PAL 10-K & 10-Q changes, risk factors and insider trading

Our business is subject to various risks and uncertainties. The following summary highlights some of the risks the Company is exposed to in the normal course of its business activities. If any of these risks actually occur, the Company’s business, financial condition or results of operations could be materially and adversely affected. This summary is not completecomplete, and the risks summarized below are not the only risks the Company faces. You should review and consider carefully the risks and uncertainties described in more detail following this summary in this Item 1A of Part I of this Annual Report, which includes a more complete discussion of the risks summarized below, as well as a discussion of other risks related to the Company’s business and an investment in its common stock.

The auto transportation and logistics market is a highly competitive and fragmented industry. We currently compete with other auto carriers of varying sizes, logistics, brokerage and transportation services providers of varying sizes, as well as with railroads and independent owner-operators. Competition for the freight we transport or manage is based primarily on service, efficiency, available capacity and, to some degree, on freight rates alone. Our competitors periodically reduce their freight rates to gain business, especially when adverse economic conditions negatively impact customer shipping volumes, truck capacities, or operating costs. In addition, certain of the Company’s customers may develop new methods for hauling vehicles, such as using local drive-away services to facilitate local delivery of products. Railroads, which specialize in long-haul transportation, may be able to provide delivery services at costs to customers that are less than the long-haul truck delivery cost of our services. Additionally, the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources, and the development of new methods or technologies for hauling vehicles could lead to increased investments to remain competitive, eitherany of which may lead to new market entrants and increased competition overall. If we lose market share to these competitors or have to reduce our rates in order to retain our market share, our financial condition and results of operations could be materially and adversely affected.

Historically, a small group of our customers have made up a majority of our revenue. Specifically, for the year ended December 31, 20242025, our top fourfive customers accounted for 49.6%,59%, and for the year ended December 31, 20232024, our top five customers accounted for 59.6%49.6% of our combined operating revenue, and our top ten customers accounted for 70.9%73.8% and 84.3%70.9% of our combined total operating revenue during the same periods, respectively. GeneralWe Motorshave Companyone customer that accounted for 29% and 22% of our combined operating revenue for the year ended December 31, 2024.2025 and 2024, respectively. There is no assurance any of our customers, including this select group of customers, will continue to utilize our services, renew our existing contracts, or continue at the same volume levels.level. Despite the existence of contractual arrangements, certain of our customers may engage in competitive bidding processes that could negatively impact our contractual relationships. A loss of any of these customers or major contracts within these customers would have a material adverse effect on the Company’s results of operations and financial condition.

Our operations are regulated and licensed by various federal, state, and local transportation agencies in the United States. We are subject to licensing and regulation by the U.S. Department of Transportation (the “DOT”) for the transportation of property. The DOT prescribes qualifications for acting in this capacity, including certain surety bonding requirements. We also have and maintain other licenses as required by law. In addition to the DOT, various federal and state agencies exercise broad regulatory powers over the transportation industry, generally governing such activities as operations of and authorization to engage in motor carrier freight transportation, safety, driver licensing and qualifications, contract compliance, insurance requirements, tariff and trade policies, taxation, and financial reporting.

We aremay be audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other rules and and regulations. If we were found to be out of compliance or receive an unsatisfactory DOT safety rating, the DOT could restrict or otherwise materially adversely impact our business, financial conditions and results of operations.

We could become subject to new or more restrictive regulations, such as regulations relating to English language proficiency, commercial drivers licensing standards, U.S. Environmental Protection AgencyAgency-mandated mandated engine emissions requirements, drivers’ hours of service, occupational safety and health, ergonomics, cargo security, collective bargaining, and other matters affecting safety or operating methods. Our drivers also must comply with the safety and fitness regulations promulgated by the DOT, including those relating to drug and alcohol testing and hours of service. Compliance with all such regulations could substantially require changes in our operating practices, influence the demand for auto transportation and logistics services, reduce equipment and driver productivityavailability and our load factor, productivity, and the costs of compliance could incur significant additional expenses.

Any suchmaterial change in an applicable regulation or a ruling in a judicial proceeding could have a material adverse effect on our business.

Our engagement of owner-operators and third-party carriers to provide a portion of our capacity exposes us to different risks than we face with our companyCompany drivers.

We face a complex and increasingly stringent regulatory and statutory scheme relating to wages, classification of employees and alternate work arrangements. Tax and othercertain federal and state regulatory authorities, as well as owner-operators and third-party carriers themselves, have increasingly asserted that owner-operators independent contractors within our industry should arebe employees,classified ratheras thanemployees independentunder contractors.particular jurisdictions. Automotive transportation companies have been, and may continue to be, subject to lawsuits alleging that their drivers were misclassified as independent contractors rather than employees. Further, class actions and other lawsuits have been filed against us and others in our industry seeking to reclassify owner-operators and third-party carriers as employees for a variety of purposes, including workers’ compensation and health care coverage. If any such cases are judicially determined determined in a manner adverse to us or our businesses, there could be an adverse impact on our operations in the effectedaffected jurisdictions.jurisdiction. Taxing Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If If the owner-operators and third-party carriers we contract with are deemed employees, we could incur additional exposure under laws for federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort. The exposure could include prior period compensation, as well as potential liability for employee benefits and tax withholdings. For example, Sierra and Deluxe, in 2022 and 2020, respectively, reclassified their owner-operators in California as sub-haulers and employees, as appropriate. While the entities experienced increased expenses associated with additional employees, the reclassification did not impact revenue recognition. We continue to evaluate the classification of drivers, drivers and ensure appropriate treatment of independent contractors where they perform services on our behalf, to ensure compliance with all relevant laws. While we continue to engage owner-operators and third-party carriers where permissible and do not believe any future reclassifications would be material, we cannot guarantee an immaterial impact. Any such change in applicable regulation or ruling in a a judicial proceeding could have a material adverse effect on our business.

We typically are able to pass throughrecover a portion of our fuel costs tofrom our customers. Changes in fuel costs will not result in a direct offset to fuel surcharges due to the nature of the calculation of fuel surcharges, which is customer-specific and fluctuates as a result of miles driven, changes in the number and types of units hauled per customer, as well as the relationship of the national average cost of fuel (the national average diesel price index) or other contractually determined customer index benchmarks compared to actual fuel prices paid at the pump. In addition, depending on the base rate and fuel surcharge levels agreed upon by our customers, there could be a delay in reflecting increases in our surcharges to customers resulting from a rapid and significant change in the cost of diesel fuel, which could also have a material adverse effect on our operating results.

Such covenants may make it more difficult for us to operate our business, obtain additional capital and pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us,us when we require it, our ability to continue to grow or support our business and respond to business challenges could be significantly limited.

However, we may not be able to identify suitable acquisition candidates in the future, and we may never realize expected business opportunities and growth prospects from acquisitions. Acquisitions involve numerous risks, including, but not limited to: difficulties in integrating the operations, technologies and products acquired; the diversion of our management’s attention from other business concerns; current operating and financial systems and controls may be inadequate to deal with our growth; and the risks of entering markets in which we have have limited or no prior experience; and the loss of key employees. Furthermore, even if we are able to identify attractive acquisition candidates, candidates, we may not be able to obtain the financing to complete such acquisitions.

If these factors limit our ability to integrate the operations of our acquisitions,acquisitions successfully or on a timely basis, our expectations of of future results of operations may not be met. In addition, our growth and operating strategies for any business we acquire may be different from the strategies that such business currently is pursuing. If our strategies are not the appropriate strategies for a company we acquire, it could have a material adverse effect on our business, financial condition and results of operations. Further, there can be no assurance that we will be able to maintain or enhance the profitability of any acquired business or consolidate the operations of any acquired business to achieve cost savings.

Furthermore, there may be liabilities that we do not discover in the course of performing due diligence investigations on each company or business we have already acquired or may acquire in the future. Such liabilities could include those arising from employee benefits contribution obligations of a prior owner or noncompliance with, or liability pursuant to, applicable federal, state or local environmental requirements by prior owners for which we, as a successor owner, may be responsible. In addition, there may be additional costs relating to acquisitions including, including, but not limited to, possible purchase price adjustments. Rights to indemnification by sellers of assets to us, even if obtained, may may not be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business.

We, by the nature of our operations, are exposed to the potential for a variety of claims, including personal injury claims, vehicular collisions and accidents, alleged violations of federal and state labor and employment laws, such as class-action lawsuits alleging wage and hour violations and improper pay, commercial and contract disputes, cargo loss and property damage claims. We maintain insurance coverage with established insurance companies at levels deemed to be adequate. The trucking business has experienced significant increases in the cost of liability insurance, in the size of jury verdicts in personal injury cases arising from trucking accidents and in the cost of settling such claims. If the number or severity of future claims increases, claims expenses might exceed historical levels or could exceed the amounts of our insurance coverage or the amount of our reserves for self-insured claims or deductible levels, which could materially adversely adversely affect our financial condition, results of operations, liquidity and cash flows.

Increases in driver compensation or difficulties attracting and retaining qualified drivers, independent contractors or thirdthird-party partycarrier capacity providers providers could have a materially adverse effect on our profitability.

Difficulty in attracting and retaining sufficient numbers of qualified drivers, independent contractors, and third-party carrier capacity providers, could have a materially adverse effect on our growth and profitability. The transportation industriesindustry areis subject to a shortage of qualified drivers, and drivers for our specialty automotive drivers.transport Suchmust have additional qualifications. Driver shortage is exacerbated during periods of economic expansion, in which there may be alternative employment opportunities, or during periods of economic or industry downturns, in which unemployment benefits might be extended and financing is limited for independent contractors who seek to purchase equipment or for students who seek financial aid for driving school. Furthermore, capacity at driving schools and the criteria to qualify for a commercial driver’s license may be limited by othernew future outbreaks similar to COVID-19rules and anyregulations, governmental imposed lockdown or other attempts to reduce the spread of such an outbreakwhich may reduce the pool of potential drivers available to us.us Regulatory requirements could further reducein the number of eligible drivers.future. Our inability to engage a sufficient number of drivers and independent contractors may negatively affect our operations. Further, our driver compensation and independent contractor expenses are subject to market conditions, and we may find it necessary to increase driver and independent contractor rates in future periods.

We have identified a material weakness in the Company’s internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified was related to IT general controls in Company’s financial systems and closing processes in the period after our IPO and prior to full integration of systems, including account reconciliations and review surrounding the close process.

While we believe that theseour efforts willhave improveimproved the Company’s internal controls over financial reporting, the implementation and oversight of these control measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.cycles.. IfIf, the steps we take do not remediate the material weaknesses in a timely manner, there could continue to be a reasonable possibility that these control deficiencies or others could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis. Ifhowever, we are unable to successfully remediate ourthe existing or any future material weakness, the accuracy of our financial reporting may be adversely affected, which could cause investors to lose confidence confidence in our financial reporting and our share price and profitability may decline as a result.

We are highly dependent upon our senior management team. In particular, the loss of the services of Richard O’Dell, Amy Rice or Brad Wright could have a material adverse effect on our business, financial condition and results of operations.operations, although we do have succession plans in place for these roles. We do not presently maintain “key man” life insurance with respect to members of senior management. In addition, our operating facilitiesoperations are managed by regional and local managers who have an average of 15 years of auto transportation and logistics experience and substantial knowledge of the local markets served, including certain former owners and employees of the Founding Companies.Companies and those acquired thereafter. We believe these employees’ knowledge of the industry and our business model, coupled with their invaluable relationships with customers and vendors, may be highly difficult to replicate. The loss of onemanagement ortalent more of these managers maycould have a material adverse effect on our business, financial condition and results of operations in the event that we are unable to find a suitable replacement in a timely manner.

We must ensure that our information technology systems remain competitive.modern, secure and effective to meet the needs of our business. If our systems are unable to maintain high volumes with reliability, accuracy accuracy and speed as the information technology systems are centralized and we continue to grow, our service levels and operating efficiencies may decline. Additionally, if we fail to enhance our systems to meet customer needs,needs and evolving cybersecurity best practices, our results of operations could be harmed.

We rely heavily on our financial, accounting, treasury, communications and other data processing systems and a continued and efficient operation of such systems. SuchDespite cybersecurity programs and policies, such systems may fail to operate properly or become disabled because of tampering or a breach of the network security systems or otherwise. In addition, such systems arecould from time to timebe subject to cyberattackscyberattacks, which may continue to increase in sophistication and frequency in the future.

CyberCybersecurity security incidents and cyber-attacks have been occurring globally at a more frequent and severe levels and will likely continue to increase in frequency in the future. Our information and technology systems may be vulnerable to damage or interruption from cyber securitycybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. Cyberattacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. If successful, these types of attacks on our network or other systems could have a material adverse effect on our business and results of operations, due to, among other things, the loss of proprietary data, interruptions or delays in the operation of our business and damage to our reputation. There can be no assurance that measures we take to evaluate the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently or are not recognized until successful.

Our risk management systemssystems, though consistent with best practices, could prove to be inadequate and, if compromised, we could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. We do not control the cyber security cybersecurity plans and systems put in place by third-party service providers, and such third-party service providers may have limited indemnification obligations obligations to us. Breaches such as those involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to stockholders and material nonpublic information. We could be required to make a significant investment investment to remedy the effects of any such failures, harm to our reputations, legal claims we may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity and other events that may affect our business and financial performance.

Our contractual agreements with ourindependent contractor owner-operators and third-party carriers expose us to risks that we do not face with companyCompany drivers.

OurThe relianceuse onof independent contractor owner-operators and third-party carriers for portions of capacity creates numerous risks for our business. For example, if ourthese independent owner-operatorscontractors fail to meet our contractual obligations or otherwise fail to perform in a manner consistent with ourcustomer requirements, we may be required to utilize alternative service providers at potentially higher prices or with some degree of disruption of the services that we provide to customers. If we fail to deliver on time, if the contractual obligations are not otherwise met, or if the costs of our services increase, then our profitability and customer relationships could be harmed.

Owner-operators are and third-party carriers are independent contractor service providers, as compared to companyCompany driversdrivers, who are employed by us.employees. As independent business owners, ourthese owner-operatorsindependent contractors may make make business or personal decisions that conflict with our best interests. For example, if a load is unprofitable, route distance is too far far from home or personal scheduling conflicts arise, an owner-operatorindependent contractor may deny loads of freight from time to time.freight. In these circumstances, circumstances, we must be able to timely deliver the freight in order to maintain relationships with customers. In addition, adverse changes in the financial condition of our independent contractor owner-operatorsnetwork or increases in their equipment or operating costs could cause thempose a threat to seektheir higherviability to revenues.support this industry.

The transportation industry is susceptible to trends in economic activity. As our business is to transport automobiles, our business levels are directly tied to the purchase and production of goods and the rate of growth of global trade — key macroeconomic measurements influenced by, among other things, inflation and deflation, supply chain disruptions, interest rates and currency exchange rates, labor costs and unemployment rates, labor shortages or strikes, fuel and energy prices, public health crises, military conflicts, inventory levels, buying patterns and disposable income, debt levels, and credit availability. In addition, the current presidential administration has stated its intention to impose new or increasedimposed tariffs on imported goods – specifically automobiles – from countries that include Canada, Mexico andMexico, the European Union.Union, and Asian countries. Such trade policies and tariff implementations, implementation, and any related retaliatory trade policies and tariff implementations implementation by foreign governmentsgovernments, have resulted and may continue to result in decreased shipping volumes and increased product costs, and could have a material adverse effect on our revenues and results of operations.

We expect to experience significant fluctuations in quarterly operating results due to a number of factors, including the timing of auto production and sales and acquisitions and related costs; our success in integrating acquired companies; the gain or loss of significant customers customers or contracts; the timing of expenditures for new equipment and the disposition of used equipment; variation in the level of self-insured self-insured claims costs; price changes in response to competitive factors; and general economic conditions. As a result of these fluctuations, results results for any one quarter should not be relied upon as being indicative of performance in future quarters.

The provision of auto transportation and logistics services is subject to seasonal variations. Specifically, there are times when auto manufacturing plants have maintenance down time, which can be prolonged from time offto whichtime and impacts the auto production and delivery cycle. Auto transportation and logistics tends to be strongeststronger in the months with the mildest weather because inclement weather tends to slow the delivery of vehicles.

Approximately 24.3% 13.2% of our outstanding common stock is beneficially owned by the executive officers and directorsdirectors, and the former stockholdersas of the FoundingMarch Companies,16, including their respective affiliates.2026. Accordingly, these persons, if acting in concert, will hold sufficient voting power to enable them to significantly influence the election of all of the directors and the outcome of all issues submitted to a vote of our stockholders. Such concentration of ownership may have the effect of delaying, deferring or preventing a change in control of the Company, including transactions in which the holders of common stock might receive a premium for their shares over prevailing market prices.

An active and liquid trading market for our common stock may not be sustained and the lack of an active and liquid market could affect a shareholder’s stockholder’s ability to sell shares of the Company’s common stock or the price at which they may be sold.

Prior to May 2024, no market for shares of our common stock existed. Our common stock is listed on the Nasdaq Global Market under the symbol “PAL.PAL”. An active or liquid trading market for our common stock may not be sustained. The lack of an active market may also reduce the fair market value of shares of our common stock. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our common stock in the future and may impair our ability to enter into strategic collaborations or acquire companies by using our shares of common stock as consideration.

The market price of our common stock may be volatile and could fluctuate widely in response to many factors, some of which are beyond our control. These fluctuations could cause youan investor to lose all or part of yourtheir investment in our common stock since youone might be unable to sell your shares at or above the price you paid for such shares. The following factors, in addition to other factors included elsewhere in this Annual Report, may have a significant impact on the market price of our common stock:

The trading market for our common stock will be influenced in part by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over the industry or securities analysts, or the content and opinions included in their reports and we may nevernot obtain research coverage by securities and industry analysts. If securities or industry analysts discontinue coverage of us, we could lose visibility in the financial markets, and the trading price for our common stock could be impacted negatively. If any of the analysts who cover us publish inaccurate or unfavorable research or opinions regarding us, our business model, or our stock performance, our stock price would likely decline.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of the Company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by current members of our Board of Directors (the “Board”) or take other corporate actions, including effecting changes in our management. These provisions:

Any provision of our certificate of incorporation, amended and restated bylaws or Delawarethe lawDGCL that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim that is governed by the internal affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, results of operations and prospects.

We have never declared nor paid dividends on our capital stock. We currently intend expect to retainprioritize allthe retention of our future earnings, if any, to finance the growth and development, operation and expansion of our business and we do not anticipate declaring or paying any dividends in the foreseeable future. As a result, capital appreciation of our common stock, which may never occur, will be your sole source of gain on your investment for the foreseeable future.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”),Act, the listing requirements of the Nasdaq Global Market and other applicable securities rules and regulations. Complying with these rules and regulations has increased and will increase our legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure disclosure controls and procedures and internal control over financial reporting. We are required to disclose changes made in our internal control control and procedures on a quarterly basis. In order to maintain and, if required, improve our disclosure controls and procedures and internal internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, result, management’s attention may be diverted from other business concerns, which could adversely affect our business and results of operations. We may also need to hire additional employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses.

By disclosing information in this Annual Report and in future filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If those claims arewere successful, our business could be seriously harmed. Even if the claims dodid not result in litigation or arewere resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.

We could be an emerging growth company for up to five years following the completion of the IPO, although circumstances could cause us to lose that status earlier, including if we are deemed to be a “large accelerated filer,” or if we have total annual gross revenue of $1.235 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the December 31 of such year,31st, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately.

Global economic and business activities continue to face widespread uncertainties, and global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks, and uncertainty about economic and geopolitical stability (e.g., related to the ongoing Russia-Ukraine conflict and Israel-PalestineMiddle East conflict). The extent of the impact of these conditions on our operational and financial financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, as well as that of third parties upon whom we rely, will depend on future developments which are uncertain and cannot be predicted. There can be no assurance that further deterioration in economic or market conditions will not occur, or how long these challenges will persist. If the current equity and credit markets further deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, difficult, more costly, and more dilutive. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.

We are a leading specialized freight company focused on providing auto transportation and logistics services. Formed in connection with the IPO through the combination of five industry-leading operating companies, we operate one of the largest auto transportation fleets in North America basedwith uponan informationoperating obtained from leadership of the Auto Haulers Associationfleet of America,approximately utilizing800 roughlyowned 1,145 auto transport vehicles and trailers on a daily basis, including approximately 845 Company-owned transport vehicles and trailers,assets and employing 671825 dedicated employees as of December 31, 2024. Prior to the completion2025. of the IPO, we had not operated as a combined company. From our 5057 strategically located facilities across the United States, we offer a broad range of auto transportation and logistics services, primarily focused on transporting finished vehicles from automotive production facilities, marine ports of entry or regional rail yards to auto dealerships around the country. We have developed a differentiated business model due to our scale, breadth of geographic coverage and embedded customer relationships with leading auto OEMs.original equipment manufacturing companies (“OEMs”). Our customers rangeinclude fromnearly large,all of the global auto companies,manufacturing suchcompanies aswho Generaloperate Motors,in BMW,the Stellantis,U.S. and Mercedes-Benz, to EV producers, such as Tesla and Rivian.market. Additional customers include auto dealers, auto auctions, rental car companies and auto leasing companies.

On December 21, 2023, Proficient Auto Logistics, Inc. entered into agreements to acquire in multiple, separate acquisitions five operating businesses and their respective affiliated entities, as applicable: (i) Delta, (ii) Deluxe, (iii) Sierra, (iv) Proficient Transport, and (v) Tribeca. On May 13, 2024, the Company completed its IPO of its common stock, and in connection with the closing of the IPO, the Company also completed the acquisitions of all of the Founding Companies. The Founding Companies were acquired for approximately $178.5$177.4 million in cash and 6,978,191 shares of our common stock (provided, that 541,866 of these shares of common stock were held back and were not be issued at the closing of the Combinations to satisfy the indemnification obligations of certain of the Founding Companies for a period of twelve months following the closing of the Company’s IPO). Thereafter, on August 16, 2024, the Company acquired ATG for approximately $28.9$28.4 million in cash and 1,069,346 shares of our common stock. Subsequently on November 1, 2024, the Company acquired Utah Truck & Trailer Repair, LLC, (“UTT”), a repair facility located at the ATG headquarters terminal in Ogden, Utah for for $4.5 million in cash. These acquisitions expanded the Company’s geographic presence and services offered. On April 1, 2025, the Company acquired Brothers Auto Transport (“Brothers”), for approximately $12.4 million in cash and 395,322 shares of our common stock. Then on May 27, 2025, the Company acquired PVT Truck & Trailer Repair, LLC, a repair facility located at the Brothers headquarters terminal in Wind Gap, Pennsylvania for $1.0 million in cash. The Combinations and subsequent acquisitions are accounted for as business combinations under ASC 805. Under this method of accounting, Proficient Auto Logistics, Inc. is treated as the “accounting acquirer.”

Proficient Auto Logistics, Inc. has been identified as the designated accounting acquirer (“Successor”) of each of the Founding Companies Companies and Proficient Transport has been identified as the designated accounting predecessor (“Predecessor”) to the Company. As a result, the Management’s Discussion and Analysis of Results of Operations and Financial Condition for the twelve months ended December 31, 2025 and 2024 for each of Proficient and Proficient Transport are included in this Annual Report. A black-line between the Successor and Predecessor periods has been placed in the financial tables below to highlight the lack of comparability between these two periods. Please refer to Note 3, “Business Combinations.”

We generate revenue by transporting autos for our customers in our OEM contract and spot arrangements, secondary market auto moves, and ourcontract contract services arrangements. Our OEM contract and spot arrangements provide auto transportation and logistics services through movements of of autos over routes across the United States. Secondary market auto moves are for customers other than OEMs. Our contract services offering devotesuses the use ofCompany-owned equipment to service specific customers and provides services through long-term contracts. Our business provides provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide transportation transportation and logistics of automobiles.

We are typically paid a predetermined rate per unit for our Company Drivers services. Consistent with industry practice, our typical customer contracts contracts do not guarantee load levels or tractor availability. This gives us and our customers a certain degree of flexibility in response to to changes in auto demand and truck capacity.

Generally, we receive fuel surcharges on the miles moved for which we are compensated by customers. Fuel surcharges revenue mitigates the effect of price increases over a negotiated base rate per gallon of fuel; however, these revenues may not fully protect us from all fuel price increases.volatility.

We monitor as key operating metrics the volume of units delivered, average revenue per unit and averageadjusted revenueoperating per loaded mile,ratio, as applicable to the portions of our business that contract on each of these bases.

Our most significant operating expenses vary with miles traveled and include (i) fuel and fuel taxes, (ii) driver related expenses, such as salaries, wages, benefits, training and recruitment, (iii) the cost of purchased transportation that we pay independent contractors and to third-party carriers and (iv) maintenance of our fleet. Expenses that have both fixed and variable components include maintenance and tiretruck expenseexpenses and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs include depreciation of long-term assets, such as revenue equipment and leasing costs for our service center facilities, the compensation of non-driver personnel and other general and administrative expenses.

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. See Note 2 of the accompanying condensed consolidated financial statements of the Company for additional information about our critical accounting policies and estimates.

Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives of the related assets (net of estimated salvage value or trade-in value). We generally use estimated useful lives of five to ten years for trucks and trailers, classified as transportation equipment. The depreciable lives of our revenue equipment represent the estimated usage period of the equipment, which may be more or less than the economic lives.

Business Combinations — The Company accounts for business combinations using the acquisition method pursuant to ASC 805, Business Combinations. For each acquisition, the Company recognizes the assets acquired and liabilities assumed at their respective fair values values as of the acquisition date. Valuations of certain assets acquired, including customer relationships, developed technology and trade names involve significant judgment and estimation. The Company uses independent valuation specialists to help determine fair value of certain assets and liabilities. Valuations utilize significant estimates, such as forecasted revenues and profits. Changes in these estimates estimates could significantly impact on the value of certain assets and liabilities. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination combination and cannot extend beyond one year from the acquisition date. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed as of the acquisition date. The Company expects to complete completes the final fair value determination of the assets acquired and liabilities assumed for each acquired business as soon as practicable within within the measurement period, but not to exceed one year from the acquisition date.

Our business is organized into two reportableoperating segments, Company Drivers and Brokered.Subhaulers, which represent the Company’s reportable segments. The Company Drivers segment offers automobile transport and contract services under an asset-based model. The Company’s dedicated contract service offering devotesuses the use ofCompany-owned equipment to service specific customers and provides transportation services through long-term contracts. The Company’s BrokeredSubhaulers segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.

In our Company Drivers Segment,segment, we generate revenue by transporting autos for our customers in our OEM contract and spot arrangements, secondary market auto moves, and our contract services arrangements. Our OEM contract and spot arrangements provide auto transportation and logistics services through movements of autos over routes across the United States. Secondary market auto moves are for customers other than OEMs. Our contract services offering devotesuses the use ofCompany-owned equipment to service specific customers and provides services through long-term contracts. Our Company Drivers segment provides services that are geographically diversified but have similar economic and other relevant characteristics, characteristics, as they all provide Company Drivers carrier services of automobiles. The main factors that affect operating revenue in the Company Drivers Segment are the average revenue per unit received from customers and the number of vehicles transported.

We are typically paid a predetermined rate per unit for our Company Drivers services. Our executed contracts generally contain fixed terms and rates and are often used by our customers with high-service and high-priority freight. We continually strive to increase our revenues derived from contracts asby delivering a percentagehigh-quality ofservice total revenue byand continuing to build upon our existing relationsrelationships and acquirereputation new relations with OEMs.

Our contracts with customers in the Company Drivers segment generally include a fuel surcharge to account for fluctuating fuel prices. Built into ourthe predetermined contract rates with each customer is a baseline fuel price and when fuel prices rise above this baseline price price, our customers compensate us for the variance in the form of additional revenue. If fuel prices drop below the baseline price, we may in turn owe our customers this variance and record a discount. This additional revenue/discount is represented on the Fuel Surcharge and Other Reimbursements line in our condensedthe consolidated financial statements.

In our Company Drivers segment, our most significant operating expenses vary with miles traveled and include (i) fuel, and (ii) driverdriver-related related expenses, such as wages, benefits, training and recruitment. Expenses that have both fixed and variable components include maintenance and tiretruck expenseexpenses and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs include depreciation of long-term assets, such as trucks and trailers (to which we refer as revenue equipment) and service center facilities, the compensation of non-driver personnel and other general and administrative expenses.

Our Company Drivers segment requires substantial capital expenditures for the purchase of new revenue equipment. We use a combination of financing leases leases and secured long-term debt to acquire revenue equipment. When we finance revenue equipment acquisitions with either finance leases leases or long-term debt, the asset and liability are recorded on our consolidated balance sheet, and we record expense under “Depreciation” and “Interest expense.expense”. We expect our depreciation and interest expense willto be impactedincrease by changes in the percentagequality and value of our revenue equipment acquired in any given year.

The primary performance indicator in our BrokeredCompany Drivers segment is operating margin (brokeredCompany Driver operating revenue, less brokeredCompany Driver operating expenses, as a percentage of brokeredCompany Driver operating revenue). Operating margin can be impacted by the rates charged to customerscustomers, Company Driver pay, fuel, trucking and themaintenance rates paid to third-party carriers.expense.

We report our financial results in accordance with US generally accepted accounting principles GAAP.(“GAAP”). However, management believes that EBITDA and Operating Ratio provide useful information in measuring our operating performance, generating future operating plans and making strategic decisions regarding allocation of capital. Management believes this information presents helpful comparisons of financial performance between periods by excluding the effect of certain non-recurring items.

EBITDA is defined as net income (loss) for the period adjusted for interest expense, income tax expense (benefit) and, depreciation expense and intangible amortization expense.

Adjusted EBITDA represents net income (loss) plus interest expense, income tax expense (benefit), depreciation expense, intangible amortization expense, and share-based compensation expenses.expenses, restructuring costs and goodwill and intangible impairment.

Adjusted Operating operatingRatio ratio is calculated as total operating expenses reduced for share-based compensation expense andexpense, amortization of intangibles and goodwill and intangible impairment as a percentage of operating revenue.

Results of Operations for the Twelve Months Ended December 31, 2025 and 2024 (Successor), Period from January 1, 2024 to May 12, 2024 (Predecessor), Twelve Months Ended December 31, 2023 (Predecessor), and Twelve Months Ended December 31, 2022 (Predecessor)2023

Operating Revenue — The Company generates revenue from two primary sources: transporting freight for customers, including related fuel surcharge revenue and other reimbursements (Company Drivers), and arranging for the transportation of customer freight by independent contractors and third-party carriers (BrokeredSubhaulers). Company Drivers revenue, before fuel surcharges and other reimbursements, is primarily generated through trucking services provided by the Company’s Company Drivers service offerings to OEMs and the secondary market. BrokeredSubhaulers revenue before fuel surcharges and other reimbursements is primarily generated through brokering freight to third-party carriers. Fuel surcharges and other reimbursements represent additional revenue the Company earns based on mileage driven and other reimbursable costs incurred for which it is compensated by its customers.

The Company disaggregates revenue from contracts with its customers for Company Drivers and BrokeredSubhaulers operations between (1) revenue, before fuel surcharges and reimbursements and (2) fuel surcharges and reimbursements. A summary of the Company’s revenue generated by type for the periods indicated is as follows:

Our business is subject to various risks and uncertainties. You should review and consider carefully the risks and uncertainties described in more detail in Item 1A of Part I of our Annual Report.Report on Form 10-K for the year ended December 31, 2025. There were no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, except for the following:

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to possible or assume future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions. We have based these forward-looking statements largely on our current expectations and projections regarding future events and trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled “Risk Factors” in this Quarterly Report and the Annual Report, and elsewhere in this Quarterly Report and the Annual Report. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. Forward-lookingThe statementsrisks, containeduncertainties, and other factors, which are described in thismore Quarterlydetail Reportherein include,and in the documents we file with the Securities and Exchange Commission (the “SEC”), include but are not limited to, statements regardingto:

We are a leading specialized freight company focused on providing auto transportation and logistics services. Formed in connection with the IPO through the combination of five industry-leading operating companies, we operate one of the largest auto transportation fleets in North America with an operating fleet with approximately 800 owned assets and employing 698724 dedicated employees as of MarchJune 31,30, 2026. From From our 57 strategically located facilities across the United States, we offer a broad range of auto transportation and logistics services, primarily focused on transporting finished vehicles from automotive production facilities, marine ports of entry or regional rail yards to auto dealerships around the country. We have developed a differentiated business model due to our scale, breadth of geographic coverage and embedded customer relationships with leading auto original equipment manufacturing companies (“OEMs”). Our customers include nearly all of the global auto manufacturing companies who participate in the North American market. Additional customers include auto dealers, auto auctions, rental car companies and auto leasing companies.

On December 21, 2023, Proficient Auto Logistics, Inc. entered into agreements to acquire in multiple, separate acquisitions, five operating operating businesses and their respective affiliated entities, as applicable: (i) Delta, (ii) Deluxe, (iii) Sierra, (iv) Proficient Transport, and (v) Tribeca (collectively, the “Founding Companies”). On May 13, 2024, the Company completed the IPO of its common stock, and in connection with the closing of the IPO, the Company also completed the acquisitions of all of the Founding Companies (the “Combinations”). Thereafter, on August 16, 2024, the Company acquired Auto Transport Group, LC, (“ATG,” which was converted to a limited liability company after closing), and on November 1, 2024, the Company acquired Utah Truck & Trailer Repair, LLC, (“UTT,” which subsequently converted into Proficient Repair Services LLC),a, a repair facility located at the ATG headquarters terminal in Ogden, Utah. On April 1, 2025, the Company acquired Brothers Auto Transport, LLC, (“Brothers”), located in Wind Gap, Pennsylvania and on May 27, 2025, the Company acquired PVT Truck & Trailer Repair, LLC, (“PVT”) a repair facility located at the Brothers headquarters. These acquisitions expanded the Company’s geographic presence and services offered. The Combinations and subsequent acquisitions are accounted for as business combinations under ASC 805.805, Business Combinations. Under this method of accounting, Proficient Auto Logistics, Inc. is treated as the “accounting acquirer”.

We generate revenue by transporting autos for our customers in OEM contract and spot arrangements, secondary market auto moves, and contract services arrangements. Our OEM contract and spot arrangements provide auto transportation and logistics services through movements of autos over routes across the United States. Secondary market auto moves are for customers other than OEMs. Our contract services offering uses Company-owned equipment and third-party capacity to service specific customers and provides services through long-term contracts. Our business provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide transportation and logistics of automobiles.

Our business is organized into two operating segments, Company Drivers and Subhaulers, which represent the Company’s reportable segments. The Company Drivers segment offers automobile transport and contract services under an asset-based model. The Company’s contract service offering uses Company-owned equipment to service specific customers and provides transportation services through long-term contracts. The Company’s Subhaulers segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.

In our Subhaulers segment, we generate revenue by independent owner operators (who run under our DOT authority(ies)) and independent third-party carriers, which assist assist in transporting autos for customers in our OEM contract and spot arrangements, and secondary market auto moves. We maintain the customer relationship, including billing and collection, but outsource the transportation of the loads. The main factors that affect operating operating revenue in our Subhaulers segment are our customers’ excess inventory needs, the rates we obtain from customers, the auto volumes volumes we ship through the Subhaulers segment and our ability to secure capacity using independent contractors and carriers.

The most significant expense of our Subhaulers segment, which is primarily variable, is the cost of purchased transportation that we pay to independent contractors and third-party carriers and is included in the “Purchased transportation” line item. This expense generally varies directly with the amount of Subhauler revenue, rates paid to independent contractors and third partythird-party carriers, and current demand and customer shipping needs. Other operating expenses are generally fixed and primarily include the compensation and benefits of non-driver personnel supporting this segment (which are recorded in the “Salaries, wages and benefits” line item).

Adjusted EBITDA represents net income (loss) plus interest expense, income tax benefit, depreciation expense, intangible amortization expense, and share-based compensation expensesexpenses, and anycertain non-recurringone-time items that management does not consider indicative of ongoing operating performance.items.

Results of Operations for the three months ended MarchJune 31,30, 2026 and and 2025

Operating Revenue - The Company generates revenue from two primary sources: transporting freight for customers, including related fuel surcharge revenue and other reimbursements (Company Drivers), and arranging for the transportation of customer freight by independent contractors and third-party carriers (Subhaulers). Company Drivers revenue, before fuel surcharges and other reimbursements, is primarily generated through trucking services provided by the Company’s Company Drivers service offerings to OEMs and the secondary market. Subhaulers revenue before fuel surcharges and other reimbursements is primarily generated through brokering freight to third-party carriers. Fuel surchargessurcharge and other reimbursements represent additional revenue the Company earns based on mileage driven and other reimbursable costs incurred for which it is compensated by its customers.

The Company disaggregates revenue revenue from contracts with its customers for Company Drivers and Subhaulers operations between (1) revenue, before fuel surcharges and reimbursements and (2) fuel surchargessurcharge and reimbursements. A summary of the Company’s revenue generated by type for the periods indicated is as follows:

In the Company Drivers segment, operating revenues increaseddecreased by $3.6$0.4 million, or 11.0%,1.1%, to $36.3$41.0 million in the firstsecond quarter of 2026 compared to $32.7$41.5 million in 2025. In the Subhaulers segment, operating revenues decreased by $5.1$5.7 million, or 8.2%,7.7%, to $57.4$68.4 million in the second quarter of 2026 compared to $74.1 million in 2025. The decrease in both segments when compared to $62.5the millionsecond quarter 2025, is a direct result of capacity impacts in 2025. The change between Company Drivers and Subhauler revenues was driven by the Company utilizing more Company drivers to perform hauls compared to third party carriers during the quarter.industry.

Salaries, wages and benefits — Salaries, wages, and benefits consist primarily of compensation for all employees. Salaries, wages, and benefits are primarily affected by the amount paid to companyCompany drivers, which is a function of the amount of freight hauled and units delivered. Salaries, wages and benefits are also affected by employee benefits such as health care and workers’ compensation, and to a lesser extent by the number of, and compensation and benefits paid to, non-driver employees.

Salaries, wages and benefits increaseddecreased slightly by $1.6$0.4 million, or 8.3%,1.7%, to $20.9$22.1 million in the three months ended MarchJune 31,30, 2026 compared to $19.3$22.5 million in 2025. This The increase in salaries, wages and benefitsreduction was largelymainly drivendue byto thea acquisitiondecrease ofin Brothers on April 1, 2025.drivers.

Stock-based compensation increased $169,000,$0.1 million, or 14.3%,10.2%, to $1.4$1.3 million in the three months ended MarchJune 31,30, 2026 compared to $1.2 million in 2025. The increase in stock-based compensation was driven by new grants awarded during the three months ended March 31, 2026.

Fuel and fuel taxes increased by $810,000,$2.2 million, or 13.1%,31.8%, to $6.9$8.9 million in the three months ended MarchJune 31,30, 2026 compared to $6.1$6.8 million in 2025. The increase in fuel and fuel taxes was primarily driven by higher fuel prices.

Purchased transportation decreased by $2.6$8.6 million, or 5.5%,8.1%, to $44.6$97.6 million in the threesix months ended MarchJune 31,30, 2026 compared to $47.2$106.2 million in 2025. The decrease in purchased purchased transportation was driven by alower decreasesubhauler revenue in Subhaulerthe revenue,2026 partiallyperiod, offsetresulting byfrom athe higher rateimpact of purchasedreduced transportation.capacity.

Truck expenses and supplies are primarily affected by the age of the Company’s company-owned and leased fleet of trucks and trailers, the number of miles driven in a period and driver turnover. Truck expenses increased $1.4$2.0 million, or 24.1%,16.0%, to $7.2$14.3 million in the threesix months ended MarchJune 31,30, 2026 2026 compared to $5.8$12.3 million in 2025. The primary increase in truck expenses is due to cold-weather-related (during the first quarter of 2026) and routine equipment maintenance and repairs, additions of Brothers acquisition on April 1,2025, and cost inflation in parts and repairs.labor, particularly when using third-party repair shops.

Depreciation and amortization — Depreciation and amortization consist primarily of depreciation for owned trucks and trailers and to a lesser extent computer software amortization. The primary factors affecting these expense items include the size and age of the Company’s truck and trailer fleets, the cost of new equipment and the relative percentage of owned revenue equipment and equipment acquired through debt or finance leases.fleets.

Depreciation and amortization and the loss (gain) on sale of equipment increased by $1.1$0.9 million, or 16.9%,6.5%, to $7.6$14.8 million in the threesix months ended MarchJune 31,30, 2026 compared compared to $6.5$13.9 million in 2025. The increase in depreciation and amortization was largely driven by the Brothers acquisition on April 1, 2025.

Intangible amortization remained consistentflat at $2.4$4.8 million in the threesix months ended MarchJune 31,30, 2026 and 2025.

Insurance premiums and claims increased by $0.3$1.0 million, or 6.0%,10.0%, to $5.3$11.3 million in the threesix months ended MarchJune 31,30, 2026 compared to $5.0$10.3 million in 2025. This increase was driven by an increased number of claims during the most recent quarter.

General, selling, and other operating expenses — General, selling, and other operating expenses consist primarily of legal and professional services fees, occupancy and other costs. General, selling, and other operating expenses increased by $0.3$0.5 million, or 7.3%,5.5%, to $4.4$8.9 million in the threesix months ended MarchJune 31,30, 2026 compared to $4.1$8.4 million in 2025. The increase in general, selling, and other operating expenses was was primarily due to the acquisition of Brothers on April 1, 2025.2025 and an increase in office lease expenses.

Interest expense, net — Interest expense, net consists of cash interest, amortization of deferred financing fees, net of any interest income received from financial institutions. Interest expense, net decreased by $0.2$0.6 million, or 12.5%,17.0%, to $1.4$2.8 million in the threesix months ended MarchJune 31,30, 2026 compared to $1.6$3.4 million in 2025. The decrease was primarily due to thelower paydownborrowings ofon equipment loans during the line2026 of credit in September of 2025 and payoff of equipment loans over the past twelve months.period.

Operating ratio — Operating ratio is calculated as total operating expenses as a percentage of operating revenue. The Company’s operating ratio increased by 4.9%3.9% to 107.4%105.0% in 2026 as compared to 102.5%101.1% in 2025. The increase in operating ratio is due to lower operating revenues duringalong the quarter alongwith with increased fuel costcost, insurance and truck expenses. We are working to achieve synergies across all operating companies, which should help reduce the operating ratio over time. See “Non-GAAP Financial Measures” section for the Company’s calculation of operating ratio.

Adjusted Operating ratio — Adjusted operating ratio is calculated as total adjusted operating expenses (operating expenses less stock-based compensation and intangible amortization) as a percentage of operating revenue. The Company’s adjusted operating ratio increased by 4.7%3.7% to 103.4%101.3% in 2026 as compared to 98.7%97.6% in 2025. The increase in adjusted operating ratio is due to lower operating revenues during the quarter along with increased fuel cost, costinsurance and truck expenses. We are working to achieve synergies across all operating companies, which should help reduce the adjusted operating ratio over time. See “Non-GAAP Financial Measures” section for the Company’s calculation of adjusted operating ratio.