all environments. And so you're going to see a flex up in the company relative to Subhaulers because the Subhaulers is kind of for excess volume. And so as that volume declines, Subhaulers will likewise decline. So that's part of the issue.

And then a lot of it also kind of depends on where we see volumes increasing in our network across the country and with which lanes and which OEMs, and some of those are kind of natural company driver areas as opposed to Subhaulers or not. And so there are several factors, but certainly, overall volume as it declines is going to favor company delivery.

Got you. Makes sense. And then now that we just have all 7 operating companies on a single TMS unified accounting, is there a specific kind of KPIs that you guys are targeting to improve first? Kind of like what's the order that you're targeting and kind of what financial returns should we see from those initiatives down the road?

Well, I think, first and foremost, again, to the same point of the previous question, we're looking to utilize our Company Drivers segment to its fullest extent. And so we track very closely the revenue -- the average revenue generated by a given driver, and we continue to push that number higher. Likewise, we're looking at a number of cost factors, capturing the expense, the procurement efforts that we've made across fuel, in particular, because it is a large cost and then also bringing down truck expenses as we've -- since the merger, we have continued to work through the fleet and to upgrade where need be. And those are also areas where we'll continue to push costs down. But I think key among those KPIs are just utilization and driving revenue per driver higher where we can.

I'd add one comment to that, which is we've talked consistently about the sort of ceiling of fixed cost coverage in our portfolio. And so what we know to be true is top line drives bottom line for us and maximizing operating productivity and flexibility to be able to capture as much volume as is available in times of larger inventories is our best path to larger revenue.

We can only move what is available to us. And what we tend to see in the automotive space is we saw some very low lows in January and February and then some pretty big peaking in March and April. And so to the extent that we can be very productive, very flexible with drivers across geographies to meet varying demand levels in various locations, it helps us put up the best top line that we can in a market that is down year-over-year.

That will conclude our question-and-answer session. And I will now turn the call back to Rick O'Dell for closing remarks. Please go ahead.

Thank you for your interest in Proficient Auto Logistics. We're clearly very disappointed in the first quarter results and certainly pleased to see the market stabilizing, particularly with the supply coming out and feel strongly that it will lead to a better rate environment and some increased efficiencies on Proficient's part. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, everyone. Welcome to the Proficient Auto Logistics, Inc. 2026 Annual Stockholders Meeting. [Operator Instructions] Please note that in the interest of all stockholders, we will only address those questions that are pertinent to the business of the meeting.

At this time, I would like to introduce Mr. Rick O'Dell, Chair of the Provision Board and Chief Executive Officer, to commence the meeting.

Thank you, and good morning, everyone. My pleasure on behalf of the Board of Directors and officers of Proficient to extend you a welcome, and thank you for attending our second Annual Stockholders Meeting. I will begin with a few introductions of persons here with me today.

Amy Rice, Amy is our President and Chief Operating Officer; Brad Wright, Brad is our Chief Financial Officer; Brad will act as the Secretary of today's meeting. Matt Warren. Grant Jordan, LLP, the company's outside auditors. Maria box of Continental Stock Transfer and Trust has been appointed inspector of the election. The business of this meeting is to elect 8 directors to hold office until the 2027 Annual Stockholders Meeting.

To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2026, and to approve the amendment of the company's third amended and restated certificate of incorporation.

I will now turn things over to Brad for a secretary's report.

Thank you, Rick. I have a signed affidavit from our transfer agent, Continental Stock Transfer and Trust stating that the notice of the meeting has been provided to each stockholder of record as required under our bylaws. The list of the stockholders of record as of March 10, 2026, who are entitled to vote showing their respective name and the number of shares held by each is available at this meeting for inspection by stockholders. According to Continent stock, there were 27,808,191 shares entitled to vote as of March 10, 2026, the record date. There are 24,899,266 shares present by proxy.

Thank you, Brad. Based on the report of the Secretary and the Inspector of the Election, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has properly been convened. Since no stockholder nominations or stockholder proposals were properly filed in advance of this meeting, our business is limited to the 3 matters on the agenda.

Brad, can you summarize these 3 matters and the voting procedures?

Sure. The first proposal we will consider is the election of 8 directors. The Board has nominated Richard O'Dell, Charles Alluto, Douglas Cole, Brenda Frank, James Gattoni, Rohit Lal, Stephen Lux and John Shrodenbach to each serve as directors until the 2027 Annual Stockholders Meeting and until their successor is duly elected and qualified or until their earlier resignation, removal in capacity or down.

No nominations may be made at this meeting. Therefore, I declare the nominations to be closed. The second proposal relates to the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026.

Matt Warren, representing Grant Thornton is present and available to answer appropriate questions. The third proposal relates to the amendment of the company's third amended and restated Certificate of Incorporation, eliminating the supermajority stockholder vote requirement to amend certain provisions of our charter and bylaws. If you have previously voted by proxy, it is not necessary to vote during the meeting. Only stockholders who have not voted or those who wish to change their vote on their proxy should vote during the meeting.

Any stockholder who desires to vote during the meeting, please do so now by clicking the Click here link at the bottom of your screen under annual meeting voting. The voting will be closing shortly.

[Voting]

Thank you, Brad. Given the fact that most stockholders previously voted by proxy and all the attending stockholders have now had adequate time to vote, voting is closed. While the votes and proxies are being tallied, I'd like to introduce the members of our Board of Directors, Charles Alluto, Doug Cole, Brenda Frank, James Gattoni, Rohit Lal, Stephen Lux and John Shrodenbach.

Information concerning their principal occupations, their service with Proficient and other matters which maybe of interest are contained in the proxy statement. On behalf of everyone here at Proficient, I thank you, our stockholders for your support.

Brad, would you now present your report on the vote.

Yes, not less than 15,531,094 shares or more than 55.9% of Proficient stock represented at this meeting have been voted for the election of each of Mr. O'Dell, Alutto, Cole, Gattoni, Lal, Lux and Shrodenbach; and Ms. Frank as Directors of the company. Not less than 24,893,308 shares or more than 89.5% of Proficient stock represented at this meeting have been voted for the ratification of the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026.

Not less than 1,805,077 shares or more than 64.8% of Proficient stock outstanding have been voted for the amendment of the company's third amended and restated certificate of incorporation. Accordingly, each of the items voted upon today as listed in the proxy statement have been approved by the company's stockholders other than proposal 3, which required the affirmative vote of the holders of 66% [indiscernible] of the outstanding shares.

I'll now turn it back to Rick to conduct the Q&A and for some final remarks.

Thank you, Brad. We'll take any questions. There are no questions were submitted. I want to thank everyone for attending today's meeting and for your interest in and support of Proficient. As we have no further business, this meeting is now adjourned.

Good day, and thank you for standing by. Welcome to the Perficient Auto Logistics Fourth Quarter Financial Information Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Perficient Auto Logistics. Thank you for joining us on Perficient's Fourth Quarter 2025 Earnings Call. Under SEC rules, our Form 10-K covering the 3- and 12-month periods ending December 31, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Perficient Auto Transport and the successor entity, Perficient Auto Logistics, Inc. We're not required to provide and the Form 10-K will not contain pro forma financial data for the combined companies. Our earnings release provides comparative summary financial information for the fourth quarter and for the 12 months ended 2025 to the same periods of 2024 for the combined companies. Note that these results are preliminary as our financial audit for 2025 is not yet complete. Our earnings release can be found under the Investor Relations section of our website at proficientautologistics.com. Our 10-K when filed, can also be found under the Investor Relations section of our website.

During this call, we'll be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by the forward-looking statements. Further information can be found in our SEC filings. During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Perficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the full year and for the fourth quarter of 2025. After our prepared remarks, we will open the call to questions. During Q&A, please limit yourself to one follow-up. You may get back into the queue if you have additional questions.

Now I would like to introduce Rick O'Dell, who will provide the company update.

Thank you, Brad, and good afternoon, everyone. I'd like to start by thanking our team members for their dedicated efforts in 2025. Together, we delivered over 2.3 million vehicles in 2025 and grew our business to over $430 million in revenue, up 11% versus 2024. Our team responded quickly and effectively to significant changes in the market throughout the year to meet customer needs of reliable quality service.

Reflecting on 2025, the automotive market peaked in March and April ahead of tariff impacts and the remainder of the year was weaker than our expectations. As we discussed in our last earnings call, the fourth quarter started out at a slower pace with October SAAR at 15.3 million units. And while November and December volumes improved modestly, the full quarter saw our results finished lower year-over-year and lacked a more typical seasonal year-end volume push. Despite this trend, our fourth quarter revenue and unit volumes each increased over 11% year-over-year as a full quarter of the Brothers acquisition and new business wins more than offset the weaker core market.

With regard to profitability, adjusted operating ratio for the fourth quarter was modestly better than the prior year. Results for the quarter were unfavorably impacted by a reduction in operating leverage due to the core market volume decline. as well as higher-than-usual insurance claims expense from the recognition of a major claim in the quarter under the higher retention levels of our new insurance program. Importantly, these factors muted underlying cost control and efficiency improvements for the quarter. We remain confident in continued momentum in the operating ratio reduction from the foundational improvements achieved over the course of 2025 and additional opportunities ahead of us.

Closing out the quarter as part of our annual goodwill impairment review, we recorded a noncash goodwill impairment charge of $27.8 million during the quarter. This charge represents an updated fair value based on a discounted cash flow analysis and primarily reflects downward changes in market conditions since the time of our initial public offering. Importantly, this charge is noncash and does not impact our liquidity, cash flow or the underlying operations of our business. As we look ahead to this year, January SAAR finished lower than forecasted and while still being finalized, may be the lowest monthly SAAR in several years as severe winter weather across multiple regions disrupted dealership operations and delayed consumer purchase decisions.

As weather impacts ease, we expect healthy dealer inventory levels, continued sales incentives and a stronger tax refund season to support improved consumer demand over the coming months. We continue to see underlying resiliency in the automotive market as replacement demand and aging vehicle fleet and lower interest rates support a stable demand environment. While automotive OEMs continue to face cost pressure and the pricing environment is not as strong as we'd like to see, [ POL ] provides highly reliable quality service and is critical infrastructure in the automotive transportation supply chain. We continue to show discipline in our pursuit of new business and in the retention of incumbent business to ensure sustainable profitability and reinvestment.

Our financial performance in automotive trucking is not universally healthy in this market, we are well positioned to improve our performance in a down market, generate strong cash flow and respond quickly and efficiently to customer needs as the market improves. The company has an increasingly stronger balance sheet position, and we will advance our strategic objectives for continued margin expansion and market share gains.

Now I'll turn it back over to Brad to cover key financial highlights.

Thank you, Rick. First, to reiterate a few high-level financial statistics. Total operating revenue for the full year 2025 of $430.4 million was an increase of 10.7% versus 2024. Operating revenue for the fourth quarter of 2025, $105.4 million was an increase of 11.5% over the fourth quarter of 2024. Adjusted EBITDA of $40.2 million for the full year 2025 was essentially unchanged from the combined 2024 result.

However, recall that the first quarter of 2024 was pre-IPO -- first half, I'm sorry, of 2024 was pre-IPO with different financial and market characteristics in the second half of 2025 as compared to the second half of '24 was meaningfully improved. To that point, fourth quarter 2025 adjusted EBITDA of $9.2 million was an increase of 32% over the same quarter of 2024. Total units delivered during 2025 of more than 2.3 million autos represented an increase of 16.2% from 2024, although revenue per unit was lower in 2025 by about 6%, reflecting the market shift away from spot traffic opportunities, which we have now fully cycled. Provision continues to refine its operations and position for higher profitability even in the current market, which will be amplified through operating leverage when volumes improve. Our healthy cash flow characteristics have allowed for a meaningfully improved leverage position.

Over the past 3 quarters, net debt to trailing 12-month adjusted EBITDA has gone from 2.2x as of June 30 to 1.7x September 30 and finished at 1.5x on December 30, 2025. While the June 30 level of debt was not outsized and well within our covenants, the current position enhances our flexibility for future capital structure decisions. In 2025, the vast majority of our growth came from market share gains and an acquisition as with the exception of the pre-tariff momentum early in 2025, the underlying new vehicle market did not grow. In 2026, the forecast for SAAR is lower than 2025 actual, and this forecast has weakened since we last reported, reflecting a Q4 that lacked the typical seasonal peaking.

Therefore, any growth in our 2026 revenue and related profitability improvement is expected to be a result of our internal initiatives, essentially unaided by the general market. At this time, we are confident that we can achieve year-over-year growth in revenue for the full year, and we reiterate our objective of 150 basis points of full year improvement in our adjusted operating ratio. That said, we will fully cycle the larger share gains from early in 2025 as well as the Brothers acquisition as of the first quarter. While we have gained new business in bid processes and expect that to continue, the competitiveness of the pricing environment is such that we're forced to bow out of certain incumbent pieces of business when the price point moves below a level where we can attract and retain drivers and produce an acceptable return. While we have not experienced material gains or losses, we are seeing both gains and losses in this environment, and we're prioritizing profitability above the pursuit of top line growth alone.

Regarding the first quarter of '26, as I mentioned, we have year-over-year improvement from last year's market share gains in the Brothers portfolio. However, recall that the first quarter is seasonally the lowest quarter of the year. Thus far in 2026, we have seen extended plant shutdowns and significant weather interference. We expect Q1 revenue to be higher than the first quarter of 2025, but lower sequentially from Q4 of 2025. Expect modest improvement in adjusted operating ratio due to our restructuring initiatives producing results and an expected normalizing of claims performance relative to last quarter.

Absent improvement in market conditions, we expect CapEx spending to be relatively light again in 2026. Total equipment CapEx was approximately $10.2 million in 2025 and expected maintenance CapEx of between $10 million to $15 million in 2026 would maintain our fleet average life between 5 and 6 years. Trailing 12-month adjusted EBITDA less CapEx was approximately $30 million for 2025. When compared to our market capitalization, even in light of a share price increase of over 60% in the last 3 months, this level of net cash flow to total market capitalization equates to an 11% yield. Finally, total common shares outstanding ended the year at 27.8 million, essentially unchanged from the end of the previous quarter.

Operator, we'll now take questions.

[Operator Instructions]

Our first question comes from the line of Tyler Brown with Raymond James.

Brad, you threw out a few numbers there. On Q1, I just want to make sure I have it. You're expecting revenues to be down sequentially and the OR to improve sequentially or year-over-year?

We expect modest improvement sequentially, Tyler.

Okay. Sequentially. Okay. Perfect. Very helpful. Okay. And then, Rick, there's been a lot of talk out there about tightening capacity, obviously, across the whole space. But I'm just curious what you guys are seeing in the auto hauling market specifically. Do you think that auto hauling has any unique exposure to non-domiciled CDLs? Is it more or less of an issue than the broader complex? Just curious if you have any thoughts anecdotally.

Sure. I think the non-domiciled issue is becoming a current issue. The final rule -- the interim final rule is now sitting with the OMB. And as a result of state audits and states changing policies prospective to a final rule, we are starting to see more enforcement action in more places. So that impacts both somewhat of a current driver population, but I think it meaningfully impacts the recruiting of new drivers because that entire population of would be drivers is precluded from entering the market.

For auto haul, we are lightly insulated there because we generally -- we don't hire drivers who are new CDL recipients. We require drivers that have experience driving a large truck before they move into auto haul as it's specialized. So we are somewhat insulated. But yes, I do think it is taking capacity out of the market. It's not being felt in terms of pricing characteristics and whatnot in our space because the volume level is so low right now that you don't see all that capacity exit.

Okay. Yes, that's helpful. So from a company-owned perspective, it's not an issue, but are you seeing a decline in motor carrier numbers in your active subhaul population? Because there's been a number of out-of-service placements. I'm just curious if you're seeing that at a deeper level.

We wouldn't see it as actively because what happens in a down market, the third-party carriers that we're using are those who choose to participate in our freight very regularly. The folks who choose to participate in our freight more episodically wouldn't have opportunities for dispatch in this volume environment. So to the extent that some of those bridge players may be exiting the market, not only for us, but in general, in the aha space, that will be felt when there's a surge and a need for capacity that is no longer there.

Okay. And maybe this is a question for all 3 of you, but do you think that rates will be up in '26 ex fuel?

So you're asking about revenue per unit. I think we should be stable, largely stable on a revenue per unit basis. We had significant volatility in our RPU over the course of the last, call it, 12 to 16 months as we were cycling the reduction in spot traffic and dedicated traffic, the level where we are now, we're very stable from an RPU perspective.

Okay. And then my last one, just real quick. Brad, obviously, it sounds like cash flow should still be good into '26. How should we think about prioritizing capital allocation between M&A, debt paydown and even repurchases? Is that even a possibility?

Yes, Tyler, I think the priorities will be largely as they have been, which is to continue paying down debt. Now we've made significant progress there, as I highlighted, over the last year, particularly the last 3 quarters. And so that does give us some flexibility and some dry powder to the extent that an M&A opportunity came along, for example, we've got a lot of flexibility to use cash or to take on additional leverage or however we might choose to approach that. But I think just on a recurring quarter in, quarter out basis, I would expect us to continue to strengthen the balance sheet first. And again, we never rule out share repurchases, but that's probably at the lower end of the priority list at this point.

Our next question comes from the line of Bruce Chan with Stifel.

Maybe just to focus a little bit more on the revenue mix and the pricing. You all mentioned a couple of things at work there with the absence of spot opportunity in the competitive market. I guess, first on the spot side, Rick, you mentioned a few of the kind of points of optimism this year just around the age of the consumer fleet, any kind of tax rebates, refunds. How do those kind of factors play out through the spot versus contract opportunity? How much are you kind of embedding in your outlook for flat revenue per unit? And then maybe on the competitive front, just to address that, I guess I'm a little surprised that given the cost trajectory in the business, carriers are still pricing so aggressively. So maybe any more detail on what you're seeing in that competitive environment there?

Yes. So on your first question with respect to what our expectations are for the spot market or what it would take to see the spot market recovery. I mean I think if the market tightens and inventories tighten, then you see there's more of a sense of urgency for delivery of vehicles that get maybe presold or if inventories get low and demand is high, then you see more spot moves. So we would just take a healthier demand environment to kind of get a recovery in the spot market.

Rick, from my perspective, at this point, any spot opportunity is upside relative to where we have been over largely the last year. So there is very little spot opportunity in the current market. I don't expect there to be a meaningful amount of spot opportunity in the market that we foresee in the near term. But to Rick's point, any tightening that would introduce that opportunity would represent upside.

Or driver shortages for other competitors that have contracts, right? If they can't handle their contract business, then it goes to the spot market.

And then to your question on OEM pricing, what we are seeing is there's an impact on the OEM side of that equation and there's an impact on the carrier side of the equation. On the OEM side, as we've seen in recent earnings releases, taking large impairment charges around EV investments and coming off of a year where they bore a significant portion of tariff expense, the OEMs are looking to improve their performance in 2026. And so they've got really stringent cost mandates in place for their procurement departments. And that's what we are seeing in the OEM environment.

On the carrier side of things, we're seeing a lot of carriers with underutilized capacity or the amount of volume that they're carrying is lesser than they would like to be carrying and it's resulting in carrier bidding at rates that, in many cases, are below a threshold that we think represents healthy reinvestment. And so we're having to show discipline about what we're willing to pursue, what we're willing to defend and when we walk away because we don't think that, that rate level is sustainable in the market over a, call it, 3-year price term.

Okay. Great. That's super helpful. And then maybe just for a final question here. You mentioned the in-sourcing and the cost control programs. I think we're a little more than 1.5 years or so post IPO. Any updates that you can share with us on progress there or any new opportunities that you may have identified?

Well, some of the big ones that have now gotten a lot of traction or that will kick in, in the first quarter, the consolidation of all of our health care programs that will kick in or did kick in January 1, 2026. Consolidation of our insurance programs, liability and cargo damage, et cetera, in August of last year is also something that we expect to see result in cost savings during 2026. The early on stuff has now kind of cycled at this point, the oil and the gas programs, the spare parts, that kind of stuff. And we continue to push on that, and we'll see marginal improvements there as well. But I think it's the insurance and benefits that will kick in the largest portion of the savings in '26.

One other comment I would make there, Bruce, is as we move into new vendors and new programs, there's a sort of flushing out of old contracts and prior expense. And so there is some doubling up in the system during that transitional period. And as we move forward, we do see opportunity to just take what I would describe as transitional and integration costs out of the system over time.

Yes. And I guess the other thing that I failed to mention is we did some restructuring late in the year last year that reduced some headcount and also got us out of one physical location that will actually create additional savings in '26.

Our next question comes from the line of Alex Paris with Barrington Research.

So I have just a couple of questions. First, I think a point of clarification. The market share gains and the Brothers acquisition, we still have one more quarter of a benefit before it cycled through. Did I get that right?

For Brothers, yes. On the market share gains, that was during the first quarter, so less of an impact there.

Okay. Got you. And then on the organic front, and then I'm going to finish with M&A. On the organic front, you had said last quarter that there were still a number of OEM contracts that were awaiting awards. And at that time, just like this time, you said that some contracts you walked away from due to pricing and so on. I was just wondering if we can get a little update on the color of contract awards either during the fourth quarter or prospectively.

Sure. Alex, it's Amy. We did see several open bids sort of matriculate to the award stage over the last couple of months. And what I would describe as puts and takes. We did pick up some new locations in a number of customer accounts. We also lost some incumbent locations in those same customer accounts, again, by virtue of rate dynamics and where the late stages of negotiations went with respect to rates and profitability. So net-net, we are pleased with where we ended up. But in a more disciplined environment, we'd like to retain our business as well as gain new markets. In the current environment, we are having to make some hard choices with respect to incumbent business as we pick up some new markets.

As we look ahead, there are a number of what I would describe, they're not national and headlining bids, but there are a number of active bids just in the ordinary course of the business that will play out here over the first and second quarter. So we continue to see opportunity to bid on new traffic and our customers are still acclimating to our broader network and capability. And we're having much more meaningful discussion with customers about what we can do across a wider swath of their network. So we are encouraged and optimistic about our opportunity to pick up some new business.

Great. That's helpful. Then two, anecdotally and without mentioning the OEM, I had heard a fairly large contract was awarded last year, and you stepped away due to pricing. But I've heard that, that same OEM is coming back and rebidding some lanes because some of these smaller carriers that bid real low are having service issues. Have we been seeing those kind of things this year? I know you said earlier that it will usually end up in spot, but the absolute rebidding of certain lanes seems to have happened much sooner than they typically do.

So you bring up an interesting point, and it's one that we think about, right? So as we get into the late stages of the negotiation, you ask yourself, would I rather be the carrier that wins this business at a rate that I'm not entirely confident I can deliver? Or would I rather be the carrier waiting in the wing if the guy who wins it can't entirely deliver. And we've made some of the latter in terms of our choices. So to your point, we do think that there's some business that has been awarded that may ultimately come back to market. And we've tried to position ourselves in a way that our customers know we've got capacity, we've got interest, and we are available to support in the event that they have service disruption.

Great. That's helpful. And then my final question, I'll finish on M&A, as I said I would. Given the weak market, given the weak SAAR given pricing pressures and service delivery challenges, would you -- maybe you can give us a little update on the M&A pipeline? And do you expect to make acquisitions in 2026?

Yes, we continue to develop a pipeline. We have one that we're actively engaged on. So we'll -- I would expect that we still would expect to maybe do 1 to 2 acquisitions a year.

Great, which is in line with what you had said at the IPO time, and it's actually what you've delivered over the last 12 months or so? Correct.

[Operator Instructions] Our next question comes from the line of Ryan Merkel with William Blair.

I want to start on 4Q. The OR missed, I think, your expectations. And I just want to be clear on why that happened. It sounds like it was the core revenue was a little bit weaker than you thought. What was the core revenue in 4Q? And was the weakness just the November and December seasonality didn't come back as you thought?

Yes. So on the revenue front, when we guided at the last quarter, we kind of gave a range of where we thought 4Q would end up. In the end, it ended up a few million shy of what we had anticipated that reflects in November and December that didn't come to fruition the way seasonally it typically does. So yes, we saw some weaker volume and general revenue there that would have been contributory from an OR perspective, but there were some specific drivers in the quarter, which Brad to talk about.

Yes. So we referenced in our commentary that we had elevated claims expense. So when we consolidated our insurance programs, we got significant reduction of premium, but we also took on a little more retention or self-insurance. And as a result, we do expect that there'll be a little more volatility or we're subject to it anyway. And we had one accident in the fourth quarter where we did have to basically reserve up to our full retention amount. And so that had an impact on OR for the quarter, and we would not expect that to recur in Q1.

How big was that, Brad?

Well, the full retention that we have on our liability is $0.5 million, and we reserved all of that.

Okay. All right. And then the '26 guide, let's start with revenue. I just want to make sure I heard it right. So I think you said you don't expect any help from the market. So talk about what do you expect from the market? I think you'll have 1 point of M&A that will carry over. You said flat pricing. So you're thinking a couple of points of volume. Am I understanding that right?

You're kind of breaking up a little bit, but I think the point is we don't expect general core market volumes to be higher than 2025. and pretty flattish revenue per unit as well. So -- but we do still expect that we will be able to generate some increase in our overall full year revenue through market share gains. As Rick mentioned, we will always be looking at strategic additions as well. But we do think that we've got some optimism around market share gains that would push our revenue up organically anyway.

Okay. So it sounds like mid-single-digit revenue in '26 is in the ballpark.

Well, just from the organic market, I would say you're probably a little high, but that's -- it's hard to say this early in the year.

Yes. I get it. Okay. And then on the OR improvement, 150 basis points, is that just all cost saves? And can you tell us how much in dollars you have for cost saves in '26?

Yes. So I think most of that would be -- most of it is cost savings, of course, to the extent that we push revenue higher, we get some fixed cost leverage as well.

And a meaningful portion of that, Ryan, as well is the ongoing initiative to shift more of our revenue base from the subhaul segment into the company driver segment. We get better asset utilization of our fleet. And we think that on an apples-to-apples basis, the OR on a company-delivered move is as much as 300 to 400 basis points better than on a move. So we do expect to see progress there, which, on the one hand, is cost driven, but on the other hand, is how we operate.

This concludes the question-and-answer session. I would now like to hand the call back over to Rick O'Dell for closing remarks.

Well, obviously, the market environment was challenging in 2025. Like I said in my opening comments, certainly pleased with the execution of our employees dedicated to providing quality service to our customers in a challenging environment. And I think I think what we did demonstrate in 2025 is that our collective network is attractive to our customer base. We grew revenue at 11%. And as we continue to mature our network and focus on our cost initiatives, we've got a high level of confidence in our ability to improve our operating margins.

In the meantime, cash flow is strong, balance sheet is improving. And we like where we're positioned in the marketplace, but we just need the marketplace to be a little bit better. And I think there's some -- there are some sort of green shoots out there that could indicate that certainly the second half of 2026 can be better. So we're looking forward to that.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, everyone, and welcome to Proficient Auto Logistics Third Quarter Financial information. [Operator Instructions] Please note that this conference is being recorded. Now it's my pleasure to turn the call over to the Chief Financial Officer, Brad Wright. Please proceed.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thanks for joining us on Proficient's Third Quarter 2025 Earnings Call. Under SEC rules, our Form 10-Q covering the 3- and 9-month periods ending September 30, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Proficient Auto Transport and the successor entity Proficient Auto Logistics, Inc. We are not required to provide and the Form 10-Q will not contain pro forma financial data for the combined companies.

Our earnings release provides comparative summary financial information for the third quarter of 2025 to the third quarter of 2024 for the company. It can be found under the Investor Relations section of our website at proficientautogistics.com. Our 10-Q when filed can also be found under the Investor Relations section of our website. During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by our forward-looking statements. Further information can be found in our SEC filings.

During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures, such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the third quarter. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may then get back into the queue if you have additional questions. Now I would like to introduce Rick O'Dell, who will provide the company update.

Well, thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the third quarter and some trends that provide insight into our expectations for the remainder of this year. First, as it relates to the third quarter, as we discussed in our last earnings call, July auto sales and deliveries were stronger than had been expected with SAAR finishing at 16.4 million units and while sequentially lower, consistent with seasonality. August and September SAAR were stronger year-over-year at an average of 16.3 million units driven in part by a surge in EV purchases ahead of the expiration of federal tax credits. Company revenue and unit volumes in the quarter largely followed these trends and were further bolstered by market share gains and the Brothers acquisition, finished up 21% and 25%, respectively, year-over-year for the quarter.

The combined results nearly matched the revenue produced in the second quarter of this year and again, improved profitability sequentially and improved 250 basis points year-over-year, demonstrating continued momentum and operational improvements and strategic execution. From a market perspective, volatility in automotive manufacturing and purchase levels continues reflecting production disruption due to supply chain issues and economic impacts of the expiring EV tax credit, interest rate adjustments and tariffs. While automotive OEMs continue to face cost pressure from tariffs as widely reported in their Q3 earnings releases, PAL continues to provide critical infrastructure in the transportation supply chain and we have the ability to be nimble to serve customer needs as they make necessary shifts. The pricing environment is not as strong as we'd like to see, however, we continue to show discipline in our pursuit of new business and retention of incumbent business to ensure that our portfolio allows for sustainable profitability and reinvestment.

We're confident that we can be successful in achieving growth and margin expansion despite complexities in the market. Looking to the fourth quarter, October SAAR slowed to 15.3 million, and we are feeling this softness on volumes. SAAR forecasts are for high 15 million to low 16 million range for the balance of this year and into next year with dealer inventory levels healthy, along with a favorable tax policy for qualifying car loan interest deductions, a high likelihood of continued interest rate reductions and average vehicle age above historical norms for replacement and a typical seasonal increase in buying at the end of the year, we're hopeful that volumes strengthened through the balance of the fourth quarter, but we expect a modestly lower revenue outcome than the third quarter, and we expect to achieve similar adjusted operating ratio and cash flow.

With regard to profitability, as I referenced in the second quarter earnings call, we remain focused on controlling costs and advancing targeted cost savings initiatives and operating efficiencies that produce sustainable benefits. In the third quarter, we recognized a $1.9 million restructuring charge, representing approximately $0.06 per share which is primarily composed of onetime headcount and facility consolidation resulting from organizational realignment as well as fees associated with the consolidation of causality insurance coverage for all operating companies. In total, we expect to realize over $3 million in annual savings from the combined restructuring actions going forward though much of this begins in 2026. Note that under our new insurance program, we have a larger retention consistent with the company of our size, and there may be greater quarter-to-quarter volatility in the insurance and claims expense line going forward reflecting frequency and severity of any accidents and injuries that do occur.

That being said, we do anticipate annual savings in our annual insurance expense. In addition to these items, we continue to leverage our national scale to drive cost synergies through our procurement efforts. While our now unified accounting and transportation management systems are increasingly providing visibility and actionable insights into our customer base, operational efficiency opportunities and profitability. As evidence of this continued progress sister hauls or load sharing between the merged companies grew to 11% of revenue in the quarter from 9% in the prior quarter, reducing empty miles and contributing to improved asset utilization.

As we look ahead, we're well positioned to operate profitably with strong cash flow in the current environment and to respond quickly and efficiently when the market improves. The company will continue to protect its strong balance sheet position and advance our strategic objectives for continued margin expansion, market share gains and acquisitions. I'll now turn it back over to Brad to cover key financial highlights.

Thank you, Rick. First, a few summary statistics and note that the contributions from ATG and Brothers are only reflected in periods since their acquisition by Proficient. Operating revenue of $114.3 million in the third quarter was 24.9% higher than in the third quarter of 2024. The adjusted operating ratio for the third quarter was 96.3%, an improvement of 250 basis points from the comparable quarter in 2024, which was 98.8%. Units delivered during the third quarter totaled 605,341, which is an increase of 21% compared to third quarter 2024. Revenue per unit excluding fuel surcharge, was approximately $173, up approximately 3% from the third quarter of 2024. Company deliveries were 36% of revenue this quarter, down slightly from 37% in the same quarter last year when revenue was much lower, which diminished the volume available for allocation to sub haulers.

Our OEM contract business generated approximately 93% of total transportation revenue in the quarter, which is essentially unchanged from last quarter and reflects a continued lack of spot volume opportunities. Likewise, our dedicated fleet business generated $4.2 million of third quarter revenue, consistent with our expected run rate for the full year 2025. Building on Rick's comments about our expectations for fourth quarter revenue, we now foresee full year top line growth in a range of 10% to 12% compared to the combined company's 2024 total.

The company has approximately $14.5 million in cash and equivalents on September 30, 2025, up from $13.6 million at the end of last quarter. Aggregate debt balances at the quarter end were approximately $79.2 million down $11 million from $90.2 million at the end of the second quarter. The resulting net debt of $64.7 million on September 30 of this year equates to 1.7x trailing 12 months adjusted EBITDA versus 2.2x at the end of last quarter. Free cash flow from operations represented by adjusted EBITDA less CapEx was approximately $11.5 million during the quarter, which allows for this meaningful reduction in our debt balances.

While CapEx was light during the past quarter, we can reiterate our expectations stated in last quarter's earnings call that full year equipment CapEx will be approximately $10 million for 2025. Maintenance CapEx will likely grow from this level as our fleet expands. However, even with expected CapEx increases, we expect free cash flow yields of mid-teens to 20% return against our current market capitalization. Total common shares outstanding ended the quarter at 27.8 million, up slightly from 27.7 million last quarter as a result of vesting share grants. Operator, we will now take questions.

[Operator Instructions] Our first question is from Tyler Brown with Raymond James.

Brad, just some clarification just real quick. So you said revenues up 10% to 12% for the full year. Brad, is that on a $389 million pro forma base? Basically, is it about a little over $430 million for -- using the midpoint for 2025?

Yes. It's off of the $388.8 million.

$388.8 million. Okay. Perfect. And then flattish OR, is that what you said, Rick, sequentially.

Yes.

Into Q4. Okay. Okay. Perfect. And then I was hoping, could we get a quick update on where we are on systems. I think that you guys had made the full conversion on the accounting system, but are we fully transitioned on the TMS across all the 7 opcos?

Yes, we are.

You are. And then how is that unified operating platform? Can you talk about how that visibility is helping with those sister hauls? I think you said it was 11% of revenue, up from 9%. But just big picture, Amy, I mean, where can that number go longer term?

We see that number continuing to rise. In the early stages, we're using that largely as a proxy for filling empty miles. But as our assets become more fluid and flexible across the network, I would expect that sister haul volume to rise, whether it's representing filling empty miles or not. So that the additional visibility in the system is very helpful to being able to act more quickly and there's opportunity for additional technology overlay for dispatch optimization and some of those capabilities as we look forward.

Okay. And then just real quick here. Just -- sorry, just a couple of other ones. But just, Rick, you mentioned last quarter that there were a number of OEM contracts that have been -- that were coming up this quarter. I'm just curious how you fared in those RFPs.

Yes, go ahead, Amy.

Yes. We still have a number of OEM contracts that are awaiting awards and sort of in the process of being resolved. We've not made any results that are material to overall revenues, and we commit to share anything that is of a materiality threshold. There is, as we've shared with pricing, we will work to retain profitable volume only to the point that it makes sense for our portfolio. So we have had some experience of letting some volume go to price points that are not attractive to us. We are, however, continuing to pick up some new lanes and new opportunities in some of these contracts, but they've been smaller more recently.

Okay. And just my last one, I promise. But -- and I know '26 is a ways away. But -- there are a few moving pieces that roll into '26. I mean I think you've got some old Jack Cooper business that kind of is still incremental. Brothers, I believe, is incremental. But Brad, is there a reason that assuming that SAAR is flat into '26 that revenue couldn't be up maybe high single digits. Is that a crazy assumption?

I don't think that's a crazy assumption, Tyler. We will pick up, as you point out, some incremental revenue for a full year of Brothers. And so that helps. It's -- we're still in the process of doing our 2026 plan, and we'll give you some more specifics on our next call. But I think that's not a crazy assumption.

Tyler, I would just add to that while, again, we're still in our '26 planning progress, we do -- we have kind of established a target to improve our operating ratio by at least 150 basis points in 2026 over the 2025 results.

Our next question comes from Ryan Merkel with William Blair.

I wanted to ask on October just to get a little more specific what was the year-over-year increase in revenue for October? And then just clarify, it sounded like you thought November and December, the growth could pick up a bit from October. Did I hear that right?

Yes. So for October, I'll give you the pieces in there. We had Brothers this year, we had the incremental market share gains this year, neither of which were in the comps from last year. And then on just the base market, I would say it was slightly improved from where October was last year. In terms of November and December, typically, seasonally, there is an end of year purchase pattern and pushing up inventory to clear out the 2025 model and bring in 2026 inventory. We're seeing a bit of sluggishness in the current market as it stands in early November. So we are still, as we said, hopeful that we see that uptick seasonally, but we are not experiencing it in the current market.

Got it. Okay. And then the ARPU was still down year-over-year for the company deliveries, so -- and then in the press release, you mentioned there's still excess supply. I realize that's a near-term problem. But how should we think about pricing in the next couple of quarters? Do you think we've bottomed here? Or might there still be a little more pressure?

So I'll take that in 2 ways, Ryan. One is how we are experiencing pricing on bids that are coming up for renewal. The other is really the RPU trends quarter-to-quarter and how that may change. As we shared pricing dynamics on new contracts are pretty weak right now. We would like to see a more constructive market for pricing with supply and demand a bit more imbalanced. From an RPU perspective, though, we would expect largely stable RPU. The big changes that we saw in some of the quarters previously, we're cycling the declines in the dedicated product cycling the declines in the spot market. So those 2 things had a really material impact on RPU year-over-year. We are stabilizing now, and you should expect to see more consistent RPU year-over-year just with any impact from mix change within the portfolio.

Got it. Okay. That's helpful. And I'll slip in one more. Rick, you said that the dealer inventory was healthy so should I take that to mean that they're fairly lean levels, you feel comfortable? And I realize it's a moving target, but is that something you feel good about as you enter 4Q?

Yes. Yes, we don't perceive the inventories to be in excess. SAAR has been strong.

Our next question comes from Alex Paris with Barrington Research.

Congrats on a strong quarter. Just to be clear on the Q4 guide, so to speak. You said 10% to 12% Brad, I think, for the full year, that would suggest Q4 revenues of somewhere between $103 million and $110 million or so. Still strong growth year-over-year, like the -- maybe not quite as high as Q3 year-over-year. But I'm wondering where is the strength coming from? I think last quarter, you talked about several buckets. The acquisitions of Brothers, Jack Cooper market share gains, organic growth, how would you allocate the importance of those buckets to the revenue growth of 25% in the quarter just ended and the unit growth of 21%?

Well, I think it's not unlike the second quarter. We still are having the same benefit, roughly the same amount of revenue from both of those 2 components, the Brothers and the new GM revenue. And with revenue essentially flat quarter-over-quarter, I think you could apply the same metrics.

Got you. And then just a follow-up question on free cash flow. You said it was adjusted EBITDA minus CapEx, $11.5 million in the quarter. And I think you said on the last call, $30 million to $40 million of free cash flow for the full year. Is that still a reasonable target? Or it seems like it's running a little hotter than that right now.

It is. If you -- I was using kind of a run rate last quarter, certainly annualizing this one gets you a little -- get you a higher, probably closer to $35 million.

Okay. And then on that basis, by far, you generate on a free cash flow yield basis more than any other company in the group, whether truckload or LTL. And a free cash flow yield approaching 20% when the next closest is 5% or 6%, which would support a significantly higher stock price. And that's enabling you to reduce debt at a pretty aggressive rate. Is it just a matter of you're a new company, you're a small company? What's it going to take to get the market to recognize this free cash flow characteristic.

Well, listen, when we talk to a lot of investors, and I think most of them appreciate the fact that the business is kind of an outsized cash flow return. When we start working off some of these other depreciation levels, amortization and that starts coming through as GAAP operating earnings, maybe that wakes other people up. But I don't know, Alex, it's -- we're as flummoxed by it as you are.

And then I guess last one, m&A pipeline. It seems that you have the 7 companies fully integrated. Is there more cost takeout potential there? And then what does the new M&A pipeline look like? Are you still pretty active there, particularly with this free cash flow generation.

Yes. I mean we're always pursuing incremental efficiencies. And I think we've demonstrated or we're in the process of demonstrating kind of a cadence of regular improvements, validating our execution and our strategy and that strategy does include a combination of organic growth opportunities, supplemented by selective tuck-in acquisitions. And we have a pretty robust pipeline of opportunities. And obviously, with our strong cash flow, we've got the capability to fund that. And we would expect to continue on our target of 1 to 2 tuck-in type acquisitions a year as we proceed in 2026.

Our last question comes from the line of Bruce Chan with Stifel.

This is Andrew Cox on for Bruce. Building upon the cash generation discussion prior. Just kind of wanted to talk a little bit about CapEx and cash flow expectations moving through the end of the year and into 2025. You guys said in the prepared remarks that you do expect CapEx to move higher after this year and really appreciate the full year reiteration of the CapEx guide. But kind of wanted to get an expectation of your CapEx into 2026 and beyond. Is -- are there any additional CapEx needs to meet higher volumes if they should come sometime next year. And how do you plan to deploy free cash flow beyond CapEx next year?

Thanks, Andrew. I think, look, CapEx at $10 million is probably kind of at the bottom of the range. But having said that, we've got fleet capacity that could support this kind of a market absent big gains in contract share. And so we'll have to kind of adjust as we go through the year. But the comment in the prepared remarks was just that we do expect that as our fleet grows, we intend to keep the average age at around 5 years. And that's just going to mean that CapEx by definition, has to go up a little bit.

And so maybe $15 million a year might be more normal or even as high as $20 million as we continue to grow. But with the cash flow generation that we've been talking about, that still yields a mid- to high teens return on market cap, at least at today's market cap. So I wouldn't expect -- we're still working on the CapEx plan along with our full budget for 2026, but I wouldn't expect a much higher commitment to CapEx during '26 unless as again, the market changes, and we see big needs for addressing some contract gains.

Okay. That's really helpful. Every trucking executive team this earnings season has been asked a question about the changes to whether it be non-domiciled CDLs or the enforcement of the English language proficiency. Just kind of wanted to see if you guys have any sense on the impact of maybe these supply changes could have on the auto hauler capacity. Anything on the regulatory side? We would expect that it would have much less impact than dry van, but just any insight you guys have to help us try to model that in would be really helpful.

Sure. So I mean, of course, we saw today that the interim rule was stayed for now on the non-domiciled CDL front. So we will continue to watch and see how that plays out through the appellate process. But assuming that interim rule does go forward in something substantially similar to what has been proposed, we do think there's a pretty material impact on trucking overall. It is not a material impact that we would expect to Proficient per se as our company's driver population is not impacted in a large way. But we would think for the auto hauler segment, that would hit more closely for smaller carriers potentially sub haulers and there are some niche players in the industry that have a driver composition that it's more likely heavily and/or majority impacted by the non-domiciled CDL interim rule proposed. It is certainly more of an impact on that front than the English language proficiency front.

Okay. Amy, that's really helpful as well. If I can sneak one more in here. Just kind of double-clicking on the mix benefit or just benefit at all that you had from the potential pull forward of EV demand prior to the expiration of the tax credits this quarter. Maybe it might be best if you guys have this offhand or if you guys can help us understand like what percentage of the units in 3Q were electric vehicles, maybe compare that to the year prior or the quarter prior. Just trying to understand what sort of impact this pull forward may have had on the quarterly results.

Yes. So I'll come at that in a slightly different way. We don't actually track our volume on the basis of internal combustion engine versus EV vehicles. But the impact to us is that the EV vehicles are a heavier weight so you can get fewer of them on a given truck. So where you'd expect to see some impact is potentially a lower load factor per truck, but that's often and we seek to ensure compensation around EVs so that the lower load factor is offset in higher revenue on those units.

Right. Okay. I just -- I mean should we believe that the revenue per unit impact this quarter, was it at all impacted by mix changes to the EV side?

I don't think so.

Minimally.

Yes. Minimally.

We have a follow-up from the line of Tyler Brown with Raymond James.

I appreciate you guys actually answered my follow-up on non-domiciled. That was very helpful, Amy. But since I've got you, real quick, I think, Brad, you mentioned last quarter that 3 of the 7 opcos were running 90 or better. Can you chalk up 1 or 2 more this quarter? And then on the opcos, the other ones that are not running at 90 or better, they've got to be running just mathematically, call it, 100 or more. And if you were to build the bridge between where they're operating and some of the 90 or better opcos, what are the kind of 2 or 3 key things that really differentiate there on the P&L?

So several things there, Tyler. One, the count on those at 90 or better hasn't really changed this quarter versus last quarter. But I would say more generally that there has been a pretty broad improvement across almost all of the opcos, and that has come on constant revenue. So we are seeing incremental gains even if small, but on flat revenue. In terms of your observation that others would have to be over 100, we don't have that in a pervasive way, but we've got a couple of opcos with -- that are experiencing lower volumes that are at or a little above 100, and that is mostly a revenue issue.

We have dealt with a lot of the cost issues through this consolidation effort and the reorganization that we talked about. And so I think that will help in the go forward even for those entities and then pushing some extra revenue through whether that's wins on contracts or whatever it may be, we will take care of the difference. That's the path really.

Okay. So it's not a fundamental cost structure issue. It sounds like it's a little bit of price, a little bit of volume would go a long way.

Yes.

Yes.

Okay. And then did you give the spot mix? That's my last question.

We -- I don't know that we did, but similar to last quarter, it was at or a little below 3%.

And with that, ladies and gentlemen, we conclude our Q&A session. I will turn it back to Rick O'Dell for final comments.

Well, thank you for your interest in Proficient Auto Logistics. We're pleased with the progress that we've made in the first 18 months of our endeavor as a public entity. And most importantly, never satisfied with the absolute results and clearly optimistic about our ability to continue to execute and progress our operating margins. Thank you again for your interest.

And ladies and gentlemen, this concludes our conference. Thank you for your participation. You may now disconnect.