EDGAR 10-K Filing

Company CIK: 1998768
Filing Year: 2025
Filename: 1998768_10-K_2025_0001013762-25-004352.json

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ITEM 1. BUSINESS
Item 1. BUSINESS
Business Overview
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 based upon information obtained from leadership of the Auto Haulers Association of America, utilizing roughly 1,145 auto transport vehicles and trailers on a daily basis, including approximately 845 Company-owned transport vehicles and trailers, and employing 671 dedicated employees as of December 31, 2024. From our 50 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, including General Motors Company (“General Motors”), Bayerische Motoren Werke Aktiengesellschaft (“BMW”), Stellantis N.V. (“Stellantis”), and Mercedes-Benz among others. Additional customers include auto dealers, auto auctions, rental car companies and auto leasing companies.
Description of the Combinations
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 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 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), using an initial public offering price of $15.00 per share. The Combinations 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 and Proficient Transport has been identified as the designated accounting predecessor (“Predecessor”) to the Company. As a result, Management’s Discussion and Analysis of Results of Operations and Financial Condition for the twelve months ended December 31, 2024 for each of Proficient and Proficient Transport are included in this Annual Report on Form 10-K. 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 of the Notes to Consolidated Financial Statements - “Business Combinations.”
Operations and Services Provided
We provide new and used auto transportation and logistics services to automobile manufacturing companies, leasing companies, automobile dealers, automobile auction companies, long-distance transporters, brokers and individuals. Services typically are provided as needed by particular customers and charged according to pre-set rates based on auto size, weight and mileage. We transport large numbers of vehicles from auto manufacturing sites, marine ports and rail hubs to individual auto dealers. On the used car transport side, cars are picked up and delivered primarily to rental car locations and automobile auctions. In addition, we provide transport services for dealers that transfer new cars from one region to another based on demand.
We operate a dispatch system to assign individual transport vehicles to particular cars that require delivery. We also have computerized positioning systems which identify and track vehicle location and status, thereby decreasing response times and increasing asset utilization.
Our initial integration efforts after the Combinations focused on consolidating route planning and dispatch software of the Founding Companies, which was completed during the third quarter of fiscal year 2024.
We began integrating and implementing accounting systems across the Founding Companies to enable us to centralize our accounting and financial reporting activities at our headquarters in Jacksonville, Florida. We anticipate that we will need to upgrade and expand our information technology systems on an ongoing basis as we expand our operations and complete acquisitions.
Segments
Our business is organized into two reportable operating segments, Company Drivers and Brokered. The Company Drivers segment offers automobile transport and dedicated services under an asset-based model. The Company’s dedicated service offering devotes the use of Company equipment to specific customers and provides transportation services through long-term contracts. The Company’s Brokered segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.
Company Drivers Segment
In our Company Drivers 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 devotes the use of equipment to 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, 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 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 fixed term contracts as a percentage of total revenue by continuing to build upon our existing relations and acquire 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 our predetermined contract rates with each customer is a baseline fuel price and when fuel prices rise above this baseline 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 condensed consolidated financial statements.
In our Company Drivers segment, our most significant operating expenses vary with miles traveled and include (i) fuel, and (ii) driver-related expenses, such as wages, benefits, training and recruitment. Expenses that have both fixed and variable components include maintenance and tire expense 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 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 purchase of new revenue equipment. We use a combination of financing leases and secured long-term debt to acquire revenue equipment. When we finance revenue equipment acquisitions with either finance 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.” We expect our depreciation and interest expense will be impacted by changes in the percentage of our revenue equipment acquired in any given year.
Brokered Segment
In our Brokerage Segment, we generate revenue by utilizing our independent owner operators (who run under our DOT) and independent third-party carriers to assist in transporting autos for our 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 revenue in our Brokered segment are our customers’ excess inventory needs, the rates we obtain from customers, the auto volumes we ship through the brokered segment and our ability to secure these carriers. We generally do not have contracted long-term rates for the cost of third-party carriers, and we cannot assure that our results of operations will not be adversely impacted in the future if our ability to obtain third-party carriers changes or the rates of such providers increase.
The most significant expense of our Brokered segment, which is primarily variable, is the cost of purchased transportation that we pay to third-party carriers and is included in the “Purchased transportation” line item. This expense generally varies directly with the amount of Brokered revenue, rates charged by third party carriers, which includes their cost of fuel, and current demand and customer shipping needs. Other operating expenses are generally fixed and primarily include the compensation and benefits of non-driver personnel (which are recorded in the “Salaries, wages and benefits” line item).
The primary performance indicator in our Brokered segment is operating margin (brokered operating revenue, less brokered operating expenses, as a percentage of brokered operating revenue). Operating margin can be impacted by the rates charged to customers and the rates charged by third-party carriers.
Strategy
Our strategy is to be one of the nation’s leading providers of auto transportation and logistics services by focusing on broadening our platform and expanding our service offerings while maintaining the high quality of our existing services and increasing our operational efficiency. We intend to achieve this objective by executing the following business strategies:
Operating Strategy
Drive Organic Growth by Offering Committed Capacity and Consistently High-Quality Service to Expand Existing Relationships. We believe that the ability to commit transportation equipment capacity and timely, professional and dependable service at a reasonable price are the most important factors in maintaining and expanding customer relationships in the auto transportation and logistics industry. We intend to use our scale to offer customers committed transportation equipment capacity and our financial strength to consistently invest in our capacity. We are continuing the proven practices of the Founding Companies throughout our operations in areas such as dispatching technology, driver training and professionalism, preventive maintenance and safety. We cross-sell the consistently high-quality service across our platform to existing customers of our various Founding Companies.
Expand Service Offerings to Further Entrench Existing Customer Relationships and Win New Customers. We have strategically identified select customers looking for additional related services that would expand our relationships with these customers. For example, there is an opportunity to further expand our operations of regional auto storage yards on behalf of major automotive OEMs, which we believe will lead to future revenue opportunities. We believe that our expanded scale and other resources will permit us to acquire new customers that require greater auto transportation and logistics capacity and storage capabilities than those possessed by smaller operators. We also intend to utilize our geographic diversity to pursue additional business from existing customers that operate on a regional or national basis, such as auto OEMs, leasing companies, insurance companies and automobile auction companies.
Achieve Operating Efficiencies. While the Founding Companies operate under their existing names, we seek to achieve operating efficiencies through improved asset utilization. Increased route density and backhaul opportunities lead to improved profitability, which we intend to achieve through the combination of the Founding Companies. We operate all operations under one integrated transportation management and route planning software, allowing us to have enhanced visibility and improve equipment utilization. The integration began immediately upon the closing of the Combinations, initially focused on consolidating route planning and dispatch software. These efforts did not and are not expected to have significant associated expenses as we utilized software already used by some of the Founding Companies. Such integration may incur financial benefits as administrative redundancies are removed. We also believe there will be, and have experienced, opportunities to use our purchasing power to seek improved pricing in areas such as purchased transportation, fuel, vehicles, and parts, and have created a position tasked with overseeing collective purchasing.
Maintain Local Expertise. Members of management of the our subsidiaries have, and companies to be acquired in the future will, maintain local control of their regional operations and work in coordination with each other, rather than compete, for business opportunities in their local markets. We believe this approach enables us to take advantage of the local and regional market knowledge, name recognition and customer relationships possessed by each acquired company while still allowing us to bring greater operating efficiency to the larger platform. We believe this structure will be attractive to owners who desire to benefit from being part of a larger platform and the efficiencies of that structure. We hired a vice president who will be responsible for overseeing and approving the pricing and bids of each of our subsidiaries, such that the subsidiaries will not be competing against each other despite maintaining existing regional operations.
Optimize Asset Flexibility. We own and operate a meaningful percentage of the tractors and trailers we utilize in our daily operations, as opposed to predominantly outsourcing to owner-operators or sub-haulers. For the years ended December 31, 2024 (successor) and December 31, 2023 (predecessor), 36%, and 32%, respectively, of our combined revenue came from company-operated vehicles and we expect those percentages to increase in the future. We believe this approach allows us to maximize our profitability because it permits us to manage down underlying operating costs versus paying a higher fixed percentage of revenue to third-party haulers. This approach also provides more certainty to our customers because of the Company’s ability to provide guaranteed capacity in an increasingly complex market. By combining companies, we believe we have more favorable purchasing opportunities with our vendors that allow us to add more Company trucks and Company drivers. At the same time, we utilize a diversified approach to securing additional capacity to service our customers where we do not currently possess significant network density.
Acquisition Strategy
Expand Within Existing Geographic Markets and Select New Markets. The auto transportation and logistics industry is highly fragmented, with the majority of the industry represented by smaller, regional providers representing attractive tuck-in acquisition opportunities. We see opportunity with regional providers that overlap with our geographic footprint that would improve our network density in select geographies and add new customers. We believe there will be significant opportunities to acquire and integrate these smaller acquisition candidates into our existing infrastructure, providing opportunities for cost synergies and cross-selling. In addition, we may seek to vertically integrate our operations by acquiring companies that offer complementary services that we do not currently offer. There are several new geographic regions where we have expanded and can expand our footprint via acquisition of smaller regional providers. When pursuing an acquisition, we intend to acquire established, high-quality companies in markets where we can establish a leading market position to serve as core businesses into which additional operations may be consolidated.
Customers
We believe that the commitment to consistent, high-quality service demonstrated by the Founding Companies has produced long-term relationships with many existing customers and positions us to expand market penetration through the use of enhanced sales and marketing efforts. The chart below indicates the tenure (i.e., the maximum number of years the customer has been served by one of the Founding Companies) of our top 12 customers:
Customer
Tenure
Customer
Tenure
Mercedes-Benz
Hyundai
Ford
Porsche
General Motors
Volkswagen
Stellantis
Land Rover
Toyota
Tesla
Nissan
BMW
We generally focus our marketing efforts on large commercial accounts, including auto manufacturers, rental car companies, auto auctions, and auto dealerships. We have augmented the capabilities and contacts of the Founding Companies with a sales program designed to identify significant target customers and expand working relationships with existing customers.
Although we generally have a diverse customer base, four customers, General Motors, Glovis (the logistics arm of Hyundai and Kia), BMW and Ford account for roughly 49.6% of our combined operating revenue in 2024. Our business with these five companies, like all other new car delivery contracts, generally run from three to five years within a certain geographic region, though more recently, some OEM customers are agreeing to longer five-to-ten-year contracts. We currently operate under 125 individual contracts with our customers, with no single contract representing more than 7% of our 2024 combined revenue. Historically, all contracts have required public re-bidding upon termination of the contract; however, if the service levels are good, there is a high likelihood that the incumbent carrier will retain the business. Today, many contracts include automatic extensions and OEMs are generally more open to private rate negotiations with incumbent carriers as opposed to a public bidding process. As an industry leader, we should benefit from these changes in contract structure and process. We expect that our existing customers will continue to account for a significant percentage of our revenue for the foreseeable future. The loss of a significant customer, including any of the top five, could have a material adverse effect on our business, financial condition and results of operations.
Competition
The provision of auto transportation and logistics services is competitive. Competition for the delivery of auto transportation and logistics services is based primarily on quality, service, timeliness, price, and geographic proximity. We compete with certain large auto transportation and logistics companies on a regional and local basis, some of which may have greater financial and marketing resources than us. We also compete with many smaller local companies, which may have lower overhead cost structures than us and may, therefore, be able to provide their services at lower rates than us. We believe that we can compete effectively because of our high-quality service, geographic scope, broad range of services offered, experienced management and operational economies of scale. We differentiate ourselves from our competition in terms of service and quality by investing in training, systems and equipment and by offering a broad range of products and services, and in terms of timeliness and geographic proximity by establishing facilities and vehicles in targeted geographic markets so that we are positioned to provide timely deliveries in response to orders from the auto companies.
We may also face competition for acquisition candidates from companies which are attempting, or may attempt in the future, to consolidate towing and transport service providers. Some of our current or future competitors may be better positioned than us to finance acquisitions, to pay higher prices for acquisition candidates pursued by us, or to finance their internal operations.
Seasonality
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 loss of significant customers or contracts; the timing of expenditures for new equipment and the disposition of used equipment; price changes in response to competitive factors; and general economic conditions. As a result of these fluctuations, results for any one quarter should not be relied upon as being indicative of performance in future quarters.
Government Regulation and Environmental Matters
Auto transportation and logistics services are subject to various federal, state and local laws and regulations regarding equipment, driver certification, training and recordkeeping, and workplace safety. Our vehicles and facilities are subject to periodic inspection by the U.S. Department of Transportation and similar state and local agencies. Our failure to comply with such laws and regulations could subject us to substantial fines and could lead to the closure of operations that are not in compliance. In addition, certain government contracting laws and regulations may impact our ability to acquire complementary businesses in a given city or county. We have numerous federal, state and local licenses and permits for the conduct of their respective businesses. Any failure by us to obtain such licenses and permits or delay in our receipt of such licenses and permits could have a material adverse effect on our business, financial condition and results of operations.
Our operations are subject to a number of federal, state and local laws and regulations relating to the storage of petroleum products, hazardous materials and impounded vehicles, as well as safety regulations relating to the upkeep and maintenance of our vehicles. In particular, our operations are subject to federal, state and local laws and regulations governing leakage from salvage vehicles, waste disposal, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters. We believe that we are in substantial compliance with all such laws and regulations and do not currently anticipate that we will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental or workplace health and safety requirements. It is possible that an environmental claim could be made against us or any of the Founding Companies or that one or more of them could be identified by the Environmental Protection Agency, a state agency, or one or more third parties as a potentially responsible party under federal or state environmental laws. If we or any of the Founding Companies were to be named a potentially responsible party, we could be forced to incur substantial investigation, legal and remediation costs, which could have a material adverse effect on our business, financial condition and results of operations.
Safety and Training
We are committed to focusing on and emphasizing safety and training. We utilize a variety of programs to improve safety, including regular driver training and certification, drug testing and safety bonuses. We utilize these and other proven practices throughout our operations to ensure that all employees comply with safety standards established by us, our insurance carriers and federal, state and local laws and regulations. In addition, we promote an emphasis on an accident-free environment. We believe that our emphasis on safety and training will assist us in attracting and retaining quality employees.
Facilities and Vehicles
We operate 50 leased facilities that are used to park, repair and maintain transport vehicles. All of our facilities are leased from other parties and, in three cases, those parties are former owners or affiliates of the Founding Companies. See Note 17 “Related Party Transactions.” Many of our facilities are capable of being utilized at higher capacities, if necessary. We will seek to consolidate facilities and vehicle storage capacity in the future.
We operated a fleet of roughly 1,145 auto transport vehicles and trailers as of December 31, 2024. Our fleet consists both of Company-owned tractors and trailers and those run by owner-operators and sub-haulers. We intend to own and operate a significant percentage of the tractors and trailers we utilize in our daily operations, as opposed to primarily outsourcing to owner-operators or sub-haulers. When needed, we have access to a vast network of sub-haulers to fulfill client needs. We believe these vehicles are generally well-maintained and adequate for our current operations.
Risk Management, Insurance and Litigation
The primary risks in our operations include bodily injury, property damage, workers’ compensation claims and, potentially, environmental and land use claims. Following the Combinations, we began consolidating insurance on a Company-wide basis, subject to customary deductibles. We have been, from time to time, parties to litigation arising in the ordinary course of their respective businesses, most of which involves claims for personal injury or property damage incurred in connection with their operations. The Company is not currently involved in any litigation that the Company believes will have a material adverse effect on our business, financial condition or results of operations, except as set forth below.
Employees
As of December 31, 2024, we had approximately 671 employees and an extensive network of independent contractors and sub-haulers. None of our employees are subject to collective bargaining agreements.
We recognize that our continued ability to attract, retain and motivate exceptional employees is vital to ensuring our long-term competitive advantage. Our employees are critical to our long-term success and are essential to helping us meet our goals. Among other things, we support and incentivize our employees in the following ways:
● Talent Development, Compensation and Retention. We strive to provide our employees with a rewarding work environment, including the opportunity for growth, success and professional development. We provide our employees with competitive salaries and bonuses, development programs that enable continued learning and growth and a robust employment package - all designed to attract and retain a skilled and diverse workforce.
● Health and Safety. The safety and well-being of our employees is our top priority. We support the health and safety of our employees by providing health care, retirement planning, paid time off and other benefits, which are intended to assist employees to manage their well-being.
Information about our Executive Officers
The following table summarizes information about each one of our executive officers as of December 31, 2024.
Name
Age
Position(s)
Richard O’Dell
Chief Executive Officer, Director
Amy Rice
President, Chief Operating Officer
Brad Wright
Chief Financial Officer, Secretary
Richard D. O’Dell - Mr. O’Dell has served as our Chief Executive Officer and a member of our Board of Directors since our IPO. Mr. O’Dell has served as the Non-Executive Chairman of the Board of Directors of Saia since April 2020. Mr. O’Dell served as Chief Executive Officer of Saia from December 2006 until his retirement in April 2020. Mr. O’Dell joined Saia in 1997 and served in various executive and financial positions until his appointment as Chief Executive Officer. Mr. O’Dell also has experience in public accounting as a certified public accountant. Mr. O’Dell graduated with a bachelor’s degree in Accounting from the University of Kansas.
Amy Rice - Ms. Rice has served as our President and Chief Operating Officer since August 2024. Ms. Rice served in various roles at CSX, a Class I freight railroad and transportation provider, from 2011 - 2019, including as Vice President, Coal and Intermodal Operations from 2018 - 2019, Vice President, Strategic Planning from 2017-2018, Vice President of Operations Planning and Performance in 2017 and Vice President of Finance in 2017. More recently, Ms. Rice served as the chief executive officer of Sy-Klone International, a private manufacturer of fine dust filtration systems, from 2019 to 2023. Ms. Rice has been a board member of Firan Technology Group Corporation since 2022. Ms. Rice has a Masters of Business Administration from the Ross School of Business of the University of Michigan and an undergraduate business degree from Emory University.
Brad Wright - Mr. Wright has served as our Chief Financial Officer and Secretary since our IPO. Mr. Wright was most recently the Chief Financial Officer and a member of the Board of Directors of PMC Consolidated Holdings, LLC, the parent company of Protect My Car, a Crestview Partners portfolio company (until its sale that closed in August 2023) providing extended auto warranty plans to consumers, since September 2018. From September 2017 through March 2018, Mr. Wright was the interim Chief Financial Officer of Eurasia Group, a global consultancy firm. From February 2008 through July 2017, Mr. Wright served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer of FBR & Co., the NASDAQ-listed parent company of Friedman, Billings Ramsey Capital Markets & Co., an investment banking and institutional brokerage firm. Mr. Wright earned a bachelor’s degree in Business Administration with an emphasis in Accounting from Nebraska Wesleyan University (1982).
Available Information
The Company maintains a website at the following address: http://www.proficientautologistics.com. The information on the Company’s website is not incorporated by reference in this Annual Report.
We make available on or through our website reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to these reports. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information available with, or furnish it to, the SEC. The SEC also maintains a website at the following address, through which this information is available: http://www.sec.gov.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
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 complete 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.
● Increased competition in the auto transportation and logistics industry could result in a loss of our market share or a reduction in our rates, which could have a material adverse effect on our operations.
● We are highly dependent on the automotive industry, and a decline in the automotive industry could have a material adverse effect on our operations.
● We are dependent on a small number of customers for a large portion of our revenue.
● Our business depends upon compliance with numerous government regulations.
● Arrangements with independent contractors expose us to risks that we do not face with employees.
● Any unionization efforts or labor regulation changes in certain jurisdictions in which we operate could divert management’s attention and could have a materially adverse effect on our operating results or limit our operational flexibility.
● Increases in driver compensation or difficulties attracting and retaining qualified drivers could have a materially adverse effect on our profitability and the ability to maintain or grow our business.
● We will need to integrate information technology systems, and our business may be seriously harmed if we fail to maintain, upgrade, enhance, protect, and integrate our information technology systems.
● Operational risks, including the risk of cyberattacks, may disrupt our business and could have a material adverse effect on our operations.
Risks Related to Our Business and Operations
Increased competition in the auto transportation and logistics industry could result in a loss of our market share or a reduction in our rates, which could have a material adverse effect on our operations.
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, either 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.
We are highly dependent on the automotive industry and a decline in the automotive industry could have a material adverse effect on our operations.
The automotive transportation market in which we operate is dependent upon the volume of new automobiles, sport utility vehicles (“SUVs”), and light trucks manufactured, imported and sold by the automotive industry in the United States, Canada, and Mexico. The automotive industry is highly cyclical, and the demand for new automobiles, SUVs and light trucks is directly affected by such external factors as general economic conditions in the United States, Canada and Mexico, unemployment rates, labor shortages or strikes, consumer confidence, government policies, including tariffs, continuing activities of war, terrorist activities and the availability of affordable new car financing. As a result, our results of operations could be adversely affected by downturns in the general economy and in the automotive industry, and by changing consumer preferences in purchasing new automobiles, SUVs and light trucks or the overall financial condition of our major customers. A significant decline in the volume of automobiles, SUVs and light trucks manufactured, imported and sold in the United States could have a material adverse effect on our operations.
We are dependent on a small number of customers for a large portion of our revenue.
Historically, a small group of our customers have made up a majority of our revenue. Specifically, for the year ended December 31, 2024 our top four customers accounted for 49.6%, and for the year ended December 31, 2023 our top five customers accounted for 59.6% of our combined operating revenue, and our top ten customers accounted for 70.9% and 84.3% of our combined total operating revenue during the same periods, respectively. General Motors Company accounted for 22% of our combined operating revenue for the year ended December 31, 2024. 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. 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 would have a material adverse effect on the Company’s results of operations and financial condition.
Our business depends upon compliance with numerous government regulations.
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, contract compliance, insurance requirements, tariff and trade policies, taxation, and financial reporting.
We are audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other rules 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 U.S. Environmental Protection Agency 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 productivity and our load factor, and the costs of compliance could incur significant additional expenses.
Any such change in an applicable regulation or ruling in a judicial proceeding could have a material adverse effect on our business.
We cannot predict the impact that future regulations may have on our business. Our failure to maintain required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our operating permits and licenses.
Our engagement of owner-operators to provide a portion of our capacity exposes us to different risks than we face with our company drivers.
We face a complex and increasingly stringent regulatory and statutory scheme relating to wages, classification of employees and alternate work arrangements. Tax and other regulatory authorities, as well as owner-operators themselves, have increasingly asserted that owner-operators within our industry are employees, rather than independent contractors. 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 as employees for a variety of purposes, including workers’ compensation and health care coverage. If any such cases are judicially determined in a manner adverse to us or our businesses, there could be an adverse impact on our operations in the effected jurisdictions. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If the owner-operators 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 to ensure compliance with all relevant laws. While we continue to engage owner-operators 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 judicial proceeding could have a material adverse effect on our business.
In addition, our lease contracts with owner-operators are governed by federal leasing regulators, which impose specific requirements on us and owner-operators retained by us. Litigation alleging violations of lease agreements or contractual terms could result in adverse decisions against us.
We may be adversely impacted by fluctuations in the price and availability of fuel and our ability to collect fuel surcharges.
We must purchase large quantities of fuel to operate our business, which is a significant operating expense. The price and availability of fuel can be highly volatile and can be impacted by factors beyond our control, such as natural disasters, adverse weather conditions, political events or international conflicts, price and supply decisions by oil producing countries, or changes to trade agreements. An increase in fuel prices or diesel fuel taxes, or any change in federal or state regulations that results in such an increase, could have an adverse effect on our operating results.
We typically are able to pass through a portion of our fuel costs to 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.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
We require substantial amounts of cash to cover operating expenses as well as to fund capital expenditures, working capital changes, principal and interest payments on debt obligations, lease payments and tax payments. In the future, we may require additional capital to cover such expenses. Any debt financing obtained by us in the future may contain certain restrictive covenants that limit our ability, among other things, to engage in certain activities that are in our long-term best interests, including our ability to:
● incur additional indebtedness;
● incur certain liens;
● consolidate, merge or sell or otherwise dispose of our assets;
● make investments, loans, advances, guarantees and acquisitions;
● enter into swap agreements;
● redeem, repurchase or refinance our other indebtedness; and
● amend or modify our governing documents.
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, when we require it, our ability to continue to grow or support our business and respond to business challenges could be significantly limited.
Our operations expose us to potential environmental liabilities.
Our operations are subject to a number of federal, state and local laws and regulations relating to the storage of petroleum products and hazardous materials, as well as safety regulations relating to the upkeep and maintenance of our vehicles. In particular, our operations are subject to federal, state and local laws and regulations governing leakage from salvage vehicles, waste disposal, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters. It is possible that an environmental claim could be made against us or that we could be identified by the Environmental Protection Agency, a state agency or one or more third parties as a potentially responsible party under federal or state environmental laws. If we were to be named a potentially responsible party, we could be forced to incur substantial investigation, legal and remediation costs, which could have a material adverse effect on our business, financial condition and results of operations.
We may be adversely impacted by work stoppages and other labor matters.
A substantial number of the employees of our largest customers are members of trade unions and are employed under the terms of collective bargaining agreements. For example, during 2023, labor strikes by the United Auto Workers of its employees at certain facilities of Ford, General Motors and Stellantis caused a 45-day shutdown of the affected manufacturing operations. Future work stoppages at our automotive customers or their suppliers could negatively impact our revenues and profitability.
Any unionization efforts or labor regulation changes in certain jurisdictions in which we operate could divert management’s attention and could have a materially adverse effect on our operating results or limit our operational flexibility.
We consider our relationship with our employees to be satisfactory, and none of our employees are represented by a union in collective bargaining with us. However, efforts could be made by employees and third parties from time to time to unionize portions of our workforce. Any unionization efforts, collective bargaining agreements or work stoppages could have a materially adverse effect on our operating results or limit our operational flexibility.
Sustained periods of severe abnormal weather can have a material adverse effect on our business.
Certain weather conditions can disrupt our operations, which will negatively affect revenues on a particular business day that may not be recouped in the future. Inefficiencies in our loading, unloading and transit times associated with cleaning snow off of our rigs before use and cleaning snow off of vehicles being transported before and after transporting them, increased lodging costs due to hours of service restrictions for our drivers and premium (overtime) pay required in order to complete the unit movements over weekends to make up for the inefficiencies caused by delayed delivery of on-ground customer inventories may also have a negative impact on earnings.
There can be no assurance that we will continue to manage our business effectively when influenced by severe weather events or that severe weather events will not have a material adverse effect on our business, financial condition and results of operations.
Our growth strategy includes acquisitions, diversification into new specialty transportation businesses and expansion into new geographic markets. We are subject to various risks in pursuing this growth strategy and we may have difficulty in integrating businesses we acquire and may be subject to unexpected liabilities.
Our business strategy includes a growth strategy partly dependent on acquisitions, diversification into specialty transportation businesses and expansion into new geographic markets.
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 limited or no prior experience and the loss of key employees. Furthermore, even if we are able to identify attractive acquisition 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, successfully or on a timely basis, our expectations 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, but not limited to, possible purchase price adjustments. Rights to indemnification by sellers of assets to us, even if obtained, may not be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business.
We currently intend to finance future acquisitions by using a combination of common stock, cash and debt. To the extent we issue shares of common stock to finance future acquisitions, the interests of existing stockholders will be diluted. If the common stock does not maintain a sufficient market value, or if potential acquisition candidates are unwilling to accept common stock as part of the consideration for the sale of their businesses, we may be required to utilize more of our cash resources, if available, in order to pursue our acquisition program. If we do not have sufficient cash resources, our growth could be limited unless we are able to obtain additional capital through debt or equity financings. There can be no assurance that we will be able to obtain the financing we will need for our acquisition program on acceptable terms, or at all.
We currently generate most of our revenue from the transportation of vehicles. However, we may grow our business by diversifying and entering into new specialty transportation businesses. To the extent we enter into such businesses, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of existing clients due to the perception that we are no longer focusing on our core business. Entry into certain new specialty transportation businesses may also subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new specialty transportation business generates insufficient revenue or if we are unable to efficiently manage our expanded operations, our results of operations could be materially adversely affected.
Technological advances are facilitating the development of driverless vehicles, which may materially harm our business.
Driverless vehicles are being developed for the transportation and automotive industries that, if widely adopted, may materially harm our business. The eventual timing of availability of driverless vehicles is uncertain due to regulatory requirements, additional technological requirements, and uncertain consumer acceptance of these vehicles. The effect of driverless vehicles on the transportation and automotive industries is uncertain and could include changes in the level of new and used vehicles sales, the price of new vehicles, and the demand for our services, any of which could materially and adversely affect our business.
Because we have operated as a combined company for less than one year, we do not have a long-term reputation of success.
As we have only operated as a combined company since May 2024, we do not have the long-term reputation of success that other well-established companies have. Particularly in the transportation market, in which trust is important, the absence of a proven reputation could make it more difficult to establish new customers. As a result, we rely more heavily on the brand value and reputation of the individual Founding Companies.
The transportation infrastructure continues to be a target of terrorists.
Because transportation assets continue to be a target of terrorists, governments around the world are adopting or are considering adopting stricter security requirements that will increase operating costs and potentially slow service for businesses, including those in the transportation industry. These security requirements are not static, but change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations.
Ongoing insurance and claims expenses could result in significant expenditures and reduce, and cause volatility in, our earnings.
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 affect our financial condition, results of operations, liquidity and cash flows.
In recent years, several insurance companies have completely stopped offering coverage to trucking companies or have significantly reduced the amount of coverage they offer or have significantly raised premiums as a result of increases in the severity of automobile liability claims and sharply higher costs of settlements and verdicts. To the extent that the third-party insurance companies propose increases to their premiums for coverage of commercial trucking claims, we may decide to pay such increased premiums or increase our financial exposure on an aggregate or per occurrence basis, including by increasing the amount of its self-insured retention or reducing the amount of total coverage. This trend could adversely affect our ability to obtain suitable insurance coverage, could significantly increase our cost for obtaining such coverage, or could subject us to significant liabilities for which no insurance coverage is in place, which could materially adversely affect our financial condition, results of operations, liquidity and cash flows.
Our self-insured retention limits can make our insurance and claims expense higher and/or more volatile. We accrue for the estimated costs of the uninsured portion of pending claims based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses associated with claims, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates.
In addition, any accident or incident for which we are liable, even if fully insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future.
Increases in driver compensation or difficulties attracting and retaining qualified drivers, independent contractors or third party capacity 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 capacity providers, could have a materially adverse effect on our growth and profitability. The transportation industries are subject to a shortage of qualified drivers. Such shortage is exacerbated during periods of economic expansion, in which there may be alternative employment opportunities, or during periods of economic 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 may be limited by other future outbreaks similar to COVID-19 and any governmental imposed lockdown or other attempts to reduce the spread of such an outbreak may reduce the pool of potential drivers available to us. Regulatory requirements could further reduce the number of eligible drivers. 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.
In connection with the preparation of the Company’s audited financial statements for the year ended December 31, 2024, a material weakness in the Company’s internal controls over financial reporting was identified and, if our remediation is not effective, or if we fail to maintain an effective system of internal controls over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence and profitability.
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 including account reconciliations and review surrounding the close process.
Remediation steps are being taken designed to improve the Company’s internal controls over financial reporting to address the underlying causes, including: designing and implementing increased controls, increased oversight and review of technical systems and engaging third-parties. We continue to work on other remediation initiatives.
While we believe that these efforts will improve the Company’s internal controls over financial reporting, the implementation of these 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. If 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. If we are unable to successfully remediate our existing or any future material weakness, the accuracy of our financial reporting may be adversely affected, which could cause investors to lose confidence in our financial reporting and our share price and profitability may decline as a result.
Increased prices for new equipment, trucks and their parts, and the decreased availability of new equipment or the failure of manufacturers to meet their sale obligations could have a materially adverse effect on our business, profitability and operations.
We are subject to risk with respect to increased prices for new trucking equipment, including due to new or increased tariffs, and decreased vendor output. Any decrease in vendor or manufacturer output could have an adverse effect on our ability to sustain our desired growth rate and maintain our trucking fleet.
We are sensitive to the used equipment market and fluctuations in prices and demand for trucking equipment. The market for used equipment is affected by several factors, including the demand for freight, the supply of new and used equipment, the availability and terms of financing, the presence of buyers for export to foreign countries, and commodity prices for scrap metal.
Our success depends in part on the contributions of our executives and managers, including those who were employees of the Founding Companies.
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. We do not presently maintain “key man” life insurance with respect to members of senior management. In addition, our operating facilities 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. 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 one or more of these managers may 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.
The timely, professional and dependable service required by auto transportation and logistics customers requires an adequate supply of skilled dispatchers, drivers and support personnel. Accordingly, our success will depend on our ability to employ, train and retain the personnel necessary to meet our service requirements. From time to time, and in particular areas, there are shortages of skilled personnel, and there can be no assurance that we will be able to maintain an adequate skilled labor force necessary to operate efficiently, that our labor expenses will not increase as a result of a shortage in the supply of skilled personnel or that we will not have to curtail our planned growth as a result of labor shortages.
Our business may be seriously harmed if we fail to maintain, upgrade, enhance, protect, and integrate our information technology systems.
We must ensure that our information technology systems remain competitive. If our systems are unable to maintain high volumes with reliability, 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, our results of operations could be harmed.
Information technology risks, including the risk of cyberattacks, may disrupt our business, result in losses or limit our growth.
We rely heavily on our financial, accounting, treasury, communications and other data processing systems and a continued and efficient operation of such systems. 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 are from time to time subject to cyberattacks which may continue to increase in sophistication and frequency in the future.
Cyber 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 security 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 systems could prove to be inadequate and, if compromised, 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 plans and systems put in place by third-party service providers, and such third-party service providers may have limited indemnification 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 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 our owner-operators expose us to risks that we do not face with company drivers.
Our reliance on independent owner-operators creates numerous risks for our business. For example, if our independent owner-operators fail to meet our contractual obligations or otherwise fail to perform in a manner consistent with our 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 third-party service providers, as compared to company drivers who are employed by us. As independent business owners, our owner-operators may make business or personal decisions that conflict with our best interests. For example, if a load is unprofitable, route distance is too far from home or personal scheduling conflicts arise, an owner-operator may deny loads of freight from time to time. In these 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-operators or increases in their equipment or operating costs could cause them to seek higher revenues.
We are directly affected by the state of the global economy and geopolitical developments.
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, 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 increased tariffs on imported goods - specifically automobiles - from countries that include Canada, Mexico and the European Union. Such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign governments may result in decreased shipping volumes and increased product costs, and could have a material adverse effect on our revenues and results of operations.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
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 loss of significant customers or contracts; the timing of expenditures for new equipment and the disposition of used equipment; variation in the level of self-insured claims costs; price changes in response to competitive factors; and general economic conditions. As a result of these fluctuations, results for any one quarter should not be relied upon as being indicative of performance in future quarters.
Our business and operating results are subject to seasonal fluctuations, which could result in fluctuations in our operating results and stock price.
The provision of auto transportation and logistics services is subject to seasonal variations. Specifically, there are times when auto manufacturing plants have maintenance time off which impacts the auto delivery cycle. Auto transportation and logistics tends to be strongest in the months with the mildest weather because inclement weather tends to slow the delivery of vehicles.
Our stockholders and management will have significant control over stockholder matters.
Approximately 24.3% of our outstanding common stock is beneficially owned by the executive officers and directors and the former stockholders of the Founding Companies, including their respective affiliates. 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.
Risks Related to the Securities Markets and Ownership of Our Common Stock
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 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.” 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.
Our stock price may be volatile, which could cause you to lose all or part of your investment in our common stock.
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 you to lose all or part of your investment in our common stock since you 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:
● volatility and instability in the financial and capital markets;
● our operating and financial performance, quarterly or annual earnings relative to similar companies;
● announcements by competitors that impact our competitive outlook;
● publication of news stories about us, our competitors or our industry;
● the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
● announcements relating to strategic transactions, including acquisitions, collaborations, or similar arrangements;
● sales of our common stock by the Company, our insiders, or other stockholders, or issuances by the Company of shares of our common stock in connection with strategic transactions;
● regulatory developments or legal developments;
● litigation or arbitration;
● changes in accounting standards, policies, guidance, interpretations or principles;
● general economic, political and market conditions and other factors; and
● the occurrence of any of the risks described in this section titled “Risk Factors.”
If securities or industry analysts discontinue publishing research or reports about our business, or if they publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
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 may never 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.
Sales of a substantial number of our shares of common stock in the public market could cause our stock price to fall.
Our common stock price could decline as a result of sales of a large number of shares of common stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur, might also make it more difficult for the Company to sell equity securities in the future at a time and price that the Company deems appropriate.
As of December 31, 2024, we had 27,069,114 shares of common stock outstanding, all of which were freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), unless held by our “affiliates” as defined in Rule 144 under the Securities Act.
In addition, in the future, the Company may issue additional shares of common stock, or other equity or debt securities convertible into common stock, in connection with a financing, acquisition, employee arrangement or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause the price of our common stock to decline.
Anti-takeover provisions in our charter documents and under Delaware law could prevent or delay an acquisition of us that may be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
Our 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:
● permit only the Board to establish the number of directors and fill vacancies on the board of directors;
● provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
● require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws;
● authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
● eliminate the ability of our stockholders to call special meetings of stockholders;
● prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
● prohibit cumulative voting; and
● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law (the “DGCL”) prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved in a prescribed manner.
Any provision of our certificate of incorporation, amended and restated bylaws or Delaware law 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.
The exclusive forum provisions in our organizational documents 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 employees, which may discourage lawsuits with respect to such claims.
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 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 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.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our amended and restated bylaws provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”), including for all causes of action asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, and our officers and directors. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While federal or other state courts may not follow the holding of the Delaware Supreme Court or may determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court, and our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, and our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions in our amended and restated bylaws, including the Federal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim, and may result in increased costs for a stockholder to bring such a claim, in a judicial forum of their choosing for disputes with us or our directors, officers, other employees or agents, which may discourage lawsuits against us and our directors, officers, other employees or agents.
Our Board is authorized to issue and designate shares of our preferred stock without stockholder approval.
Our amended and restated certificate of incorporation authorizes our Board, without the approval of our stockholders, to issue shares of preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated certificate of incorporation, and to establish from time to time the number of shares of preferred stock to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional series of convertible preferred stock may be senior to or on parity with our common stock, which may reduce our common stock’s value.
Because we do not anticipate paying any dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared nor paid dividends on our capital stock. We currently intend to retain all 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.
General Risk Factors
The requirements of being a public company may strain our resources, result in more litigation and divert management’s attention.
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”), 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 controls and procedures and internal control over financial reporting. We are required to disclose changes made in our internal control and procedures on a quarterly basis. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a 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.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.
These new rules and regulations may make it more expensive for us to obtain director and officer liability insurance and, in the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
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 are successful, our business could be seriously harmed. Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.
We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iii) exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not approved previously.
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, 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.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and once we are no longer “an emerging growth company,” management will be required to assess the effectiveness of these controls annually. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.
Unstable economic and market conditions may have serious adverse consequences on our business, financial condition and stock price.
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-Palestine conflict). The extent of the impact of these conditions on our operational and 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, 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.
The success of our business is dependent on our brand equity.
Negative press coverage, lawsuits, regulatory investigations, unfavorable publicity, or allegations of wrongdoings could affect our reputation and result in a loss of brand equity. Any assertion of wrongdoing by a Company executive, associate, or hired independent contractor, despite a lack of factual basis, may affect our brand image and reputation. If we fail to maintain and affirmatively protect our brand value, demand for our services could wane and we may fail to attract qualified candidates for open positions. Such events may cause us to devote additional resources to repairing our brand value and reputation. Any negative effect on our brand value may cause an adverse effect on our financial condition, liquidity, and results of operations.
We are subject to risks associated with climate change, including increased regulation of our emissions, and the potential increased impacts of severe weather events on our operations.
Concern over climate change, including the effect of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit emissions, including vehicle engine emissions. Increasingly, state and local governments are also considering greenhouse gas regulatory (“GHG”) requirements. Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to the regulation of climate change. Increased regulation regarding GHG emissions, vehicle engine emissions, could impose substantial costs on us. These costs include an increase in the cost of the fuel and other energy we purchase to transport vehicles. Until the timing, scope, and extent of such possible regulation becomes known, we cannot predict its effect on our cost structure or our operating results. It is reasonably possible, however, that it could materially increase our operating expenses and have an adverse direct or indirect effect on our business, if instituted.
Additionally, the potential acute and chronic physical effects of climate change, such as increased frequency and severity of storms, floods, fires, sea-level rise, excessive heat, longer-term changes in weather patterns and other climate-related events, could affect our operations, infrastructure and financial results. Operational impacts, such as more frequent delays in our ability to transport cargo, could result in loss of revenue. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to predict accurately the materiality of any potential losses or costs associated with the physical effects of climate change.
We may be subject to securities litigation, which is expensive and could divert management attention.
As described above, the market price of our common stock is likely to be volatile. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation (including the cost to defend against, and any potential adverse outcome resulting from any such proceeding) can be expensive, time-consuming, damage our reputation and divert our management’s attention from other business concerns, which could seriously harm our business.
Developments in applicable tax laws may adversely impact our business, results of operations and financial condition. Our effective tax rate could also be adversely affected as a result of various evolving factors, including changes in the scope of our operations.
New tax laws, statutes, rules or regulations may be enacted at any time, or interpreted, changed, modified or applied to us, any of which could have an adverse impact on our business, results of operations and financial condition. We are currently unable to predict whether such changes will occur. If such changes are enacted or implemented or changes in the scope of our operations occur, including expansion to new geographies, such changes could adversely affect our effective tax rate and our operating results.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
We operate 50 leased facilities that are used to park, repair and maintain transport vehicles. All of our facilities are leased from other parties and, in three cases, those parties are former owners or affiliates of the Founding Companies. Many of our facilities are capable of being utilized at higher capacities, if necessary. We will seek to consolidate facilities and vehicle storage capacity in the future.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings and governmental and regulatory proceedings that arise in the ordinary course of business. The Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse impact on the Company’s financial position or results of operations. See Note 18 “Commitments and Contingencies.”

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURES
This section is not applicable.
Part II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
Our common stock is listed on The Nasdaq Stock Market under the symbol “PAL.”
(b) Holders
As of March 25, 2025, there were 21 holders of record of our common stock.
Common Stock
As of December 31, 2024, we had 50,000,000 common shares authorized at a par value of $0.01, of which 27,069,114 shares were outstanding.
Preferred Stock
As of December 31, 2024, we had 10,000,000 preferred shares authorized at a par value of $0.01, of which no shares were outstanding.
(c) Dividends
We have never declared or paid cash dividends on our common stock, and we intend to retain our future earnings, if any, to fund the growth of our business. We therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. Our future decisions concerning the payment of dividends on our common stock will depend upon our results of operations, financial condition and capital expenditure plans, as well as any other factors that the Board, in its sole discretion, may consider relevant.
(d) Securities Authorized for Issuance Under Equity Compensation Plan
For a description of securities authorized under our equity compensation plans, see Part III, Item 12 of this Annual Report.
(e) Stock Performance Graph
The following graph compares the cumulative return to stockholders for $100 invested in our common stock relative to the cumulative total returns of the NYSE Composite and NASDAQ Truck & Transportation for the last fiscal year. In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only. This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The stock price performance included in the graph above is not necessarily indicative of future stock price performance.
(f) Recent Sales of Unregistered Securities
On December 21, 2023, the Company entered into the Combination Agreements with the equity owners of the Founding Companies pursuant to which the Company agreed to acquire the Founding Company for a combination of cash and shares of the Company’s common stock. The consideration paid in the Combinations (which closed on May 13, 2024) consisted of cash (including certain amounts payable as bonuses to certain key employees and certain amounts payable to reimburse certain Founding Companies for pre-closing capital expenditures) of approximately $178.5 million (subject to certain adjustments), and 6,978,191 shares of the Company’s common stock (provided, that 541,866 of these shares of common stock were held back to satisfy the indemnification obligations of certain of the Founding Companies for a period of 12 months following the closing of the IPO). All such shares were issued in private offerings pursuant to Section 4(a)(2) of the Securities Act and applicable state securities laws.
The Registration Statement was declared effective by the SEC on May 8, 2024 and the IPO closed on May 13, 2024. Stifel, Nicolaus & Company, Incorporated, Raymond James & Associates, Inc. and William Blair & Company, L.L.C. acted as joint book-running managers representatives for the IPO. Proficient sold 14,333,333 shares of its common stock in the IPO at a public offering price of $15.00 per share. Proficient also granted the underwriters a 30-day option to purchase up to an additional 2,149,999 shares of common stock from Proficient at the initial public offering price, less the underwriting discount. On June 4, 2024, the underwriters purchased 1,435,000 shares of common stock pursuant to their overallotment option. The net proceeds from the IPO (including the net proceeds from the partial exercise of the IPO underwriters’ overallotment option) were approximately $215.2 million, after payment by the Company of underwriting discounts and commission of approximately $16.6 million and expenses of approximately $4.75 million. Approximately $178.5 million was used to pay the cash portion of the Combinations consideration payable to the equity holders of the Founding Companies and approximately $3.0 million was used to pay expenses incurred in connection with the Combinations. The remaining net proceeds were used for general corporate purposes, which included working capital and future acquisitions.
Prior to the IPO, the Company entered into various subscription agreements with certain natural persons pursuant to which they agreed to purchase an aggregate of 2,939,130 shares of common stock, made in a private offering pursuant to Section 4(a)(2) of the Securities Act and applicable state securities laws.
On August 16, 2024, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), between PAL Stock Acquiror, Inc. and PAL Merger Sub, LLC, subsidiaries of the Company, on the one hand, and Auto Transport Group, LC, (“ATG”), each seller identified therein and Chris Baldwin, solely in his capacity as the representative of the Sellers, on the other hand, the Company completed the acquisition (the “ATG Transaction”) of ATG. ATG provides vehicle transportation and shipping services in the Mountain Western region utilizing a fleet of 76 tractors and 76 trailers.
In connection with the ATG Transaction, the Company paid the sellers cash consideration of approximately $28.9 million (after certain pre-closing adjustments) and issued to the sellers approximately 1.07 million shares of the Company’s Common Stock, approximately 105,000 of which have been held back to secure certain of the seller’s post-closing adjustment and indemnification obligations. The purchase price is subject to customary post-closing adjustments. The cash portion of the ATG Transaction consideration was funded by cash on the Company’s consolidated balance sheet and borrowings under available credit facilities.
(g) Issuer Purchases of Equity Securities
The Company did not repurchase any shares of its common stock during the year ended December 31, 2024.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See Part I, “Forward-Looking Statements” and Part I, Item 1A, “Risk Factors” for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results could differ materially from the results referenced in forward-looking statements.
Business Overview
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 based upon information obtained from leadership of the Auto Haulers Association of America, utilizing roughly 1,145 auto transport vehicles and trailers on a daily basis, including approximately 845 Company-owned transport vehicles and trailers, and employing 671 dedicated employees as of December 31, 2024. Prior to the completion of the IPO, we had not operated as a combined company. From our 50 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. Our customers range from large, global auto companies, such as General Motors, BMW, Stellantis, and Mercedes-Benz, to EV producers, such as Tesla and Rivian. Additional customers include auto dealers, auto auctions, rental car companies and auto leasing companies.
Description of the Combinations
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 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 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 $4.5 million in cash. 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. 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 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, 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.”
Financial Statement Components
Revenue
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 devotes the use of equipment to 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.
We are typically paid a predetermined rate per unit for our Company Drivers services. Consistent with industry practice, our typical customer contracts do not guarantee load levels or tractor availability. This gives us and our customers a certain degree of flexibility in response 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.
We monitor as key operating metrics average revenue per unit and average revenue per loaded mile, as applicable to the portions of our business that contract on each of these bases.
Operating Expenses
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 to third-party carriers and (iv) maintenance of our fleet. Expenses that have both fixed and variable components include maintenance and tire expense 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 service center facilities, the compensation of non-driver personnel and other general and administrative expenses.
Critical Accounting Policies and Estimates
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
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 less than the economic lives.
Periodically, we evaluate the useful lives and salvage values of our revenue equipment and other long-lived assets based upon, but not limited to, our experience with similar assets including gains or losses upon dispositions of such assets, conditions in the used equipment market and prevailing industry practices. Changes in useful lives or salvage value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material impact on our financial results. We review our property and equipment whenever events or circumstances indicate the carrying amount of the asset may not be recoverable. An impairment loss equal to the excess of carrying amount over fair value would be recognized if the carrying amount of the asset is not recoverable.
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 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 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 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 the final fair value determination of the assets acquired and liabilities assumed as soon as practicable within the measurement period, but not to exceed one year from the acquisition date.
Goodwill - Goodwill is recorded when the purchase price paid in a business combination exceeds the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment on an annual basis, or upon an occurrence of an event or changes in circumstances that indicate that the carrying value may not be recoverable. In the absence of any indications of potential impairment, the evaluation of goodwill is performed during the fourth quarter of each year.
Goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. When testing goodwill for impairment, the Company may first perform a qualitative assessment to determine whether the fair value of a reporting unit is less than its carrying amount. The Company then completes a quantitative impairment test if the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than the carrying value of its assets. If the estimated fair value of the reporting unit exceeds the carrying value, goodwill is not considered impaired, and no additional steps are needed. If, however, the fair value of the reporting unit is less than its carrying value, then the amount of the impairment loss is the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
Income taxes - Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.
We evaluate the need for a valuation allowance on deferred tax assets based on whether we believe that it is more likely than not all deferred tax assets will be realized. A consideration of future taxable income is made as well as on-going prudent feasible tax planning strategies in assessing the need for valuation allowances. In the event it is determined all or part of a deferred tax asset would not be able to be realized, management would record an adjustment to the deferred tax asset and recognize a charge against income at that time.
Our estimates of the potential outcome of any uncertain tax issue is subject to our assessment of relevant risks, facts and circumstances existing at that time. We account for uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, and record a liability when such uncertainties meet the more likely than not recognition threshold. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
Reportable Segments
Our business is organized into two reportable segments, Company Drivers and Brokered. The Company Drivers segment offers automobile transport and contract services under an asset-based model. The Company’s dedicated service offering devotes the use of equipment to specific customers and provides transportation services through long-term contracts. The Company’s Brokered segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.
Company Drivers Segment
In our Company Drivers 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 devotes the use of equipment to 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, 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 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 as a percentage of total revenue by continuing to build upon our existing relations and acquire 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 our predetermined contract rates with each customer is a baseline fuel price and when fuel prices rise above this baseline 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 condensed consolidated financial statements.
In our Company Drivers segment, our most significant operating expenses vary with miles traveled and include (i) fuel, and (ii) driver related expenses, such as wages, benefits, training and recruitment. Expenses that have both fixed and variable components include maintenance and tire expense 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 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 purchase of new revenue equipment. We use a combination of financing leases and secured long-term debt to acquire revenue equipment. When we finance revenue equipment acquisitions with either finance 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.” We expect our depreciation and interest expense will be impacted by changes in the percentage of our revenue equipment acquired in any given year.
Brokered Segment
In our Brokerage Segment, we generate revenue by utilizing our independent owner operators (who run under our DOT) and independent third-party carriers to assist in transporting autos for our 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 revenue in our Brokered segment are our customers’ excess inventory needs, the rates we obtain from customers, the auto volumes we ship through the brokered segment and our ability to secure these carriers. We generally do not have contracted long-term rates for the cost of third-party carriers, and we cannot assure that our results of operations will not be adversely impacted in the future if our ability to obtain third-party carriers changes or the rates of such providers increase.
The most significant expense of our Brokered segment, which is primarily variable, is the cost of purchased transportation that we pay to third-party carriers and is included in the “Purchased transportation” line item. This expense generally varies directly with the amount of Brokered revenue, rates charged by third 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 (which are recorded in the “Salaries, wages and benefits” line item).
The primary performance indicator in our Brokered segment is operating margin (brokered operating revenue, less brokered operating expenses, as a percentage of brokered operating revenue). Operating margin can be impacted by the rates charged to customers and the rates paid to third-party carriers.
Our Brokered segment does not require significant capital expenditures and is not asset-intensive like our Company Drivers segment.
Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles 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 and Operating Ratio do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other companies, and it should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
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.
The following table provides a reconciliation of net income, the most closely comparable GAAP financial measure, to EBITDA and Adjusted EBITDA:
Successor Predecessor
Twelve
months
ended
December 31,
Period from
January 1,
to May 12,
Twelve
months
ended
December 31,
Twelve
months
ended
December 31,
Total operating revenue $ 240,854,527 $ 41,217,688 $ 135,755,993 $ 130,160,074
Net (loss) income $ (8,475,268 ) $ (15,384,676 ) $ 7,156,170 $ 10,399,119
Add Back:
Interest expense 4,007,661 717,431 953,667 1,163,508
Income tax expense (benefit) (1,245,384 ) (6,350,642 ) 2,243,617 3,130,964
Depreciation 15,699,025 934,988 2,523,971 2,289,026
Intangible amortization 5,709,360 - - -
EBITDA $ 15,695,394 $ (20,082,899 ) $ 12,877,425 $ 16,982,617
EBITDA Margin 6.5 % -48.7 % 9.5 % 13.0 %
Add Back:
Stock-based compensation 8,883,142 - - -
Adjusted EBITDA $ 24,578,536 $ (20,082,899 ) $ 12,877,425 $ 16,982,617
Adjusted EBITDA Margin 10.2 % (48.7 )% 9.5 % 13.0 %
Operating ratio is calculated as total operating expenses as a percentage of operating revenue.
Adjusted operating ratio is calculated as total operating expenses reduced for share-based compensation expense and amortization of intangibles as a percentage of operating revenue.
The following table provides a reconciliation of total operating revenue and operating (loss) income, to operating margin and adjusted operating margin:
Successor Predecessor
Twelve
months
ended
December 31,
Period from
January 1,
to May 12,
Twelve
months
ended
December 31,
Twelve
months
ended
December 31,
Total operating revenue $ 240,854,528 $ 41,217,688 $ 135,755,993 $ 130,160,074
Total operating expenses 248,747,069 62,237,653 125,402,539 115,466,483
Operating (loss) income (7,892,541 ) (21,019,965 ) 10,353,454 14,693,591
Operating Ratio 103.3 % 151.0 % 92.4 % 88.7 %
Add Back:
Stock-based compensation 8,883,142 - - -
Intangible amortization 5,709,360 - - -
Adjusted Total Operating Expenses $ 234,154,566 $ 62,237,653 $ 125,402,539 $ 115,466,483
Adjusted Operating Ratio 97.2 % 151.0 % 92.4 % 88.7 %
Results of Operations for the Twelve Months Ended December 31, 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)
Successor Predecessor
Proficient Auto
Logistics, Inc. Proficient Auto
Transport, Inc.
Twelve
months
ended
December 31,
Period from
January 1,
to May 12,
Twelve
months
ended
December 31,
Twelve
months
ended
December 31,
Operating revenue
Revenue, before fuel surcharge 92.2 % 94.5 % 93.1 % 89.2 %
Fuel surcharge and other reimbursements 6.8 % 5.0 % 6.9 % 10.8 %
Other revenue 0.6 % - - -
Lease revenue 0.4 % 0.5 % - -
Total operating revenue 100.0 % 100.0 % 100.0 % 100.0 %
Operating Expenses
Salaries, wages and benefits 18.9 % 66.7 % 15.1 % 17.6 %
Stock-based compensation 3.7 % - - -
Fuel and fuel taxes 6.7 % 2.7 % 3.3 % 5.5 %
Purchased transportation 49.8 % 63.1 % 61.8 % 54.0 %
Truck expenses 5.4 % 4.6 % 5.2 % 5.4 %
Depreciation 6.5 % 2.3 % 1.9 % 1.8 %
Intangible amortization 2.4 % - - -
Loss (Gain) on sale of equipment (0.1 )% (0.6 )% (0.1 )% -
Insurance premiums and claims 5.6 % 2.7 % 2.3 % 2.0 %
General, selling, and other operating expenses 4.4 % 9.6 % 2.9 % 2.4 %
Total Operating Expenses 103.3 % 151.0 % 92.4 % 88.7 %
Operating (loss) income (3.3 )% (51.0 )% 7.6 % 11.3 %
Other income and expense
Interest expense (1.7 )% (1.7 )% (0.7 )% (0.9 )%
Acquisition Costs (0.5 )% - - -
Earn Out Contingency Gain 1.3 % - - -
Other income (expense), net 0.1 % 0.0 % - -
Total other income (expense) (0.8 )% (1.7 )% (0.7 )% (0.9 )%
(Loss) Income before income taxes (4.0 )% (52.7 )% 6.9 % 10.4 %
Income tax expense (benefit) (0.5 )% (15.4 )% 1.7 % 2.4 %
Net (loss) income (3.5 )% (37.3 )% 5.2 % 8.0 %
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 third-party carriers (Brokered). 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. Brokered 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’s total operating revenue is affected by, among other things, the general level of economic activity in the United States, customer inventory levels, specific customer demand, the level of capacity in the truckload and brokerage industry, the success of its marketing and sales efforts and the availability of drivers and third-party carriers.
The Company disaggregates revenue from contracts with its customers for Company Drivers and Brokered 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:
Successor Predecessor
Twelve
months
ended
December 31,
Period from
January 1,
to May 12,
Twelve
months
ended
December 31,
Twelve
months
ended
December 31,
Operating Revenue:
Revenue, before fuel surcharge and other reimbursements $ 222,055,006 $ 38,947,787 $ 126,437,360 $ 116,108,865
Fuel surcharges and other reimbursements 16,302,886 2,073,087 9,318,633 14,051,209
Other Revenue 1,509,218 - - -
Lease Interest Income 987,417 196,814 - -
Total operating revenue $ 240,854,527 $ 41,217,688 $ 135,755,993 $ 130,160,074
The increases in total operating revenue and revenue before fuel surcharge, were primarily due to the Successor period including revenues from the acquired entities from May 13, 2024 to December 31, 2024
In 2024, approximately 49.6% of the Company’s operating revenue was derived from its four largest customers, General Motors, Glovis (the logistics arm of Hyundai and Kia), BMW and Ford.
A summary of the Company’s revenue generated by segment for the periods indicated is as follows:
Successor Predecessor
Twelve
months
ended
December 31,
Period from
January 1,
to May 12,
Twelve
months
ended
December 31,
Twelve
months
ended
December 31,
Operating Revenue:
Company Driver $ 80,364,399 $ 6,749,129 $ 38,475,802 $ 33,268,483
Company Driver fuel surcharge and other reimbursements 5,907,191 819,998 4,927,753 6,297,435
Lease Revenue - - - -
Other Revenue 995,507 - - -
Total Company Driver revenue 87,267,097 7,569,127 43,403,555 39,565,918
Brokerage 141,690,607 32,198,658 87,961,559 82,840,382
Brokerage fuel surcharge and other reimbursements 10,395,695 1,253,089 4,390,879 7,753,774
Lease Revenue 513,711 - - -
Other Revenue 987,417 196,813 - -
Total Brokerage revenue 153,587,430 33,468,560 92,352,438 90,594,156
Total operating revenue $ 240,854,527 $ 41,217,687 $ 135,755,993 $ 130,160,074
Results of Operations for the years ended December 31, 2024 (Successor) and 2023 (Predecessor)
In the Company Driver segment, operating revenues increased by $43.9 million, or 101.1%, to $87.3 million in 2024 compared to $43.4 million in 2023. The increase in the Company Driver segment’s revenue was driven by the Successor period including revenue from the acquired entities. Additionally, we leveraged our expanded company drivers to replace historical brokered lanes and secured new contracts, along with contract renewal pricing increases.
During the first quarter of 2025, market conditions and other competitive pressures resulted in the cessation of business by one of the Company’s largest competitors. The immediate result of this development has been a redistribution among market participants of a significant amount of OEM contract business. New contract business in place at the Company is expected to ramp during 2025 to a run rate that would represent an approximate 15% increase to pro forma combined revenue in 2024 and with contribution margins consistent with the remainder of the contract portfolio.
In the Brokered segment, operating revenues increased by $61.2 million, or 66.3%, to $153.6 million in 2024 compared to $92.4 million in 2023. The increase in the Brokerage segment’s revenue was driven by the Successor period including revenue from the acquired entities, as well as synergies from sharing subhauler resources, new contracts and spot buy opportunities.
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 company 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 increased by $25.2 million, or 123.5%, to $45.6 million in 2024 compared to $20.4 million in 2023. The increase is primarily related to the Successor period which includes expenses from the acquired entities. Additionally, we expanded our Corporate Leadership Team to ensure we have the expertise and experience needed to support our growth as a public company.
Stock-based compensation- Stock-based compensation consists primarily of compensation for certain employees, officers, and directors as a key component of our overall compensation strategy.
Stock-based compensation increased to $8.9 million in 2024 compared to $0 in 2023. The increase is due to the result of stock-based compensation being offered following the Company’s IPO during 2024.
Fuel and fuel taxes - Fuel and fuel taxes consist primarily of diesel fuel expense and fuel taxes for the Company’s company-owned equipment. The primary factors affecting the Company’s fuel and fuel taxes expense are the cost of fuel per mile and the number of miles driven by company drivers.
Fuel and fuel taxes increased by $11.6 million, or 257.8%, to $16.1 million in 2024 compared to $4.5 million in 2023. The increase in fuel and fuel taxes was driven primarily by the Successor period including expenses from the acquired entities.
Purchased transportation - Purchased transportation consists of the payments the Company makes to owner-operators and third-party carriers.
Purchased transportation increased by $36.1 million, or 43.1%, to $119.9 million in 2024 compared to $83.8 million in 2023. The increase in purchased transportation was driven by the Successor period includes expenses from the acquired entities, as well as the expansion of our subhauler database, revenue from new contracts and spot buy opportunities.
Truck Expenses - Truck expenses consist of operating expenses and supplies incurred for ordinary vehicle repairs and maintenance costs, driver on-the-road expenses and tolls.
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 85.7% to $13.0 million in 2024 compared to $7.0 million in 2023. This is primarily due to the Successor period including expenses from the acquired entities.
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.
Depreciation and amortization and the gain on sale of equipment increased by $13.2 million, or 528.0%, to $15.7 million in 2024 compared to $2.5 million in 2023. The increase in depreciation and amortization and the gain on sale of equipment was driven by the Successor period including expenses from the acquired entities.
Intangible Amortization - Intangible amortization is the amortization of our intangible assets, including customer relationships and trade names, recognized during each acquisition, as applicable.
Intangible amortization increased $5.7 million in 2024 compared to $0 in 2023. This is due to the Predecessor not having any intangible assets.
Insurance premiums and claims - Insurance premiums and claims consist primarily of retained amounts for liability (personal injury and property damage), physical damage and cargo damage, as well as insurance premiums. The primary factors affecting the Company’s insurance premiums and claims are the frequency and severity of accidents, trends in the development factors used in the Company’s actuarial accruals and developments in large, prior year claims. The number of accidents tends to increase with the miles we travel. With our significant retained amounts, insurance claims expense may fluctuate significantly and impact the cost of insurance premiums and claims from period-to-period, and any increase in frequency or severity of claims or adverse loss development of prior period claims would adversely affect the Company financial condition and results of operations.
Insurance premiums and claims increased by $10.2 million, or 318.8%, to $13.4 million in 2024 compared to $3.2 million in 2023. The increase in insurance premiums and claims was driven by the Successor period includes expenses from the acquired entities. We are working toward consolidating our insurance plans into a single policy, which will benefit the company by not only providing cost savings relative to similar coverage levels spread across numerous carriers, but also simplifying administration, streamlining the claims process, and ensuring better coverage consistency.
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 $6.5 million, or 158.6%, to $10.6 million in 2024 compared to $4.1 million in 2023. The increase in general, selling, and other operating expenses was primarily due to the Successor period includes expenses from the acquired entities.
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 increased by $3.0 million, or 300.0%, to $4.0 million in 2024 compared to $1.0 million in 2023. The increase was primarily due to the Successor period includes interest expense from the acquired entities.
Operating ratio - Operating ratio is calculated as total operating expenses as a percentage of operating revenue. The Company’s operating ratio increased by 10.9% to 103.3% in 2024 as compared to 92.4% in 2023. The increase in costs was primarily due to expenses that the Predecessor did not incur, including stock compensation expense ($8.9 million) and intangible amortization expense ($5.7 million). Excluding these expenses, the operating ratio for 2024 would be 97.2%. We are working to achieve synergies across all operating companies, which should help reduce the operating ratio over time. See “Non-GAAP Financial Measure” section for the Company’s calculation of operating ratio.
EBITDA - EBITDA increased by $2.8 million, or 21.7%, to $15.7 million in 2024 compared to $12.9 million in 2023. The increase was due to the Successor period having more revenue from the acquired entities. See “Non-GAAP Financial Measure” section for the Company’s calculation of EBITDA.
Adjusted EBITDA - Adjusted EBITDA represents net income (loss) plus interest expense, income tax expense (benefit), depreciation expense, intangible amortization expense, and share-based compensation expenses. Adjusted EBITDA increased by $11.7 million, or 90.7%, to $24.6 million in 2024 compared to $12.9 million in 2023. The increase was due to was primarily due to Predecessor not incurring any stock compensation expense or intangible amortization expense. See “Non-GAAP Financial Measure” section for the Company’s calculation of Adjusted EBITDA.
Results of Operations for the Period from June 13, 2023 (Inception) through December 31, 2023 (Successor)
Results of Operations
Revenue - Proficient did not generate any revenue for the period from June 13, 2023 through December 31, 2023.
Operating Expenses - Proficient’s general and administrative expenses for the period from June 13, 2023 through December 31, 2023 totaled $0.6 million. The expenses were incurred for various legal and accounting services in preparation of this offering and the Combinations.
Net Loss - Proficient’s net loss was $0.6 million for the period from June 13, 2023 through December 31, 2023.
Liquidity and Capital Resources -Proficient’s source of funding was capital raises of $0.9 million of cash through December 31, 2023 from a small group of investors. Proficient may obtain additional financing as needed.
Net cash used in operating activities totaled $0.5 million for the period from June 13, 2023 through December 31, 2023, which resulted in $0.4 million of the cash capital raise left on hand as of December 31, 2023.
Proficient Transport’s Results of Operations for the years ended December 31, 2023 to 2022
The following table sets forth items derived from Proficient Transport’s Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 and 2022 presented as a percentage of operating revenues:
For the years ended
December 31,
Operating revenue
Revenue, before fuel surcharges 93.1 % 89.2 %
Fuel surcharges and reimbursements 6.9 % 10.8 %
Total operating revenue 100.0 % 100.0 %
Operating expenses
Salaries, wages, and benefits 15.1 % 17.6 %
Fuel and fuel taxes 3.3 % 5.5 %
Purchased transportation 61.8 % 54.0 %
Truck expenses 5.2 % 5.4 %
Depreciation and amortization 1.9 % 1.8 %
Gain on sale of equipment (0.1 )% 0.0 %
Insurance premiums and claims 2.3 % 2.0 %
Operating taxes and licenses 0.2 % 0.1 %
General, selling, and other operating expenses 2.7 % 2.3 %
Total operating expenses 92.4 % 88.7 %
Total operating income 7.6 % 11.3 %
Other expense
Interest expense, net (0.7 )% (0.9 )%
Total other expense (0.7 )% (0.9 )%
Income before income taxes 6.9 % 10.4 %
Income tax expense 1.7 % 2.4 %
Net income 5.2 % 8.0 %
Fiscal year 2023 compared to Fiscal year 2022
Operating Revenue - Proficient Transport generates revenue from two primary sources: transporting freight for its customers (including related fuel surcharge revenue and other reimbursements) and arranging for the transportation of customer freight by third-party carriers. Proficient Transport has two reportable segments: its Truckload segment and its Brokerage segment. Truckload revenue, before fuel surcharges and other reimbursements, is primarily generated through trucking services provided by Proficient Transport’s two Truckload service offerings: OEM transports and contract. Brokerage 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 Proficient Transport earns based on mileage driven and other reimbursable costs incurred for which it is compensated by its customers.
Proficient Transport’s total operating revenue is affected by, among other things, the general level of economic activity in the United States, customer inventory levels, specific customer demand, the level of capacity in the truckload and brokerage industry, the success of our marketing and sales efforts and the availability of drivers and third-party carriers.
Proficient Transport disaggregates revenue from contracts with its customers for Truckload and Brokerage operations between (1) revenue, before fuel surcharges and reimbursements and (2) fuel surcharges and reimbursements. A summary of Proficient Transport’s revenue generated by type for the periods indicated is as follows:
Operating revenue:
Revenue, before fuel surcharge and other reimbursements $ 126,437,360 $ 116,108,865
Fuel surcharges and other reimbursements 9,318,633 14,051,209
Total operating revenue 135,755,993 130,160,074
The increases in total operating revenue and revenue before fuel surcharge, were primarily due to the increases in volume of activity (in the Truckload Segment) and secondarily due to increases in Proficient Transport’s contract pricing. In 2023, Proficient Transport delivered 296,352 units (174,434 Truckload Segment) compared to 297,204 units (168,938 in the Truckload Segment) in 2022. The increases in volume in the Truckload Segment were primarily driven by the reduction in backlog of undelivered cars that had built up over 2021 and 2022. In 2021, Proficient Transport’s OEMs experienced significant microchip supply shortages which resulted in new automobiles being only partially manufactured and not ready for shipment. This shortage continued, albeit to a lesser extent, into 2022. Once the microchip supply shortages were resolved, OEMs completed the production of unfinished cars, creating a need to deliver the excess automobile inventory. Proficient Transport serviced the OEMs’ excess inventory through company-owned vehicles as well as Proficient Transport’s Brokerage segment.
In 2023, approximately 81.5% of Proficient Transport’s operating revenue was derived from its four largest customers, General Motors, Glovis (the logistics arm of Hyundai and Kia), Ford and Mercedes Benz.
A summary of Proficient Transport’s revenue generated by segment for the periods indicated is as follows:
Operating revenue:
Truckload $ 38,475,802 $ 33,268,483
Truckload fuel surcharge and other reimbursements 4,927,753 6,297,435
Total Truckload revenue 43,403,555 39,565,918
Brokerage 87,961,559 82,840,382
Brokerage fuel surcharge and other reimbursements 4,390,879 7,753,774
Total Brokerage revenue 92,352,438 90,594,156
Total operating revenue $ 135,755,993 $ 130,160,074
In the Truckload segment, operating revenues increased by $3.8 million, or 9.7%, to $43.4 million in 2023 compared to $39.6 million in 2022. Average revenue per unit increased to $220 from $197 in 2022. The increase in the Truckload segment’s revenue was driven by a $5.2 million increase in truckload services and a $1.4 million decrease in fuel surcharges and other reimbursements. The $5.2 million increase in truckload services was comprised of contractual increases in revenue per unit hauled and the utilization of additional owner operators. The decrease in Proficient Transport’s Truckload fuel surcharge and other reimbursements primarily related to the decrease in fuel prices, which resulted in lower fuel surcharge compensation from Proficient Transport’s customers, as well as fewer reimbursements Proficient Transport earned from the contracts that expired mid-year.
In the Brokerage segment, operating revenues increased by $1.7 million, or 1.9%, to $92.4 million in 2023 compared to $90.6 million in 2022. The increase in the Brokerage segment’s revenue was driven by a $5.1 million increase in brokerage services offset by a $3.4 million decrease in fuel surcharges and other reimbursements. The primary factors driving the increase in brokerage services revenue was Proficient Transport’s ability to expand services under its contract service arrangements to third-party carriers as well as the need for timely transportation of the excess inventory of Proficient Transport’s OEMs.
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 company drivers, which is a function of the amount of freight hauled and includes 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 decreased by $2.5 million, or 10.7%, to $20.4 million in 2023 compared to $22.9 million in 2022. The decrease is primarily related to Proficient Transport’s smallest contract expiring in June of 2023, which resulted in the termination of approximately 30 drivers. Additionally, approximately 20 drivers transitioned from company drivers to owner-operators during 2023.
Fuel and fuel taxes - Fuel and fuel taxes consist primarily of diesel fuel expense and fuel taxes for Proficient Transport’s company-owned equipment. The primary factors affecting Proficient Transport’s fuel and fuel taxes expense are the cost of fuel per mile and the number of miles driven by company drivers.
Fuel and fuel taxes decreased by $2.7 million, or 38.2%, to $4.5 million in 2023 compared to $7.2 million in 2022. The decrease in fuel and fuel taxes was driven primarily by the decrease in price per gallon for diesel fuel, which declined from an annual average of $4.99 per gallon in 2022 to $4.21 per gallon in 2023, according to the Department of Energy. For 2023, the average cost of fuel per mile was $0.79 compared to $1.11 in 2022 and the total number of miles driven in 2023 was 10 million compared to 9.2 million in 2022. Additionally, the expiration of Proficient Transport’s smallest fleet contract mid-year resulted in less fuel being purchased in 2023.
Purchased transportation - Purchased transportation consists of the payments Proficient Transport makes to owner-operators and third-party carriers.
Purchased transportation increased by $13.5 million, or 19.2%, to $83.8 million in 2023 compared to $70.3 million in 2022. The increase in purchased transportation was driven by two factors: Proficient Transport had approximately 20 company drivers become owner-operators during 2023 and Proficient Transport added third-party carriers to its contract service arrangement.
Truck Expenses - Truck expenses consist of operating expenses and supplies incurred for ordinary vehicle repairs and maintenance costs, driver on-the-road expenses and tolls.
Operating expenses and supplies are primarily affected by the age of Proficient Transport’s company-owned and leased fleet of trucks and trailers, the number of miles driven in a period and driver turnover. Truck expenses decreased 0.4% to $7.0 million in 2023 compared to $7.1 million in 2022. Truck expenses as a percentage of operating revenue decreased from 5.4% in 2022 to 5.2% in 2023 due to the disproportional increase in Brokerage segment activity, which operates under an asset-light model and does not incur truck expenses.
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 Proficient Transport’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.
Depreciation and amortization and the gain on sale of equipment increased by $0.1 million, or 4.9%, to $2.3 million in 2023 compared to $2.2 million in 2022. The increase in depreciation and amortization and the gain on sale of equipment was driven by an increase in the average depreciation offset by gains recognized on sold equipment.
Insurance premiums and claims - Insurance premiums and claims consist primarily of retained amounts for liability (personal injury and property damage), physical damage and cargo damage, as well as insurance premiums. The primary factors affecting Proficient Transport’s insurance premiums and claims are the frequency and severity of accidents, trends in the development factors used in Proficient Transport’s actuarial accruals and developments in large, prior year claims. The number of accidents tends to increase with the miles we travel. With our significant retained amounts, insurance claims expense may fluctuate significantly and impact the cost of insurance premiums and claims from period-to-period, and any increase in frequency or severity of claims or adverse loss development of prior period claims would adversely affect Proficient Transport’s financial condition and results of operations.
Insurance premiums and claims increased by $0.6 million, or 23.8%, to $3.2 million in 2023 compared to $2.6 million in 2022. The increase in insurance premiums and claims was driven by an increase in Proficient Transport’s premiums.
Operating taxes and licenses - Operating taxes and licenses consist of property and use taxes. Operating taxes and licenses increased by $114,599 or 83.5%, to $251,789 in 2023 compared to $137,190 in 2022. The increase in operating taxes and licenses was driven by the increase in operating revenue.
General, selling, and other operating expenses - General, selling, and other operating expenses consist primarily of legal and professional services fees, general and administrative expenses, and other costs. General, selling, and other operating expenses increased by $0.8 million, or 27.6%, to $3.9 million in 2023 compared to $3.0 million in 2022. The increase in general, selling, and other operating expenses was primarily due to increased legal fees, as well as the overall increase in general expenses such as repairs and maintenance at our owned facility, operations, and utilities.
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 million, or 18.0%, to $1.0 million in 2023 compared to $1.2 million in 2022. The decrease was primarily due to the interest income earned from the Lease to Purchase program with our owner-operators.
Operating ratio - Operating ratio is calculated as total operating expenses as a percentage of operating revenue. Proficient Transport’s operating ratio increased by 3.7% to 92.4% in 2023 as compared to 88.7% in 2022. The increase in costs was primarily due to the increase in purchase transportation activity in Proficient Transport’s Brokerage segment.
EBITDA - EBITDA decreased by $4.1 million, or 24.2%, to $12.9 million in 2023 compared to $17.0 million in 2022. The decrease was primarily due to the $3.2 million decrease in net income as well as the $0.9 million decrease in income taxes, which is an add back for the EBITDA calculation. See “Non-GAAP Financial Measure” section below for Proficient Transport’s calculation of EBITDA.
Non-GAAP Financial Measure
EBITDA
EBITDA is a supplemental non-GAAP financial measure used by management of Proficient Transport. Proficient Transport defines EBITDA as net income (loss) before (i) interest expense, net, (ii) tax expense (benefit), and (iii) depreciation and amortization expense. Proficient Transport believes that EBITDA is useful because it provides a more effective evaluation of Proficient Transport’s operating performance and allows comparison of Proficient Transport’s results of operations from period to period without regard to Proficient Transport’s financing methods or other items that impact comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation and amortization, or any unusual items. EBITDA should not be considered as an alternative to, or more meaningful than, net income, operating ratio, or any other measure as determined in accordance with GAAP. Proficient Transport’s computation of EBITDA may not be comparable to EBITDA of other companies. Proficient Transport presents EBITDA because management believes these metrics provide useful information regarding the factors affecting Proficient Transport’s operations.
The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated.
Net income $ 7,156,170 $ 10,399,119
Interest expense, net 953,667 1,163,508
Income tax expense 2,243,617 3,130,964
Depreciation and amortization expense 2,523,971 2,289,026
EBITDA $ 12,877,425 $ 16,982,617
Liquidity and Capital Resources
Overview
Our business requires substantial amounts of cash to cover operating expenses as well as to fund capital expenditures, working capital changes, principal and interest payments on our debt obligations, lease payments and tax payments when we generate taxable income. Recently, we have financed our capital requirements with cash flows from operating activities, direct equipment financing, and proceeds from our IPO. We intend to spend between $5 - $10 million per year on new revenue equipment to maintain our desired average age of the fleet. We plan to finance the purchases through a combination of operating cash flows and direct equipment financing. Additional purchases of revenue equipment in a given year will depend on new business added as well as management’s desire to shift delivery volume away from subhaulers in favor of company drivers which will require growth in the aggregate fleet.
We believe we can fund our expected cash needs in the short-term, including debt repayment and the capital purchases described above, with projected cash flows from operating activities, borrowings under our credit facility and direct debt and lease financing we believe to be available for at least the next 12 months. Over the long-term, we expect that we will continue to have significant capital requirements, which may require us to seek additional borrowings or lease financing. The availability of financing will depend upon our financial condition and results of operations as well as prevailing market conditions.
Sources of liquidity
In May 2024, we raised money in the capital markets through an IPO and then subsequently in June sold additional shares through an over-allotment option. The approximately $30 million remaining after acquiring the Founding Companies was used to support operations for 2024 and to partially fund strategic acquisitions. We anticipate that our cash flows from operations and available direct equipment financing will provide adequate liquidity for our planned capital expenditures during fiscal year 2025. For any new capital expenditures in 2025 and beyond that exceed our cash flow from operations, we have negotiated credit agreements with financial institutions in amounts sufficient to fund planned purchases. While we generally control the timing and extent of our capital expenditures, there is no assurance that we can obtain financing arrangements on terms acceptable to the Company.
Pinnacle Loan Agreement
On November 8, 2024, the Company and certain of its subsidiaries, as borrowers, entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle Bank, as lender (the “Lender”). The Loan Agreement provides for (i) a delayed draw term loan facility of up to an aggregate principal amount of $25 million (the “Term Loan Facility”) and (ii) a revolving credit facility of up to an aggregate principal amount of $20 million at any time outstanding (the “Revolving Credit Facility”), in each case, subject to the terms of the Loan Agreement. Proceeds of the Term Loan Facility may be used to refinance existing indebtedness of the Company, to finance certain permitted acquisitions and fees and expenses related thereto, and to pay fees and transaction expenses associated with the Loan Agreement. Proceeds of the Revolving Credit Facility may be used for general working capital, to pay the fees and transaction expenses associated with the Loan Agreement, and to pay any of the Company’s obligations thereunder. The loans under the Loan Agreement may be voluntarily prepaid at any time, in whole or in part, without premium or penalty. The maturity date of the Term Loan Facility is May 8, 2031, and the maturity date of the Revolving Credit Facility is November 8, 2029.
Borrowings under the Loan Agreement bear interest at a rate per annum equal to Term SOFR for an interest period equal to one month plus a margin of (x) 2.50% per annum with respect to any loan under the Term Loan Facility and (y) 2.20% per annum with respect to any loan under the Revolving Credit Facility. In addition, the Company is required to pay an unused line fee on the unutilized commitments with respect to the Revolving Credit Facility at the rate of 0.15% per annum.
The Loan Agreement contains customary affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens on their respective assets, engage in mergers and other fundamental changes, make investments, enter into transactions with affiliates, pay dividends and make other restricted payments, prepay other indebtedness and sell assets, in each case subject to certain exceptions set forth in the Loan Agreement. The Loan Agreement also requires the Company to maintain (i) a Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of greater than or equal to 1.25 to 1.00 and (ii) a Funded Debt to Adjusted EBITDA Ratio (as defined in the Loan Agreement) of less than or equal to 3.00 to 1.00, in each case, as of the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2025.
All obligations under the Loan Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest on substantially all of the property of the Company and its subsidiaries.
Upon closing, the Company drew $16.0 million from the available term debt, a portion of which was used to repay and terminate the Proficient Transport line of credit. As of December 31, 2024, there was $16.0 million outstanding under the Loan Agreement.
Cash Flows
For the twelve months ended December 31, 2024, cash flows from operating activities of $ 10,718,960, was down slightly from the twelve months ended December 31, 2023.
For the twelve months ended December 31, 2024, cash flows used in investing activities was $(205,033,308). This decrease of $(205,227,563) compared to December 31, 2023 is mainly due to the cash paid to acquire the Founding Companies, ATG and UTT as discussed above in Note 3 - Business Combinations.
For the twelve months ended December 31, 2024, cash flows provided by financing activities was $209,254,829, which was an increase of $220,181,913 compared to the twelve months ended December 31, 2023. This increase is due to our issuance of common stock in the Company’s IPO plus proceeds from debt.
Successor Predecessor
Twelve Period from Twelve Twelve
months
ended January 1,
months
ended months
ended
December 31, to May 12, December 31, December 31,
2022
Cash flows provided by operating activities $ 10,718,960 $ 7,996,542 $ 10,733,478 $ 5,948,650
Cash flows provided by (used in) investing activities (205,033,308 ) (51,093 ) 194,255 (447,142 )
Cash flows provided by (used in) financing activities 209,254,829 (5,597,522 ) (10,927,084 ) (5,552,434 )
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 14,940,481 $ 2,347,927 $ 649 $ (50,926 )
Cash, cash equivalents, and restricted cash, beginning of period $ 458,233 $ 4,273 $ 3,624 $ 54,550
Cash, cash equivalents, and restricted cash, end of period $ 15,398,714 $ 2,352,200 $ 4,273 $ 3,624
Contractual obligations
The table below summarizes the Company’s contractual obligations as of December 31, 2024:
1 year or
less 2 - 3 years 4 - 5 years Thereafter Total
Long-term debt obligations $ 19,122,009 $ 30,328,005 $ 22,428,888 $ 3,861,630 $ 75,740,532
Finance lease obligations 96,134 8,011 - - 104,145
Operating lease obligations 2,517,743 3,401,264 3,071,335 5,285,601 14,275,943
Total contractual obligations $ 21,735,886 $ 33,737,280 $ 25,500,223 $ 9,147,231 $ 90,120,620
Emerging Growth Company Status
We qualify as an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: (i) reduced disclosure about our executive compensation arrangements; (ii) not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved; (iii) an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and (iv) an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements.
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of the IPO; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this Quarterly Report. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. Additionally, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to those of other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inflation and Fuel Cost
Most of the Company’s operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. Historically, the Company has limited the effects of inflation on its business through increases in freight rates and certain cost controls. The most relevant items impacted by inflation to the Company are the cost to insure and maintain the fleet. Significant inflation has been experienced in insurance and claims costs related to health insurance and claims as well as auto liability insurance and claims. Significant price increases in revenue equipment have impacted the cost for the Company to acquire new equipment. The cost increases have also impacted the cost of parts for equipment repairs and maintenance, inclusive of tires. Over the long term, general economic growth and industry supply and demand conditions have allowed increases in rates charged to customers, although these rate increases have significantly lagged the increases in tractor prices and related depreciation expense.
In addition to inflation, significant fluctuations in fuel prices can adversely affect the Company’s operating results and profitability. The Company has attempted to limit the effects of increases in fuel prices through certain cost control efforts and its fuel surcharge program. The Company receives fuel surcharges on all Company Driver accounts. Although the Company historically has been able to pass through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges and higher rates, these arrangements generally do not fully protect the Company from short-term fuel price increases or continued rising price environments like the Company experienced throughout 2023 and 2024. These arrangements may also prevent the Company from receiving the full benefit of any fuel price decreases. Additionally, the Company generally does not receive fuel surcharge on empty miles.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and supplementary data are included as a separate section of this Annual Report on Form 10-K commencing on page and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on this evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to the material weakness in internal controls over financial reporting described below.
Notwithstanding the material weakness in our internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that our Condensed Consolidated Financial Statements present fairly, in all material respects, our financial position, results of operations and cash flows in accordance with GAAP.
In connection with the preparation of the Company’s audited financial statements for the year ended December 31, 2024, a material weakness in the Company’s internal controls over financial reporting was identified and, if our remediation is not effective, or if we fail to maintain an effective system of internal controls over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence and profitability.
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 including account reconciliations and review surrounding the close process.
Remediation steps are being taken designed to improve the Company’s internal controls over financial reporting to address the underlying causes, including: designing and implementing increased controls, increased oversight and review of technical systems and engaging third-parties. We continue to work on other remediation initiatives.
While we believe that these efforts will improve the Company’s internal controls over financial reporting, the implementation of these 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. If 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. If we are unable to successfully remediate our existing or any future material weakness, the accuracy of our financial reporting may be adversely affected, which could cause investors to lose confidence in our financial reporting and our share price and profitability may decline as a result.
Management’s Report on Internal Control Over Financial Reporting
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
Except for the enhancements to controls to address the material weakness discussed above, there were no changes to our internal control over financial reporting during the twelve months ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
Rule 10b5-1 Plans
None of our officers or directors, as defined in Rule 16a-1(f), adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended December 31, 2024.
2025 Annual Meeting of Stockholders
We currently plan to hold our 2025 Annual Meeting of Stockholders (the “2025 Annual Meeting”) on May 6, 2025. The time and location of the 2025 Annual Meeting, and the matters to be considered, will be as set forth in our definitive proxy statement for the 2025 Annual Meeting to be filed with the SEC.
In order for a stockholder to submit a proposal for inclusion in the Company’s proxy materials for the 2025 Annual Meeting, the stockholder must comply with the requirements set forth in the Company’s amended and restated bylaws and Rule 14a-8, including with respect to the subject matter of the proposal, and must deliver the proposal and all required documentation to the Company no later than April 7, 2025. The public announcement of an adjournment or postponement of the date of the 2025 Annual Meeting will not commence a new time period (or extend any time period) for submitting a proposal pursuant to Rule 14a-8.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table summarizes information about each one of our executive officers as of December 31, 2024.
Name
Age
Position(s)
Richard O'Dell
Chief Executive Officer
Amy Rice
President and Chief Operating Officer
Brad Wright
Chief Financial Officer and Secretary
Information required to be furnished in response to this Item 10 can be found in the Company’s proxy statement for the 2025 annual meeting of stockholders, which will be filed within 120 days after the close of the 2024 fiscal year (the “Proxy Statement”) under the headings “Proposal No. 1: Item 1 - Election of the Board of Directors,” "Other Matters - Delinquent Section 16(a) Reports," “Stockholder Engagement - Stockholder Recommendations and Nominations of Director Candidates” and “Proposal No. 1: Item 1 - Election of the Board of Directors- Board of Directors - Audit Committee,” That information is incorporated into this report by reference.
Code of Ethics and Business Conduct
We have adopted a code of ethics that applies to all of our employees, including our principal executive officer, our principal financial officer and our principal accounting officer. This code of ethics can be found on the investor relations portion of our website, at www.proficientautologistics.com . We intend to disclose any amendment to, or waiver from, a provision of this code of ethics by posting such information on the investor relations portion of our website. Information found on our website is not part of this Annual Report or any other report filed with the SEC.
Insider Trading Policies
The Company has adopted an insider trading policy that governs the purchase, sale, and/or other transactions of our securities by our directors, officers and employees. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report. In addition, with regard to the Company’s trading in its own securities, it is the Company’s policy to comply with the federal securities laws and the applicable exchange listing requirements.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
Information required to be furnished in response to this Item 11 can be found in the Proxy Statement under the headings “Compensation discussion and analysis,” “Compensation Committee report,” “Corporate governance - Compensation Committee Interlocks and Insider Participation,” “Executive compensation” and “Director compensation.” That information is incorporated into this report by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Additional information in response to this Item 12 can be found in the Proxy Statement under the heading “Security ownership of certain beneficial owners and management.” That information is incorporated into this Annual Report by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information in response to this Item 13 can be found in the Proxy Statement under the headings “Corporate governance - Director independence,” “Corporate Governance - Committee member qualifications” and “Certain relationships and related transactions.” That information is incorporated into this Annual Report by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information in response to this Item 14 can be found in the Proxy Statement under the headings “Audit Committee report and payment of fees to auditor - Fees to independent auditor” and “Audit Committee report and payment of fees to auditor - Administration of engagement of independent auditor.” That information is incorporated into this Annual Report by reference.
Part IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS AND FINANCIAL STATEMENTS
(a) Financial Statements and Notes to the Consolidated Financial Statements
See Index to Consolidated Financial Statements on page at beginning of attached financial statements.
(b) Exhibits
Exhibit
Number
Description
2.1
Stock Purchase Agreement, dated as of December 21, 2023, by and among the Company, PAL Stock Acquiror, Inc., Leonel Munoz, Ramon Munoz and Tribeca Automotive Inc. (filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.2
Contribution Agreement, dated as of December 21, 2023, by and among the Company, Leonel Munoz, Ramon Munoz and Tribeca Truck Leasing LLC (filed as Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.3
Agreement and Plan of Merger, dated as of December 21, 2023, by and among the Company, ELI Merger Sub, Inc., Jesus Holguin, Raul Silva and Excel Leasing, Inc. (filed as Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.4
Stock Purchase Agreement, dated as of December 21, 2023, by and among the Company, PAL Stock Acquiror, Inc., Jesus Holguin, Raul Silva, and Deluxe Auto Carriers, Inc. (filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.5
Contribution Agreement, dated as of December 21, 2023, by and among the Company, Proficient Auto Transport, Inc., the shareholder listed thereto and BOCF, LLC (filed as Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.6
Stock Purchase Agreement, dated as of December 21, 2023, by and among the Company, PAL Stock Acquiror, Inc., Proficient Auto Transport, Inc., the shareholder listed thereto and BOCF, LLC (filed as Exhibit 10.13 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.7
Agreement and Plan of Merger, dated as of December 21, 2023, by and among the Company, WCL Merger Sub, Inc., William E. Scanlon, Trustee of the William E. Scanlon Living Trust Utd 7/29/05 and West Coast Leasing Company, Inc. (filed as Exhibit 10.14 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.8
Stock Purchase Agreement, dated as of December 21, 2023, by and among the Company, PAL Stock Acquiror, Inc., William E. Scanlon Living Trust Utd 7/29/05 and Sierra Mountain Group, Inc. (filed as Exhibit 10.15 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.9
Contribution Agreement, dated as of December 21, 2023, by and among the Company, John Skiadas, Delta Auto Brokers, LLC, North East Fleet Services, Inc., Delta Automotive Services, Inc. and the sellers listed thereto (filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
2.10
Amendment No. 1 to Contribution Agreement, dated as of April 26, 2024, by and among the Company, John Skiadas, Delta Auto Brokers, LLC, North East Fleet Services, Inc., Delta Automotive Services, Inc. and the sellers listed thereto (filed as Exhibit 10.21 to the Company’s Registration Statement on Form S-1 filed on April 29, 2024, and incorporated herein by reference).
2.11
Purchase Agreement, dated as of December 21, 2023, by and among the Company, PAL Stock Acquiror, Inc., John Skiadas, Delta Automotive Services, Inc. and the sellers listed thereto (filed as Exhibit 10.17 to the Company’s Registration Statement on Form S-1 filed on April 11, 2024, and incorporated herein by reference).
3.1
Third Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 15, 2024, and incorporated herein by reference).
3.2
Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 15, 2024, and incorporated herein by reference).
4.1
Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
4.2
Form of Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed on April 29, 2024, and incorporated herein by reference).
10.1*
Form of Indemnification Agreement, between the Company and its directors and officers (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed on April 23, 2024, and incorporated herein by reference).
10.2*
Proficient Auto Logistics, Inc. 2024 Long-Term Incentive Plan, and forms of award agreements (filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed on April 23, 2024, and incorporated herein by reference).
10.3*
2024 Non-Employee Director Compensation Policy (filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1 filed on April 23, 2024, and incorporated herein by reference).
10.4*
Executive Employment Agreement, dated as of November 30, 2023, by and between Brad Wright and the Company (filed as Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed on April 23, 2024, and incorporated herein by reference).
10.5*
Executive Employment Agreement, dated as of April 22, 2024, by and between Richard O’Dell and the Company (filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on April 29, 2024, and incorporated herein by reference).
10.6*
Executive employment agreement, dated August 14, 2024, between Proficient Auto Logistics, Inc. and Amy Rice (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 14, 2024, and incorporated herein by reference).
10.7
Registration Rights Agreement (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed on April 23, 2024, and incorporated herein by reference).
10.8
Loan Agreement, dated November 8, 2024, by and among Proficient Auto Logistics, Inc. and certain of its subsidiaries, as the borrower, and Pinnacle Bank, as lender (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2024, and incorporated herein by reference).
10.9*+
Consulting Agreement, dated January 26, 2025, by and among Proficient Auto Logistics, Inc., Delta Automotive Services, LLC (d/b/a Delta Transport), and John Skiadas (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 30, 2025, and incorporated herein by reference).
19.1
Insider Trading Policy
21.1
Subsidiaries of the Registrant
23.1
Consent of Grant Thornton LLP, independent registered public accountants
31.1
Certification by principal executive officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification by principal financial officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification by principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification by principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Clawback Policy
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* Indicates a management contract or compensatory plan or arrangement.
+ Information in this exhibit has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.