What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-05 · 278 added, 176 removed, 551 unchanged (45% of the section changed)

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• the impacts of the COVID-19 global pandemic,

• the future impact of acquisitions, including achievement of anticipated synergies,

• the future impact of acquisitions, including achievement of anticipated synergies and the anticipated risks regarding our acquisition of ACT,

• the flexibility of our model to adapt to market conditions,

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Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to materially differ from those set forth in, contemplated by, or underlying the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A "Risk Factors" in our 2020 Annual Report and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part II, Item 1A "Risk Factors" of this Quarterly Report, Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

All such forward-looking statements speak only as of the date of this Quarterly Report.

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Our objective is to operate our business with industry-leading margins and growth while providing safe, high-quality, cost-effective solutions for our customers.

ACT Acquisition — On July 5, 2021, we acquired 100% of ACT.

ACT is a leading less-than-truckload ("LTL") carrier that also offers dedicated contract carriage and ancillary services.

Further details regarding this acquisition are included in Note 3 in Part I, Item 1 of this Quarterly Report.

• Our trucking services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base.

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Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, amortization of intangible assets, interest expense, and non-driver employee compensation.

Operating Statistics — We measure our consolidated and segment results through certain operating statistics, which are discussed under "Results of Operations — Segment Review — Operating Statistics," below.

Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Table of Contents Glossary of Terms

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our 2020 Annual Report, supplemented in Part II, Item 1A "Risk Factors" of this Quarterly Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Consolidated Key Financial Highlights and Operating Metrics

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

GAAP financial data:

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Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are reconciled to the most directly comparable GAAP financial measures under "Non-GAAP Financial Measures," below.

2 The average age of our company-owned tractor fleet was 2.3 years and 2.0 years as of March 31, 2021 and 2020, respectively.

3 The average age of our trailer fleet was 8.2 years and 7.6 years as of March 31, 2021 and 2020, respectively .

2 The average age of our company-owned tractor fleet was 2.4 years and 2.1 years as of June 30, 2021 and 2020, respectively.

3 The average age of our trailer fleet was 8.3 years and 7.6 years as of June 30, 2021 and 2020, respectively .

Table of Contents Glossary of Terms

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Market Trends and Company Performance

Trends and Outlook — Our consolidated revenue, excluding trucking fuel surcharge, grew by 10.3% during the first quarter of 2021, as a result of revenue growth across all of our reportable segments.

We generated consolidated Adjusted Net Income Attributable to Knight-Swift of $139.4 million, which represents an 83.0% increase from $76.2 million during the first quarter of 2020.

Our Trucking segment overcame inclement weather conditions and driver sourcing challenges during the quarter and improved average revenue per tractor by 7.7%, which resulted in a 470 basis point improvement in the Adjusted Operating Ratio to 81.8% in the first quarter of 2021 from 86.5% in the first quarter of 2020.

Our Logistics segment grew revenue by more than 50% and more than doubled operating income year-over-year.

Despite weather and service disruptions during the first quarter of 2021, our Intermodal segment achieved year-over-year improvements in operating results, and we anticipate ongoing improvement in the coming quarters.

The national unemployment rate was 6.0% 1 as of March 31, 2021, reflecting the continued resumption of economic activity that had been curtailed due to the pandemic.

During the first quarter of 2021, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 6.4% 2 per preliminary third-party forecasts.

Third-party forecasts are predicting a continued economic rebound in 2021.

The first quarter 2021 US employment cost index rose 2.6% 1 and 0.9% 1 on a year-over-year and sequential basis, respectively.

Trends and Outlook — Our consolidated revenue, excluding trucking fuel surcharge, grew by 15.9% during the first half of 2021, reflecting meaningful growth across all reportable segments.

We generated consolidated Adjusted Net Income Attributable to Knight-Swift of $302.4 million, which represents a 75.1% increase from $172.7 million during the first half of 2020.

Revenue per tractor was up 9.0% despite lower fleet utilization as a result of the difficult driver sourcing environment.

Our Trucking segment increased revenue, excluding fuel surcharge and intersegment transactions, by 7.2%, resulting in a 470 basis point improvement in the Adjusted Operating Ratio to 81.3% in the first half of 2021 from 86.0% in the first half of 2020.

Our Logistics segment increased revenue, excluding intersegment transactions by 93.2%.

Our Intermodal segment grew revenue 25.3% and improved its Adjusted Operating Ratio by 820 basis points to 95.8% in the first half of 2021, compared to the same period last year.

We anticipate ongoing improvement within the Intermodal segment in the coming quarters.

The national unemployment rate was 5.9% 1 as of June 30, 2021.

The US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 6.5% 2 and 1.6% 2 on a year-over-year and sequential basis, per preliminary third-party forecasts.

Third-party forecasts are predicting a continued economic rebound in the second half of 2021, but perhaps at a slower pace.

The first half 2021 US employment cost index rose 2.9% 1 and 0.7% 1 on a year-over-year and sequential basis, respectively.

From a freight market perspective, we are encouraged by the continued strength in freight demand;

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The 2021 market outlook includes the following:

• over-the-road truckload demand has been strong and we expect this to continue throughout the remainder of the year and into 2022,

• capacity expansion may be limited as there has been some constraint by parts availability with respect to new tractor builds,

• rates may continue to be favorable in the coming year, as a result of inventory restocking and strong demand,

• sourcing and retaining drivers is likely to contribute to additional driver wage inflation,

• there has been an increased demand for power-only services, and

• there may be continuing non-contract freight opportunities with more challenging year-over-year comparisons in the back half of the year.

• we expect the unprecedented demand for over-the-road truckload capacity to continue throughout 2022,

• capacity expansion continues to be limited as new tractor builds are constrained by parts availability, and

• sourcing and retaining drivers will remain challenging and lead to additional driver wage inflation.

The above factors should continue to support a favorable rate environment.

In addition to the above market factors, demand for power-only opportunities continues.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding trucking fuel surcharge, as we intend to purchase, rather than enter into operating leases, for a majority of our revenue equipment in 2021.

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While fuel expense is generally offset by fuel surcharge revenue, our fuel expense, net of fuel surcharge revenue may increase in the future.

We expect that our acquisition of ACT will have a significant impact on future financial results, including an overall increase to operating revenues and expenses.

However, we are still in the preliminary stages of this transaction and the assessment of the impact on our operations, policies or financial results.

We continue to manage our leverage ratio relative to our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended March 31, 2021 and 2020 — The $64.4 million increase in net income attributable to Knight-Swift to $129.8 million during the quarter ended March 31, 2021 from $65.4 million during the same period last year includes the following:

Comparison Between the Quarters Ended June 30, 2021 and 2020 — The $72.6 million increase in net income attributable to Knight-Swift to $152.8 million during the second quarter of 2021 from $80.2 million during the same period last year includes the following:

• Contributor — $60.7 million increase in operating income within our Trucking segment.

Average revenue per tractor increased by 10.3%, driven by a 18.8% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

• Contributor — $11.3 million increase in operating income within our Logistics segment.

Revenue, excluding intersegment transactions, increased by 141.8% within our Logistics segment, as brokerage load volumes grew by 55.3% and brokerage revenue per load increased by 55.8% (including the results of UTXL beginning June 1, 2021).

• Contributor — $10.3 million improvement in operating income (loss) within our Intermodal segment.

Revenue per load increased 16.3 % and load counts increased 19.9%.

• Contributor — $22.6 million improvement in "Other income (expenses), net," primarily related to gains recognized within our portfolio of investments.

• Offset — $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.

All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.

• Contributor — $8.3 million improvement in "Other income (expenses), net," primarily related to unrealized gains recognized from our investment in Embark, partially offset by a reduction in unrealized gains recognized for other investments within our portfolio.

• Offset — $25.0 million increase in consolidated income tax expense, primarily due to an increase in income before income taxes resulting in an effective tax rate of 25.3% for the second quarter of 2021 and 25.0% for the second quarter of 2020.

Comparison Between the Year-to-Date June 30, 2021 and 2020 — The $137.0 million increase in net income attributable to Knight-Swift to $282.6 million during the first half of 2021 from $145.6 million during the same period last year includes the following:

• Contributor — $111.8 million increase in operating income within our Trucking segment.

Average revenue per tractor increased by 9.0%, driven by a 17.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

• Contributor — $15.2 million improvement in operating income within our Logistics segment.

Revenue, excluding intersegment transactions, increased by 93.2% within our Logistics segment, as brokerage load volumes grew by 28.4% and brokerage revenue per load increased by 50.4%

• Contributor — $16.5 million improvement in operating income (loss) within our Intermodal segment.

Revenue per load increased 13.1% and load counts increased 10.8%.

• Contributor — $31.0 million improvement in "Other income (expenses), net," primarily due to the Embark gain discussed above and an increase in unrealized gains recognized for other investments within our portfolio.

• Offset — $45.7 million increase in consolidated income tax expense, primarily due to an increase in income before income taxes resulting in an effective tax rate of 25.5% for the first half of 2021 and 26.0% for the first half of 2020.

See additional discussion of our operating results within "Results of Operations — Consolidated Operating and Other Expenses" below.

Liquidity and Capital — During the quarter ended March 31, 2021, we generated $306.1 million in operating cash flows, reduced our operating lease liabilities by $15.2 million, used $43.8 million for capital expenditures (net of disposal proceeds), spent $39.3 million on acquisitions, and returned $67.3 million to our stockholders in the form of quarterly dividends and repurchases of our common stock.

Liquidity and Capital — During year-to-date June 30, 2021, we generated $459.5 million in operating cash flows, reduced our operating lease liabilities by $28.3 million, used $120.5 million for capital expenditures (net of disposal proceeds), spent $63.3 million on acquisitions, and returned $53.7 million in share repurchases and $30.3 million in dividends to our stockholders.

We ended the quarter with $179.0 million in unrestricted cash and cash equivalents, $55.0 million outstanding on the Revolver, $300.0 million face value outstanding on the 2017 Term Loan, and $6.1 billion of stockholders' equity.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

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Consolidating Tables for Total Revenue and Operating Income (Loss)

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

(In thousands)

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Total revenue $ 1,315,701 $ 1,060,698 $ 2,538,715 $ 2,185,496

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

Operating income (loss):

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Operating income $ 191,115 $ 102,167 $ 353,374 $ 204,286

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Operating Statistics

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Average Revenue per Load Logistics, Intermodal Total revenue (excluding intersegment transactions) divided by load count

Gross Margin Percentage Logistics (Brokerage) Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions

Gross Margin Percentage Logistics Logistics gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of logistics revenue, excluding intersegment transactions

Average Containers Intermodal Average containers in operation during the period

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Trucking Segment

We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings with 13,130 irregular route tractors and 5,094 dedicated route tractors.

We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings with 12,967 irregular route tractors and 5,067 dedicated route tractors in use during the quarter-to-date period ended June 30, 2021.

Generally, we are paid a predetermined rate per mile or per load for our trucking services.

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The main fixed costs in the Trucking segment are depreciation and rent expenses from leasing and acquiring revenue equipment and terminals, as well as compensating our non-driver employees.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per tractor data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands, except per tractor data) Increase (Decrease)

Total revenue $ 985,858 $ 879,369 $ 1,948,805 $ 1,798,430 12.1 % 8.4 %

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Operating ratio 2

83.5 % 88.3 % (480 bps)

82.9 % 87.7 % 83.2 % 88.0 % (480 bps) (480 bps)

Adjusted Operating Ratio 1 2

81.8 % 86.5 % (470 bps)

80.9 % 85.5 % 81.3 % 86.0 % (460 bps) (470 bps)

Non-paid empty miles percentage 2

12.8 % 12.8 % — bps

13.0 % 13.8 % 12.9 % 13.3 % (80 bps) (40 bps)

Average length of haul (miles) 2

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2 Defined under "Operating Statistics," above.

3 Includes 16,305 and 16,339 average company-owned tractors for the first quarter of 2021 and 2020, respectivel y.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — We grew revenue, excluding fuel surcharge and intersegment transactions, by 6.3% within the Trucking segment.

Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

The rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the quarter and a 7.3% decline in miles per tractor due to inclement weather and an increase in unseated tractors.

3 Includes 16,144 and 16,315 average company-owned tractors for the second quarter of 2021 and 2020, respectivel y.

Includes 16,225 and 16,327 average company-owned tractors for the year-to-date June 30, 2021 and 2020, respectivel y.

Table of Contents Glossary of Terms

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended June 30, 2021 and 2020 — Operating income grew by 56.3% within the Trucking segment, overcoming inflationary pressures related to sourcing and retaining drivers.

Revenue, excluding fuel surcharge and intersegment transactions, grew by 8.2%.

Average revenue per tractor increased by 10.3%, driven by an 18.8% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

Consumer demand remained strong, while capacity remained constrained across our industry, which is driving up sourcing costs and corresponding rates.

Our year-over-year rate improvement was partially offset by driver-related sourcing expenses, as well as an 8.0% decline in miles per tractor due to an increase in unseated tractors.

On a sequential basis, miles per tractor remained relatively flat.

Comparison Between Year-to-Date June 30, 2021 and 2020 — Operating income grew by 52.0% within the Trucking segment.

Revenue, excluding fuel surcharge and intersegment transactions, grew by 7.2%.

Average revenue per tractor increased by 9.0%, driven by a 17.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

Our year-over-year rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the first half of 2021, as well as a 7.7% decline in miles per tractor due to inclement weather and an increase in unseated tractors.

Logistics Segment

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Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits" and depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the condensed consolidated statements of comprehensive income.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per load data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands, except per load data) Increase (Decrease)

Total revenue $ 166,737 $ 70,104 $ 285,624 $ 149,302 137.8 % 91.3 %

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Operating income $ 14,356 $ 3,038 $ 21,933 $ 6,757 372.5 % 224.6 %

Revenue per load – Brokerage 1

Adjusted Operating Income 1

$ 14,453 $ 3,038 $ 22,030 $ 6,757 375.7 % 226.0 %

Gross margin percentage – Brokerage 1

14.4 % 14.7 % (30 bps)

Revenue per load 2

$ 2,193 $ 1,408 $ 2,094 $ 1,392 55.8 % 50.4 %

Gross margin percentage 2

15.7 % 15.7 % 15.2 % 15.1 % — bps 10 bps

Operating ratio 2

93.6 % 95.3 % (170 bps)

91.4 % 95.7 % 92.3 % 95.5 % (430 bps) (320 bps)

Adjusted Operating Ratio 1 2

93.5 % 95.2 % (170 bps)

1 Defined under "Operating Statistics," above.

91.1 % 95.5 % 92.1 % 95.3 % (440 bps) (320 bps)

1 Refer to "Non-GAAP Financial Measures" below.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — Revenue, excluding intersegment transactions, increased by 50.8% within our Logistics segment, as brokerage revenue per load increased by 43.0% and load volumes grew by 5.4%.

Brokerage gross margin was 14.4% in the first quarter of 2021 and 14.7% in the first quarter of 2020.

The operating ratio improved by 170 basis points to 93.6% for the first quarter of 2021, compared to 95.3% for the first quarter of 2020.

Within our power-only service offering, load volumes grew 56.2%, contributing to 161.6% revenue growth and representing over 25% of our total first quarter 2021 brokerage load volumes.

2 Defined under "Operating Statistics," above.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended June 30, 2021 and 2020 — Revenue, excluding intersegment transactions, increased by 141.8% within our Logistics segment, as brokerage load volumes grew by 55.3% and brokerage revenue per load increased by 55.8% (including the results of UTXL beginning June 1, 2021).

Excluding the results of UTXL, brokerage load volumes grew by 49.6% and revenue per load increased by 47.5%.

Logistics gross margin was 15.7% in the second quarters of 2021 and 2020, while Adjusted Operating Ratio improved by 440 basis points to 91.1% for the second quarter of 2021, from 95.5% for the second quarter of 2020.

Within our power-only service offering, revenue grew 410.5%, as a result of a 141.5% increase in load volumes.

Power-only represented 26.9% of brokerage revenue and over 25% of our total second quarter 2021 brokerage load volumes.

During 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions.

During the first quarter of 2021, approximately 4,500 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.

During the second quarter of 2021, more than 4,500 carriers were digitally matched with loads through our Select platform, achieving an 18.2% sequential increase in Select platform load volumes.

Comparison Between Year-to-Date June 30, 2021 and 2020 — Revenue, excluding intersegment transactions, increased by 93.2% within our Logistics segment, as brokerage load volumes grew by 28.4% and revenue per load increased by 50.4%.

Logistics gross margin was 15.2% in the first half of 2021 and 15.1% in the first half of 2020.

Adjusted Operating Ratio improved by 320 basis points to 92.1% in the first half of 2021, compared to 95.3% in the first half of 2020.

Within our power-only service offering, load volumes grew 284.5%, representing 24.5% of brokerage revenue and over 25.0% of our brokerage load volumes in the first half of 2021.

Table of Contents Glossary of Terms

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The main fixed costs in the Intermodal segment are depreciation of our company tractors related to drayage, containers, and chassis, as well as non-driver employee compensation and benefits.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per load data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands, except per load data) Increase (Decrease)

Total revenue $ 115,378 $ 82,820 $ 222,444 $ 177,551 39.3 % 25.3 %

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Operating ratio 2

96.8 % 102.9 % (610 bps)

95.0 % 105.4 % 95.8 % 104.1 % (1,040 bps) (830 bps)

Adjusted Operating Ratio 1 2

96.8 % 102.8 % (600 bps)

95.0 % 105.3 % 95.8 % 104.0 % (1,030 bps) (820 bps)

Load count 44,073 36,769 86,041 77,658 19.9 % 10.8 %

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2 Defined under "Operating Statistics," above.

3 Includes 542 and 536 company-owned tractors for the first quarter of 2021 and 2020 , respectively.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — Revenue, excluding intersegment transactions within our Intermodal segment increased 13.1%, as revenue per load increased 10.2% and load counts increased 2.6%.

We improved the operating ratio within the Intermodal segment to 96.8%, compared to 102.9% during the first quarter of 2020, despite weather and service disruptions.

Operating results within the Intermodal segment improved toward the end of the quarter.

We anticipate sequential improvements in operating results in the coming quarters, as we focus on growing load counts and improving revenue per load.

3 Includes 555 and 510 company-owned tractors for the second quarter of 2021 and 2020, respectively.

Includes 549 and 523 company-owned tractors for the year-to-date June 30, 2021 and 2020, respectively.

Comparison Between the Quarters Ended June 30, 2021 and 2020 — Intermodal r evenue, excluding intersegment transactions increased 39.4% year-over-year, as load counts increased 19.9% and revenue per load increased 16.3%.

The Adjusted Operating Ratio improved to 95.0% in the second quarter of 2021, from 105.3% in the second quarter of 2020.

Intermodal is exhibiting solid momentum, and we expect operational improvements in cost structure and network design in the coming quarters to lead to continued improvement.

Comparison Between Year-to-Date June 30, 2021 and 2020 — Intermodal revenue, excluding intersegment transactions increased 25.3%, as load counts increased 10.8% and revenue per load increased 13.1%.

Adjusted Operating Ratio within the Intermodal segment improved to 95.8%, compared to 104.0% during the first half of 2020, despite weather and service disruptions in the beginning of the year.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Non-reportable Segments

The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and $11.6 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Total revenue $ 66,795 $ 45,289 $ 117,464 $ 91,531 47.5 % 28.3 %

Operating loss $ (7,258) $ (6,197) 17.1 %

Comparison Between the Quarters Ended March 31, 2021 and 2020 — A $1.2 million increase in legal expenses resulted in a year-over-year increase in operating loss within the non-reportable segments.

Operating income (loss) $ 2,490 $ (4,184) $ (4,768) $ (10,381) 159.5 % 54.1 %

Quarter-to-date and year-to-date revenue growth and improved profitability within the non-reportable segments is related to revenue and margin improvement in our warehousing activities, expanded services to third-party carriers, and increased demand for our equipment leasing services.

This was partially offset by an increase in legal accruals.

Table of Contents Glossary of Terms

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Therefore, we believe that revenue, excluding trucking fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Salaries, wages, and benefits $ 377,613 $ 365,311 $ 747,983 $ 720,144 3.4 % 3.9 %

% of total revenue 30.3 % 31.5 % (120 bps)

% of revenue, excluding fuel surcharge 32.7 % 34.5 % (180 bps)

% of total revenue 28.7 % 34.4 % 29.5 % 33.0 % (570 bps) (350 bps)

% of revenue, excluding fuel surcharge 31.1 % 36.6 % 31.9 % 35.6 % (550 bps) (370 bps)

Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by company driving associates, the rate per mile we pay our company driving associates, and employee benefits, including healthcare, workers' compensation, and other benefits.

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We expect driving associate pay to remain inflationary, which we expect will result in additional driving associate pay increases in the future, thereby increasing our salaries, wages, and benefits expense.

The $15.5 million increase in consolidated salaries, wages and benefits was primarily due to an increase in driving associate pay rates, partially offset by a decrease in miles driven by company driving associates and lower medical insurance costs.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Consolidated salaries, wages, and benefits increased by $12.3 million for the second quarter of 2021 and by $27.8 million for the first half of 2021, as compared to the same periods last year.

The increases pertained to driving associate pay rates and an non-driver salaries and wages.

These were partially offset by a decrease in miles driven by company driving associates and lower medical insurance costs.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Fuel $ 126,055 $ 86,381 $ 244,291 $ 208,236 45.9 % 17.3 %

% of total revenue 9.7 % 10.8 % (110 bps)

% of revenue, excluding trucking fuel surcharge 10.4 % 11.9 % (150 bps)

% of total revenue 9.6 % 8.1 % 9.6 % 9.5 % 150 bps 10 bps

% of revenue, excluding trucking fuel surcharge 10.4 % 8.7 % 10.4 % 10.3 % 170 bps 10 bps

Fuel expense consists primarily of diesel fuel expense for our company-owned tractors and fuel taxes.

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Typical fuel surcharge programs involve a computation based on the change in national or regional fuel prices.

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our Trucking segment.

Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue.

Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

operating income during periods of falling fuel costs.

for our Trucking segment.

Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue.

Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our operating income during periods of falling fuel costs.

We continue to utilize our fuel efficiency initiatives such as trailer blades, idle-control, management of tractor speeds, fleet updates for more fuel-efficient engines, management of fuel procurement, and driving associate training programs that we believe contribute to controlling our fuel expense.

The $3.6 million decrease in consolidated fuel expense is primarily due to a 7.7% decrease in the total miles driven by company driving associates.

Average DOE fuel prices were $2.91 per gallon for the first quarter of 2021 and $2.92 per gallon for the first quarter of 2020.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

The $39.7 million and $36.1 million increases in consolidated fuel expense for the second quarter and first half of 2021, respectively, are attributable to higher average DOE fuel prices when compared to the same periods last year.

Average DOE fuel prices were $3.21 per gallon for the second quarter of 2021 and $2.44 per gallon for the second quarter of 2020.

Average DOE fuel prices were $3.06 per gallon for year-to-date June 30, 2021 and $2.67 per gallon for year-to-date June 30, 2020.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Operations and maintenance $ 71,313 $ 66,067 $ 139,383 $ 134,471 7.9 % 3.7 %

% of total revenue 5.6 % 6.1 % (50 bps)

% of revenue, excluding trucking fuel surcharge 6.0 % 6.7 % (70 bps)

% of total revenue 5.4 % 6.2 % 5.5 % 6.2 % (80 bps) (70 bps)

% of revenue, excluding trucking fuel surcharge 5.9 % 6.6 % 5.9 % 6.6 % (70 bps) (70 bps)

Operations and maintenance expense consists of direct operating expenses, such as driving associate hiring and recruiting expenses, equipment maintenance, and tire expense.

2 unchanged sentences

We expect to continue refreshing our tractor and trailer fleet in the coming quarters to maintain or improve the average age of our equipment.

The first quarter decrease of $0.3 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment and the decrease in miles driven by company driving associates noted above.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

The increases of $5.2 million for the second quarter of 2021 and $4.9 million for the first half of 2021, as compared to the same periods last year, were attributed to higher driving associate hiring expenses and increased chassis expense.

This was partially offset by a decrease in miles driven by company driving associates.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Insurance and claims $ 58,776 $ 45,302 $ 114,419 $ 99,582 29.7 % 14.9 %

% of total revenue 4.5 % 4.8 % (30 bps)

% of revenue, excluding trucking fuel surcharge 4.9 % 5.3 % (40 bps)

% of total revenue 4.5 % 4.3 % 4.5 % 4.6 % 20 bps (10 bps)

% of revenue, excluding trucking fuel surcharge 4.8 % 4.5 % 4.9 % 4.9 % 30 bps — bps

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as our level of self-insurance, and premium expense.

2 unchanged sentences

In future periods, our higher self-insured retention limits or lower excess coverage limits may cause increased volatility in our consolidated insurance and claims expense.

Consolidated insurance and claims expense increased by $1.4 million for the quarter ended March 31, 2021, as compared to the same period last year.

This increase was primarily due to negative development within certain prior year claims.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Consolidated insurance and claims expense increased by $13.5 million for the second quarter of 2021 and by $14.8 million for the first half of 2021, as compared to the same periods last year.

These increases were primarily due to negative development within certain prior year losses and costs incurred through our third-party carrier insurance program.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Operating taxes and licenses $ 21,717 $ 20,883 $ 43,765 $ 43,052 4.0 % 1.7 %

% of total revenue 1.8 % 2.0 % (20 bps)

% of revenue, excluding trucking fuel surcharge 1.9 % 2.2 % (30 bps)

% of total revenue 1.7 % 2.0 % 1.7 % 2.0 % (30 bps) (30 bps)

% of revenue, excluding trucking fuel surcharge 1.8 % 2.1 % 1.9 % 2.1 % (30 bps) (20 bps)

Operating taxes and licenses include state franchise taxes, state and federal highway use taxes, property taxes, vehicle license and registration fees, fuel and mileage taxes, among others.

The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities.

Operating taxes and licenses decreased by $0.1 million for the quarter ended March 31, 2021 and remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge, as compared to the same periods last year.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

The increases of $0.8 million for the second quarter of 2021 and $0.7 million for the first half of 2021, as compared to the same periods last year, were primarily due to higher overall toll expenses.

These increases were partially offset by a decrease in total miles driven by our company driving associates.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Communications $ 4,635 $ 4,902 $ 9,672 $ 9,776 (5.4 %) (1.1 %)

% of total revenue 0.4 % 0.4 % — bps

% of revenue, excluding trucking fuel surcharge 0.4 % 0.5 % (10 bps)

% of total revenue 0.4 % 0.5 % 0.4 % 0.4 % (10 bps) — bps

% of revenue, excluding trucking fuel surcharge 0.4 % 0.5 % 0.4 % 0.5 % (10 bps) (10 bps)

Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems.

Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the quarter ended March 31, 2021, as compared to the same period last year.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the second quarter of 2021 and the first half of 2021, as compared to the same periods last year.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Depreciation and amortization of property and equipment $ 123,606 $ 114,601 $ 243,521 $ 224,822 7.9 % 8.3 %

% of total revenue 9.8 % 9.8 % — bps

% of revenue, excluding trucking fuel surcharge 10.6 % 10.7 % (10 bps)

% of total revenue 9.4 % 10.8 % 9.6 % 10.3 % (140 bps) (70 bps)

% of revenue, excluding trucking fuel surcharge 10.2 % 11.5 % 10.4 % 11.1 % (130 bps) (70 bps)

Depreciation relates primarily to our owned tractors, trailers, buildings, electronic logging devices, other communication units, and other similar assets.

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Management periodically reviews the condition, average age, and reasonableness of estimated useful lives and salvage values of our equipment and considers such factors in light of our experience with similar assets, used equipment market conditions, and prevailing industry practice.

Consolidated depreciation and amortization of property and equipment increased by $9.7 million for the quarter ended March 31, 2021, when compared to the same period last year.

The increase was primarily related to an increase in owned versus leased equipment.

Consolidated depreciation and amortization of property and equipment increased by $9.0 million for the second quarter of 2021 and increased by $18.7 million for the first half of 2021, as compared to the same periods last year.

These increases were primarily related to an increase in owned versus leased equipment.

We expect consolidated depreciation and amortization of property and equipment to increase both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge , as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Amortization of intangibles $ 11,984 $ 11,474 $ 23,733 $ 22,948 4.4 % 3.4 %

% of total revenue 1.0 % 1.0 % — bps

% of revenue, excluding trucking fuel surcharge 1.0 % 1.1 % (10 bps)

% of total revenue 0.9 % 1.1 % 0.9 % 1.1 % (20 bps) (20 bps)

% of revenue, excluding trucking fuel surcharge 1.0 % 1.2 % 1.0 % 1.1 % (20 bps) (10 bps)

Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions.

See Note 6 in Part I, Item 1, of this Quarterly Report for further details regarding the Company's intangible assets.

The increase of $0.3 million for the quarter ended March 31, 2021, when compared to the same period last year, was attributed to the Eleos acquisition completed on February 1, 2021.

The increases of $0.5 million and $0.8 million for the second quarter and first half of 2021, as compared to the same periods last year, were attributed to the Eleos and UTXL acquisitions.

See Note 3 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Rental expense $ 13,399 $ 22,372 $ 30,263 $ 47,747 (40.1 %) (36.6 %)

% of total revenue 1.4 % 2.3 % (90 bps)

% of revenue, excluding trucking fuel surcharge 1.5 % 2.5 % (100 bps)

% of total revenue 1.0 % 2.1 % 1.2 % 2.2 % (110 bps) (100 bps)

% of revenue, excluding trucking fuel surcharge 1.1 % 2.2 % 1.3 % 2.4 % (110 bps) (110 bps)

Rental expense consists primarily of payments for tractors and trailers financed with operating leases.

The primary factors affecting the expense are the size of our revenue equipment fleet and the relative percentage of owned versus leased equipment.

Consolidated rental expense decreased by $8.5 million for the quarter ended March 31, 2021, as compared to the same period last year.

This was primarily due to increasing our ratio of owned versus leased equipment.

Consolidated rental expense decreased by $9.0 million for the second quarter of 2021 and decreased by $17.5 million for the first half of 2021, as compared to the same periods last year.

This was primarily due to an increase in our owned versus leased equipment.

We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Purchased transportation $ 304,157 $ 200,107 $ 562,387 $ 425,383 52.0 % 32.2 %

% of total revenue 21.1 % 20.0 % 110 bps

% of revenue, excluding trucking fuel surcharge 22.8 % 21.9 % 90 bps

% of total revenue 23.1 % 18.9 % 22.2 % 19.5 % 420 bps 270 bps

% of revenue, excluding trucking fuel surcharge 25.1 % 20.1 % 24.0 % 21.0 % 500 bps 300 bps

Purchased transportation expense is comprised of payments to independent contractors in our trucking operations, as well as payments to third-party capacity providers related to logistics, freight management, and non-trucking services in our logistics and intermodal businesses.

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The increase could be partially offset if independent contractors exit the market due to regulatory changes.

Consolidated purchased transportation expense increased by $33.0 million for the quarter ended March 31, 2021, as compared to the same period last year.

This increase was primarily due to expenses related to third-party carriers and was partially offset by a 12.9% decrease in miles driven by independent contractors for the quarter ended March 31, 2021.

Consolidated purchased transportation expense increased by $104.1 million for the second quarter of 2021 and increased by $137.0 million for the first half of 2021, as compared to the same periods last year.

These increases were primarily due to payments made to third-party carriers, partially offset by a decrease in miles driven by independent contractors of 8.3% for the second quarter of 2021 and 10.7% the first half of 2021, as compared to the same periods last year.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Impairments $ — $ 353 $ — $ 1,255 (100.0 %) (100.0 %)

In 2020, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Trucking and non-reportable segments).

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Impairments $ — $ 902 (100.0 %)

In 2020, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Trucking and non-reportable segments).

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Miscellaneous operating expenses $ 11,331 $ 20,778 $ 25,924 $ 43,794 (45.5 %) (40.8 %)

Miscellaneous operating expenses primarily consist of legal and professional services fees, general and administrative expenses, other costs, as well as net gain on sales of equipment.

The $8.4 million decrease in net consolidated miscellaneous operating expenses was primarily due to a $7.5 million increase in gain on sales of equipment.

• Comparison Between the Quarters Ended June 30, 2021 and 2020 — The decrease in net consolidated miscellaneous operating expenses was primarily due to a $13.4 million increase in gain on sales of equipment.

• Comparison Between Year-to-Date June 30, 2021 and 2020 — The decrease in net consolidated miscellaneous operating expenses was primarily due to a $20.9 million increase in gain on sales of equipment.

Consolidated Other Expenses, net

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2021 vs.

2021 2020 2021 2020 QTD 2020

(Dollars in thousands) Increase (Decrease)

Interest expense $ 3,307 $ 4,021 $ 6,793 $ 10,128 (17.8 %) (32.9 %)

Other (income) expenses, net (16,105) 6,507 (347.5 %)

Other (income), net (16,840) (8,499) (32,945) (1,992) 98.1 % 1,553.9 %

Income tax expense 51,783 26,815 97,112 51,369 93.1 % 89.0 %

Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs.

The decrease in interest expense for the quarter ended March 31, 2021 was primarily due to lower overall interest rates, as well as lower overall debt balances.

Other (income) expenses, net — Other (income) expenses, net is primarily comprised of (gains) and losses from our various equity investments, including our TRP investments accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.

The $22.6 million favorable change between the quarter ended March 31, 2021 compared to the same period last year is primarily driven by gains recognized within our portfolio of investments.

The quarter and year-to-date decreases in interest expense were primarily due to lower overall interest rates.

We expect interest expense to increase during the second half of 2021 due to the inclusion of the 2021 Term Loan which was entered into subsequent to June 30, 2021.

Other (income), net — Other (income), net is primarily comprised of (gains) and losses from our various equity investments, including our TRP investments accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.

• Comparison Between the Quarters Ended June 30, 2021 and 2020 — The $8.3 million favorable change between the second quarter of 2021 and the second quarter of 2020 is primarily driven by unrealized gains recognized from our investment in Embark, partially offset by a reduction in unrealized gains recognized for other investments within our portfolio.

• Comparison Between Year-to-Date June 30, 2021 and 2020 — The $31.0 million favorable change between the first half of 2021 and the first half of 2020 is primarily due to the Embark gain discussed above and an increase in unrealized gains recognized for other investments within our portfolio.

Income tax expense — In addition to the discussion below, Note 7 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.

The $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.

All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.

• Comparison Between the Quarters Ended June 30, 2021 and 2020 — The $25.0 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes resulting in an effective tax rate of 25.3% for the second quarter of 2021 and 25.0% for the second quarter of 2020.

• Comparison Between Year-to-Date June 30, 2021 and 2020 — The $45.7 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes resulting in an effective tax rate of 25.5% for the first half of 2021 and 26.0% for the first half of 2020.

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Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

(In thousands)

6 unchanged sentences

Impairments 2

— 353 — 1,255

Legal accruals 3

879 — 2,121 —

COVID-19 incremental costs 4

— 9,966 — 12,259

Transaction fees 5

Adjusted income before income taxes 218,109 128,797 406,219 233,446

5 unchanged sentences

Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

Earnings per diluted share $ 0.92 $ 0.47 $ 1.69 $ 0.85

3 unchanged sentences

Amortization of intangibles 1

0.07 0.07 0.14 0.13

Impairments 2

Legal accruals 3

0.01 — 0.01 —

COVID-19 incremental costs 4

— 0.06 — 0.07

Transaction fees 5

Adjusted income before income taxes 1.31 0.75 2.44 1.37

2 unchanged sentences

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions.

Refer to Note 3 in Part I, Item 1 of this Quarterly Report for additional details regarding the acquisition.

2 "Impairments" for the first quarter of 2020 reflect the impairment of trailer tracking equipment (within the Trucking segment).

3 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee related matters.

Refer to Note 3 in Part I, Item 1 of this Quarterly Report for additional details regarding our acquisition.

2 "Impairments" reflects the non-cash impairment of certain tractors (within the Trucking segment) and certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market during the second quarter of 2020, as well as impairment charges of trailer tracking equipment (within the Trucking segment) during the first quarter of 2020.

4 "COVID-19 incremental costs" reflects costs incurred during 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak.

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The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

5 "Transaction fees" represent certain acquisition related expenses associated with the UTXL and ACT acquisitions, consisting of legal and professional fees and are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.

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Consolidated Adjusted Operating Income and Adjusted Operating Ratio

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

GAAP Presentation (Dollars in thousands)

13 unchanged sentences

Impairments 2

— (353) — (1,255)

Legal accruals 3

(879) — (2,121) —

COVID-19 incremental costs 4

— (9,966) — (12,259)

Transaction fees 5

(659) — (659) —

Adjusted Operating Expenses 1,008,235 873,637 1,966,090 1,783,944

9 unchanged sentences

Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

5 See Non-GAAP Reconciliation:

Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 5.

Table of Contents Glossary of Terms

4 unchanged sentences

Trucking Segment

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

GAAP Presentation (Dollars in thousands)

13 unchanged sentences

Amortization of intangibles 1

(324) (324) (648) (648)

Impairments 2

— (153) — (1,055)

COVID-19 incremental costs 3

— (9,901) — (12,146)

Adjusted Operating Expenses 713,779 697,867 1,427,786 1,408,146

10 unchanged sentences

Logistics Segment

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

GAAP Presentation (Dollars in thousands)

10 unchanged sentences

Intersegment transactions (4,570) (3,038) (7,735) (5,479)

Amortization of intangibles 1

(97) — (97) —

Adjusted Operating Expenses 147,714 64,028 255,859 137,066

1 unchanged sentence

Adjusted Operating Ratio 91.1 % 95.5 % 92.1 % 95.3 %

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition.

Intermodal Segment

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2021 2020 2021 2020

GAAP Presentation (Dollars in thousands)

11 unchanged sentences

COVID-19 incremental costs 1

— (65) — (113)

Adjusted Operating Expenses 109,482 87,109 212,996 184,420

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Our primary sources of liquidity are funds provided by operations and the following:

Source March 31, 2021

Source June 30, 2021

(In thousands)

1 unchanged sentence

Availability under Revolver, due October 2022 1

Availability under 2018 RSA, due July 2021 2

Availability under 2021 RSA, due April 2024 2

Total unrestricted liquidity $ 943,159

2 unchanged sentences

Total liquidity, including restricted cash and restricted investments $ 1,004,783

1 As of March 31, 2021, we had $115.0 million in borrowings under our $800.0 million Revolver.

1 As of June 30, 2021, we had $55.0 million in borrowings under our $800.0 million Revolver.

We additionally had $36.6 million in outstanding letters of credit (discussed below), leaving $708.4 million available under the Revolver.

2 Based on eligible receivables at March 31, 2021, our borrowing base for the 2018 RSA was $267.2 million, while outstanding borrowings were $ 199.0 million.

2 Based on eligible receivables at June 30, 2021, our borrowing base for the 2021 RSA was $400.0 million, while outstanding borrowings were $ 279.0 million.

We additionally had $65.3 million in outstanding letters of credit (discussed below), leaving $55.7 million available under the 2021 RSA.

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Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet, fund replacement of our revenue equipment fleet, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings.

We expect that net capital expenditures from the aforementioned projects will be in the range of $450.0 – $500.0 million for the full-year 2021.

We expect that net capital expenditures from the aforementioned projects will be in the range of $500.0 – $550.0 million for the full-year 2021, including anticipated net cash capital expenditures of ACT.

The range provided excludes cash outlays for potential acquisitions.

We believe we have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or other conditions warrant.

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However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under our accounts receivable securitization, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

Principal and Interest Payments — As of March 31, 2021, we had debt, accounts receivable securitization, and finance lease obligations of $825.5 million, which are discussed under "Material Debt Agreements," below.

Principal and Interest Payments — As of June 30, 2021, we had debt, accounts receivable securitization, and finance lease obligations of $870.7 million, which are discussed under "Material Debt Agreements," below.

Certain cash flows from operations are committed to minimum payments of principal and interest on our debt and lease obligations.

Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.

Subsequent to June 30, 2021, we acquired ACT and borrowed $1.2 billion pursuant to the 2021 Term Loan to finance the transaction.

Letters of Credit — Pursuant to the terms of the 2017 Debt Agreement and the 2021 RSA, our lenders may issue standby letters of credit on our behalf.

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Share Repurchases — From time to time, and depending on free cash flow availability, debt levels, common stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock.

As of March 31, 2021, the Company had $196.3 million remaining under the 2020 Knight-Swift Share Repurchase Plan .

As of June 30, 2021, the Company had $196.3 million remaining under the 2020 Knight-Swift Share Repurchase Plan .

Additional details are discussed in Note 11 in Part I, Item 1 of this Quarterly Report.

Working Capital

We had a working capital surplus of $15.3 million as of March 31, 2021 and $83.7 million as of December 31, 2020.

Our working capital surplus as of March 31, 2021 was negatively impacted by our 2018 RSA, which is included within current liabilities since it was scheduled to mature in July 2021.

On April 23, 2021, we entered into the 2021 RSA, which amended the 2018 RSA extending the maturity to April 23, 2024.

Additional details are discussed in Note 8 in Part I, Item 1 of this Quarterly Report.

We had a working capital surplus of $369.3 million as of June 30, 2021 and $83.7 million as of December 31, 2020.

Material Debt Agreements

As of March 31, 2021, we had $825.5 million in material debt obligations at the following carrying values:

As of June 30, 2021, we had $870.7 million in material debt obligations at the following carrying values:

• $299.2 million:

1 unchanged sentence

• $278.4 million:

2018 RSA outstanding borrowings, due July 2021

2021 RSA outstanding borrowings, net of $0.6 million in deferred loan costs

• $238.1 million:

15 unchanged sentences

Cash Flow Analysis

Quarter Ended March 31, Change

Year-to-Date June 30, Change

(In thousands)

3 unchanged sentences

Net Cash Provided by Operating Activities

Comparison Between Quarter Ended March 31, 2021 and 2020 — The $150.8 million increase in net cash provided by operating activities was primarily due to less cash paid for legal settlements in the first quarter of 2021, as compared to the first quarter of 2020, when we paid $93.4 million associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift.

Net cash provided by operating activities was also favorably impacted by a $60.1 million increase in our operating income.

Comparison Between Year-to-Date June 30, 2021 and 2020 — The $76.1 million increase in net cash provided by operating activities was primarily due to a $149.1 million increase in operating income and a $4.7 million decrease in interest payments, partially offset by a $129.7 million increase in income tax payments.

The remaining difference is attributed to various changes in working capital.

Net Cash Used in Investing Activities

Comparison Between Quarter Ended March 31, 2021 and 2020 — The $51.4 million decrease in net cash used in investing activities was primarily due to a $31.8 million decrease in net cash capital expenditures.

Comparison Between Year-to-Date June 30, 2021 and 2020 — The $56.2 million decrease in net cash used in investing activities was primarily due to a $74.7 million decrease in net cash capital expenditures, partially offset by $25.0 million spent on our investment in Embark's convertible note.

Net Cash Used in Financing Activities

Comparison Between Quarter Ended March 31, 2021 and 2020 — Net cash used in financing activities increased by $113.5 million, primarily due to a $110.0 million net increase in cash used for our Revolver, as we made net prepayments of $95.0 million during the first quarter of 2021, as compared to assuming net borrowings of $15.0 million during the first quarter of 2020.

Comparison Between Year-to-Date June 30, 2021 and 2020 — Net cash used in financing activities increased by $54.0 million, primarily due to a $24.5 million increase in net repayments of our debt and finance lease obligations and a $19.0 million increase in repurchases of our common stock.

Discussion regarding the impact of seasonality on our business is included in Note 1 in the notes to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report, incorporated by reference herein.

7 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis