Tripp Grant: Hey Mike.
David Parker: Hey Mike.
Michael Vermut: So, I’m kind of building on what Jack was just asking. So, your stock now is trading at, give or take, 11 times, right, significantly below the group’s 20 times that the rest of the group is trading at. No one has come close to what Covenant has done — what you guys have done, the resiliency that we’ve had this year. You bought back stock at an excellent price last year. And it seems from what you’re saying that the cycle we’re at the bottom, close to the bottom, not sure how much worse it can get really. Can you just walk us through the math how you’re looking at it behind growing the Lew Thompson Poultry business and the returns we should expect there versus doing a significant buyback here? At 11 times, I can’t see that — and at a trough in the cycle, trading at 11 times with the performance that we’ve done, it’s just absurd.
So, take us through kind of the math and how you look at those two. And then building on that, if you can remember this — give us a look into how you intend to grow that piece of the business. And the OR we can think about as you grow it over the next one, two, three and four years down the road? And could this become a third of the overall business, right? Assuming there’s no recovery in the other businesses, how accretive and how we can kind of add on to the financials over the next two, three, four years, just growing this business alone organically?
David Parker: Hey Mike…
Tripp Grant: Let me. Go ahead, Dave.
David Parker: Yes, this is David. I’ll let Trip and Paul talk as well there. A couple of comments because I was looking at this yesterday. You look at — we’re trading at 11 and our peers are 18, 19, hunts up to 24 or so, but just the rest of them are in that 18, 19 number, we’re at 11. And it’s just interesting that we’ve been on this journey now for whether you want to use the Landair acquisition in 2018 or you want to even go back to 2015 when we got into the logistics business with Delta Airlines in 2015. But let’s just go back to 2018 when we bought Landair there that got us into real dedicated and really operating the company and the warehousing business and really operating the company, the dedicated side in the correct fashion.
And we’ve done nothing but grow that. And then we go into 2020 and we get out of 95% of the OTR business that was not even in our portfolio anymore. And got to have refrigerated OTR — got out of 95% of the solo [ph] operations that we’ve got and really concentrating on the expedited with long-term — half of that business being long-term contracts that have proven out in 2023 that is bringing value to the customer because not one of those accounts asked for any rate decreases in a market that has got slaughtered with rate decreases. So, it’s showing that that we’re bringing true value. On the dedicated side, rates did not go down, very few rates went down. It was virtually more adjustment of 30 trucks down to 25 trucks or 50 trucks to 40 trucks and those kind of things, more than it was pressure on the rate side.
And the warehousing side has done nothing but improved. And over the last few years, but again since July 3rd will be six years, it’s when we started down this path. And the company has been transformed tremendously. In 2022, we buy the — get into the DoD and all the things that Paul was talking about, the difficulty of operating that. You do not have everybody’s brother running into operating in that business because you’ve got to be an expert in it. And it’s got to be something that’s part of your bloodstream, similar to our expedited side. Everybody’s brother just doesn’t go in and start getting into teams. Right now they could, but they don’t because it is difficult and it is hard. And that is okay and that is good. And then last year buying the poultry in the Lew Thompson.
And everybody doesn’t get into it because it is hard and it is tough. And it is something that is not commoditized. And it’s something that those birds have got to get to the farms even if it was last week and we had ice and snow all over the United States and how are you reacting into that? How are you able to deliver those birds to the plants on time? And that’s what the value is. And the thing that we’ve seen for — heard for many years is that eventually the stock price will follow. Just keep doing it, keep doing it, keep doing what you’re doing. Well, it’s been six years of doing this and I will only say as the largest shareholder it’s time for the market to respond to what this team is doing. And I couldn’t be any more proud of what the team has done in the last couple of years.
I went into 2023 with our Board saying, this is a great test. It’s a great test for our management team. It’s a great test for all the new folks that we’ve had involved in the company since 2018. Does anybody want to go through a deep recession? No. Does anybody want to go through what trucking has gone through last year? No. But at the same time, this team has tested, has been tested, and has been proven that they’ve done great and I couldn’t be any more proud of what they’ve done. So, we said four or five, again, three or four years ago as we started buying some of the stock that somebody’s going to love us. Either Wall Street can love us or we’re going to love ourselves. And that has not changed. We haven’t bought back any stock in the last, I don’t know, six, eight, 10 months or so that we haven’t.
But with the cash flow that projected in 2024, there’s a lot of different options out there that, again, somebody’s going to love us. And 11 times, it’s not –Wall Street’s not loving us. And if that means we need to be buying back some more stocks, then we will. Or if Wall Street starts loving us, then ain’t the Lord for that. And we’ll cherish that. So I will say that that starts the internal conversations that will be leading us in 2024. And anyway, I’ll shut up and let Paul and them talk a little bit about your questions on poultry and stuff.
Michael Vermut: Excellent. Thank you, David.
Paul Bunn: Yeah. Like I agree with everything David said. I’ll go back specific to your poultry question. I mean the Lew Thompson business is about 225 trucks when we bought it in April of last year. It’ll be over 500 trucks by the end of this year based on contracts already signed. And, we’ve got a lot of site, just based on pipeline and other things to grow it, probably another 250 trucks past that and — and again, it could grow more. So if you can triple the volume on something in three, four years, that’s a — that’s a win. That’s a win in our book, especially stuff that is, operates well, has good contracts, good driver base, and a really good customer base. So we couldn’t be more excited about the prospects for the poultry business.
