Q4 2021 Old Dominion Freight Line Inc Earnings Call
Speaker 1: Good morning and welcome to the Old Dominion Freightline Inc. fourth quarter and year-end 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good morning, and welcome to the old Dominion Freightliner, Inc. Fourth quarter and year end 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
Speaker 1: To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is
To withdraw your question. Please press Star then two please.
Please note this event is being recorded.
Speaker 1: I would now like to turn the conference over to Drew Anderson. Please go ahead.
I would now like to turn the conference over to drew Anderson. Please go ahead.
Speaker 2: Thank you. Good morning and welcome to the fourth quarter in 2021 conference call for Old Dominion Freightline. Today's call is being recorded and will be available for replay beginning today and through February the 9th, 2022 by dialing 877-344-7529, Access Code 463-1573.
Thank you good morning, and welcome to the fourth quarter and 2021 conference call for old Dominion freight line today's call is being recorded and will be available for replay beginning today and through February nine 2022 by dialing 87734 475.
<unk> two nine access code 4631573.
Speaker 2: The replay of the webcast may also be accessed for 30 days at the company's website.
The replay of the webcast may also be accessed for 30 days at the company's website.
Speaker 2: This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.
This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding old dominions expected financial and operating performance for this purpose any statements made during this call that are not statements of historical.
Fact may be deemed to be forward looking statements without limiting the foregoing. The words believes anticipates plans expects and similar expressions are intended to identify forward looking statements.
Speaker 2: Without limiting the foregoing, the words believe, anticipates, plans, expects, and similar expressions are intended to identify forward-looking states.
Speaker 2: You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release, and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statement.
You are hereby cautioned that these statements may be affected by the important factors among others set forth in old Dominion's filings with the Securities and Exchange Commission and in this morning's news release and consequently, actual operations and results may differ materially from the results discussed in the forward looking statements the company undertakes no.
Speaker 2: The company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise.
Legations to publicly update any forward looking statements, whether as a result of new information future events or otherwise.
Speaker 2: As a final note before we begin, we welcome your questions today, but we do ask in fairness to all that you limit yourself to just a few questions at a time before returning to the queue. Thank you for your cooperation.
As a final note before we began we welcome your questions today, but we do ask in fairness to all that you limit yourself to just a few questions at a time before returning to the queue. Thank you for your cooperation.
Speaker 2: At this time for opening remarks, I would like to turn the conference over to the company's president and chief executive officer, Mr. Greg Gantt. Please go ahead, sir.
At this time for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Greg Gantt. Please go ahead Sir.
Speaker 3: Good morning, and welcome to our fourth quarter conference call.
Good morning, and welcome to our fourth quarter Conference call.
Speaker 3: With me on the call today is Adam Satterfield, our CFO .
With me on the call today is Adam Satterfield, our CFO .
Speaker 3: After some brief remarks, we'll be glad to take your questions.
After some brief remarks, we'll be glad to take your questions.
Speaker 3: Old Dominion finished 2021 with outstanding fourth quarter financial performance that resulted in new company records for annual revenue and profitability.
Old Dominion's finished 2021 with outstanding fourth quarter financial performance that resulted in New company Records for annual revenue and profitability.
Speaker 3: The fourth quarter of 2021 was our fourth straight quarter with double digit revenue growth and the sixth straight quarter of double digit growth in earnings per deleted shares.
The fourth quarter of 2021.
<unk> straight quarter with double digit revenue growth and the sixth straight quarter of double digit growth in earnings per diluted share.
Speaker 3: We are encouraged by the momentum in our business and believe that we are uniquely positioned to win a digital market share in 2022.
We are encouraged by the momentum in our business and believe that we are uniquely positioned to win additional market share in 2022.
Speaker 3: We can do this by continuing to execute on the same strategic plan that has driven our history of long-term profitable growth.
We can do this by continuing to execute on the same strategic plan that has driven our history of long term profitable growth.
Speaker 3: This strategy is centered on our ability to deliver a value proposition of superior service at a fair price to our customers.
This strategy is centered on our ability to deliver a value proposition of superior service at a fair price to our customers.
Speaker 3: The OD family of employees worked through every challenge thrown its way in 2021 and continued to deliver best in class service while skillfully managing the 19.4% growth in our LTL shipments per day for the full year. I can assure you that delivering on time without damage is a significant accomplishment with this type of volume growth.
<unk> family of employees worked through every challenge thrown its way in 2021 and continuing to deliver best in class service, while skillfully managing the 19, 4% growth in our <unk> shipments per day for the full year.
I can assure you that delivering all time.
Without damage is a significant accomplishment with this type of volume growth.
Speaker 3: That is why I'm so proud that in 2021, we once again earned the Mastio Quality Award, which recognizes us as the national number one LTF carrier for the 12th straight year.
That is why I am so proud that in 2021, we once again earned the Matthew quality Award, which recognizes us as the national number one L. P up carrier for the 12th straight year.
Speaker 3: providing superior service, not only allows us to win market share, it also supports our long-term pricing strategy.
Providing superior service not only allows us to win market share. It also supports our long term pricing strategy.
Speaker 3: We have consistently focused on improving our yields at the individual account level to both offset our cost inflation and support further investment in our business.
We have consistently focused on improving our yields at the individual account level.
Both offset our cost inflation and support further investment in our business.
Speaker 3: This approach has helped strengthen our financial position over time and allow us to do something that others in our industry have not consistently invest in new capacity.
This approach has helped strengthen our financial position over time and allow us to do something that others in our industry have not consistently invest in new capacity.
We have historically invested 10% to 15% of our revenue and capital expenditures each year, and we expect to spend approximately $825 million this year.
Speaker 3: We have historically invested 10 to 15 percent of our revenue in capital expenditures each year and we expect to spend approximately 825 million this
Speaker 3: We believe consistent and long term investments in capacity are valued by customers as an integral component of quality service. And these investments are also necessary to support our ongoing market share initiative.
We believe consistent and long term investments and capacity are valued by customers as an integral component of quality service.
And these investments are also necessary to support our ongoing market share initiatives.
Speaker 3: We simply never want our service center network to be a limiting factor to growth, which is why we have spent over 1.8 billion over the past 10 years to expand our service center capacity across the nation.
We simply never want our service center network to be a limiting factor to growth, which is why we have spent over $1 8 billion over the past 10 years to expand our service center capacity across the nation we.
Speaker 3: We currently have approximately 15 to 20 percent of spare capacity in our network, although our 2022 capital expenditure plan includes another $300 million to further expand our service center capacity to stay ahead of our anticipated growth curve.
We currently have approximately 15% to 20% of spare capacity in our network. Although our 2022 capital expenditure plan includes another 300 million to further expand our service center capacity to stay ahead of our anticipated growth curve.
Speaker 3: There are, of course, two other ingredients in the capacity equation, our fleet and our people.
There are of course to other ingredients and the capacity equation, our fleet and our people.
Speaker 3: We intend to spend $485 million for new tractors and trailers this year. We would frankly like to spend more, but we have been limited by several suppliers that are facing manufacturing challenges.
We intend to spend $485 million for new tractors and trailers this year.
We would frankly like to spend more but we have been limited by several suppliers that are facing manufacturing challenges.
Speaker 3: We are fortunate, we're fortunate to enter the pandemic with one of the youngest fleets in our industry. And as a result, we can continue to use existing equipment that otherwise would have been replaced this year.
We are fortunate we're fortunate to enter the pandemic with one of the youngest fleets in our industry and as a result, we can continue to use existing equipment that otherwise would have been replaced this year.
This strategy may continue to cost us a little more on maintenance and repair calls as it did in 2021.
Speaker 3: This strategy may continue to cost us a little more maintenance and repair costs as it did in 2021. But we believe our currently and these additions will be sufficient to accommodate our expected growth.
But we believe our current fleet and these conditions will be sufficient to accommodate our expected growth.
Speaker 3: As we have done in recent quarters, we also expect to continue to utilize purchase transportation to supplement the capacity of our people and our equipment.
As we have done in recent quarters. We also expect to continue to utilize purchased transportation to supplement the capacity of our people and our equipment.
Speaker 3: The final ingredient and the most important piece of our strategic plan is the investment that we continuously make in our people.
The final ingredient and the most important piece of our strategic plan is the investment that we continuously making our people.
Speaker 3: The OD family of employees grew by 20% in 2021, which including adding adding over 1700 drivers in a challenging labor market.
The <unk> family of employees grew by 20% in 2021, which including adding adding over 1700 drivers.
Challenging labor market.
Speaker 3: We expect that 2022 will be another big recruiting year for OD.
We expect that 2022 will be another big recruiting year for a.
Speaker 3: While the labor market remains challenging, we are confident in our ability to add to our team due to our outstanding company culture.
While the labor market remains challenging we are confident in our ability to add to our team due to our.
Standing company culture.
Speaker 3: In addition, we offer a rewarding pay and benefits package and soon expect to make company record discretionary contribution to our employees 401k retirement plan.
Additionally, we offer a rewarding pay and benefits package and so don't expect to make company record discretionary contribution to our employees 401, K retirement plan.
Speaker 3: Our long-term strategic plan is straightforward, difficult for others to successfully replicate and builds on itself year after year. Our success over the years has proven the flywheel effect of our strategic plan and we believe it will spin even faster in 2022.
Our long term strategic plan is straightforward dip.
Difficult for others to successfully replicate and builds on itself year after year.
Our success over the years has proven the flywheel effect of our strategic plan and we believe it will span even faster in 2022.
Speaker 3: We are encouraged by the opportunities ahead and we are confident that the discipline execution of this strategic plan will produce further profitable growth and increase shareholder value.
We are encouraged by the opportunities ahead, and we are confident that the disciplined execution of this strategic plan will produce further profitable growth and increase shareholder value.
Speaker 3: Thank you for joining us this morning and now Adam will discuss our fourth quarter financial results in greater detail.
Thank you for joining us this morning, and now Adam will discuss our fourth quarter financial results in greater detail.
Speaker 3: Thank you Greg and good morning. Old Dominion's revenue grew 31.4% to $1.4 billion in the fourth quarter of 2021 and our operating ratio improved 270 basis points to 73.6%.
Thank you, Greg and good morning.
<unk> revenue grew 31, 4% to $1 $4 billion in the fourth quarter 2021, and our operating ratio improved 270 basis points to 73, 6%.
Speaker 4: The combination of these changes resulted in a 49.7% increase in earnings per diluted share to $2.41 for the quarter.
The combination of these changes resulted in a 49, 7% increase in earnings per diluted share to $2 41 for the quarter.
Speaker 4: Our revenue growth included a nice balance of increases in both volume and yield, which were both supported by a favorable domestic economy.
Our revenue growth included a nice balance of increases in both volume and yield which were both supported by favorable domestic economy.
Speaker 4: We believe we are currently winning a significant amount of market share based on a comparison of our shipment trends with publicly disclosed information for other LTO carriers.
We believe we are currently winning a significant amount of market share based on a comparison of our shipment trends with publicly disclosed information for other <unk> carriers.
Speaker 4: our LTL tons per day increased 14.3%, and our LTL revenue per 100 weight increased 16.1%.
Our <unk> tons per day increased 14, 3% and our <unk> revenue per hundredweight increased 16, 1%.
Speaker 4: Our LTL revenue per 100 weight, excluding fuel surcharge, just increased 9.2% due primarily to the success of our long-term pricing strategy, as well as changes in the mix of our freight.
<unk> revenue per hundred weight, excluding fuel surcharges increased nine 2% due primarily to the success of our long term pricing strategy as well as changes in the mix of our freight.
Speaker 4: On a sequential basis, fourth quarter LTL shipments per day increased 0.1% over the third quarter of 2021, which compares favorably to the 10-year average sequential decrease of 3.5%.
On a sequential basis fourth quarter <unk> shipments per day increased 1% over the third quarter of 2021, which compares favorably to the 10 year average sequential decrease of three 5%.
Speaker 4: LTL tons per day increased 2.4% as compared to a 10-year average sequential decrease of 1.7%.
<unk> tons per day increased two 4% as compared to a 10 year average sequential decrease of one 7%.
These 10 year average trends exclude our 2020 metrics were more normalized comparison.
Speaker 4: These 10-year average trans exclude our 2020 metrics for more normalized compares.
Speaker 4: For January , our revenue per day increased 25.7% as compared to January of 2021.
For January our revenue per day increased 25, 7% as compared to January of 2021.
Speaker 4: This growth included a 7.7% increase in LTO tons per day, and a 16.8% increase in LTO revenue per 100 weight.
This growth included a seven 7% increase in <unk> tons per day, and a 16, 8% increase in <unk> revenue per hundredweight.
Speaker 4: Our fourth quarter operating ratio improved to 73.6% and once again included improvements from both our direct operating costs and overhead costs as a percentage revenue.
Our fourth quarter operating ratio improved to 73, 6% and once again included improvements in both our direct operating cost and overhead cost as a percent of revenue.
Speaker 4: Within our direct operating costs, productive labor as a percent of revenue improves 320 basis points, which more than offset the increase in expenses for both their operating supplies and purchase transportation.
Within our direct operating cost productive labor as a percent of revenue improved 320 basis points, which more than offset the increase in expenses for both of our operating supplies and purchase transportation.
Speaker 4: The increase in our operating supplies and expenses as a percent of revenue was primarily due to the increase in the cost of diesel fuel.
The increase in our operating supplies and expenses as a percent of revenue was primarily due to the increase in the cost of diesel fuel.
Speaker 4: We continue to use purchase transportation during the quarter to supplement the capacity of our workforce and our fleet. And we expect to use this similar amount of these third-party services in the first quarter.
We continued to use purchase transportation during the quarter to supplement the capacity of our workforce and our fleet and we expect to use a similar amount of these third party services in the first quarter.
Speaker 4: We are very proud that our annual operating ratio of 73.5% surpassed our previous internal goal of 75%.
We are very proud that our annual operating ratio of 73, 5% surpassed our previous internal goal of 75%.
Speaker 4: As we execute on a long-term continuous improvement cycle for our operating ratio, we intend to follow the same successful approach that we have in the past, which is to focus on density and yield.
As we execute on our long term continuous improvement cycle for our operating ratio. We intend to follow the same successful approach that we have in the past, which is to focus on density and yield.
Speaker 4: The spare capacity within our ever-growing network allows us to drive additional volumes through our system, which generally creates strong incremental margins at the local service center level.
The spare capacity within our ever growing network allows us to drive additional volumes through our system, which generally create strong incremental margins at the local service center level.
Speaker 4: We're confident in our ability to further improve our operating ratio and have dropped our internal goal another 500 basis point.
We are confident in our ability to further improve our operating ratio and have dropped our internal goal another 500 basis points.
Speaker 4: As a result, we will now be focused on achieving an annual operating ratio in the six...
As a result, we will now be focused on achieving an annual operating ratio in the sixes.
Speaker 4: Ultimately, it's cash flow from operations, total of $340 million and $1.2 billion for the fourth quarter and 2021 respectively, while capital expenditures were $165.4 million and $550.1 million for the same period.
Old dominion's cash flow from operations totaled $340 million and $1 2 billion for the fourth quarter and 2021, respectively. While capital expenditures were $165 4 million and $550 $1 million for the same period.
Speaker 4: Greg mentioned earlier that we currently expect capital expenditures in 2022 of approximately $825 million. This total includes $300 million to expand the capacity of our service center network, although we would increase this amount further if we identify additional properties that fit into our long-term strategic plan.
Greg mentioned earlier that we currently expect capital expenditures in 2022 of approximately $825 million. This total includes 300 million to expand the capacity of our service Center network. Although we would increase this amount further if we identify additional properties that fit into our long term.
Our strategic plan.
Speaker 4: We would also increase our expenditures for new equipment if availability improves during the year.
We would also increase our expenditures for new equipment, if availability improves during the year.
Speaker 4: We paid $23 million in cash dividends in the fourth court.
We paid $23 million in cash dividends in the fourth quarter.
Speaker 4: While we did not utilize cash for share repurchases, our $250 million accelerated share repurchase program remained active during the fourth quarter.
While we did not utilize cash for share repurchases, our $250 million accelerated share repurchase program remained active during the fourth quarter.
Speaker 4: We utilize $691.4 million of cash for our shareholder return programs during 2021, and that consisted of $599 million for share repurchases and $92.4 million for cash dividends.
We utilized $691 $4 million of cash for our shareholder return programs. During 2021 and that consisted of $599 million for share repurchases and $92 4 million for cash dividends.
Speaker 4: We were pleased that our Board of Directors approved a 50% increase for the quarterly dividend to $0.30 per share in the first quarter of 2022.
We were pleased that our board of directors approved a 50% increase for the quarterly dividend to <unk> 30 per share in the first quarter of 2022.
Speaker 4: Our effective tax rate for the fourth quarter of 2021 was 25 percent as compared to 25.1 percent in the fourth quarter of 2020. We currently expect an effective tax rate of 26.0 percent for 2022.
Our effective tax rate for the fourth quarter of 2021 was 25% as compared to 25, 1% in the fourth quarter of 2020. We currently expect an effective tax rate of 26.0% for 2022.
Speaker 1: This concludes our prepared remarks this morning. Operator will be happy to open the floor for questions at this time. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing.
This concludes our prepared remarks. This morning, operator, we'll be happy to open the floor for questions at this time.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.
Speaker 1: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our rots.
At this time, we will pause momentarily to assemble our roster.
Okay.
Speaker 1: And the first question will come from Jack Atkins from Stevens. Please go ahead.
And the first question will come from Jack Atkins from Stephens. Please go ahead.
Speaker 5: OK, great. Good morning, guys. And thanks for the longer term color on the new operating ratio target. That's exciting.
Hey, great good morning, guys and.
Thanks for the longer term color on on the new operating ratio target that's exciting.
Speaker 5: So I guess for my first question, if we can maybe kind of shorter term kind of focus.
So I guess for my my first question, if we could maybe kind of shorter term kind of focus on what you saw in January Adam Thanks for the for the trend.
Speaker 5: what you saw in January adam thanks for that for that
Trends from a tonnage perspective at a yield perspective, but anything that you can maybe add was weather in the first couple of weeks and months a little bit of a challenge and we've heard that the rise in Covid cases in December and January presented some challenges for carriers just sort of curious if you could maybe comment on what you saw there are sort of within the month.
Speaker 5: from a tonnage perspective and a yield perspective, but anything that you can maybe add was whether the first couple of weeks in the month, a little bit of a challenge. We've heard that the rise in COVID cases in December and January presented some challenges for carry. We're just sort of curious if you could maybe comment on what you saw there sort of within the month. And I'll follow up.
I'll follow up after that.
Speaker 4: Sure, and good morning, Jack. There were several things impacting January , and certainly every January we deal with weather. It's not a one-time event.
Sure and good morning, Jack there were.
Several things impacting January and certainly every January we deal with weather.
That's not a onetime event and it's.
Speaker 4: Included in all of our 10-year average trends that we typically compare to. Similar to the effect of COVID in certain months of last year, when you only look on a one-month period, we did have some...
Included in all of our 10 year average trends that we typically compare to.
Similar to the effect of Covid in certain months of last year. When you only look on a one month period.
We did have some effect, we felt like both directly and indirectly with customers that were impacted.
Speaker 4: We felt like both directly and indirectly with customers that were impacted through labor shortages and so forth. And so we saw a little bit of that impact as well during the month. And we came off an incredibly strong December . So to talk about December first a little bit, just on a way per day basis.
Through labor shortages, and so forth and so we saw a little bit of that.
<unk> as well during the month.
We came off an incredibly strong.
So to talk about December 1st a little bit just on a weight per day.
Speaker 4: December's tons per day was down 1.1 percent. Our 10-year average is a decrease of 9.1 percent.
Basis.
December <unk> tons per day was down one 1% of our 10 year average is a decrease of nine 1%.
Speaker 4: from a sequential standpoint, we felt like we were going to see that build up in December , coming off November , that had a little bit of some of these same effects that we talked about earlier. So we expected that. But the timing of year-end...
But from a sequential standpoint, we felt like we were going to see that buildup in December coming off November that had a little bit of some of these same effects that we talked about earlier. So we expect that that the timing of year end.
Speaker 4: also had a little bit of effect of both helping December and then starting out that first day of January being a lot softer. You know we don't typically get into these half-day conventions and and so forth like some others do.
Also had a little bit of a effect of both helping December .
And then starting out that first day of January being a lot softer.
We don't typically get into these half day conventions, and so forth like some others do.
Speaker 4: But I would just say that first day of the month was certainly not a full normal day like what we saw for the remainder of the month. So, you know, with all that said, we still grew revenue at 25%. We're really pleased to see that. We saw a continuation of the strong yield trends continue.
But I would just say that first day of the month was certainly not a full normal day like what we saw for the remainder of the month so.
With all that said, we still grew revenue.
At 25%, we're really pleased to see that we saw continuation of the.
The strong yield trends continue.
Speaker 4: in solid volume performance given all the factors that we just discussed.
And solid volume performance given all of the factors that we just discussed.
Speaker 5: OK, that's great to hear, and thank you for that. I guess maybe a longer term question. Adam, I don't know if you want to take it, or if Greg wants to take it, but I would just be curious to get your sense for the trajectory of the growth rate for the LTL market more broadly, not just in 22, but over the next several years. I think there's a sense.
Okay.
That's great to hear and thank you for that I guess, maybe.
Longer term question.
Adam I don't know Greg.
Greg wants to take it but I would just be curious to get your sense for.
The trajectory of the growth rate for the LTE market more broadly not just in 'twenty two but over the next several years I think there is a sense that.
Speaker 5: that some folks have a concern maybe that some folks have that uh... ltl have benefited from all the supply chain disruption maybe more so than others uh... but there seems to be highly increased shipper demand for ltl capacity because of e-commerce and a number of other factors you guys are investing for growth i would just be curious if you could maybe uh... walk us through sort of your maybe your longer term perspective for the ltl market uh... not just in twenty two but over the next several
Some folks have a concern maybe that some folks have that.
<unk> had benefited from all the supply chain disruption, maybe more so than others.
But there seems to be increased shipper demand for LTE capacity because of e-commerce and a number of other factors you guys are investing for growth I would just be curious if you could maybe walk us through sort of your maybe your longer term perspective for the <unk> market.
Not just in 'twenty, two but over the next several years.
Speaker 3: Jack, I'll take a shot at that, and I'll let Adam add to this, but you're right. From what we have seen and from talking with our customers, we expect continued growth. It looks like, if anything, this e-commerce is continuing to drive the LTL market. The industrial economy has been strong, and everything that we see on the horizon is, we expect continued growth.
Jack.
Take a shot at that and I'll, let Adam add to this but but you are right what we.
We have seen and talking with our customers. We expect continued growth it looks like if anything to E. Commerce is continuing to drive the LTE market.
The industrial economy has been strong and everything that we see on the horizon is as we expect continued growth.
Speaker 3: Hey, I want to roll back to the current question that you asked prior.
I want to roll back to the question that you asked prior.
Speaker 3: Just just for everyone's information, and I'm sure somebody else intends to ask this, but we have seen our numbers go in the right direction over the last several weeks.
Just just for everyone's information I'm sure somebody else tends to ask this but we have seen our numbers go in the right direction over the last several weeks.
Speaker 3: And I think it's important to note, I think we've heard the same thing on the news as to what's happening around the country, but our trend has been really positive the last few weeks. Our cases are really down.
I think it's important to note I think we've heard the same thing all the moves.
As to what's happening around the country, but our trend has been really positive. The last few weeks. Our cases are really down and it looks like from our perspective this thing could be dying out so.
Speaker 3: And it looks like from our perspective, the thing could be dying out. So hopefully that's happening everywhere. And I think if it is, that'll sure be a boost to everything related to the economy and certainly to conduct and business more as as
Hopefully that's happening everywhere and I think if it is that will that will sure be a boost to everything related to the economy and certainly due to conduct.
Business Morris as normal.
Speaker 3: been a long time since normal, but hopefully we can get back to that. And I let Adam add to that.
Long time since normal but.
Hopefully, we can get back to that.
And I'll, let Adam I add to that longer term.
Speaker 4: Jack, I would just repeat what Greg said and certainly feel like there continue to be tailwinds for the industry and we feel like the industry has already been growing above GDP and I believe really that the industry as a whole could have grown more but the industry continues to be capacity constrained and that's why we talk about the service advantages that we have in the marketplace as well as the capacity advantages.
Question.
Jack I would just repeat what Greg said and certainly feel like there continue to be tailwind to the industry.
We feel like the industry has already been growing above GDP.
Believe really that the.
The industry as a whole could have grown more but.
The industry continues to be capacity constrained and that's why we talk about the service advantages that we have in the marketplace as well as the capacity advantages.
Speaker 4: that have driven much of our growth. We probably could have grown even faster this year, but it's something that we've certainly taken advantage of all the investment.
That have driven much of our growth.
We probably could have grown even faster.
This year, but it's something that.
We've certainly taken advantage of all the investments.
Speaker 4: that we've made over time. We've invested a lot in our network.
We've made over time, we've invested a lot in our network over $1 8 billion for the last 10 years growing our door count over 50%, while our shipment count has grown over the last 10 years about 70% or so.
Speaker 4: over $1.8 billion dollars the last 10 years growing our door count over 50%.
Speaker 4: While our shipment count has grown over the last 10 years, about 70% are so. When you look at the other group of public carriers,
When you look at the other group of public carriers.
Speaker 4: There's been a decrease in the number of service centers in the industry. So, and then for that reason, the other carriers, the total shipment managed by the group is pretty flat as well. So we'll see how that continues to trend, but there's service value that we add.
It's been a decrease in the number of service centers in the industry. So.
And then for that reason the other carriers. The total shipments managed by the group is pretty flat as well. So we'll see how that continues to trend, but theyre service value that we add and I think our customers are starting to appreciate that more when they look to their supply chain in total.
Speaker 4: and I think our customers are starting to appreciate that more when they look through their supply chain in total in leveraging an LTL carrier's net
And leveraging an LPL carriers network. That's why it's so important that we continue with our yield improvement initiatives to continue to have the financial strength to.
Speaker 4: It's why it's so important that we continue with our yield improvement initiatives to continue to have the financial strength to invest further in our system.
Best further in our system.
Speaker 4: To allow us to continue to grow with our customers because that's a big piece of the overall quality Equation and that service value that we deliver they can call on us and they certainly are doing so when you look at our volume performance this year Customers are increasingly calling on us Deliver to deliver for them because of capacity shortfalls that they're experiencing through either other carriers or other modes Okay, that's helpful. Thanks
To allow us to continue to grow with our customers because that's a big piece of the overall quality.
Equation.
That service value that we deliver they can call on us and they certainly are doing when you look at our volume performance this year.
Customers are increasingly calling on us to.
The liver to deliver for them because of capacity shortfalls that they're experiencing.
Either other carriers or other modes.
Okay. That's helpful. Thanks again for the time.
Thanks Jay.
Speaker 1: And the next question will be from Jason Seidel from Cowan. Please go ahead. Thank you, Operator. Greg Adam.
And the next question will be from Jason Seidl from Cowen. Please go ahead.
Thank you operator, Greg Adam and team Thanks for taking my questions.
Speaker 6: I wanted to focus a little bit on the yield side first, the numbers you gave imply probably the large...
Want to focus a little bit on the.
Yield side first the numbers you gave imply.
Probably the largest sequential <unk> increase we've seen in a little bit of time I'm wondering if you could talk about.
Speaker 6: I wonder if you could talk about contractual rate renewals and how they transfer.
Contractual rate renewals and how they trended in <unk> and how Theyre looking early on and then I want to chat a little bit about your length of haul.
Speaker 6: and how they're looking early on. And then I want to chat a little bit about your length of haul.
Speaker 6: growing again for Q is that the type of business that you're winning out there in the marketplace or is there Something structurally going on in the
Growing again for Q is that the type of business that youre winning out there in the marketplace or is there something structurally going on in the marketplace to lengthen that moh interesting.
Speaker 4: I think that, you know, on the link to Fall, just to address that piece of your question first.
I think that.
On the link the fall just to address that piece of your question first.
Speaker 4: It was a little bit longer. We were at 944 miles in the fourth quarter, but we've been around 935 to 945 miles. When you look longer.
It was a little bit longer we were at 944 miles in the fourth quarter, but we've been around 935 to 945 miles.
When you look longer term.
Speaker 4: We've seen length of halls decrease. We've certainly seen
We've seen linked to Paul's decrease we've certainly seen.
Speaker 4: this regionalization of kind of going back to the longer term question, we believe is regionalization of the industry will continue and we're seeing good growth and our next day and second day lanes, but
This regionalization of kind of going back to the longer term question. We believe is regionalization of the <unk>.
The industry will continue and we're seeing good growth in our next day and second day lanes, but.
Speaker 4: You know, the last couple of years, there's been pockets of growth in different places. We've had tremendous growth off the West Coast, which typically has a little bit longer length of haul with it. So there's just been some different growth in different areas with certain customers. It's moved it up a little bit, but it's...
The last couple of years, there's been pockets of growth in different places, we've had tremendous growth off the west coast, which typically has a little bit longer length of haul with it. So there's just been some different growth.
And different areas with certain customers, that's moved it up a little bit but it's.
Speaker 4: pretty much staying within a fairly consistent band and wouldn't really expect any material change from where we are, other than eventually getting back to seeing it decreasing a little bit. And with regards to the yield performance...
Pretty much staying within a fairly consistent band.
And what really expecting a material.
Material change from where we are other than eventually getting back to the scene of decreasing a little bit.
With regards to the yield performance.
Speaker 4: You know, for us, we have a long-term consistent strategy that focuses on trying to achieve
For us we have a long term consistent strategy that that focus on small and trying to achieve.
Speaker 4: yield improvement to offset our cost inflation each year. And we need cost plus because again, it gets back to supporting the investments that customers are demanding from us in additional real estate capacity.
Yield improvement to offset our cost inflation, each year, and we need cost plus because again it gets back to supporting the investments that customers are demanding from us in.
In additional real estate capacity as.
Speaker 4: as well as into our technologies as well.
As well as into our technologies as well.
Speaker 4: from a revenue procurement standpoint, just getting away from the perhundered, because certainly some of those metrics that change in weight persh...
From a revenue per shipment standpoint is getting away from the per hundred because certainly.
Some of those metrics that change in weight per shipment the.
Speaker 4: The change in the link of haul both had the effect of increasing the revenue for hunting late, but a revenue for shipment excluding the fuels up 6%.
The change in the length of haul both had the effect of increasing the revenue per hundredweight, but our revenue per shipment excluding fuel was up 6%.
Speaker 4: That was a good performance, but overall, we had to see some higher renewals in the back half of the year.
That was a good performance but.
But overall.
We had to see some some higher renewals kind of in the back half of the year, our cost inflation on a per shipment basis in the back half of the year was a little bit higher than what we had anticipated the average cost per shipment for the full year would be and we will see that trend a little bit higher in the in the first half of <unk>.
Speaker 4: our cost inflation on the per shipment basis in the back half of the year.
Speaker 4: was a little bit higher than what we had anticipated the average call for shipment for the full year would be. And we'll see that trend a little bit higher in the first half of next year and then kind of normalized. But certainly we're continuing to get increases to offset that call inflation. So those renewals in the back half of this year has probably been a little bit higher than those in the first half of 2021 that is.
Next year, and then kind of normalized but.
But certainly we're continuing to get increases to offset that cost inflation. So those renewals in the back half of this year.
Probably been a little bit higher than those in the first half of 2021 that is.
Speaker 4: And so, you know, it's always just a continuous improvement cycle that we have. We look at each account on its own operating merits, the freight that we get, and ways that we can improve yield, and that's not always through price.
So it's always just a.
Continuous improvement cycle that we have we look at each account on its own operating merits. The freight that we get in ways that we can improve yield and thats not always through price.
Speaker 4: either. I think we've been successful. Certainly, when you look at that revenue per shipment and cost per shipment delta in the fourth quarter and really for the full year as well, just reinforces that long-term consistent approach that we've strived for.
Either so.
I think we've been successful certainly when you look at that revenue per shipment and cost per shipment delta.
In the fourth quarter and really for the full year as well just reinforces that that long term consistent approach that we strive for.
I appreciate the color thanks for the time again.
Speaker 1: And the next question will be from Scott Group from Wolf Research. Please go ahead.
And the next question will be from Scott Group from Wolfe Research. Please go ahead.
Hey, Thanks, good morning.
Speaker 7: Adam, can you share the yield trends, XFUEL, in January , and then any thoughts on just that 1QOR seasonality and how you're thinking about that?
Adam can you share the yield the yield trends ex fuel in January and then any thoughts on just that <unk> or seasonality and how youre thinking about that.
Speaker 4: Sure, so the per hundred weight with the fuel, as we said earlier, was between 16.5 and 16.8 percent, without the fuels right at 11 percent. So we're still seeing increasing rates, really, on the average price per gallon, and as that increased through the year, it's...
Sure so the per hundredweight with.
The fuel as we said earlier was between 16, 5% 16, 8%.
That was fueled right at 11% so we're still seeing.
Increasing rates really on the average price per gallon.
Is that increase through the year.
Speaker 4: that the average in January was up about 39% versus...
The average in January was up about 39% versus January of last year, just for the National average there so.
Speaker 4: January of last year, just for the national average there, so that fuel price component is certainly picking up and going into both that revenue component, but also getting into the cost as well, and certainly, you know, there's more than just the direct cost of diesel fuel that we use in our operations.
So that fuel price component is certainly picking up and.
Going into both the that revenue component, but also.
Getting into the cost as well and certainly there is more than just the direct cost of diesel fuel that we use in our operations.
Speaker 4: As fuel prices go higher, that certainly works its way into tires and other components that we have to deal with, so anything that's sort of fuel-related, we'll see that same type of inflation on. With that said, and in regards to our costs,
As fuel prices go higher that certainly works its way into.
Tires and other components.
But we have to deal with anything that sort of fuel related we'll see that same type of inflation or.
With that said in regards to our calls.
Speaker 4: Typically, the fourth quarter to first quarter sequential is about 100 basis point deterioration.
Typically the fourth quarter, the first quarter sequential is about 100 basis point deterioration.
Speaker 4: Now one thing to say before I get into
Now one thing to say before I get into.
Speaker 4: you know, a little bit more detail about that is typically that includes kind of a flat-ish when you look at the insurance and claims line.
A little bit more detail about that.
<unk> typically that includes kind of a flattish when you look at the insurance and claims line.
Speaker 4: kind of flat performance from 4Q to 1Q.
Kind of flat performance from <unk>.
Speaker 4: We had a benefit in the fourth quarter, as you could see on that insurance and claims line, and that mainly comes from the actuarial assessment that we do each year. That was only seven-tenths of a percent.
We had a benefit in the fourth quarter as you could see on that insurance and claims line and that mainly comes from the actuarial assessment that we do each year that was only seven tenths of a percent.
Speaker 4: where we averaged 1.1 to 1.2 percent the first three quarters of 21.
Where we averaged one one to one 2% in the first three quarters of 'twenty. One we expect that number to go back up to about one 2% in the first quarter give or take so we've got a little net natural drag if you will versus the.
Speaker 4: We expect that number to go back up to about 1.2% in the first quarter, give or take, so we've got a little natural drag, if you will, versus our normal sequential performance, if you will. With that said, however, we're still targeting about 100 basis points of change there. And plus or minus, certainly, that's just one specific number, but I think that given the strong revenue performance...
Our normal sequential performance, if you will with that said however.
We're still targeting about 100 basis points.
Change there.
Plus or minus certainly that's just one specific number but I think that.
Given the strong revenue performance I think that we can offset much of that so maybe 80 to 120 basis points is due to give us a little range. There will be what we're trying to target achieved in <unk> and certainly the one key performance when you look at the average.
Speaker 4: I think that we can offset much of that, so maybe 80 to 120 basis points to give us a little range there will be what we're trying to target achieving in 1Q. Certainly, the 1Q performance, when you look at the average.
Speaker 4: You know a lot goes into that the revenue effect like we mentioned earlier Can can be a little different from one period to the next and you know certainly there's that cost that come in There's not as consistent performance from 4q to 1q like there is and maybe some of the other quarters just given the natural disruption That happens in those periods, but that natural disruption goes into that 10-year average
A lot goes into that the revenue effect like we mentioned earlier.
Can can be a little different from one period to the next.
Certainly there is the cost that come in there is not as consistent performance from <unk> like there is maybe some of the other quarters just given the natural disruption that happens in those periods, but that natural disruption goes into that 10 year average.
Speaker 7: Very helpful. And then just last one. If I look over the last five years, your operating ratio has improved about 200 basis points a year on average. Do you think that's a realistic way to think about either 22 or the next several years? I'm just trying to think about when realistically you can get to that sub-70 OR.
Very helpful. And then just last one if I look over the last five years your operating ratios improved about 200 basis points a year on average do you think thats.
In a realistic way to think about either 22 or the next several years I'm just trying to think about.
When realistically you can get to that sub 70 or.
Speaker 4: We didn't put a timeline on it because we're looking for profitable growth each year. Some years we get a little bit more revenue contribution.
We didn't put a.
Timeline per se because really we're looking for for.
For profitable growth each year in some years, we get a little bit more revenue contribution.
Speaker 4: Some years we get a little bit more margin contribution, they all go into that profitable growth line.
Some years, we get a little bit more margin contribution they all go into that profitable growth line.
Speaker 4: You know, we pretty much played 2021 like a piano and got a little bit of both revenue and margin. So we were pleased to see that and that followed a very successful 2020. so the 5 year of 200 bips is probably a little bit stronger given the performance in 18 as well. When you look over a longer term, you know, it's, it's been more in the 100 to 150.
We're pretty much played 2021 like a piano and got a little bit of both revenue and.
Margins, we were pleased to see that and that followed.
Very successful 2020, so the five year.
200 bps is probably a little bit stronger given the performance in 18 as well when you look over a longer term.
More on the 100 to 150.
Speaker 4: basis points and, you know, we talk about 10-year sequentials.
At this point, we talk about 10 year sequential.
Speaker 4: from quarter to quarter and that's probably been more in that long term but right now the demand continues to be incredibly strong so we certainly are expecting another very solid revenue performance year this year and
From quarter to quarter, and that's probably been more in that long term, but right now demand continues to be incredibly strong. So we certainly are expecting.
Another very solid revenue performance here this year.
Speaker 4: We're going to be investing dollars, investing significantly for headcount growth, as Greg mentioned. So we can continue to give the same service that our customers expect, and we're going to be adding to our fleet and adding to our network. So there's a lot of investment that goes into continuing to take advantage of the market share opportunities.
Going to be investing dollars investing significantly for head count growth as Greg mentioned, so we can continue to give the same service that our customers expect and we're going to be adding to our fleet, adding to our network. So there's a lot of investment that goes into continuing to take advantage of the market share opportunities.
Speaker 4: We're not going to give a specific goal for what we think we can do in 2022, but certainly the focus will be to produce as much profitable growth as we can.
That we feel are out there so.
We're not going to give a specific goal for what we think we can do in.
In 'twenty, two but but certainly the focus will be to produce as much profitable growth as we can.
Okay. Appreciate the time guys. Thank you.
Speaker 1: The next question is from Jordan Halger from Goldman Sachs. Please go ahead.
The next question is from Jordan <unk> from Goldman Sachs. Please go ahead.
Speaker 8: Yeah, I'm sorry, I'm sorry. I'm sorry. I'm sorry. LPL, we do start the face and pretty tough compables as you get into second quarter, particularly around volumes. So if industrial production grows 3 and 4% this year, I mean, how do you think about high level sort of ability to grow tonnage? I assume on a full year basis, but looking past the first quarter of the second, and how you may be thinking about those more challenging comps.
Yes.
Okay.
Yeah.
S.
I mean do you start to face some pretty tough comparables as you get into second quarter, particularly around volumes.
Production growth <unk>, 4% this year I mean, how do you think about <unk>.
High level sort of ability to grow tonnage.
On a full year basis, but.
Looking past the first quarter the second how you.
Maybe thinking about those more challenging comps.
Speaker 4: You're gonna be broke up a little bit. So I don't know if I missed anything at the start, but just in regards to the volume environment. Again, it just gets back to the underlying strength of demand. And certainly that's all the customer feedback that we've been hearing, coupled with capacity issues and other places of our customer supply chains. When we look at the economic trends, which is a thing.
Yes, Jordan you broke up a little bit so I don't know if I missed anything at the start but just in regards to the volume environment.
Again, it just gets back to the underlying strength of demand.
And certainly that's all the customer feedback that we've been hearing.
Coupled with capacity issues in other places of our customers' supply chain.
When we look at the economic trends.
We feel like that.
Speaker 4: We would expect continued strength with our industrial-related customers.
We expect continued strength with our industrial related customers.
Speaker 4: As well as the ongoing strength with our retail related customers as well. So, you know, we're we're used to Tough comps if you will
As well as the ongoing strength with our retail related customers as well so.
We're used to.
Comps if you will.
Speaker 4: You know, given our long-term revenue performance over the last 10 years.
Given our long term revenue performance over the last 10 years.
Speaker 4: pretty much we've produced about 11% average growth in revenues and even though we'll follow up what would have been a record growth year 1.2 billion dollars of
Much we've produced about 11%.
Average growth in revenues.
Even though we will follow up what would've been a record growth the year of $1 2 billion.
Speaker 4: of new revenue produced last year, we certainly have got big expectations for 22, just given all those factors. So, you know, we'll see how the comparisons work out, and, you know, I think that if you just assumed normal sequential trends, you know, that would still put us at kind of the high single-digit, low double-digit type range.
New revenue produced last year, we certainly have they've got big expectations for 'twenty two.
Given all of those factors so.
We'll see how the.
Comparisons workout in.
I think that if you just assumed.
Normal sequential trends.
That would still put us at kind of the <unk>.
Single digit low double digit type range.
Thank you.
Speaker 1: And the next question will be from Tom Waterwoods from UBS. Please go ahead.
And the next question will be from Tom Waterworks from UBS. Please go ahead.
Speaker 9: Yes, good morning. I wanted to ask you about
Yes, good morning.
Wanted to ask you about.
Speaker 9: I guess price, and I don't know if you want to refer to like contract renewals, but I think you saw some acceleration in price through the year in 21.
I guess price.
I don't know if you want to refer to like contract renewals, but.
I think you saw some acceleration in price through the year and 'twenty one.
Speaker 9: You know, maybe you see that stay elevated in first half and kind of ease in second half, but I wanted to see if you could offer some kind of high-level thoughts on maybe where contract renewals were in fourth quarter and what you think the profile looks like on price in fourth quarter.
Maybe you see that stay.
<unk> first half and kind of ease in second half, but wanted to see if you could offer some kind of high level thoughts on where maybe where contract renewals were in fourth quarter and what you think the profile looks like on price in <unk>.
Speaker 9: twenty twenty two and then and then i had a follow-up uh... cycle
2022, and then I had a follow up on a cycle question.
Speaker 4: Yeah, Tom, we've kind of just stopped talking about contractual renewals because I somewhat feel like...
Yes, Tom.
We've kind of just stopped talking about contractual renewals.
Somewhat feel like.
Speaker 4: You know, that's obviously a very big piece of the overall revenue equation. About 25% of our business is on our tariff business and certainly the majority being on contract. But it seems like it's a talking point from the others in the industry that doesn't always reconcile with.
That's obviously, a very big piece of the overall <unk>.
Revenue equation about 25% of our business is on our turf business and certainly the majority being on contract but.
It seems like it's a talking point.
The others in the industry that doesn't always reconcile with.
Speaker 4: necessarily what you see out of the yield performance but you know it all just sort of goes into it whether it's price increases
Necessarily what you see out of the yield performance, but it all just sort of goes into it whether it's price increases other operational changes that drive yields.
Speaker 4: other operational changes that drive yield.
Speaker 4: And so forth and the things that we look for, you know, we'll say that, like I mentioned earlier.
So forth and the things that we look for I will say that like I mentioned earlier, we expect our we saw higher cost per shipment in the back half of last year.
Speaker 4: We saw higher cost per shipment in the back half of last year. We expect our cost per shipment this year to probably be on a net basis, maybe in the 4.5% to 5% range, and that's excluding the effects of fuel.
We expect our cost per shipment this year.
So probably be on a net basis, maybe in the four 5% to 5% range and Thats excluding.
The effects of fueled but but it's going to be weighted heavier we're going to see higher cost per shipment inflation in the first half of the year and then things that some of those.
Speaker 4: but it's going to be weighted heavier. We're going to see higher costs for shipment inflation in the first half of the year and then think that some of those expenses normalized.
<unk> normalized.
Speaker 4: when we get into the back half and start lapping over where we've recently been seeing inflation in our business.
When we get into the back half and start lapping over where we've recently been seen.
Inflation in our business.
Speaker 4: You know, with that said, certainly the contracts that mature in the first half of the year, they didn't have as much of an increase last year, so they will probably get a little bit more. And then those in the back half that maybe got a little bit higher increase reflecting what the actual cost trends were.
With that said certainly the contracts that mature in the first half of the year. They didn't have as much of an increase last year. So they will probably get a little bit more than those in the back half that maybe got a little bit higher.
Increased reflecting what the actual cost trends were in the back half of 'twenty, one may not see as much but but overall.
Speaker 4: in the back half of 21 may not see as much, but overall.
Speaker 4: you know, the focus continues. We've got to look at how our cost inflation is trending and then try to target 100, 150 basis points above that.
The focus continues we've got to.
To look at power cost inflation is trending and then try to target a 100 150 basis points above that.
Speaker 4: We did the January numbers that had missed in this earlier, but we did take our general rating increase, which
Did the January numbers that had mentioned this earlier, but we did take our general rate increase which is on our turf business that was effective at the beginning of January so that was a part of that yield performance that we've already seen to start off the year.
Speaker 4: is on our tariff business, that was effective at the beginning.
Speaker 4: of January , so that was a part of that yield performance that we've already seen to start off the year.
Speaker 9: So you think you move back in second half of the year towards kind of more normal annual LTL pricing, call it mid-single digits, is that a reasonable expectation if you look towards kind of second half of the year?
So you think you can move back in second half of the year towards kind of more normal annual LCL pricing call. It mid single digits is that is that a reasonable expectation. If you look towards kind of second half of the year.
Speaker 4: Well, again, I think that, you know, we've got to look at how our cost inflation at that time is trending. And, you know, if we're seeing some normalization.
Well again, I think that we've got to look at how our cost inflation at that time is trending.
If we're seeing some normalization.
Speaker 4: Uh, in that point, then then the expectation comes back. But at the end of the day, we've got to look at
And that point then the expectation comes back but at the end of the day, we've got to look at.
Speaker 4: at each customer's account, the revenue inputs and the cost inputs in terms of what we're actually seeing and how the account is operating, and look at ways to drive improvement in that customer's operating ratio. If we can do that by price, that's one way to look at it. If there may be other operational changes, new pieces of business that we may get.
At each customer's account the revenue inputs and the cost inputs and in terms of what we're actually seeing and how the account is operating and look at ways to drive improvement in that customer's operating ratio.
If we can do that by price.
One way to look at is there may be.
Other operational changes new pieces of business that we may get.
Speaker 4: different factors that can overall drive an improvement. For us, we're looking at driving a continuous improvement cycle in each
Different factors that can overall drive an improvement for us we're looking at driving a continuous improvement cycle in each each customer account not a customer.
Speaker 4: each customer account and that customer account builds up each individual service center and those built to the company. So certainly we're looking to improve the operating ratio and that's how you got to go about taxing.
Account builds up to each individual service center and those built to the company. So.
Certainly we're looking to improve the operating ratio and Thats, how you got to go about tackling it.
Speaker 9: Okay, that makes sense. If I can ask one more, I guess for Greg.
Okay that makes sense, if I can ask one more I guess for Greg.
How do you think about.
Speaker 9: the cycle and with respect to, it seems like historically you probably have some give back in a cycle where you've had strength in LTL and a tight truckload market and truckload loosens that there might be some impact in a cycle historically.
The cycle.
With respect to it seems like historically you probably have.
Some give back in the cycle, where you had strength in <unk> truckload market than truckload loosens that there might be some impact in our cycle. Historically do you think that is it.
Speaker 9: Do you think that it is reasonable to expect that this time? I mean, it does seem like LTL has been the one mode that could add capacity, and it would be natural to think some LTL freight in the market, maybe not for OD, but in the market goes back to truckload later this year or next year. You think that's right, or is it going to be different maybe this time?
A reasonable to expect that at this time I mean, it does seem like LPL has been the one mode that could add capacity and it would be natural to think some LCL freight in the market maybe not for OE EBIT and the market goes back to truckload later this year or next year, you think thats right or is that.
Is it going to be different maybe this time.
Speaker 3: Tom, I can tell you we don't have any volumes at this point in time to go back to truckload. I think if you look at what we've done and what we've been able to take out over the course of time due to capacity restraints and whatnot, most of those type volumes are out of our network at this point in time. So I think the environment for us from that standpoint is extremely positive.
I can tell you we don't have any.
Volumes at this point in time to go back to truckload. Thank you Pete.
Look at what we've done.
What we've been able to take out over the course of time due to capacity restraints and whatnot.
Most of those type volumes are out of our network at this point in time.
So I don't I think the environment for us from that standpoint is extremely positive.
Speaker 3: As far as we can see through 2022, certainly things change as you go through the year. But right now, I don't see any volume going over the truckload at all, not from our standpoint.
As far as we can see through 2022.
Certainly things change as you go through the year, but right now I don't see any volume going over the truckload at all.
Not from our standpoint.
Speaker 3: And, you know, as Adam has mentioned numerous times, you know, we're continuing to add capacity.
And as Adam mentioned numerous times.
<unk> to add capacity.
Speaker 3: And I would expect that we'll be on a strong trajectory all year long.
I wouldn't expect that will be on a strong trajectory all year long.
Right. Okay. Thanks for the time.
Speaker 1: Thank you. And the next question will come from Amit Narotra from Deutsche Bank. Please go ahead.
Thank you and the next question will come from Amit Mehrotra from Deutsche Bank. Please go ahead.
Speaker 10: Operator. Hi, Greg. Hi, Adam. Adam, I just wanted to clarify one question, I guess, from Jordan earlier. You talked about high single digit, low double digit.
Thanks, Operator, Hi, Greg Hi, Adam I, just wanted to clarify one question I guess from Jordan earlier, you talked about high single digit low double digits maybe.
Speaker 10: Maybe I didn't catch it. Was that first quarter full year or was it tonnage with the shipment?
Maybe I didn't catch it was that first quarter and full year was at tonnage with the shipman well you exactly referring to.
On high single digit low double digits.
Speaker 4: I wasn't giving any specific guidance there. I was just basically saying that if you assumed normal sequential trends in our tons that that would about be, you know, if you just roll them out quarter by quarter, what the year might look like. But certainly, you know, at this point,
And I wasn't given any specific guidance there I was just basically saying that if you.
Assumes normal sequential trends.
And our tons that.
What about the if you just roll them out quarter by quarter.
The year might look like but certainly at this point.
Speaker 4: We feel like, just like what we saw last year, that the demand is so strong out there, and we'll see how the year progresses.
We feel like just like what we saw last year that.
The demand is so strong out there, we'll see how the year progresses.
Speaker 4: Uh, you know, in the past, we've typically had.
In the past we've typically had.
Speaker 4: you know probably about six quarters or so when you look through past growth cycles.
Probably about six quarters or so when you look through pass growth cycles.
Speaker 4: We typically have had six or so quarters where we significantly exceed our 10-year trends, and then it kind of reverts back to the average.
We typically have had six or so quarters, where we significantly.
Exceed our 10 year trends and then it kind of reverts back to the average.
Speaker 4: You know, the average sequential performance for us includes a lot of market share wins. Going back to my previous comment, we've grown our shipments over the
The average sequential performance for us includes.
A lot of market share wins.
Going back to my previous comment we have grown our shipments over the.
Speaker 4: the past 10 years around 70%. So those 10 year trends include a lot of market shares and we certainly think that
Past 10 years around 70% so.
Those 10 year trends include a lot of market share and we certainly think that.
Speaker 4: given the comparison of our volumes that we've seen to the industry for the third quarter. You know, that's kind of the way things have...
Given the comparison of our volumes that we've seen to the industry for the third quarter, that's kind of the way things have trended.
Speaker 4: We have this spare capacity that's out there that we try to invest ahead of the curve.
We have this spare capacity that's out there that we try to invest ahead of the curve.
Speaker 4: So that the network is not a limiting factor and we can help our customers grow when we get in these strong demand periods. So we'll see how the quarter-by-quarters trend as we work our way through 22, but the one thing we'll say is that the underlying demand has not changed. It was consistently strong through 21.
So the network is not a limiting factor and we can help our customers grow when we get into the strong demand periods.
We will see how they.
The quarter by quarters training as we work our way through 'twenty, two but but the one thing we will say is that.
The underlying demand has not changed it was consistently strong through 'twenty one.
Speaker 4: and the customer conversations that we have.
And the customer conversations that we have.
Speaker 4: Today, indicated that strength is going to continue for the foreseeable future.
Today indicated that that strength is going to continue for the foreseeable future.
Speaker 10: Yeah, so that was just more a tonnage commentary by extrapolating current trends and kind of where the year shakes out. Okay, so I guess that's the other question I have is incremental door capacity in 2022. Obviously all this new capacity that you're putting online doesn't come on on January 1st. And so any help around what the kind of, you know,
Yes. So so that was just more tonnage commentary extrapolating current trends and kind of where the year shakes out. So okay. So I guess the other question I have is.
Sure.
Incremental door capacity in 2022, obviously, all this new capacity that you are putting online it doesn't come on January one.
And so any help on around what the kind of.
Speaker 10: incremental door capacities from these investments per rata for when they actually come online in 22 and even 23.
Incremental door capacity from these investments.
But when they actually come online in 'twenty, two and even 'twenty three if you could talk about that.
Speaker 4: Yeah, we, you know, I think we've said before that we intend to add somewhere in the neighborhood of 8 to 10 service centers.
Yes.
I think we've said before that we intend to add somewhere in the neighborhood of 8%.
In service centers.
Speaker 4: this coming year. You know, we don't necessarily always share the door detail, for example, but when we look, we don't give it year-by-year more for strategic reasons, but if you look over the last 10 years, we've expanded
This coming year.
We don't necessarily always share the door detail.
For example, but when we look.
We don't give it year by year more for strategic reasons, but.
Look over the last 10 years, we've expanded.
Speaker 4: uh, the door count by about 50% in total. So, you know,
The door count by about 50% in total so.
Speaker 4: As Greg mentioned before, we've got about 15 to 20% spare capacity in the network.
As Greg mentioned before we've got about 15% to 20%.
Near capacity in the network, we were fortunate that we started out the 'twenty one in a really good spot. So despite the the 19, 4% growth that we had in shipments during the year, we were still able to keep fair measure of spare capacity out there. So we will continue to build on that.
Speaker 10: to keep fair measure of spare capacity out there. So we'll continue to build on that level. We've got a few openings that will happen earlier in the year. Those are projects that already have been in the works and some that we thought we might have been able to finish by the end of the year. But so we'll get some new capacity out there on the service center side pretty early and we'll be adding to it pretty consistently throughout the year. Okay, I wanted to come back, I think, to Scott's question on long-term margin improvement.
Level, we've got a few openings that that will happen earlier in the year.
These were projects that already had been in the works.
Some that we thought we might have been able to finish by the end of the year, but we will get some new capacity out there on the service center side pretty early and we'll be adding to it.
Speaker 4: and we'll be adding to it pretty consistently throughout the year.
Pretty pretty consistently throughout the year.
Speaker 10: Okay, I wanted to come back, I think, to Scott's question on long-term margin improvement. I want to kind of approach it a little bit different way if I could. I mean, Adam, you've talked about, you know, direct and indirect costs as a way to kind of articulate the inherent operating leverage of the business.
Okay I wanted to come back.
To Scott's question.
On long term margin improvement.
Approach it a little bit different way if I could.
Adam you've talked about.
Direct and indirect costs as a way to kind of articulate the inherent operating leverage in the business I think it was like 25% previously.
Speaker 10: The cost pressure looks different now given the progress that you've made and the pricing
Obviously, you have a cost structure looks different now given the progress that you've made and the pricing initiatives to some degree but wondering it seems like the new baseline.
Speaker 10: But wondering, it seems like the new baseline operating leverage is kind of 30% plus.
Operating leverage is kind of 30% plus <unk>.
Speaker 10: Is that 25%? I don't know if you'd agree with that or if that's the right baseline.
Versus that 25% I don't know if you'd agree with that or if that's the right baseline to use that can maybe help ensure our.
Speaker 11: that can maybe help us for our, you know, our pace.
Pace of margin improvement going forward.
Speaker 4: Sure, yeah, we've talked about the cost structure in previous quarters and, you know, effectively our total direct costs for last year were about 55% of revenue, and our overhead was around 19% of revenue, and so, you know, some of that overhead, maybe 5%, is also variable in nature. If you look at the total variable cost.
Sure Yeah, we've talked about the cost structure in previous quarters.
Effectively our total direct cost for last year were about 55%.
Revenue in our overhead was around 19%.
Revenue.
So.
Some of that overhead maybe 5%.
<unk> is also variable in nature. So when you look at the total variable cost.
Speaker 4: And that structure, that revenue growth, can give us the incremental margins in the 35 to 40 percent range in a short period of time. And certainly, we did, I think, 39 percent for all of last year, so a really strong operating leverage year for us.
And that structure that revenue growth can give us the incremental margins in the 35% to 40% range in a short period of time and certainly we did I think 39% for all of last year. So.
Really strong operating leverage year for us.
Speaker 4: But, you know, our story, like I said, it's not just all margin improvement. We want to continue to build up the network to take advantage of the market share opportunities we feel are out there. And we want to keep growing the top line, which takes investment. We know that we need to continue to invest.
But our story like I said, it's not just all margin improvement we want to continue to build up the network to take advantage of the market share opportunities. We feel are out there and we want to keep growing the top line, which.
<unk> investment so.
We know that we need to continue to invest.
Speaker 4: to keep taking advantage of that revenue growth opportunity, and so that may cause some quarters that the incremental margin might not be in that 35 to 40 percent range, and that's okay. That's why we don't manage the business to an incremental margin per se.
To keep taken advantage of that revenue growth opportunity.
So that that may call some quarters that.
The incremental margin might not be in that 35% to 40% range and that's okay. That's why we don't manage the business to an incremental margin per se.
Speaker 3: We're going to do the right things right that we feel like build out the network to allow us to keep achieving the top-line growth and have the ultimate effect of also driving long-term margin improvement for us.
To do the right things right that we feel like.
Build out the network to allow us to keep achieving the top line growth and have the ultimate effect of also driving long term margin improvement for us.
Okay that makes sense. Okay. Thank you very much I appreciate the time.
Speaker 1: And the next question will come from John Chappell from Evercore ISI. Please go ahead.
And the next question will come from Jon Chapelle from Evercore ISI. Please go ahead.
Speaker 12: Thank you. Good morning. I'm just going to combine a couple into one because they're kind of all related. Adam, a ton of talk about market share on this call and then the press release.
Thank you good morning.
I'm just going to combine a couple into one because theyre kind of all related Adam to talk about market share in this call and in the press release.
Speaker 12: Is there any way to quantify how your market share, how much you've taken effectively from the LTL pie over the last, call it, five years, and as you look at your service center growth for this year?
Is there any way to quantify how your market share how much you've taken effectively from the <unk>.
Over the last call it five years and as you look at your service center growth for this year and I'm sure you are not completely in tune with what everyone's doing but you probably have a pretty good sense for the market.
Speaker 12: I'm sure you're not completely in tune with what everyone's doing, but you probably have a pretty good sense for the market, how much do you think that you're set up to take this year. And then the second part of it is, as you think about these market share gains that you've won, especially in the last 12 months.
How much do you think that Youre set up to take this year and then the second part of it is as you think about these market share gains that you've won especially in the last 12 months have been kind of just traditional contract duration traditional customers, but given the tightness of capacity across the entire logistics here are you winning.
Speaker 12: Have these been kind of just traditional contract duration, traditional customers, or given the tightness of capacity across the entire logistics sphere, are you winning kind of longer term contracts, new types of customers as you've taken share recently?
Longer term contracts new types of customers.
As you've taken share recently.
Speaker 3: Yeah, I think our biggest wins have come from our ability to service the customers. You know, as they
Yes, I think our biggest wins have come from our ability to service the customers.
As they say.
Speaker 3: see the need. I mean, the, the lot of our competitors just haven't been able to provide the capacity that we have. And that's what, that's my opinion is that while we've taken the share that we have, just to get back to that share growth over the last five years. And that,
See the need I mean.
Lot of our competitors just haven't been able to provide the capacity that we have.
And that's what that's my opinion as to why we've taken the share that we have.
Just to get back to that share growth over the last five years.
Adam you may need to help me here, but.
Speaker 3: I was pretty fair to say, we've been growing about, that share about 1% a year. You know, it's kind of a creep, if you will, it's not really a leap by any stretch, but it has been very consistent and we continue to see that as we get.
I was pretty say its pretty fair to say, we've been growing about that share about 1% a year.
It's kind of a creep if you will it's not really.
Our leap by any stretch, but but it is has been very consistent and we continue to see that as we go.
Speaker 3: As far as the service center network and whatnot, Adam mentioned, you know, we're looking at eight to ten this year. We've got quite a few in the process now. The good thing is some of those are fairly large. There's a couple big ones in there that will give us quite a few additional doors, so I think we're going to be in a good spot. As I've mentioned,
As far as the service Center network.
Adam mentioned, we're looking at eight to 10 this year, we've got quite a few in the process now.
The good thing is some of those are fairly large there is a couple of big ones in my ear that'll give us quite a few additional doors. So I think we're going to be in a good spot.
Speaker 3: And over the last several years on all of our calls, I think we talk about the places where we're challenged and we still got places that are a challenge to expand and you know.
I've mentioned.
Over the last several years on all of our calls I think we talk about the places where we're challenged and we still got places that are a challenge to expand in.
Speaker 3: Whatnot, but we do have some good ones working and I think we're going to be better off as the year progresses So we'll see how the growth trends and whatnot But I think we're a really good spot and I would expect that that work is going to pay off for us
But we do have some good ones working.
We're going to be better off as the year progresses.
Well see how the growth trends and whatnot, but I think we're a really good spot.
I would expect that that work is going to pay off for us.
Great. Thank you guys.
Speaker 13: And the next question will come from Todd Fowler from KeyBank Capital Markets. Please go ahead. Hey, great. Thanks, and good morning. I was wondering if you could comment a little bit, you know, headcount's been growing faster than shipment count for the past couple of quarters, and I understand there's probably some catch-up there. What's your expectation for headcount growth into 2022, and also relative to shipment count? And then just any general comments on labor availability.
And the next question question will come from Todd Fowler from Keybanc capital markets. Please go ahead.
Thanks, and good morning I.
I'm wondering if you could comment a little bit head count spend growing faster than shipment count for the past couple of quarters and I understand there's probably some catch up there.
Your expectation for head count growth into 'twenty, two and also relative to shipment count and then just any general comments on labor availability. Thanks.
Speaker 3: Todd, certainly we're trying to add.
Yes, Todd.
Certainly we're trying to add.
Speaker 3: labor as we speak. It has been a challenge as I mentioned before, but we have been able to successfully add folks and right now we have needs. Certainly as we get into the stronger parts of our season later in the spring and certainly through the summer and into the fall, we need to continue to add folks without a doubt.
Labor as we speak.
It has been a challenge as I mentioned before but we have been able to successfully add folks and right now we have needs certainly as we get into the stronger parts of our season later in the spring and certainly through the summer and into the fall we need to continue to add folks without a doubt.
Speaker 3: So I would expect that those trends would pretty much mirror our shipment growth and tonnage growth. So I don't expect that to be a whole lot different. But yes, we need to add. And those efforts are certainly underway at this point.
So I would expect that those trends would pretty much mirror our shipment growth.
Tonnage growth, so I don't expect that to be a whole lot different but.
Yes, we need to add in those.
Those efforts are certainly underway at this point.
Right.
Speaker 13: Gregor, Adam, could you, I mean, you care to kind of put like a finer point, I mean, to the spread between headcount growth and shipment count starts to narrow, or do you expect to continue to try and add in front of the shipment growth for the next, you know, kind of foreseeable future?
Greg or Adam could you I mean, do you care to kind of put like a finer point I mean should the spread between headcount growth and shipment count start to narrow.
Or do you expect to continue to try and add in front of the shipment growth for the next foreseeable future.
Speaker 4: Yeah, I think that, you know, we finally just sort of caught back up with it at the tail end of 21 and yeah, we'd expect to.
Yes, I think that we finally, just sort of caught back up with it.
The tail end of 'twenty one.
We would expect to see probably the the head count a little bit stronger than the shipment count.
Speaker 4: probably the head count a little bit stronger than the shipment count.
Speaker 4: You know, certainly probably for the first half of this year, but
Certainly probably for the first half of this year, but when you look over the longer term those two numbers kind of work in concert with one another they are pretty matched.
Speaker 4: And when you look over the longer term, those two numbers kind of work in concert with one another. They're pretty matched evenly. And I think that really the top line is what dictates it, Todd.
<unk>.
But really the top line is what dictates and Todd and certainly last year.
Speaker 4: You know, certainly last year, really going back to.
Really going back to.
Speaker 4: to 2020. Once the recovery began, which for us was in May, we were pretty much playing catch up. We've had this tremendous volume performance.
To 2020, once the recovery began which for US was in May.
We were pretty much playing catch up we've had just tremendous volume performance.
Speaker 4: Um, yeah, really unlike anything we've ever seen with the fourth quarter being higher than the third. I mean, just really tremendous recovery since since that drop in April of 2020.
Really unlike anything we've ever seen with the fourth quarter being higher than the third.
I mean, just really tremendous recovery.
Since that drop in April of 2020 so.
Speaker 4: We've continued to add people really at levels above what the normal sequential trends and head count would be.
We've continued to add people really at levels above what the normal sequential trends in head count would be.
Speaker 4: Nothing that will continue in the first quarter until we get back to the levels where we can can support the freight that we're seeing.
I think that will continue in the first quarter until we get back to the levels where we.
Can can support the freight that we're seeing.
Speaker 4: But we've got to match it to with the equipment base that we have. And so it's just something that we've got to manage through.
But we've got to match it to with the equipment base that we have and so it's just something that we've got to manage through.
Speaker 4: As we work our way through the year, but as long as we keep seeing that that top line performance.
As we work our way through the year, but as long as we keep seeing that top line.
Speaker 4: in strength coming at us. We're gonna continue to try to hire and have the right people in the right place that is, you know, efficiently operated.
Performance and strength coming at Us, we're going to continue to try to.
Higher and have the right people in the right place that.
As efficiently operating.
Speaker 4: keeping our service metrics best in class and taking care of our customer and the lever that will continue to pull.
Keeping our service metrics best in class and taking care of our customer and the lever that we'll continue to pull and.
Speaker 4: And we think that we'll have to keep using this in 22 will be the purchase transportation and yeah, we've we've had to utilize
And we think that we'll have to keep using this in 'twenty two it will be the purchased transportation.
We've had to utilize that.
Speaker 4: I think probably every quarter, as we worked our way through last year, we talked about trying to get away from it, and ultimately we do. We want that number to revert back to that old 2 to 2.5% that was there for our Canadian operation and our truckload brokerage business.
I think probably every quarter as we worked our way through last year, we talked about trying to get away from it and ultimately we do we want that number to revert back to that old two to two 5%.
Was there for our Canadian operation in our truckload brokerage business, where we've got 100% of our line haul network in sourcing and.
Speaker 4: where we've got 100% of our line haul network insourced and we're using our people and our equipment to service our freight. But until then, we've got some good partners and, you know, they're continuing to deliver within our service expectations and keep our service metrics best in class and really just helping us to be able to grow the top line. So we'll continue to pull that lever while we have to.
And we're using our people and our equipment servers or freight but until then we've got some good partners.
They're continuing to deliver within our service expectations and keep our service metrics best in class and really just helping us to be able to grow the top line. So so we'll continue to pull that lever while we have to.
Speaker 13: Well Adam, my follow-up was on purchase transportation and kind of the expectations in the service. So you covered that one for me. I'll pass the long things for the time.
Well Adam My follow up was on purchase transportation in kind of the expectations and the surface. So you covered that one for me.
Pass along thanks for the time.
It's Bob.
Speaker 1: And the next question will come from Baxim majors with Susquehanna. Please go ahead.
And the next question will come from <unk> majors with Susquehanna. Please go ahead.
Speaker 14: Yeah, thanks for taking my questions. On the real estate expansion, as some of your peers become more eager to invest in growth like you've been doing for quite a time here, are you starting to see more competition at the locations that you'd like to expand in, or is it really just you versus broader industrial real estate?
Yes, thanks for taking my questions on the real estate expansion as some of your peers become more eager to invest in growth like you've been doing for quite a time here are you starting to see more competition at the locations that you'd like to expand in or is it really just you versus broader industrial real estate.
Speaker 3: Yeah, it's certainly the latter basket.
Yeah.
Certainly the latter baskin.
Speaker 3: I don't know that it's the competition for real estate, generally speaking, it's just being able to find the real estate that we need and being able to get it its own and get the building done.
Just I don't know that its the competition for real estate generally speaking is just being able to find real estate that we need and being able to get it solved it and get the building done.
Speaker 3: Sometimes you can find the land and you know it's the hoops you've got to jump through to get it zoned and meet all the building requirements and all those different things but
Sometimes you can find the land.
The hoops, you've got it Jeff.
Get it zoned and meet all of the building requirements and all those different things but.
Speaker 3: Trust me, there's a lot of challenges out there from a real estate standpoint. It's not easy. As we've grown and as we require bigger and bigger facilities to meet our needs.
Trust me, there's a lot of challenges out there from a real estate standpoint, it's not easy.
As we've grown and as we require a bigger and bigger facilities to meet our needs.
Speaker 3: You know, I end to plan for years down the road. It's just gotten more and more difficult, but certainly there is some competition in certain locations, and I've talked about that numerous times before, but the competition in certain markets is definitely tougher than others. Some places, you know, it's still relatively easy. You know, we can't find and meet our needs, but there are some that again, they're rather challenging if you will.
And to plan four years down the road.
Just got more and more difficult, but certainly there is some competition in certain locations and I've talked about that numerous times before but the competition in certain markets is definitely tougher than others. Some places it's still relatively easy we can find.
Meet our needs, but there are some that again.
They are rather challenging if you will.
Speaker 14: And, you know, to that point, you mentioned a couple of locations would be particularly large ads this year. Can you talk to the geography or timing of those?
And to that point, you mentioned a couple of locations would be particularly large adds this year can you talk to the geography, you're timing of those.
Speaker 3: Yeah, one of those is in the northeast that we've owned for several years now. It's been, it was occupied with the, tied up with the lease.
Yes.
One of those is in the northeast that we've owned for several years now it's been it was <unk>.
Occupied with the tied up with the lease.
Speaker 3: We should get that late this year sometime. It's up in northern Pennsylvania. We own it today.
We should get that.
This year sometime its up in northern Pennsylvania.
We own it today.
Speaker 3: It's not available for the time being, but we will get it, I think, about mid-year. We'll probably have a little work to do to get it up and running, but that should come on late this year. We've got another fairly large facility in southern Minneapolis, the southern part of
It's not available.
$10 billion, but we will get it to think about mid year, we'll probably have a little work to do to get it up and running but that should come on late this year. We've got another fairly large facility in.
Southern Minneapolis, Southern part of Minneapolis help us better serve that area were up on the north side now and.
Speaker 3: help us better serve that area. We're up on the north side now and certainly with the growth that we've had in that market, we need to have another facility in the South. Getting close, I think we're just a couple months away from opening that. We're working on a big one that's well underway in Kansas City that'll give us.
And certainly with the growth that we've had in that market, we need to have another facility in the south.
Getting close I think were just a couple of months away from opening that.
We're working on a big one that's well underway in Kansas City that will give us.
Speaker 3: another additional fair amount of doors. So we've had a lot of irons in the fire around the country and a lot of good things work.
Another additional fair amount of doors so.
Ill irons in the fire around the country and a lot of good things working.
Speaker 3: Again, I think we're a pretty well positioned from that standpoint. I've got a few others that I'll probably rather not talk about at this point, but
Again, I think we are.
Pretty well positioned from that standpoint, <unk> got a few others that I'll.
Probably rather not talk about at this point, but.
Speaker 3: not a lot of work going on in the real estate department that's for sure
A lot of work going on in the real estate Department that's for sure.
Thank you.
Speaker 1: And the next question will be from Ken Hoaster from Bank of America. Please go ahead.
And the next question will be from Kenn Hoekstra from Bank of America. Please go ahead.
Speaker 15: hey great morning Greg and Adam thanks for getting me in here just to real quick out into clarify the your target you said moving from seventy five to five hundred basis point brew into seventy and then you talked about sub sub seventy can you just kind of clarify what the target is an outlook there
Hey, great Good morning, Greg and Adam Thanks for getting me in here.
Real quick on to clarify the tar.
Target you said moving from $75.
500 basis point improvement to 70, and then you talked about sub sub 70 can you just kind of clarify what the targeted and outlook there.
Speaker 4: Sure, it's, I mean, 70 is the target that we want to see something start with the six. So it'll be.
Sure.
I mean 70 is the target, but we want to see something start with a six.
So it will be.
Speaker 4: you know, 69 or whatever we get to when we cross that that line. We obviously blew through the 75 this year pretty strong and have got a good, good jump on making our way towards that 70 goal. But, but nevertheless, that's, that's the goal, if you will, at a raw 70. But, but seeing an OR start with the six.
60.
69, or whatever we get to when we cross that.
That line, we obviously blew through the 75% this year pretty strong.
Got a good good jump on making our way towards that 70 go but but.
Nevertheless, that's that's the goal if you will at a raw 70, but but seeing in or start with the six.
Speaker 15: And I think it's still fairly balanced between pricing costs just as you've been doing, but you mentioned in the opening comments some maybe seeing some scale of maintenance cost increases as you kind of extend the life of the fleet. Can you talk about the impact of that we should see in the near term or this year?
And I think it's still fairly balanced between price and cost just as <unk> been doing but you mentioned in the opening comments some maybe seeing some scale of maintenance cost increases as you kind of extend the life of the fleet can you talk about the impact of that we should see in the near term or this year.
Speaker 4: Well, I mean, there's some trade-off there. And when you look at...
Well I mean, there is some trade off there.
And then when you look at.
Speaker 4: the depreciation expense, for example, we're seeing some improvement there. That was at 4.7% of revenue.
The depreciation expense for example.
We're seeing some improvement there that was at four 7% of revenue.
Speaker 4: And that typically runs quite a bit higher. So we're seeing some increased maintenance costs, if you will, to maintain our fleet, our average fleet age is up to five years.
And that typically runs quite a bit higher so.
We're seeing some increased maintenance cost if you will.
We also to maintain our fleet our average fleet age is up to five years.
Speaker 4: Now, for our power equipment, it's been as low as three and a half years when you look over the last five.
Now for our power equipment, it's been as low as three and a half years. When you look over the last five.
Speaker 4: Seven years or so and so it's certainly a bit higher Than what we would like to see and but there's there's also a little bit of a drag Just in total operating supplies and expenses on the fuel element the older equipments not as fuel efficient
Seven years or so.
So it's certainly a bit higher.
Then what we would like to see and but Theres also a little bit of a drag just in total operating supplies and expenses on the fuel element the older equipment not as fuel efficient.
Speaker 4: as the newer equipment. So, you know, that's just something that we've got to keep balanced. We'll probably see, once we can start replenishing the fleet at the levels that we would like to, we'll see some incremental depreciation costs that will come online that will somewhat offset.
As the newer equipment. So that's just something that we've got to keep balanced we'll probably see once we can start replenishing the fleet at the levels that we would like to.
We will see some incremental depreciation cost that will come online that will somewhat offset.
Speaker 4: you know, the cost that we're seeing now, operating supplies and expenses, but it all sets some of the purchase transportation costs that we're seeing, and certainly I'm sure you're familiar with the truck load rate environment is pretty strong.
The costs that we're seeing in operating supplies and expenses, but it offset some of the purchase transportation costs that we're seeing and certainly.
I'm sure you're familiar with the truckload rate environment is pretty strong.
Speaker 4: Right now so those loads that we are moving with third parties. We're paying a pretty fair price for
Right now so those loads that we are moving with third parties, we are painting, a pretty fair price for.
Speaker 15: lastly for me just that i know you said that the peers hadn't been growing kind of looking back but but you know i guess somewhat backward as a we've heard a lot from the carriers there they're starting to talk about growing real estate even art best xp o talking door and service center as that we had heard in a while does that give you or or gregany any thoughts on potential pricing pressure that we haven't seen in the past
Lastly for me just Adam I know you said the peers hadn't been growing kind of looking back, but but I guess somewhat backward we've heard a lot from the carriers. There. They are starting to talk about growing real estate, even hard fast spo talking door and service center adds that we haven't heard in a while.
Does that give you or Greg any any thoughts on potential pricing pressure that we haven't seen in the past.
Speaker 3: I wouldn't, I don't think so. Yeah, thanks. So we just got to keep doing our thing and providing value to our customers.
I Wouldnt I don't think.
So we just got to keep doing our thing and providing value to our customers.
Speaker 3: I don't, I don't see that as a, as a negative circle.
I don't I don't see that as a negative certainly.
Speaker 4: And generally speaking, you know, I think that, you know, can't speak for everyone and we don't really know other than what we hear from customers, but.
And generally speaking I think that.
Can't speak for everyone and we don't really know other than what we hear from customers but.
Speaker 4: We anticipated that we would see capacity issues with the industry this year, just based on some...
We anticipated that we would see capacity issues with the industry. This year.
Based on some internal.
Speaker 4: computations that we go through and we started hearing that.
Computations that we go through and we started hearing that.
Speaker 4: uh you know before we got to mid-year before the real uh rush began and so uh you know i think that there's probably some needs uh out there like i mentioned we still feel like the industry is growing and when you look over the last 10 years there's been a couple of other carriers that have also increased their market share
Before we got to mid year before the real rush began and so.
I think that there's probably some needs out there like I mentioned, we still feel like the industry is growing and when you look over the last 10 years. There's been a couple of other carriers that have also increased their market share I think that the industry revenue is continuing to consolidate.
Speaker 4: I think that the industry revenue was continuing to consolidate with the larger national non-union providers and we think that that trend will continue in the future. But certainly, you know, we've got service advantages as well and it all comes back to the service value you deliver for your customer.
With the larger national non union providers, and we think that that trend will continue in the future but.
But certainly we've got service advantages as well and it all comes back to the service value you deliver for your customer.
Speaker 4: We think we've got an unmatched value proposition that wins market share for us, and we're going to continue to execute and keep giving the very best service to our customers, and we think that
We think we've got an unmatched value proposition that wins market share for us.
We're going to continue to execute and keep given the very best service to our customers and we think that that will drive the market share in field in the real estate capacity that that we continue to expect to add.
Speaker 3: that will drive the market share and fill in the real estate capacity that we continue to expect to add.
Great stuff appreciate the time and thoughts thanks, Greg Thanks, John .
Thank you and the next question is from Chris Wetherbee from Citigroup. Please go ahead.
Speaker 1: Thank you. And the next question is from Chris Weatherby from Citigroup. Please go ahead.
Speaker 3: Thanks for taking my question. Maybe just a follow-up on that last point about the market and competitive dynamics. I guess I'm just trying to make sure I understand.
Yeah, Hey, thanks for taking my question.
Maybe just to follow up on that last point about the market and competitive dynamics I guess I'm, just trying to make sure I understand.
Speaker 16: how you guys might respond to the extent that there is maybe a larger push by some of your competitors into the market. You guys have always been extraordinarily disciplined with the way that you approach the market. So I'm guessing
How you guys might respond to the extent that there is maybe a larger push by some of your competitors into the market you guys have always been extraordinarily disciplined with the way that you approach the market so I'm guessing.
Speaker 16: in a scenario where maybe some of your competitors get a bit more aggressive to, you know, expand. And obviously, there's a lot of demand out there, so I don't know that necessarily has an impact on the pricing dynamic. But I guess, I think I know the answer to this, but I'm kind of curious your take on how you would adapt to a market which might actually see more, you know, sort of push for market share from some of your competitors than we've historically seen over the last
Area, where maybe some of your competitors getting more aggressive to expand.
And obviously, there's a lot of demand out there. So I don't know what necessarily has an impact on the pricing dynamics.
I guess I think I know the answer just curious your take on how you would adapt to a market, which might actually see more sort of a push for market share from some of your competitors than we've historically seen over the last several years.
Speaker 4: Well, I think what we expect, Chris, is that the industry has been very price-discipline.
Well I think what we would expect Chris is that.
The industry has been very price disciplined.
Speaker 4: You know, really going back to the last slowdown in 2016. And so I think that we've seen some margin improvement by some of those other carriers.
Really going back to the lab.
Last slowdown in 2016.
And so I think that we've seen some margin improvement by some of those other carriers if.
Speaker 4: If they don't have capacity, you know, maybe they'll continue to follow our lead in terms of continuing to consistently try to increase price. When you look at the current environment, much of the revenue growth is coming by yield from other carriers. I get back to the third quarter to performance.
If they don't have capacity.
They will continue to follow our lead in terms of continuing to consistently try to increase price. When you look at the current environment.
Much of the revenue growth is coming by yield from other carriers I go back to the third quarter performance.
Speaker 4: We grew our shipments 19 percent on average the public carrier group was up 1 percent. So that wide delta and volume growth.
We grew our shipments 19% on average the public carrier group was up 1% so that wide delta in volume growth.
Speaker 4: We want to have that volume contribution and we've got the capacity to grow both volumes and yields.
Want to have that volume contribution and we've got the capacity to grow both volumes and yields.
Speaker 4: Whereas, we've seen in prior growth periods, like 2017, 2018, what we've seen this year, or 2021 rather, the other carriers that don't have barely any capacity to grow throughout their entire system, just take advantage of the strong demand and increase yield, which is the current situation. And I think that's a good thing. I think that's a good thing.
Whereas we've seen in prior growth periods like 2017, 2018, what we've seen this year.
<unk> 2021, rather.
The other carriers that don't have barely any capacity to grow throughout the entire system just take advantage of the strong demand and increase yield, which if they're increasing faster us because again our.
Speaker 4: if they're increasing fast for us, because again, our pricing approaches.
Pricing approaches.
Speaker 4: One that's long-term and consistent customers know what to expect if other carriers are increasing Their rates faster than us and closing some of that price gap that service value looks better and better and so You know, I think that's that's what we've seen in the past It's what we would continue to expect to see to see that wide Outperformance if you will against the other public carrier group data that we see on average You got it
That's loan Perm and consistent customers know what to expect of.
Other carriers are increasing their rates faster than us in closing some of that price gap.
That service value looks better and better and so.
I think that's what we've seen in the past, it's what we would continue to expect to see to see that wide outperformance. If you will against the other public carrier group data that we see on average.
Got it that's very helpful. Thanks for the time I appreciate it.
Speaker 1: And the next question is from Bruce Chan from Stiefel. Please go ahead.
And the next question is from Bruce Chan from Stifel. Please go ahead.
Speaker 16: Hey, good morning, Jensen. Thanks for squeezing me in here. I know you mentioned that there's no truckload freight to give back this cycle, and that's good to hear, but as we think about some of your comments earlier, Adam, around regionalization and secular growth in e-commerce, how are you thinking about your freight mix characteristics? And do you think you can kind of keep those as they are, or do you think there may be some pressures on length of haul and shipment density as you start to grow your share and expand your network over time?
Hey, good morning, gentlemen, thanks for squeezing me in here.
I know you mentioned that Theres no truckload freight to give back this cycle and thats good to hear but as we think about some of your comments earlier Adam around.
Our regionalization and secular growth in E. Commerce, how are you thinking about your freight mix characteristics.
And do you think you can kind of keep those as they are or do you think there may be some pressures on length of haul and shipment density as you start to grow your share and expanded network over time.
Speaker 4: Yeah, I mean, it's certainly, you know, we constantly communicate with our customers, including third-party logistics companies, to try to navigate through and foresee the types of changes that are coming down the line. That goes into some of our thinking in terms of how we expand our service center network as well and where we're building facilities. So, you know, we certainly foresee, you know, some of those changes that have been happening over the last five, ten years.
Yes.
Certainly.
We constantly communicate with.
With our customers, including third party logistics companies to try to navigate through and foresee that.
So changes that are coming down the line.
That goes into some of our thinking in terms of how we expand our service center network as well and where we're building facilities. So.
We certainly foresee.
Some of those changes that have been happening over the last 510 years continue.
Speaker 4: continue. I think they've all been favorable trends for the LTL industry, and I think we're certainly maybe benefiting more than anyone. And the reason for that, and, you know, some of how we think some of this market share growth we've seen recently will be very sticky is that there's an increased premium that's being placed on service quality. And when you think about especially as low as inventory balances are right now.
I think they've all been favorable trends for the <unk> industry and I think we're certainly maybe benefiting more than anyone and the reason for that.
Some of how we think some of this market share growth. We've seen recently will be very sticky is that there is a.
Increased premium that's being placed on service quality.
When you think about especially as low as inventory balances are right now.
Speaker 4: You know, shippers have got to get their product on the shelves, and so they're increasingly relying on a carrier that can give 99% on-time service performance and not have damages. And if you're delivering into one of the big retailers that have...
Shippers have got to get their product on the shelves and so they are increasingly relying on a carrier that can give 99% on time service performance and not have damages and if youre delivering into one of the big retailers that have.
Speaker 4: these chargeback programs in place, then it puts an even more importance, if you will, on that service value. So that's how we're winning share in that retail segment of the market. Certainly we've still got our healthy mix of industrial freight and think that that will continue to grow as well, but we're really winning across all segments, if you will, with direct.
These chargeback programs in place then it puts an even more important if you will on that service side. So that's how we're winning share in that retail.
Segment of the market certainly we've still got our healthy mix of industrial freight and think that that will continue.
To grow as well, but we're really winning across all segments. If you will with direct.
Speaker 4: industrial and retail related customers and seeing tremendous growth with our third-party logistics customers as well. So, but we we think that those trends are going to continue and the importance
Industrial and retail related customers and seeing tremendous growth with our third party logistics customers as well so.
But we think that those trends are going to continue and the importance on total service value will continue to rise.
Speaker 4: on total service value will continue to rise.
Speaker 1: Thank you, Bruce. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Greg Gant for any closing remarks.
Thank you Bruce ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Greg <unk> for any closing remarks.
Speaker 3: Well, thank you all for your participation today. We appreciate your questions and please feel free to give us a call if you have anything further. Thanks and have a great day.
Well. Thank you all for your participation today, we appreciate your questions and please feel free to give us a call. If you have anything further.
Thanks, and have a great day.
Speaker 1: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now dissapear.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Speaker 17: ??? ??? ???
Okay.
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