Proficient Auto Logistics, Inc (PAL)

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Special Note Regarding Forward-Looking Statements

The following discussion
and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and our
Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”).

Unless otherwise indicated,
the terms the “Company,” “we,” “us” and “our” refer to Proficient Auto Logistics, Inc.
and its subsidiaries as a whole, after giving effect to the Combinations (as defined below) and recent acquisitions.

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

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We
caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report. In addition,
in light of certain risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly
Report may not occur. The forward-looking statements made in this document relate only to events as of the date on which the statements
are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated events. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.
We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or
otherwise, except as required by law.

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 with an operating fleet with approximately 800 owned assets and employing 724 dedicated employees as of June 30, 2026. From
our 57 strategically located facilities across the United States, we offer a broad range of auto transportation and logistics services,
primarily focused on transporting finished vehicles from automotive production facilities, marine ports of entry or regional rail yards
to auto dealerships around the country. We have developed a differentiated business model due to our scale, breadth of geographic coverage
and embedded customer relationships with leading auto original equipment manufacturing companies (“OEMs”). Our customers include
nearly all of the global auto manufacturing companies who participate in the North American market. Additional customers include auto
dealers, auto auctions, rental car companies and auto leasing companies.

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 (collectively, the “Founding Companies”). On May 13, 2024, the Company completed the IPO of
its common stock, and in connection with the closing of the IPO, the Company also completed the acquisitions of all of the Founding
Companies (the “Combinations”). Thereafter, on August 16, 2024, the Company acquired Auto Transport Group, LC,
(“ATG,” which was converted to a limited liability company after closing), and on November 1, 2024, the Company acquired
Utah Truck & Trailer Repair, LLC, (“UTT,” which subsequently converted into Proficient Repair Services LLC), a
repair facility located at the ATG headquarters terminal in Ogden, Utah. On April 1, 2025, the Company acquired Brothers Auto
Transport, LLC, (“Brothers”), located in Wind Gap, Pennsylvania and on May 27, 2025, the Company acquired PVT Truck & Trailer Repair, LLC, (“PVT”) a repair facility located at the Brothers headquarters. These acquisitions expanded
the Company’s geographic presence and services offered. The Combinations and subsequent acquisitions are accounted for under
ASC 805, Business Combinations. Under this method of accounting, Proficient Auto Logistics, Inc. is treated as the
“accounting acquirer”.

H&A Acquisition

On August 10, 2026, the Company
entered into a definitive agreement to acquire Hansen & Adkins (“H&A”), a vehicle logistics platform with a network
spanning the United States and Canada, and it closed the transaction on August 13, 2026. The upfront purchase price in the transaction
was $130 million, including assumed debt of approximately $75 million. Of the approximately $55 million remaining purchase price, approximately
$3 million was paid in shares of Company Common Stock with approximately $52 million paid in cash. The terms of the transaction also provide
for potential earnout payments of up to approximately $22.1 million, of which $2 million would be payable in shares of Company Common
Stock with the remainder payable in cash. The cash portion of the purchase price was paid with available cash resources and borrowings
under the Company’s existing credit facilities. No amounts related to the acquisition are reflected in the Company’s

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 with an operating fleet of approximately 800 owned assets and employing 825 dedicated employees as of December 31, 2025.
From our 57 strategically located facilities across the United States, we offer a broad range of auto transportation and logistics services,
primarily focused on transporting finished vehicles from automotive production facilities, marine ports of entry or regional rail yards
to auto dealerships around the country. We have developed a differentiated business model due to our scale, breadth of geographic coverage
and embedded customer relationships with leading auto original equipment manufacturing companies (“OEMs”). Our customers
include nearly all of the global auto manufacturing companies who operate in the U.S. market. 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
$177.4 million in cash and 6,978,191 shares of our common stock (provided, that 541,866 of these shares of common stock were held back
and were not be issued at the closing of the Combinations to satisfy the indemnification obligations of certain of the Founding Companies
for a period of twelve months following the closing of the Company’s IPO). Thereafter, on August 16, 2024, the Company acquired
ATG for approximately $28.4 million in cash and 1,069,346 shares of our common stock. Subsequently on November 1, 2024, the Company acquired
Utah Truck & Trailer Repair, LLC, (“UTT”), a repair facility located at the ATG headquarters terminal in Ogden, Utah
for $4.5 million in cash. These acquisitions expanded the Company’s geographic presence and services offered. On April 1, 2025,
the Company acquired Brothers Auto Transport (“Brothers”), for approximately $12.4 million in cash and 395,322 shares of
our common stock. Then on May 27, 2025, the Company acquired PVT Truck & Trailer Repair, LLC, a repair facility located at the Brothers
headquarters terminal in Wind Gap, Pennsylvania for $1.0 million in cash. The Combinations and subsequent acquisitions are accounted
for as business combinations under ASC 805. Under this method of accounting, Proficient Auto Logistics, Inc. is treated as the “accounting
acquirer.”

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

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Financial
Statement Components

Revenue

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

We
are typically paid a predetermined rate per unit for our 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
volatility.

We
monitor as key operating metrics the volume of units delivered, average revenue per unit and adjusted operating ratio, 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 independent
contractors and to third-party carriers and (iv) maintenance of our fleet. Expenses that have both fixed and variable components
include maintenance and truck expenses and our total cost of insurance and claims. These expenses generally vary with the miles we travel,
but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs include depreciation
of long-term assets, such as revenue equipment and leasing costs for our service center facilities, the compensation of non-driver personnel
and other general and administrative expenses.

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 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 more or less than the economic lives.

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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 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 completes
the final fair value determination of the assets acquired and liabilities assumed for each acquired business 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 amo

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